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Q4 Earnings Roundup: On the Whole, Wholly Good
Written by RiverFront Investment Group. Reprinted with permission from RiverFront Investment Group. Redistribution is prohibited.
For some people, St. Patrick’s Day is a celebration of their Irish heritage. For others, it is primarily a religious day. (It’s named, after all, for a legendary religious figure.) More recently, it has become a celebration of Irish culture in general. But many people don’t know that St. Patrick’s Day also plays an important role in American history. Specifically, with the American Revolution.
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There have been few winters more brutal than that of 1779-1780. For the American soldiers of the Continental Army, conditions were even worse than they had been two years earlier at Valley Forge. Most of the army was camped near Morristown, New Jersey, buried under nearly six feet of snow. The soldiers had been struck by twenty-eight different snowstorms since the beginning of winter. There was a constant shortage of food and supplies. George Washington wrote that soldiers often had to go “five or six days together without bread, at other times as many days without meat, and once or twice, two or three days without either.”1 Smallpox was a constant threat. Few soldiers had adequate clothes. Most had not been paid in months.
Of the 8,000 troops in the camp, Washington estimated that as many as one-third were unfit for duty.
Despite these appalling conditions, duty never stopped. There was still a war to be fought. The men were so busy, they hadn’t even had the time to celebrate Christmas.
Washington knew something had to be done. The situation was so bad, and morale so low, that the entire army seemed on the verge of deserting. So, as winter went on, with no hope for an early spring, he began to look at a very specific date on his calendar:
March 17.
It was a well-chosen date. The day already had a tradition of being the anniversary of St. Patrick’s death. And the American army was an increasingly Irish-American army. Over 200,000 Irish people had emigrated to the colonies in the 18th century, the largest of any immigrant group.2 Many came from a long tradition of opposing British rule. As the Revolutionary War dragged on, more and more began volunteering for the Continental Army. Washington’s own aide was from Ireland, as were several of his subordinates. Of the rank-and-file, approximately 25% were either Irish-born or of Irish descent.3
Then, early in the year, news came through the camp of a possible armed revolt in Ireland. To the Americans, the idea of other kindred spirits fighting for their own liberty against the British was an inspiring one.
This convinced Washington the time was ripe to give his soldiers something they desperately needed: A holiday. And so, he selected March 17, 1780. St. Patrick’s Day.
“The general congratulates the army on the very interesting proceedings of Ireland and the inhabitants of that country which have been lately communicated; not only as they appear calculated to remove those heavy and tyrannical oppressions on their trade but to restore to a brave and generous people their ancient rights and freedom and by their operations to promote the cause of America. Desirous of impressing upon the minds of the army, transactions so important in their nature, the general directs that all fatigue and working parties cease for tomorrow the seventeenth, a day held in particular regard by the people of the nation.” 2 – George Washington, Proclamation, March 16, 1780
This was actually not the first time Washington turned to Ireland for inspiration. Four years before, he had watched British troops evacuate Boston after an eleven-month siege. It was his first major victory of the war. That day, Washington ordered that anyone wishing to re-enter the city must provide a password and countersign. The password: Boston.
The countersign? St. Patrick.
Back in 1780, the holiday was exactly what the Continental Army needed. One local newspaper reported that day was “…ushered in with music and hoisting of colors, exhibiting the 13 stripes, the favorite Harp, and an inscription declaring in capitals, THE INDEPENDENCE OF IRELAND.”4 There were parties of music and dancing throughout the camp. A Pennsylvania brigade was able to procure an entire barrel of rum. One Irish relief organization was so grateful to Washington that they named him an honorary member of their society.
Of course, the Revolutionary War still had several years left to go. But that one St. Patrick’s Day celebration helped the soldiers who secured our independence to rediscover their morale, spirit, and hope for the future. It was not only a chance for them to celebrate where they had come from. It was a chance to rededicate themselves to where they were going.
Today, St. Patrick’s Day is a celebration of Irish heritage and culture. But it’s also a chance for us as a country to do what our ancestors did: Raise our spirits, lift up morale, celebrate our past…and look forward to our future. This year, may we all do just that! So, on behalf of everyone at Hudock Capital Group, we wish you a very happy St. Patrick’s Day!
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant
1 “Washington’s Encampment at Morristown,” Battlefields.org, https://www.battlefields.org/learn/articles/washingtons-encampment-morristown-new-jersey-and-hard-winter-1779-1780
2 “Washington’s St. Patrick’s Day Proclamation of 1780,” Mount Vernon, https://www.mountvernon.org/george-washington/religion/a-brave-and-generous-people/
3 “George Washington’s Revolutionary St. Patrick’s Day,” History, https://www.history.com/news/george-washingtons-revolutionary-st-patricks-day
4 “St. Patrick’s Day 1780 in Jockey Hollow,” National Park Service, https://www.nps.gov/articles/000/stpatricksday1780.htm
The Great Cash Mismatch
Written by RiverFront Investment Group. Reprinted with permission from RiverFront Investment Group. Redistribution is prohibited.
American ‘Economic’ Exceptionalism
Written by RiverFront Investment Group. Reprinted with permission from RiverFront Investment Group. Redistribution is prohibited.
Happy Valentine’s Day!
For many people, Valentine’s is the most romantic day of the year. But not everybody feels that way. Some people are single. Some are divorced. Some are widowed. Others don’t think the idea of spending money on flowers, chocolates, and fancy dinners is romantic at all and may resent the feeling that society “expects” them to do it.
In truth, though, the day is about far more than romance. It’s about showing others they are loved and appreciated. Recently, we came across several stories of people who are doing just that: Using Valentine’s Day to spread love in their communities and show appreciation to those who need it most. In honor of the holiday, we thought we’d share three of those stories with you.
At Rush University Medical Center in Chicago, many of the patients are veterans. Most of these wounded warriors are there for the long term. Some are injured in body, mind, and heart. Others are elderly and frail, their bodies finally on the verge of giving up the long fight.
All have dedicated their lives to serving their country.
So, every Valentine’s Day, a group of local teenagers take the time to show these veterans how much their service and sacrifice mean to the community. Working with the residents of a nearby senior living community, the teens craft Valentine’s Day gifts by hand. First, they paint dozens of bowls, then fill them with paper hearts and cranes. Each is carefully shaped, cut, and folded with as much care and love as possible.
The students were not the first to do this. The tradition started eight years ago with former students and has continued ever since. And they know they will not be the last.
According to the hospital staff, “It lets [the veterans] know we love them, and we appreciate them. When they get these [Valentines], it really warms their heart.”1
And as one gift giver put it: “By showing love for other people, we can be their Valentine in a way.”1
***
When it comes to showing love, nothing on Earth shows it better than a dog. That’s why, in the Philippines, some people choose to spend Valentine’s Day giving love back.
Every Valentine’s Day in Manila, an animal shelter charges guests about $10 to spend half an hour with a rescue dog. Many of the dogs came from abusive households or experienced trauma. The fee goes to running the shelter, which cares for over 240 dogs and cats. The guests can choose one or more dogs to walk and play with, and many will choose to adopt their new furry friend. But all the dogs benefit, because it helps them relax, improve their social skills…and yes, feel more loved.
Says one of the caretakers: “A lot of animals in the shelter can give all the love that they can give, but they aren’t given a chance.”2 But now, many dogs will get that chance.
Thirty minutes with a dog. Who could ask for a better date on Valentine’s Day?
***
As you know, few gifts are as romantic as flowers – making Valentine’s like Christmas for the floral industry. In fact, 250 million flowers are sold around the world every Valentine’s Day!
For some people, though, Valentine’s Day doesn’t trigger feelings of romance, but of loneliness. This is especially true for those who have lost their spouse or partner. Back in 2021, a florist in North Carolina decided it was time those people felt loved around the holiday, too.
It all began when the florist, Ashley, delivered a bouquet to her son’s preschool teacher as a gift. It meant so much to the teacher that Ashley started thinking about others who might enjoy a similar gift. With the help of some volunteers, Ashley decided to deliver free flowers to widows in her community. Using Instagram to get the word out, Ashley built a list of 125 people.
The next year, that number increased to 800.
Since then, Ashley has raised $50,000 and recruited over 1000 volunteers to help make Valentine’s Day special to those who have lost their spouse or partner. The initiative has become so popular that she no longer does regular business on Valentine’s Day. Instead, she spends that time knocking on doors and delivering flowers to those who least expect them…and most appreciate them.
“It’s a total surprise, and [at first] there is a lot of confusion,” Ashley says. “But on a day that may be sad, you open your door, and there’s a young person there with a bouquet and gifts saying, ‘We just want you to know you’re loved today and every day.’ We flipped the script and turned it into a holiday that is not just for people who are married or have a partner to celebrate with. When we see the smiles on people’s faces, it’s encouraging to know there are a lot of good people in this world, and it takes one movement to create a ripple effect.”3
To us, these stories prove that Valentine’s Day isn’t just for romance, as fun as that can be. It’s a day for spreading love throughout our community. A day for letting those around us know they are appreciated, valued, and seen. And that, to us, makes it a special day indeed. So, on behalf of everyone here at Hudock Capital Group, we want you to know how much we value and appreciate you. Have a wonderful Valentine’s Day!
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant
1 “For Valentine’s Day, Chicago teens, seniors spread love with veterans,” CBS News, www.cbsnews.com/chicago/news/valentines-chicago-veterans/
2 “Animal lovers book Valentine’s with shelter dogs,” Reuters, www.reuters.com/lifestyle/philippines-animal-lovers-book-valentines-dates-with-shelter-dogs-2023-02-14/
3 “Charlotte florist gives flowers to widows on Valentine’s,” CBS News, www.cbsnews.com/news/valentines-day-flowers-charlotte-florist-widow/?intcid=CNM-00-10abd1h
Our ‘Three Tactical Rules’ Collectively Flashing Yellow
Written by RiverFront Investment Group. Reprinted with permission from RiverFront Investment Group. Redistribution is prohibited.
All-Time Highs: Nothing to Fear
Written by RiverFront Investment Group. Reprinted with permission from RiverFront Investment Group. Redistribution is prohibited.
Walking the Talk
Written by RiverFront Investment Group. Reprinted with permission from RiverFront Investment Group. Redistribution is prohibited.
Q4 Recap: Just like Q3, in Reverse
Written by RiverFront Investment Group. Reprinted with permission from RiverFront Investment Group. Redistribution is prohibited.
Every January, it’s customary to look back on the year that was. What were the highlights? What were the “lowlights”? What events will we remember? Most importantly, what did we learn?
As you know, many noteworthy and historic events happened in 2023. Conflicts in Gaza, Ukraine, and Sudan. India surpassed China as the most populous country in the world. New temperature records were set all around the globe. The use of “artificial intelligence” exploded and turned multiple industries on their heads. Chinese spy balloons and deep-sea submarines grabbed the headlines. The “Barbenheimer” phenomenon reinvigorated Hollywood.
But in some ways, one of the most notable occurrences of 2023 is actually what didn’t happen: We never entered a recession.
When 2023 began, the fear of a recession was so widespread that it almost seemed inevitable. According to one survey, 70% of economists expected a recession to hit the U.S. in 2023.1 Another survey found 58% of economists believed there was a more than 50% chance of a recession. 1 For politicians, pundits, and analysts, it was practically all they could talk about.
But it never happened. Instead, the economy grew by 2.2% in the first quarter, 2.1% in the second, and 4.9% in the third.2 (As of this writing, the numbers for Q4 are not yet available, but it’s expected to go up again.) None of this is to say that our economy is perfect, or that we won’t have a recession in the future. But for 2023, all the gloomy forecasts simply didn’t come to pass.
Now, let’s be fair to all those economists who got it wrong: They had very good reasons for expecting a recession. Reasons based on data, logic, and history.
You see, when the year began, the U.S. was coming off a nasty 2022. While consumer prices were already coming down from their earlier highs, the national inflation rate was still 6.5%.3 Interest rates, meanwhile, had risen dramatically, from just above 0% at the beginning of 2022 to over 4% by the end.4 It was already the highest level we’d seen in fifteen years – just before the Great Recession, in fact – and every indication was that rates would continue to rise higher. All this economic pain was reflected in the stock market. The S&P 500, for example, dropped over 19% in 2022.5
For economists, all this data seemed to point a clear way forward. The Federal Reserve is mandated to keep consumer prices as stable as possible. (Its target has long been to hold inflation to around 2%.) When inflation runs hot, the Fed’s main tool for lowering it is to raise interest rates. Higher rates often lead to lower consumer spending. Lower spending, in turn, prompts businesses to decrease the cost of the goods and services they provide. Essentially, higher rates create an environment where supply is greater than demand, thus cooling inflation.
But there’s a side effect to this. If spending drops too much, businesses are often forced to cut back on expansion, investment, and labor costs. This leads to a rise in unemployment…and a contracting economy. In short, a recession.
This string of events isn’t just logical. It’s supported by history. When inflation has skyrocketed in the past, the Fed’s playbook has usually worked to bring prices down…but it’s usually triggered a recession, too. Economists call this a “hard landing.”
Take a look at these two charts. The top shows interest rate levels since 1955.3 The gray bars indicate a recession. Notice how often a gray bar appears in the aftermath of a sharp rise in rates? Similarly, the bottom chart shows the unemployment rate.6 See how the gray bars always coincide with a major spike in unemployment? It’s clear that, historically, fast-rising rates often trigger a rise in unemployment…which contributes to a recession.
What about when prices come down, but the economy does not? Economists call that a soft landing, and it’s proven to be very difficult to achieve. It’s no surprise, then, that most economists predicted a hard landing in 2023.
One year later, that hasn’t happened. Interest rates did continue to rise. As of this writing, they’re at 5.3%.4 Inflation has continued to cool, albeit slowly. As of November, the inflation rate was 3.1%. That’s a 3.4% drop from the beginning of the year.3 But consumer spending has remained steady. The labor market has remained strong. The unemployment rate was only 3.7% as of November.6 And, as we’ve already covered, the economy has continued to grow.
From a financial standpoint, this, to me, is the major storyline of 2023. Which means we have to ask ourselves: “What can we learn from it?” As your financial advisors, we’ve taken the time to jot down a few lessons we think are worth remembering as we move into the New Year. Here they are:
#1: Always emphasize preparation over prediction. The economists who predicted a recession weren’t stupid. They used the best data they had to make the best predictions they could. But 2023 shows that even the most well-informed people simply can’t see the future. Even the near future! There are simply too many variables to consider. That’s why, as investors, we have to always emphasize planning over predicting. We can’t predict when the markets will drop nearly 20%, as they did in 2022.5 Or, when they’ll rise by well over 20%, as they did in 2023.5 What we can do is plan ahead for what we’ll do if the markets fall, or if they rise. We can prepare mentally and financially for both market storms and market sunshine. So that we can weather the former and take advantage of the latter.
When we predict, we’re essentially swinging for the fences on every pitch. Occasionally, a prediction can lead to a home run…but it can also lead to a lot of strike outs. By planning, we don’t have to swing at all. Since we can’t control the situation, we simply make the best out of every situation. We control only what we can control – ourselves.
#2: Be wary of confirmation bias. Earlier in the year, many people were convinced a recession would happen. Because of that, they tended to disregard all data that pointed away from a recession, and only valued information that confirmed what they already believed. As a result, many investors missed out on a stellar year in the markets! This is another example of why preparing is so much better than predicting. It removes emotion from our decision-making. Because we’re not so focused on “being right,” we can focus instead on “being ready!”
#3: Remember that past performance is no guarantee of future results. You’ve probably seen this line in the past, and 2023 is a great example of why. Just because rising interest rates have led to recessions in the past doesn’t mean they always will. Just because the markets went one direction yesterday doesn’t mean they’ll go the same direction tomorrow. While history is a great resource to draw from when making decisions, it’s just a guide, not a guarantee.
#4: At the same time, don’t anchor to the present. As humans, we have a natural tendency to think that the way things are today is how they’ll be tomorrow. When 2022 ended, many investors felt that 2023 would be much the same. Now, we run the risk of thinking that just because a recession didn’t happen last year, it won’t happen this year.
Again, it all goes back to planning and preparation. Here at Hudock Capital Group, we will continue to prepare for all possible outcomes. We’ll plan for how to reach the outcomes we want and avoid the ones we don’t. But instead of predicting, instead of assuming, instead of anchoring, we will accept that the future is written in clay, not stone. Only when it becomes the past does it harden. So, when you get right down to it, the lesson of 2023 is this: The future is flexible, and so we must be flexible, too. By doing this, we can continue shaping your future into whatever it is you want it to be.
So, that’s 2023! We hope it was a wonderful year. On behalf of our entire team, we look forward to making 2024 even better. Have a Happy New Year!
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant
SOURCES:
1 “Top US economists are often wrong – should we trust their predictions?” The Guardian, www.theguardian.com/business/2023/nov/19/us-economists-wrong-predictions
2 “Annualized growth of real GDP in the United States,” Statista, www.statista.com/statistics/188185/percent-change-from-preceding-period-in-real-gdp-in-the-us/
3 “United States Inflation Rate,” Trading Economics, https://tradingeconomics.com/united-states/inflation-cpi
4 “Federal Funds Effective Rate,” St. Louis Fed, https://fred.stlouisfed.org/series/FEDFUNDS
5 “S&P 500 Historical Annual Returns,” Macrotrends, https://www.macrotrends.net/2526/sp-500-historical-annual-returns
6 “Unemployment Rate,” St. Louis Fed, https://fred.stlouisfed.org/series/UNRATE
You know Dasher, Dancer, Prancer, and Vixen…but do you recall the most famous reindeer of all?
We’re referring, of course, to Rudolph the Red-Nosed Reindeer. And yes, we know what you’re thinking: everyone knows Rudolph. But do you know the actual story behind everyone’s favorite flying deer? Until recently, all we knew were the words to the song. But the other day we came across the history of Rudolph and found it so fitting for the season that we thought we’d share it with you today.
It was January 1939. The Great Depression was ongoing, and war was breaking out all over Europe. It wasn’t exactly the most festive of times – especially for a young writer named Robert L. May.
At the time, Robert was working as a copywriter for the Montgomery Ward department store in Chicago. While he was often seen as the life of every party, in private he found himself feeling more and more downhearted. For one thing, he was buried in debt, as many Americans were, with little prospect of getting out of it. Professionally, he felt like a failure. Instead of writing the next Great American Novel, he spent his days writing catalog copy, trying to make dress shirts sound exciting. Worst of all, his wife was dying of cancer. Soon, he knew he would have to raise their only daughter alone.
So, when he came to work one freezing day in January, the last thing he felt was the holiday spirit. In fact, he later confessed to being relieved that the Christmas decorations from the previous year were finally being taken down. But as any good writer would tell you, this is the point – when things look bleakest, and the main character is at their lowest point – that the story takes an unexpected turn.
That day, Robert’s boss came to him with an unusual request. Every Christmas, the company released a promotional coloring book for children. Since Robert was so good with jokes and limericks, would he be willing to write a story to go along with the next one?
Writing something jolly as a way to sell more clothes was the last thing on Robert’s mind. But he was in no position to say no – so, of course, he said yes.
Robert got down to work. At first, all he could come up with was that the story should be about a reindeer since his little daughter loved seeing them at the zoo. But that presented a problem. Reindeer were already associated with Christmas. Ever since the poem A Visit from Saint Nicholas was published back in 1820. Every child in the country could list their names: Dasher, Dancer, Prancer, Vixen, Comet, Cupid, Donner, and Blitzen. So, what would the story actually be about?
Then, one day, Robert looked out his window at the wintry fog coming off Lake Michigan. That’s when it hit him: How could Santa Claus or his reindeer ever deliver presents in conditions like that?
The solution, Robert decided, was to create a ninth reindeer…with a glowing nose that could guide Santa in
the fog. He wrote down a list of names, all beginning with the letter R for “alliterative purposes.”1 There was Rodney, Roddy and Roderick. He tried Rudy, Romeo, and Rolland, too. At last, he came up with a group of three finalists: Rollo, Reginald, and…Rudolph. He selected the last because it “rolled off the tongue nicely.” 1 Rudolph the Red-Nosed Reindeer was officially born!
Meanwhile, his wife’s sickness worsened. Instead of running away from his grief, Robert decided to draw from it. He also drew from his experiences as a child when he had been bullied or didn’t quite “fit in”. So, he made the story open on a sad, crying reindeer. A reindeer who just couldn’t understand why life was being so cruel. A reindeer who knew it had more to offer the world than the world could see.
Robert decided to write the story as a poem, using the same meter as A Visit from Saint Nicholas. Slowly, the story took shape. But then, in July, his wife passed away. His boss offered to take the story off his plate and assign it to someone else, but Robert refused. As he later explained, “I needed Rudolph now more than ever. Gratefully, I buried myself in the writing.”1
By the end of summer, Robert had a draft. But when he showed it to his boss, the response was, “Can’t you come up with anything better?”
That might have been the end of poor Rudolph right there – had Robert not received somewhat different feedback from much more important critics. When he read it to his daughter and his wife’s parents, they immediately fell in love with the red-nosed deer. “In their eyes, I could see that the story accomplished what I had hoped,” he later said. 1
So, Robert enlisted a friend to draw pictures for every page. This time, the story was accepted…and the company distributed more than two million copies across the country. Then, a small publishing house printed the book in hardcover, and it became a best-seller. Eventually, the rage died down. Robert continued to work for Montgomery Ward, although, like Rudoph, his life improved from that point on. He was able to get out of debt and, a few years later, remarried.
After World War II ended, the company decided to give the rights to Rudolph entirely over to Robert, thinking the reindeer’s usefulness was over. So, Robert asked his brother-in-law, a musician, if he wouldn’t mind turning the poem into a song. The song found its way into the hands of the legendary singer, Gene Autry…and the resulting recording sold more than 25 million copies.
Having started under a mountain of debt, Robert and his family were financially set for life. And though he may not have written the Great American Novel, he wrote something that, perhaps, will last for even longer: A reindeer that will go down in history. A reindeer that, as the Chicago Tribune once wrote, “has become the first new and accepted Christmas legend since A Visit from St. Nicholas.”2
We all experience low points in our lives. Sometimes, we feel discouraged about where we are in life. But we love this story because it reminds us that, with just a bit of hope, a bit of belief in ourselves, and by remembering that all of us have so much to offer the world – like Robert, like Rudolph – things will get better. So, on behalf of everyone on our team, we wish you a Merry Christmas! May your holidays be as bright as the nose of a very special reindeer soaring across the sky.
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant
1 “Rudolph the Red-Nosed Reindeer Origins,” TIME, https://time.com/5479322/rudolph-the-red-nosed-reindeer-history-origins/
2 “Robert L. May,” Wikipedia, https://en.wikipedia.org/wiki/Robert_L._May
2024 Outlook Summary: ‘Tap-Dancing on a Tightrope’
Written by RiverFront Investment Group. Reprinted with permission from RiverFront Investment Group. Redistribution is prohibited.