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Have you ever received a gift you didn’t actually want? Well, investors got just such a gift recently – the kind nobody wants. We’re not talking about an ugly sweater or a pair of socks. We’re referring to a new bout of market volatility, just in time for the holidays.
(Quick recap in case you haven’t been following the news. The Dow fell over 900 points the day after Thanksgiving – giving a whole new meaning to the term “Black Friday” – and then it slid a further 650 points on November 30.)1
So, what’s the cause of this winter wobble? Three familiar characters from our ongoing pandemic drama: COVID-19, inflation, and the Federal Reserve. In this message, we’ll recap what’s going on and then discuss what we as investors can do about it. Let’s start with…
The Omicron Variant
On November 26, the World Health Organization announced the discovery of a new variant of COVID-19 designated as Omicron. What we know: It was first discovered in South Africa, and it contains “an unusually large number of mutations” from the original virus.2
Here’s what we don’t know: Is Omicron more contagious? Is it more virulent? Can it evade the protection offered by vaccines? Scientists are racing to find the answers, but until they do, the rest of us must wait.
When it comes to the markets, what we know prompts investors to buy, but what we don’t spurs the impulse to sell. The markets hate unknowns. When faced with too many – especially on such an important subject – the reaction tends to be fear and panic. That’s especially true here. You see, any answers scientists come up with will inevitably lead to more questions. For example, if Omicron is more contagious, will it lead to fresh lockdowns and restrictions? Will that derail the economic recovery? If so, would that also overturn the bull market?
Another unknown: How will Omicron affect our second character, inflation?
Inflation
As you know, inflation has risen sharply in 2021. While inflation doesn’t directly impact stocks as much as, say, bonds, it can still spook investors. That’s because higher inflation typically leads to higher interest rates – more on this in a moment – which can cut into corporate profits. Inflation can also increase the cost of doing business, such as hiring new employees or purchasing new equipment. This eats into profits further still.
With Omicron, experts are trying to figure out what the new variant will do to inflation. There are three possibilities.
First, if Omicron were to cause an economic slowdown – and remember, that’s still a big “if” at this point – then that would likely dampen inflation. (Remember, inflation increases when demand outpaces supply.) But if demand were to fall, inflation would, too. Unfortunately, an economic slowdown is not the remedy anyone would choose to fight inflation.
The second possibility is the exact opposite: Omicron could make inflation worse. Imagine that Omicron doesn’t require a new wave of restrictions here in the States. In that case, the economy probably wouldn’t be affected too much. But there’s more to the world than the United States. If other nations – those with a lower percentage of vaccinated citizens, say – were to get hit hard by Omicron, it could further snarl supply chains. Given that supply is already struggling to keep up with demand, that would be like trying to put out a fire with gasoline.
The third possibility: Omicron turns out to be manageable and has little to no effect on inflation or the economy. Keep an eye on this space!
In the meantime, though, these unknowns are giving our third character a major headache.
The Federal Reserve
Ever since the pandemic began, the Federal Reserve has tried to prop up the economy by keeping interest rates near zero. But with inflation on the rise, the Fed recently signaled plans to wind down their stimulus efforts. Their reasoning? The economy is strong, and inflation doesn’t seem to be going away, so it’s time to start raising interest rates. (Higher interest rates tend to cool off the economy, because they prompt people to save their money instead of spending or borrowing it. A cooler economy decreases inflation, and things gradually go back to normal.)
The problem is the stock market has become accustomed to the Fed’s low interest, “easy money” policies. Low interest rates mean that many securities, like bonds, simply don’t provide the same return on investment as they would in a high-interest-rate environment. That drives more into the stock market to get the returns they need. Higher interest rates could potentially reverse this trend. That’s why investors don’t like any talk of the Fed “tapering” their stimulus program.
On Monday, November 29, the Chairman of the Federal Reserve announced the possibility that tapering might happen even sooner than investors thought.3 That was too much for investors handle, preoccupied as they already were with the Omicron variant.
And now you know why the markets delivered a big, ugly pile of volatility on our doorstep. There wasn’t even a bow on it!
So, what do we do?
we were thinking about how best to answer this question when we came across another headline: The start of the 2021 World Chess Championship in Dubai. Then it hit us. The best way to describe what we as investors should do is by comparing it to what the top chess players do.
The best chess players are masters at calculating possibilities. (“If I move my Bishop here, he’ll have to move his Queen there, which means I can move my Knight…”) In some ways, they think like computers, and indeed they often use computers to figure out the best moves to play.
But no human can calculate everything. There are occasions when the position is just too complex to predict every possible outcome. In some cases, they literally don’t have time to calculate, and must make a move with only seconds on the clock. In a sense, chess players, like investors, are always operating under uncertainty.
When this happens, chess players rely on principles instead of predictions. They make decisions they know to be fundamentally sound, even if they can’t calculate the result. They don’t react emotionally. They don’t guess. They rely on years of training and experience, knowing that, more often than not, their overall strategy will see them through.
Analysts, pundits, the Federal Reserve – they’re all trying to calculate. But no one can calculate everything, which is why no one knows exactly what the future holds. As a result, too many investors fall back on emotional guessing as they try to navigate unknowns. Hence, the big selloff right after Thanksgiving.
We’re not going to do that. Right now, the markets are beset with unknowns. Since we can’t calculate every possible outcome, we’re going to rely on principle instead of prediction. We know that volatility is always temporary. We know that none of these unknowns are actually new – investors have been wrestling with them for a year now. (Just swap “Omicron” for “Delta”.) And we know our long-term strategy has helped you get closer to your long-term goals. In other words, we’ve put our pieces on good, sound squares – and we’ll continue to do so moving forward.
That way, you’ll be giving yourself the kind of gift everyone wants: Financial confidence.
In the meantime, our advice is to enjoy the holiday season! We hope it’s a wonderful one, filled with family and good cheer. As always, let us know if you have any questions or concerns about your portfolio. We are always happy to talk with you!
Happy Holidays!
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant
1 “Dow drops 650 points on growing omicron fears, Powell taper comments,” CNBC, https://www.cnbc.com/2021/11/29/stock-market-futures-open-to-close-news.html
2 “SARS-CoV-2 Omicron variant,” Wikipedia, https://en.wikipedia.org/wiki/SARS-CoV-2_Omicron_variant
3 “Powell: The Fed May wind down its stimulus sooner than expected,” CNN Business, https://edition.cnn.com/business/live-news/stock-market-news-113021/h_59fd45577438f2211df2aedffcea26d9
It is cold, muddy, and the cities are in ruins. It is France, November 1918, and over a million Americans are about to miss Thanksgiving, being far away from home.
The First World War has ended, Germany having signed an armistice only a few weeks before. The rebuilding, however, has just begun. It will be a long time before the Americans – doughboys, as they are popularly known – sail back across the Atlantic. Many are wounded and most are sick; either homesick or from disease.
Back in the states, people are rationing food. The government asks them to cut back on sugar (none on fruits or in desserts, less on cereals and in coffee) and refrain from eating turkey and cranberry sauce. Thanksgiving dinner will be as “home grown as possible,” with each family expected to grow their own food.
“Everybody is expected to remember that other nations are subsisting on tight belt rations,” declares one newspaper.1 Since our Allies know only scorched fields and devastated economies, their ability to feed themselves – much less our troops – is limited. “Only by moderation in use of food on our part can this condition be bettered.”
After all, everyone knows someone “over there.”
In the trenches and the hospitals, the doughboys write letters to their loved ones. They are anxious for news, stories, and written kisses, anything to feel closer to home. Anything to make home closer to them.
Then, the flyers arrive.
Five-hundred-thousand soldiers receive a copy of Abraham Lincoln’s legendary proclamation: that all Americans, including those sojourning in foreign lands, should give thanks “with one heart and one voice” for their blessings. Lincoln’s words strike a chord. Auxiliary organizations set up Thanksgiving Day celebrations for the benefits of the troops. The Y.M.C.A. arranges football games between rival units. Those soldiers who were professional actors, comedians, and singers before the war stage plays and dances. Technicians erect movie screens; carpenters lay down dance floors. And all the turkey, cranberries, cider and pumpkin pie willingly forfeited back home arrives via the Red Cross. The sick and the wounded, the bent and broken – each gets a Thanksgiving feast.
Perhaps it is not quite like mother would have made it. But it is close.
Then, an announcement comes down the lines. All over France, families are inviting American soldiers into their houses. This family can host three men. This family can host five. And on and on and on. What little they have to share – and for most, it is little indeed – is shared gladly. Commanders publish official lists of those soldiers who most desire a meal around an actual table, in an actual dining room. In response, local French communities take the lists and send out personalized invitations.
All so these strangers can feel closer to home.
In France, there is no such holiday as Thanksgiving. This year, the French celebrate it anyway. And on both sides of the Atlantic, people unite with one heart and one voice, just as Lincoln wanted.
That was Thanksgiving, over 100 years ago.
Isn’t it astounding to see how, even after such a long and horrible conflict, people still found so much to be thankful for? Even more astounding is how people relished the opportunity to give thanks. They saved and skimped and shared. They opened their doors to strangers.
They worked just to make Thanksgiving possible.
Now, over a century later, we think about all we have to be thankful for. It’s an enormous list. Unlike those doughboys, we are not wounded, hungry, or homesick. Unlike their families, we do not have to ration food or go without. And unlike the French, we do not see a ruined, smoking skyline whenever we step outside our doors.
Yes, we have so much to be thankful for.
We are thankful for this country. We are thankful for all people in our lives who have ever shown us kindness. We are thankful for the convenience of this modern world we live in.
And we are thankful for a chance to express our gratitude every Thanksgiving.
This year, let us do as President Lincoln asked and give thanks with one heart and one voice. Let us remember how far we’ve come since that day in 1918.
Let’s have a wonderful Thanksgiving.
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant
Sources:
“Turkey, Football, Shows on A.E.F’s Thanksgiving Day,” The Stars and Stripes, November 22, 1918. http://www.oldmagazinearticles.com/Thanksgiving_in_WW1_France-pdf
“Sugar Conservation,” U.S. Food Administration, 1917-1919, U.S. National Archives
Frederic J. Haskin, “Thanksgiving Dinner of Home Grown Food Advocated by Hoover,” The Wyoming State Tribune, November 23, 1918. https://blog.genealogybank.com/rationing-thanksgiving-dinner-during-world-war-i.html
Happy Veterans Day!
As you know, Veterans Day is a chance to honor those who have served our country. Of course, we always hope that when soldiers return home from defending our country, they are rewarded for their heroism. Sometimes, it may be in the form of a ticker tape parade. Sometimes it may be a medal ceremony. Sometimes it may be a plaque hung in their honor at their old high school. It can come in many forms, but recently, I read about one soldier – Air Force pilot Royce King – who received the greatest reward of all. You see, Royce got to watch his wife walk down the aisle in her wedding dress.
He just had to wait 77 years to do it.
The year was 1944. World War II was still raging across several continents when Royce King was told he would be stationed overseas for the Air Force. Royce had always wanted to fly and had no qualms about serving his country. But there was just one problem: He and his fiancé, Frankie, were due to be married. Because the young couple had already been engaged for six months, they didn’t want to delay their marriage until after the war. After all, no one knew how long it would last – or if Royce would come home at all.
Unfortunately, Royce was given only two days to say his goodbyes. That simply wasn’t enough time to stage their dream wedding, so Frankie and Royce had to improvise. They quickly booked a local church, but there was no photographer. No elaborate meal for all their friends and family. No grand wedding cake. Not even a dress – Frankie wore a tailored suit instead of a white gown.1
But it was enough. Because what they did have was each other.
The next day, Royce shipped out. For a year, he flew a C-47 over the Himalayas. Luckily, he returned home in one piece, and though they didn’t get a dream wedding or idyllic honeymoon, he and Frankie spent over seven happy decades with each other.
Yet, while Royce and Frankie were content, their children – and the staff of St. Croix Hospice, who care for the elderly lovebirds – were not. So, they took matters into their own hands.
On September 24, 2021, staffers helped the 98-year-old Royce into his old Air Force uniform. They placed a handkerchief over his eyes and led him into the backyard to stand under a white arch. In the background, another staffer played hits from the 1940s on his guitar and saxophone. Then, Royce’s daughter, Sue, stepped up and said, “Are you ready to see your bride?”
They removed the blindfold. For the first time, the pilot, the veteran, the hero, was able to see his beloved Frankie in a beautiful white dress.
As Sue later described it, “He gazed at her and just beamed. They both did.”2
The rest of that afternoon, husband and wife kissed under the arch, danced to the tunes of their youth, and posed in front of a photographer. For the staff of St. Croix Hospice, it was a chance to give back to a hero. For Royce and Frankie’s families, it was a chance to finally be able to peruse photos of a beautiful wedding.
And for one old soldier, it was a reward long delayed…but a reward well-worth the wait.
***
As you know, veterans give up so much in defense of our country. Their time, their talents, and sometimes their lives. But they also give up many of life’s richest experiences. High school graduations and first dates and Saturday nights spent with friends. Opportunities to be best men or bride’s maids. Birthday parties and funerals. Their child’s birth. Their child’s first steps.
The chance to see the person they love walk down the aisle.
Our job, as citizens, is to honor and reward our veterans as much as we can. The staff of St. Croix Hospice did that. We hope we can all find opportunities to honor them in our own way, too. So, this Veterans Day, let’s all strive to remember the veterans in our communities. Let’s all strive to make their futures as rich as the future they have given us.
From everyone here at Hudock Capital Group, we wish you and the veterans in your life a happy Veterans Day. And to Royce and Frankie…congratulations!
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant
1 María Luisa Paúl, “After 77 years, Iowa couple gets long overdue wedding photos – with help from hospice workers,” The Washington Post, October 10, 2021. https://www.washingtonpost.com/lifestyle/2021/10/10/hospice-workers-help-couple-take-wedding-photos/
2 Caitlin O’Kane, “Couple gets wedding photo redo 77 years later,” CBS News, October 14, 2021. https://www.cbsnews.com/news/bride-wedding-day-hospice-77-years-later/
Remembering September 11…and the Day After
This month, we observe the twentieth anniversary of the September 11 attacks. But there’s another day we feel we should be observing, too. The Day After. September 12.
Now, what’s so special about this day, you ask? It’s simple. If September 11 was the day America was hurt, September 12 was the day America began to heal.
It’s been a long road for our country since then. So much has happened, so much has changed. One of those changes, in my opinion, is the role September 11 plays in our lives…and the place it holds in our hearts.
You see, when those nineteen terrorists seized the planes, they were trying to drive a wedge through the heart of America. They wanted every American to feel terror and hatred. And it worked – but only for a short time. Because even though the towers fell, something happened after September 11 that they couldn’t anticipate. Something far too powerful for them to ever destroy.
That thing was September 12.
On September 12, firefighters rescued two survivors who were buried beneath the rubble, even after all hope of finding survivors was lost.
On September 12, workers began the monumental task of cleaning and then rebuilding Ground Zero.
On September 12, candlelight vigils were held in Union Square, Central Park, and locations around the country.
On September 12, other nations played The Star-Spangled Banner in honor of the United States.
On September 12, parents everywhere hugged their children close and whispered, “I love you.”
On September 12, spouses held hands and gave thanks for what they had.
On September 12, the country began to heal.
Since then, we remember September 11 differently than the terrorists wanted us to. Yes, we still feel sadness for those who lost their lives, or who lost loved ones. But every September 11, we spend more time marveling at the bravery and heroism of those in the towers and on the ground; in the planes and the Pentagon. We spend more time reaffirming our love for those around us. We spend more time reflecting on the rights and freedoms we enjoy.
We spend more time being grateful for our country.
All of us, we think, have at some point wondered, “Why?” Why did September 11 happen? Why did such a tragedy occur? Why is there evil in the world? But at some point, those questions recede into the background. Anger and bewilderment over the past fade…replaced by hope for the future.
As Brian Clark, a survivor of the World Trade Center, once said:
“Why am I here? What is the reason I was saved? They’re really unanswerable questions. After going through something like I did, all you can do is try to live your best life from day to day and move forward with gratitude.”1
No terrorist in the world could stop America from healing…or her people from moving forward with gratitude. Twenty years later, that, to us, is the legacy of September 11. That is why we will always remember that fateful day.
And it’s why we will always remember September 12.
On behalf of our entire team, we wish you a safe and peaceful September 11…and a hope-filled September 12. May we never forget.
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant
1 “9/11 Survivors Reflect on Their Miraculous Escape,” People Magazine, September 11, 2017. https://people.com/human-interest/911-survivors-reflect-escape-south-tower/
On July 4, 1852, a young man named Ezra Meeker found himself staring up at a huge granite monolith in central Wyoming. It was called Independence Rock, partially because westward-bound pioneers, like Ezra, knew that if they made it to this landmark on or before Independence Day, they stood a good chance of reaching their destination before winter came.
That day, Ezra was more concerned about keeping his wife and newborn baby alive than anything else, but he and the other pioneers in the area did take the opportunity to celebrate Independence Day. He also took the time to carve his name into the rock, like hundreds had before him, and hundreds would after. Then, he continued his way along the Oregon Trail.
In 1906, fifty-four years later, Ezra Meeker found himself concerned that the nation’s memories of the Oregon Trail were beginning to fade. So, despite being 75 years old, he set out again, retracing his exact steps along the trail in an actual covered wagon. Along the way, he set markers and tablets, designating important landmarks and milestones. And once again, on July 4, he found himself staring up at Independence Rock. He was no longer able to climb to the top, as he could in his younger days, but he still inscribed a message for future generations to read:
The Old Oregon Trail, 1843-57
In 1916, now 85, Meeker traveled the trail again –this time in a Pathfinder automobile. Although the car was an absolute relic by modern standards, Meeker was probably amazed at how much faster and easier the route was compared to when he walked it on his own two feet. Along the way, he became one of the first advocates for a national highway system, so that every American could travel the width and breadth of our country.
The years passed. Technology improved. The country changed. But Meeker kept on traveling. And for his last trip over the Old Oregon Trail, in 1924 at the grand age of 93, Meeker finally did it in style – in an airplane.
Between Meeker’s birth and his death, America celebrated 97 birthdays. We’re sure Meeker was astonished at how much the nation changed during that time. It expanded, going from 30 states to 48. It grew, going from roughly 13 million people to over 120 million. It mechanized, with horses and covered wagons being replaced by trains, then cars, and finally aircraft. It modernized, thanks to the invention of the camera and the film projector. When Meeker was born, the telegraph was just coming into use. During his life, he would witness the birth of both the phone and the radio. (In fact, Meeker made an appearance on the radio one year before he died. He declared it a “new and wondrous invention.”1)
Most of all, the country progressed. During Meeker’s life, slavery ended, women won the right to vote, and children swapped the coal mine for the classroom.
In a few years, America will have celebrated almost 100 more birthdays since Meeker died. If he were to see America today, we think he would be even more impressed! Meeker dreamed of a national highway. Today, we have 70 different interstates. Meeker appeared on the radio. Today, we have smartphones. Meeker flew in an airplane. Today, we have spacecraft. 48 states have become 50; 120 million people have become 330 million.
When the pioneers reached Independence Rock on the 4th of July, they couldn’t possibly fathom how their country would change over the decades. Now, as we celebrate another birthday for our great nation, we wonder how it will continue to change. What amazing new inventions await us? What progress will we make, and our children after us?
There are many reasons to be grateful for the United States of America. But high at the top of our list is that we live in a country that is constantly changing, constantly moving, constantly growing. America never stands still. Neither do her people. That was true in Ezra Meeker’s day, and it’s true in ours.
And for that, we are grateful.
So, happy birthday America! We can’t wait to see where you’ll go – and how you’ll grow – next. And to you, we wish a very happy Independence Day!
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant
1 “Meeker, Ezra,” HistoryLink.org, 5/02/2006. https://www.historylink.org/file/7737
As you know, the world is full of important people. From presidents to scientists to singers, all celebrities influence our culture in different ways. But when it comes to us as individuals, there are few people more influential than our fathers. Fathers inspire us, guide us, and motivate us. They not only shape who we are, but also what we will become. Their impact can even be felt long after they’re gone.
Take the story of Rivaldo Vitor Borba Ferreira … or just Rivaldo for short. Rivaldo is a retired Brazilian soccer player, famous the world over for the goals he scored, the trophies he won, and the skill he displayed. But that’s not what makes his story so compelling … nor is it what this letter is about. This letter is not about Rivaldo the athlete, but Rivaldo the father and Rivaldo the son. It’s about family.
Rivaldo spent his childhood in Recife, a city on Brazil’s northeast coast. Like most cities, Recife has both its glamor side and its less glamorous side, and it was the latter where Rivaldo was raised, in the favelas (Portuguese for slums) of the giant port city.
Soccer has always been huge in Brazil’s metropolitan areas, especially in the poorer quarters. That’s because, for children growing up in a favela, soccer is more than just a game—it’s a means of escape. Rivaldo spent most of his days selling souvenirs to tourists in order to bring money home for his family, before devoting his nights to kicking a ball around on the beach. But while playing with his friends was fun, it wasn’t enough to stave off the effects of poverty and hunger. Rivaldo and his four siblings all suffered greatly, especially due to malnutrition. Even today, as a famous and successful athlete, Rivaldo still seems unable to cast off the physical effects of malnutrition. His face and frame are still as gaunt as ever, and he’s worn dentures for years—the hunger he suffered as a child made his teeth fall out.
Hence, soccer: the only way to forget the pangs of an empty belly. When the tourists went inside their hotels to sleep, Rivaldo could play, run, and dream; dreams of playing before thousands of adoring fans. Dreams of playing like the legends he saw on television, dreams of a better, safer, easier life. But to Rivaldo, they were only dreams. “I never really thought I could be that good,” he once said.1
But one person did believe: his father, Romildo. The two were very close. Romildo had his own dreams, too: dreams of a real escape from the slums, not just a fantasy one. He encouraged his three sons to train hard and get better at the sport they all loved. It was their best hope at a better life. “He always said to us that one of the three brothers would be a professional footballer,” Rivaldo recalled in an interview.1
But when Rivaldo was 16, his number one fan was taken away forever. His father was killed in a car accident. Rivaldo was devastated.
Without his father, soccer meant nothing anymore, and he went a whole month without playing. But his mother begged him to continue, saying, “You can’t give up now. You must make your father’s dream come true.”1
So Rivaldo the son kept on playing for Romildo the father. And he worked, even going so far as to walk ten miles by himself almost every night in order to train with his team. He couldn’t afford a bus. But through it all, he once said, “My father never left my side; on the street, on the beach, he was always with me. He helped me on the road to becoming a professional, and now I play just for him.”1
And what a professional he was! By the age of twenty, Rivaldo had turned pro. Soon he was playing for one of the biggest teams in Brazil. By his mid-twenties, Europe was calling. Rivaldo spent over a decade playing overseas, including a stint at Barcelona, one of the biggest teams in the world. He made more money than he ever thought possible, and listened as tens of thousands of fans chanted his name. Just like in his dreams. Just like in his father’s.
In 1999, he was officially named the best player in the world. Three years later, he won the World Cup with Brazil.
Despite his success, he never forgot his background. He founded his own charity, and always donated a part of his wages to help the children who looked up to him the way he had looked up to the legends of his own youth. He also started a family of his own. Rivaldo the son had become Rivaldo the father.
One of his sons is named Rivaldinho, Portuguese for “little Rivaldo.” True to his namesake, Rivaldinho is a soccer talent, too, currently playing for a team called Mogi Mirim EC, one of the first teams his father played for … and the last.
Rivaldo’s long road out of the slums passed a new milestone on February 19th, 2014.2 Forty-one years old, Rivaldo returned home and signed with Mogi Mirim. On the aforementioned date, ten minutes into the second half, Rivaldo came off the bench and joined his eighteen-year-old son on the pitch for an official game. They played together for just over half an hour inside the Estadio Romildo Ferreira … the stadium named after Rivaldo’s father, Romildo.
“I thank God for this moment,” Rivaldo said afterward, shortly before retiring. “I am really happy to have played with my son.”3
Once upon a time, he had wanted to quit. But Rivaldo the son kept playing for his father, so that, in the end, Rivaldo the father could play with his son.
From all of us here at Hudock Capital Group, Happy Father’s Day! Thank you to all fathers everywhere!
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant
1 “Rivaldo: In the name of the father,” FIFA.com, February 1, 2000. http://www.fifa.com/ballondor/archive/edition=1999901999/news/newsid=74934/index.html
2 Matthew Nash, “Rivaldo and son Rivaldinho play at Rivaldo Stadium,” Metro, February 19, 2014. http://metro.co.uk/2014/02/19/rivaldo-makes-history-by-joining-son-in-brazilian-league-action-at-the-age-of-41-4309839/
3 “Rivaldo and Rivaldinho play together,” Marca, February 19, 2014. http://www.marca.com/2014/02/19/en/football/international_football/1392844760.html
When I was young, I remember asking my parents why we observe Memorial Day. While some people use it mainly as a chance to throw a backyard BBQ, others take the time to visit cemeteries, pour over old photographs, or read the stories of those who died serving our country.
“But why?” I wanted to know. It seemed like such a sad holiday. Why do we do it?
That’s when my parents showed me something I’ll never forget. It’s a speech given by President Dwight Eisenhower – and if there’s any president who understood the “why” of Memorial Day, it was surely Ike. It’s an extremely short speech, just 250 words. But those words made me realize why Memorial Day is so important.
In honor of this Memorial Day, I’d like to share those words with you right now.
Whereas the bodies of our war dead lie buried in hallowed plots throughout the land, and it has long been our custom to decorate their graves on Memorial Day in token of our respect for them as beloved friends and kinsmen and of our aspiration that war may be removed from the earth forever; and
Whereas it is fitting that, while remembering the sacrifices of our countrymen, we join in united prayers to Almighty God for peace on earth; and
Whereas the Congress, in a joint resolution approved May 11, 1950, provided that Memorial Day should thenceforth be set aside nationally as a day of prayer for permanent peace and requested that the President issue a proclamation calling upon the people of the United States to observe each Memorial Day in that manner:
Now, Therefore, I, Dwight D. Eisenhower, President of the United States of America, do hereby proclaim Memorial Day, Saturday, May 30, 1953, as a day of prayer for permanent peace, and I designate the hour beginning at eleven o’clock in the morning of that day, Eastern Daylight Saving Time, as a period in which all the people of the Nation, each according to his religious faith, may unite in solemn prayer.
Let us make that day one of twofold dedication. Let us reverently honor those who have fallen in war, and rededicate ourselves to the cause of peace, to the end that the day may come when we shall never have another war—never another Unknown Soldier.1
Read that last paragraph again.
Let us make that day one of twofold dedication. Let us reverently honor those who have fallen in war, and rededicate ourselves to the cause of peace, to the end that the day may come when we shall never have another war—never another Unknown Soldier.
That’s why. That’s why Memorial Day is so important.
You see, it’s not just a holiday. It’s an opportunity. By remembering what we have lost, we give thanks for what we have. By honoring the sacrifice of war, we place an even greater value on the promise of peace.
Like President Eisenhower said, Memorial Day is a day of twofold dedication. Dedication for those who died. Dedication for those who, as a result, may yet live. A day for remembering what was, and a day for looking forward to what may yet be.
Ever since I read those words, Memorial Day has held a special place in my heart. I’m so grateful for the freedoms we enjoy – and for those who fought to uphold them. I’m so grateful for this nation we live in – and for those who laid down their lives to protect it. I’m grateful for everything they did, and everything we can do because of them.
I’m grateful for Memorial Day.
On behalf of everyone at Hudock Capital Group, I wish you a safe and peaceful Memorial Day.
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
1 Dwight D. Eisenhower, “Proclamation 3016 – Prayer for Peace, Memorial Day, 1953”. https://www.presidency.ucsb.edu/documents/proclamation-3016-prayer-for-peace-memorial-day-1953
The most important job a person can have is the job of being a mother.
Mothers must be strong to show us the way. They must be firm should the need arise to teach us how to find our feet without falling again.
Mothers must be loving, to teach us what love is all about. They must be sympathetic in our times of need, from losing our first pet to moving away.
Mothers must protect us from the harm that we can experience yet, not hover to the extent we never find the courage to stand alone.
They must be all these things, for the reliability of the next generation lies upon their capable shoulders.
And most of the time, they need to be all of these things at once.
Have a great day!
Happy Mother’s Day!
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant
One year. It seems incredible, but it has been one year since COVID-19 struck our shores. One year since the World Health Organization declared a pandemic. One year since the markets crashed and the schools closed, and we realized just how much we take toilet paper for granted.
Since then, the markets have recovered and risen to new heights. The economy, meanwhile, has recovered more slowly. Now, a quarter of the way through 2021, we have a new president, several new vaccines, and a completely different world than the one we knew before all this started. We have also seen some renewed volatility in recent weeks. This has many of my clients asking, “Where are the markets going next? What should we expect for the rest of 2021?”
We’ll address those questions in this letter.
As you know, there are two types of long-term market situations: Bull markets and bear markets. But the whole “bull vs bear” concept can also be used to describe two types of investor sentiment. Bulls are investors who have a positive, or “bullish”, view of where the markets are headed. Bears, meanwhile, generally have negative, or “bearish” expectations. So, in this letter, we’re going to let both animals debate each other, each presenting their case for why the markets will have a positive year or a negative one. We’ll start with the Bull, move onto the Bear, and then give the Bull a chance for a short rebuttal. Finally, as your financial professionals, we’ll give you our view.
The Bullish View
Last year’s market crash was sudden, swift, and deep. But in the grand scheme of things, it didn’t last very long. In fact, it took only six months for the markets to recover. (By contrast, it took the markets almost six years to recover after the Great Recession.) Since then, the markets have risen to new highs.
Three things propelled the markets to this remarkable turnaround: Low interest rates, federal stimulus, and the expectation of a major economic recovery. Let’s start with the first one. To help juice up the economy, the Federal Reserve lowered interest rates to a historic degree. Low interest rates promote more borrowing and spending, two pillars our economy is based on. They also help people buy homes and encourage businesses to invest more in themselves. (Including hiring more workers.)
Congress, meanwhile, has passed three major stimulus packages in the last year. The most recent bill was signed by President Biden on March 11. The America Rescue Plan Act of 2021, as it’s called, provides $1.9 trillion in aid for both businesses and consumers.1 Among other things, the Act extends COVID unemployment benefits through Labor Day, provides $1,400 direct payments to individuals, expands certain tax credits, and grants billions to small businesses to help meet payroll and retain workers.1 The first two stimulus packages had a positive impact on things like retail sales and consumer spending, and it’s widely expected that this one will, too.
This combination of low interest rates and government stimulus have helped the economy tread water while we deal with the virus. But much of the market’s rise is due to something else: Expectation. Specifically, expectation that the pandemic will end, and the economy will hit the accelerator. As more people are vaccinated and case numbers fall, the thinking goes, more and more of society will re-open, releasing a flood of pent-up demand. Demand to travel, to eat out, to catch a movie in theaters, you name it. Add the latest round of stimulus to the mix, and suddenly Americans have both extra money in their pocket and the means to spend it. In other words, all the ingredients are there for a major economic comeback, the likes of which we haven’t seen in decades.
Now, we seem closer than ever to that expectation becoming reality. As of this writing, there are three approved vaccines in the U.S., with more than 115 million doses administered.2 (40 million people are currently considered fully vaccinated, approximately 12.3% of the total population. 2) Currently, our nation is averaging over 2 million shots each day.2 It’s no surprise, then, that cases in the U.S. have been falling for weeks. In fact, as of March 19, cases are down over 14% over the last two weeks.3
We’re not out of the woods yet, not by a long shot. Masks and social distancing will continue to be a part of our lives for some time yet, and of course there are relatively new variants of the coronavirus to deal with. But if we can maintain this trajectory, increasing the number of people vaccinated and reducing the number of people sick, that could do wonders for our economy. It could lead to more of society re-opening, leading in turn to more jobs, more consumer spending, and greater company earnings. Greater earnings, of course, usually lead to higher stock prices.
The Bearish View
So, in light of all this, how can anyone have a negative view of where the markets are headed? It all comes down to a single word: Inflation.
Inflation. It’s a scary-sounding word that conjures up images of German children stacking useless money in the 1920s, or gas rationing in the 1970s. For decades, economists have monitored it relentlessly. The Federal Reserve considers managing inflation to be a core aspect of its mission. That’s partly why our nation’s inflation rate has been relatively stable over the last twenty years.
But recently, some analysts and investors have begun stressing over inflation again. They don’t deny that the economy is poised to grow. They just worry that it will grow too much, too fast. There’s a word for this, too. Economists call it overheating.
When an economy overheats, it essentially no longer has the capacity to meet all the demand it faces from consumers. Some producers will simply not be able to supply all the goods their customers want. Other producers, to keep up with that demand, will be forced to raise prices. It’s a classic example of the Law of Supply and Demand. (When the demand for something outpaces its supply, the price goes up.) For example, if everyone suddenly decides to fly to that vacation spot they’ve been putting off for a year, the cost of air travel would skyrocket.
If the economy were to grow too quickly, prices would rise across the board – and the value of our currency would drop. This, essentially, is inflation: When the general price level rises, a dollar simply pays for less than it used to. That makes it much harder for people to buy the goods and services they need. Or to pay off their debts. It makes it harder for businesses to hire new workers or pay the workers they already have. The upshot? When inflation gets too high, consumer spending plummets, unemployment jumps, and economic booms turn into economic busts.
Some experts worry this is what’s in store in 2021. They see the economy as a garden hose that’s been tied up into a knot. Untie the knot – or re-open the economy too quickly – and the water will burst out with sudden, savage force.
So, here’s what this has to do with the stock market. Normally, the Federal Reserve combats inflation by raising interest rates. Higher interest rates tend to cool off the economy, because they prompt people to save their money instead of spending or borrowing it. A cooler economy decreases inflation, and gradually things go back to normal. The problem is the stock market has become accustomed to the Fed’s low interest, “easy money” policies. Low interest rates mean that many types of investments, most notably bonds, simply don’t provide the same return on investment as they would in a high-interest rate environment. That drives more and more investors into the stock market to get the returns they need. But what happens when interest rates go up? Consumers and businesses could cut back on spending, which in turn could cause earnings to fall and stock prices to drop.
Fear of inflation, and fear of higher interest rates. That’s the bearish view in a nutshell.
Rebuttal
We promised the Bull would have the opportunity for a short rebuttal, so here it is. There are two main reasons for thinking this fear of high interest rates are overblown. The first is that, even if inflation does go up – which it likely will – we have a lot of room to work with before it becomes a problem. In 2020, the inflation rate was only 1.2%.4 That’s well below the 2% mark the Fed generally aims for, and nowhere close to the mindboggling numbers we saw in the late 70s and early 80s. (In 1979, for example, the inflation rate was 13.3%.4)
The other reason is that there’s no reason to assume the Federal Reserve will automatically raise interest rates just because inflation goes up. Why? Because the Fed itself has said that it won’t!5 Currently, the Fed sees stimulating the economy and boosting employment to be far bigger priorities than tamping down on inflation, and recently, the Fed Chairman suggested interest rates would remain low at least until 2022.
My View
We’ve told you what the Bulls and Bears think. So, here’s what we think. Go watch a video on YouTube and then read the comments. Ever notice how many people like to say “First”? In my experience, a lot of investors – be they Bulls or Bears – are like that. They stress over “getting ahead” or “being first”, and as a result, they overreact to the slightest provocations.
Here at Hudock Capital Group, we don’t worry about being first. We only care about moving forward. That’s why we focus on one thing: Investing for the long term without trying to guess whether the Bulls or the Bears will dominate. That means positioning ourselves to take advantage of bull markets while being prepared – mentally and financially – for bears.
Historically, an improving economy leads to a stronger stock market. If that happens in 2021, wonderful! But if interest rate fears worsen and volatility goes up, experience has taught us not to overreact. Remember, we’re not investing for next week, or next month, or next quarter. We’re investing for years. Any general rise in prices is likely to be temporary, just as any bouts of volatility are temporary, too.
It’s been a year since the pandemic began. A year since some of the worst market turmoil in a long time. We got through that by being disciplined and patient, and we’ve been rewarded. So, that’s what we’ll continue to do. Other investors can worry about being a Bull, or a Bear, or “first”. We’ll just continue being disciplined and patient.
If you have any questions or concerns about the market, please feel free to contact me. In the meantime, enjoy the upcoming spring season!
Sincerely,
Barbara B. Hudock CIMA®, CPM®
Chief Executive Officer
Founding Partner
Michael J. Hudock, Jr., CPM®
President and Founding Partner
Wealth Consultant
1“The American Rescue Plan Act Greatly Expands Benefits through the Tax Code in 2021,” Tax Foundation, March 12, 2021. https://taxfoundation.org/american-rescue-plan-covid-relief/
2 “How is the COVID-19 Vaccination Campaign Going In Your State?” NPR, March 19, 2021. https://www.npr.org/sections/health-shots/2021/01/28/960901166/how-is-the-covid-19-vaccination-campaign-going-in-your-state
3 “How Severe is Your State’s Coronavirus Outbreak?” NPR, March 19, 2021. https://www.npr.org/sections/health-shots/2020/09/01/816707182/map-tracking-the-spread-of-the-coronavirus-in-the-u-s
4 “US Inflation Rate by Year,” The Balance, March 1, 2021. https://www.thebalance.com/u-s-inflation-rate-history-by-year-and-forecast-3306093
5 “Powell Confirms Fed to Maintain Easy Money Policies, The Wall Street Journal, March 4, 2021. https://www.wsj.com/articles/feds-powell-to-take-questions-on-job-market-interest-rates-bond-yields-11614872817
This material was prepared by Bill Good Marketing.
As you know, the four-leaf clover has become a common symbol of St. Patrick’s Day. Because four-leaf clovers are so rare — you have about a 1-in-5000 chance of finding one1 — they’re often associated with luck. But in truth, each leaf represents something special: luck, yes, but also hope, faith, and love.
The reason we mention this is because, over the years, we’ve learned that the history of St. Patrick’s Day represents each of these attributes, too. Now, that might seem pretty deep for a day where we all pinch each other for not wearing green. But it’s true! To illustrate how, let’s take each clover leaf one at a time, starting with…
Hope
Did you know that, in an alternate universe, we might all be wearing blue on St. Patrick’s Day? While “kelly green” is the most popular symbol associated with the day, it didn’t used to be that way. Saint Patrick himself is thought to have worn blue for much of his life, and the Order of St. Patrick, a fraternity of knights founded in the 17th century, adopted the color, too.
So why the color green? Because green was the color of those who sought Irish independence. Beginning in that same century, more and more Irish people began hoping that one day, they would have their own country, free of dominion under a foreign crown. These patriots increasingly wore green as a symbol of Irish identity and culture. It would take centuries for independence to happen, but generation upon generation passed down the secret hope that one day, Ireland would be counted among the free nations of the world.
So why green, exactly? It all has to do with another symbol associated with both Ireland and Saint Patrick: the shamrock.
Faith
Although they are often confused, shamrocks and four-leaf clovers are not the same thing. Shamrocks are standard three-leaf clovers. What makes them special is not how many leaves they have, but what they represent. In the late 1700s and early 1800s, Irish revolutionaries adopted the green shamrock as their emblem. They included shamrocks on their uniforms, their flags, and in their songs. Eventually, the shamrock became the de facto symbol of Ireland itself.
The shamrock’s importance goes back over 1500 years – all the way to Saint Patrick himself. Legend has it that when Patrick first began preaching Christianity in Ireland, he used the shamrock to illustrate the concept of the Holy Trinity. Patrick’s message of putting faith in God resonated, and he reportedly baptized thousands of people.
Over time, Patrick became the patron saint of Ireland, and eventually, like the shamrock, a symbol of Ireland itself.
Love
Just as Ireland’s symbols have changed over time, St. Patrick’s Day itself has changed, too. Now, it’s not only a celebration of the saint, but of all things Irish. That’s important, because Patrick is not the only patron saint of Ireland. Another is Brigid of Kildare – a remarkable woman, and quite possibly, someone who knew Patrick well.
Brigid was born into slavery in the 450s. (The parallels to Patrick are interesting because Patrick was also a slave for many years.) From an early age, Brigid showed amazing love for those who had less than her. She never passed up an opportunity to feed, heal, or comfort the poor. Some stories claim she could replenish by praying to God. Other stories, less religious but just as interesting, tell of the time when she gave away her master’s entire store of butter. Furious, her master tried to sell her to a king. While he bartered, Brigid gave away his jeweled sword to a beggar so he could sell it to buy food. When the king saw this, he took it as a sign that she was holy and commanded her master to set her free.
As she grew older, Brigid decided to devote her life to charity. She founded her own monastery and worked tirelessly to ensure that women and the poor had a safe place to worship. She even founded Ireland’s first art school! One of the earliest books about Patrick said, “Between Saint Patrick and Saint Brigid, the pillars of the Irish people, there was so great a friendship of charity that they had but one heart and one mind.”2 When Brigid died in 525, she left behind an incredible legacy of compassion, charity, and most of all, love.
Luck
“The Luck of the Irish” has become a common phrase. It means to have extremely good fortune, but the saying originated in America, not Ireland – and it was initially meant to be a slight, not a compliment. Here’s how Edward T. O’Donnell, author of 1001 Things Everyone Should Know About Irish American History, puts it:
“During the gold rush years…a number of the most successful miners were of Irish and Irish American birth. Over time this association of the Irish with mining fortunes led to the expression ‘luck of the Irish.’ Of course, it carried with it a certain tone of derision, as if to say, only by sheer luck, as opposed to brains, could these fools succeed.”3
As the decades passed, though, the opposite became true. “Luck of the Irish” now often refers to someone who has succeeded through their wits, their cleverness, and their perseverance. And given how much Irish immigrants have had to overcome over the centuries – including both prejudice and economic hardship – we’d say those qualities describe the Irish people pretty well!
As you can see, there’s more to St. Patrick’s Day than simply throwing on a green shirt or eating corned beef. St. Patrick’s Day represents the hope, faith, love, and perseverance of an entire people. It’s a day for all of us to practice those things as well. A day for us all to treasure and enjoy.
On behalf of our entire team, we wish you a 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“How rare are four-leaf clovers really?” share the luck, 2017. https://www.sharetheluck.ch/single-post/How-rare-are-four-leaf-clovers-really
2 “Brigid of Kildare,” Wikipedia, https://en.wikipedia.org/wiki/Brigid_of_Kildare
3 Edward T. O’Donnell, “1001 Things Everyone Should Know About Irish American History,” Broadway, February 26, 2002.