In today’s Steady Investor, we dive into current news and key indicators in the market that we believe investors should consider such as:
Natural Gas Prices Plummet from Highs – If winter gets an extension this year, U.S. households are likely to be relieved by how far natural gas prices have fallen. Since last December, the price per billion BTUs of natural gas has plummeted by 65%, reaching the lowest level since the pandemic lockdowns in early 2020. Over-supply has been the main driver – while the winter storms and flight cancellations received major headline attention in late December, overall, a mild winter has kept demand at bay relative to what producers were expecting. In January, production was greater than demand, which led to an increase of gas in storage facilities – the first time that’s happened in at least 10 years. Normally the opposite is true, where production cannot keep up with demand in the early part of the year and stored gas is drawn down. There are two key reasons that natural gas prices have experienced such a large swing. The first is supply and demand. Natural gas producers saw a market last summer where natural gas prices were trading at very high levels, which led to increased production in an attempt to capitalize. But with a mild winter tempering demand, the result was over-production and over-supply, which drove prices back down. The second reason for falling prices was that a key export facility in the U.S. – Freeport LNG in Texas – had to shut down last June due to a fire, which curbed exports and led to increased domestic supply. As that export facility and others ramp up exports, the U.S.’s export capacity is expected to rise by 40%. This could eventually put upward pressure back on prices.1
Are You Protecting Your Retirement Portfolio?
In today’s volatile market, it is essential to have an effective strategy in place to account for the market’s ups and downs. Such strategies can help investors protect their retirement assets against life’s unknowns.
Our free guide, How Solid Is Your Retirement Strategy, can help you build a retirement strategy that takes the “what ifs” into account.
This guide offers our views on some key retirement investment strategies that may help you preserve your financial security in retirement, including:
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Housing Market Stabilizes but is Still Sputtering – For the past year, sales of previously owned homes have fallen month-over-month. In January, the trend continued with a seasonally adjusted 4 million sold homes, which was down -0.7% from December levels. The year-over-year figures look a lot worse, with January’s existing home sales falling by -36.9%. The twelve consecutive month-over-month declines are the longest streak going back to 1999. To be fair, however, the monthly declines have historically high comparisons, since the housing market’s boom in the two years following the pandemic led to a surge in sales and prices. It’s also true that the monthly declines are abating, signaling that the housing market may be stabilizing at these levels.3
Corporate Profit Margins Feel the Squeeze – Based on a combination of earnings reports for Q4 with analyst estimates for remaining companies, it appears that net profit margins for the S&P 500 have fallen to 11.3%. That would mark the sixth consecutive quarterly decline in profit margins, from a peak of 13% reached in 2021. While this decline is receiving quite a bit of headline coverage, it is important for investors to note that prior to 2019, corporate profit margins were not above 10%. The uptick in profit margins was related to the sizable corporate tax cut that was enacted during the Trump administration, and its current decline is largely tied to rising input costs like wages – which tends to be good for workers and by extension, U.S. consumers.4
Higher Producer Prices Send Mixed Signals on Inflation Outlook – The producer price index (PPI) is a fairly key inflation indicator, as it unveils what suppliers are charging businesses and other customers, like wholesalers. Since the PPI captures what producers are paying to manufacture goods and supply the market, and higher prices are usually passed along, it is a good leading indicator for what consumers may ultimately pay months from now. In January, the PPI rose by 6% year-over-year, which was an improvement from December’s 6.5% gain but still stubbornly high. The key data point that has some economists worried, however, is that the PPI increased 0.7% in January from December, which was a sharp reversal from December’s -0.2% decline from November. The PPI report adds to concerns that inflation is stubborn, which bolsters the case for more rate hikes from the Fed.5
How to Protect Your Retirement – There is a way to protect your retirement assets through market ups and downs. We recommend finding a retirement strategy that takes the “what ifs” into account. Our free guide can help you to prepare for what’s to come as you plan your ultimate retirement.
If you have $500,000 or more to invest, get our free guide, How Solid Is Your Retirement Strategy.6 You’ll get valuable and practical ideas to help build a “weatherproof” retirement strategy that can potentially protect your retirement nest egg from any storm that could threaten your financial security.