The Rice Partnership’s Chief Investment Officer, Orest Saikevych, discusses what we are doing in client portfolios during times of economic uncertainty and market volatility.
Partnership, has been selected as one of Pacific Coast Business Times 40 Under 40 Honorees, Class of 2022.According to the publication, nominees must be under 40 years old and have made significant contributions through professional or volunteer work in the Tri-County region.
As the Senior Wealth Manager for The Rice Partnership and head of the firm’s San Luis Obispo and Paso Robles offices, Wilken has been recognized for her achievements in the financial industry since 2011.
She also takes on a highly active role in the community, currently serving on the boards of the Foundation for the Performing Arts Center, the Paso Robles Chamber of Commerce, and the Rotary Club of Paso Robles. She has also previously served on the boards for the SLO County California Women for Agriculture and the California Central Coast Girl Scouts.
Previously, Wilken worked as a commercial and agricultural lender in San Luis Obispo County since graduating from Cal Poly with an MBA and a degree in Agribusiness. She is a CERTIFIED FINANCIAL PLANNERTM and NFLPA Registered Player Financial Advisor.
The Rice Partnership LLC is a national financial advisory firm headquartered in Honolulu with branches in Maui and California. The firm specializes in investment management and estate planning, as well as tax and strategic advisory services for individuals, families and charitable organizations throughout Hawaii and the mainland.
The Rice Partnership is pleased to announce that Lia Young has been made a partner at the Honolulu-based wealth management firm. She will continue to oversee day-to-day operations, client
services and compliance administration across all the firm’s offices in Hawaii and California.
“In addition to all that, Lia does an outstanding job leading human resources, as well as managing our tech stack,” Principal Bonnie Rice said. “She is incredibly important to the way our company functions every single day.”
Young has over 20 years of experience in the finance industry handling operations, client services, compliance, accounting and human resource administration for small businesses and nonprofit organizations. She holds a Bachelor of Business Administration degree from the University of Hawaii-Manoa.
The Rice Partnership LLC is a national financial advisory firm headquartered in Honolulu with branches in Maui and California. The firm specializes in investment management and estate planning, as well as tax and strategic advisory services for individuals, families and charitable organizations throughout Hawaii and the mainland.
The Rice Partnership’s Chief Investment Officer, Orest Saikevych, discusses whether the recent market rebound is a new bull market or a bear market rally.
Economic and Market Review and Outlook, July 2022
“It’s absolutely essential to restore price stability. Economies don’t work without price stability.” — Jerome Powell
Second Quarter Review
Financial markets fell again in the spring. Posting its worst first half since 1970, the S&P was down 16% while the NASDAQ slumped 22%. Foreign
markets fared only slightly better with developed markets dropping 14% and emerging markets declining over 11%. Bond prices also slumped, with the yield on ten-year Treasuries rising from 2.34% to 3.01% (recall it was 1.51% at the start of the year).
Commodities were mixed, as metals rallied early in the quarter only to sell off sharply in June. Oil rose, though its gains were more subdued relative to the spike of the first quarter. Gold came off its winter highs, while the US dollar was the standout, displaying strength throughout the spring. On the other hand, crypto assets crashed with bitcoin declining 59%, almost three-quarters from its highs of last year.
An Economic Cycle and Financial Markets in Fast Motion
From an overheating economy in January, to the beginning of Fed rate hikes in March, followed by concerns of recession in June — the first half of 2022 was a whirlwind of gloomy news unlike any other economic cycle since World War II. Financial markets also reflected this dynamic. At the start of the year, there was a rotation out of highly valued stocks into inflationary beneficiaries, then in the spring, a move into defensive stocks that would perform better in a slowing economy.
The effects of the pandemic have made economic forecasting even more challenging. Although there are job openings, many people haven’t returned to the labor force. Government stimulus checks swelled consumer savings but spending patterns have changed. When Covid first struck, people stayed home for safety reasons and ordered goods online like electronics, furniture and home improvement items. Services such as restaurants, hotels and airlines suffered.
As the population became vaccinated, many began venturing out and traveling, helping services recover, while the demand for goods fell. Retailers and other businesses had a difficult time determining how much to order, especially with the persistent supply chain issues. To make matters worse, the war in Ukraine has added to uncertainty about global energy and food prices.
The Federal Reserve and the Fight Against Inflation
To fight inflation, the Fed has steadily restricted monetary policy, sharply raising the Federal Funds rate from 0.25% in March to 1.75% currently. The logic is that by increasing rates, the overall demand in the economy will decrease, causing inflation to cool off. Yet rising prices have persisted, with the latest Consumer Price reports revealing they may still have not yet peaked as many economists earlier predicted.
Chair Powell and other members are increasingly concerned that inflationary expectations may become imbedded, leading to price instability and further compounding problems. However, Fed rate hikes along with “jawboning” or tough policy talk have already had some effect in slowing demand, especially in the housing sector where 30-year fixed mortgage rates have spiked from 3.11% to almost 5.30%.
Soft Landing or Recession?
In a soft-landing scenario, growth moderates but does not contract, while a recession features an economic contraction with a significant rise in unemployment. There is a great debate going on about which outcome will occur.
The yield curve has inverted (displaying a negative slope) among many maturities although the most important one — the 90-day Treasury yield to the 10-year Treasury yield — remains positively sloped. While growth has slowed in manufacturing and retail areas and consumer confidence surveys indicate a more pessimistic outlook, other indicators show a moderate expansion.
As mentioned earlier, consumer spending has come off its highs, although this is largely a shift to service spending. There is still about $2 trillion in consumer savings from Covid stimulus checks sent by the government, which provides a cushion against a weakening economy. In addition, the labor market is holding firm, producing over one million jobs in the last quarter alone.
Looking Ahead
Reflecting the more difficult environment so far this year: