SFM Observer - January 2023
Issued: February 6, 2023
The Dow closed the month of January at 34,086 for a gain of 939 points or 2.8%. The NASDAQ was up 11% for the month. Many of the stocks that suffered the worst declines in 2022 rallied strongly into the new year. It may not persist, but it is good to start 2023 with gains across the board. Bonds are also making a comeback with positive returns for the first month of the year. Inflation is showing signs of cooling down after peaking last summer. The latest reading at 6.5% is headed in the right direction and will lessen the need for the Federal Reserve to keep hiking interest rates. The economy is slowing and there is a growing number of layoff announcements coming from corporate America but luckily, people being laid off are finding new jobs right away.
Some interesting events from the month just past:
• Electric vehicle sales ramped up in 2022 to 807,000 units from 490,000 the prior year. Tesla is the leader in the space with 65% market share followed by Ford at 8%. As a share of total vehicles sold, the EV slice is still relatively small at 6% of all new vehicles sold last year.
• The University of California is putting $4 billion into the Blackstone Real Estate Income Trust. This is the same investment many of our clients at SFM own and it has been in the news lately due to a wave of redemption requests Blackstone received on the fund. The University of California is a very large investor in the endowment world and their investment is a vote of confidence in the strategy of the BREIT fund.
• Subway Sandwich is considering going public and becoming a publicly traded company. The company is a very large private company with 21,000 locations in the U.S.. It is controlled by the two families that started the company in Connecticut 50 years ago. The firm is estimated to be worth $10 billion dollars or thereabouts.
• Wealthy investors are fed up with paltry yields on their bank accounts and taking action to move their money to higher yielding accounts. Many banks are still paying sub 1% rates on cash even though every time the Fed raises interest rates by ¾%, all of their adjustable rate loans (home equity loans) go up immediately. If you do a little homework, it is not hard to find FDIC insured accounts paying 3 to 4% (check Capital One, Ally and Synchrony Bank).
• Southwest reported a loss in for the fourth quarter of -$220 million. The year before they made $68 million. The meltdown they had during the holidays when they cancelled 16,000 flights cost them dearly and the financial impact is likely to spill over into 2023 as their once loyal customers decide it is time to try another airline.
• This is cash flow erupting from the ground. Exxon Mobil announced they made more than $1 billion dollars per week in 2022. An astonishing amount of profit.
Thank you for reading this issue of the SFM OBSERVER.
Until next month,
Glenn Sweeney CFA