“Instant gratification is one of the seven deadly killers,” says Wambolt Trader Kurt Gallup. “Staying invested and planning for the future is always the right thing to do.”
Gallup works closely with the wealth management advisors on the team to educate clients that the market rarely produces quick return. “Timing in the market beats timing of the market every single time,” he says. “There is a lot more rhyme and reason behind why assets grow in value beyond what you see on the news.”
Kurt gained valuable insight into investment strategies as a student of University of Northern Colorado’s Monfort College of Business where he helped manage a $2 million portfolio whose gains were earmarked for a student scholarship program. He recently acquired his Series 65 professional license qualifying him to be an investment advisor representative to clients. Kurt also has passed Level 1 of the Chartered Financial Analyst (CFA) program. He is a candidate for the Level 2 examination on his way to earning formal CFA designation.
Gallup enjoys analyzing financial markets and understanding the factors that determine the pricing of securities in global and emerging markets. He appreciates the open dialogue that he has with his colleagues to assess the most prudent portfolio strategy for each client.
“We put our brains together, think about client portfolio collections, and analyze securities,” Gallup says. “For example, a lot of clients had asked us about crypto currency. We laid out the risks and had detailed conversations about whether dipping into this dynamic investment would bring value to our clients. It’s our responsibility to do the research so clients are making the most informed decisions in their best interests.”
The culture of teamwork at the firm. “The good thing about working at Wambolt is that it is ‘all hands on deck,’” said Gallup. “It’s a great culture. We learn a lot from each other, we bring value to each other through our diversified talents and we’re growing at a good rate with Greg as the mentor of our pack.”
One of the factors Gallup and his colleagues watch carefully is the evolution of Artificial Intelligence and how it changes publicly traded companies. “The power of AI has shown its dominance on the market,” he says. “Companies are using AI to cut costs and increase profit margins. It has a sweeping influence.”
While AI and other technology shape company performance in the market and impact how most individuals live day to day, Gallup sees the advantages of unplugging during his free time. He heads to his family’s ranch in Edwards, Colorado to “get back to cowboy side of me.” Whether fixing broken equipment or putting up fence, Gallup connects to “an old school feeling that everything didn’t always come in an Amazon box. There’s a whole lot more to life than a screen.”
The IRS issued a news release on July 9, 2024, related to scams and evolving threats to taxpayers and tax preparers.
The IRS highlights the following as potential threats:
- Artificial intelligence or AI scams used for false correspondence, with AI being used to create fake IRS letters that are mailed to victims.
- The so-called Zero Tax program, in which callers promise to wipe out tax debt for people who owe back taxes. The callers request people’s Social Security numbers as part of their pitch, which they use for nefarious purposes.
- Social media scams circulating inaccurate or misleading tax information that can involve creating common tax documents that are false like a Form W-2 or claiming credits to which the taxpayer is not entitled like the Fuel Tax Credit, Sick and Family Leave Credit and household employment credits.
- Scammers reaching out by phone or text message to dupe people into handing over sensitive financial information in exchange for a false promise of IRS money for them.
If you receive any suspicious communications or have questions related to the legitimacy of any tax related information, please reach out to your tax preparer or to our in-house tax analyst, Evan Coats, evan.coats@wamboltwealth.com.
In addition to tracking inflationary pressures and wage growth, the Federal Reserve also tracks asset valuations to try to identify excessive increases. The Fed’s Financial Stability Report assesses the stability of the US financial system by also analyzing asset valuations, borrowings by businesses and households, leverage and funding risks.
A model used in valuing residential home values found that homes are now 25% overvalued, just below the 28% peak in 2007. Using the Labor Department’s measure of rent, home prices are 19% overvalued using private measures of market rents. The Fed also follows the S&P CoreLogic Case-Shiller U.S. national home price index, which tracks U.S. home prices nationwide. The index is up 51% since the end of 2019, an extraordinary rise relative to historical data.
Another factor that is closely followed is the cost to rent versus owning. According to the Labor Department, the owner-equivalent rent is up 24% since 2019, meaning that the cost to purchase a home has risen more than the cost to rent since 2019.
Sources: Federal Reserve Board of Governors
Markets were influenced by election dynamics and economic data in June as equities and bonds responded to uncertainty surrounding the direction of future fiscal policy and when the Fed might commence its rate reduction initiative.
Equity indices ended the second quarter mixed as the S&P 500 Index and the Nasdaq Composite Index outperformed the Dow Jones Industrial Index. Technology related companies advanced during the quarter while energy and industrial companies lagged.
Big banks underwent a stress test, which is imposed by the Federal Reserve to determine financial viability as well as the ability for banks to withstand severe economic and financial shocks. All 31 banks tested remained above their minimum capital requirements during the hypothetical severe recession scenario and are considered well-positioned to weather a severe recession and continue lending.
The most recent employment report showed that the unemployment rate rose to 4.1%, incentivizing the Federal Reserve to consider lowering rates sooner rather than later. Companies have been slowing their rate of hiring as well as increasing layoffs across various industries. Economists view these dynamics as indicative of slowing economic activity.
European central bankers, academics, financial market representatives, and journalists met in Sintra, Portugal in early July to exchange views on current policy issues and discuss long-term economic perspectives affecting European countries and the EU. Primary topics included continued inflationary pressures throughout Europe, the ongoing conflict with the Russian invasion of Ukraine, and employment challenges for the region. Subdued economic activity and slowing industrial production were part of the discussions, as Industrial production in the EU dropped by 5.4% between February 2023 and February 2024. The significant year-over-year decrease indicates a slowdown in industrial activity throughout Europe.
Financing costs for new autos remained relatively high in June, even though auto prices have been dropping. The typical monthly payment for a new auto loan set a record high of $740 this quarter, thus reducing consumer demand even as the average price on autos continue to drop due to easing supply chains and ample inventory.
China is flooding global markets, including the U.S., with cheap exports across various industries including steel, electric vehicles, solar panels, computer chips, and other manufactured goods.
China’s factories are producing far more goods than its domestic market can absorb, leading to a glut of excess supply being exported at low prices to foreign markets such the U.S. and Europe. This overcapacity issue spans multiple sectors including steel, cars, solar panels, computer chips, and other manufactured products where China has rapidly expanded production capabilities.
China’s global trade surplus in goods has soared to around $900 billion in 2022, more than double the pre-pandemic level, indicating the scale of oversupply. Factors including China’s slowing economy, protracted property slump, and shift in consumer spending patterns have exacerbated the overcapacity problem.
The U.S., European Union and other trading partners accuse China of unfair trade practices such as subsidies, intellectual property theft, and forced technology transfers that have enabled the overcapacity trend. China’s government has been subsidizing Chinese companies in order to export more competitively and aggressively.
The current U.S. administration announced major tariff hikes on $18 billion worth of Chinese imports including electric vehicles, solar cells, semiconductors, and some medical supplies to counter the inflow of subsidized Chinese products. The prior administration imposed tariffs of 25% on $300 billion worth of Chinese goods in order to stem the import of such products from China.
Sources: IMF, whitehouse.gov
The Dow Theory has been an indicator of the stock market for over 100 years, with a specific attention to transportation. It originated with a simple notion, that the Dow Transportation Index follows the Dow Jones Industrial Index. This is so because whatever the underlying 30 companies in the Dow Jones Index manufacture and produce, is ultimately shipped and transported to consumers and stores nationwide.
Market analysts have closely followed any disparities between the two indices for decades, trying to identify any lag or disconnect. Such a disparity has appeared recently, which may be an indicator of things to come.
The divergence between the DJTA and the DJIA can be significant for market analysts and investors. According to the Dow Theory, the performance of the transportation sector (DJTA) should confirm the trends seen in the industrial sector (DJIA). If the two indices diverge, it may signal potential economic issues. For instance, if the DJIA is rising while the DJTA is falling, it could indicate that goods are being produced but not transported at the same rate, suggesting a potential slowdown in economic activity.
As of May 29, 2024, the DJTA was at 14,781.56, down by 213.56 points or 1.42% from the previous close. This reflects a year-to-date change of -7.03% and a 1-year change of 6.32%. The DJIA, in contrast, had a year-to-date change of -2% and a 1-year change of 16.16%. Historically, this disparity in returns is greater than it has been.
Various factors may create or alter the performance of the Transportation Index, such as elevated fuel costs, weather, or logistical issues. Another factor has evolved more recently, whereas the believe that the U.S. economy has transformed into a more service-oriented economy with non-tangible products such as software platforms, not needing physical transportation or delivery. Incidentally, the objective results of any disparities have become much more subjective as analysts deduce varying reasons for disparities.
Sources: Dow Jones, Bloomberg
