There's so much going on in the world right now, and probably in your world, too. Have you noticed, though, that we often have a tendency to focus more on what's happening externally than that which falls under our purview?

We're going to cover the external first today with another busy Weekly Market Update, but then we're going to turn our gaze inward, and I'm going to invite some self critique that may challenge you as much as it challenges me, concluding with the ultimate predictor of financial success.

In this FLiP weekly you'll find:

• Weekly Market Update:
  • Green Jackets, Red Markets
• Quote O' the Week:
  • Bryan Cranston
• Financial LIFE Planning:
  • The #1 Predictor Of Financial Success

Weekly Market Update

John was on vacation this week, but he couldn't stay away from this week's Weekly Market Update. The Florida sun left him a bit red, and rising interest rates left the stock markets in the red:

• - 1.27% .SPX (500 U.S. large companies)
• + 0.20% IWD (U.S. large value companies)
• - 4.67% IWM (U.S. small companies)
• - 4.04% IWN (U.S. small value companies)
• - 1.61% EFV (International value companies)
• - 2.48% SCZ (International small companies)
• - 1.15% VGIT (U.S. intermediate-term Treasury bonds)

Green Jackets And Red Markets

Contributed by John Marske, CFP®, a Notre Dame grad and generally good guy.

We welcomed last Monday morning with the Tweet heard around the world. Tech Titan Elon Musk announced he had taken a 9% “passive” ownership interest in Twitter. No one knows the implications of his new position, but Twitter stock was up over 25% on the day…as was speculation regarding Mr. Musk’s intentions.

U.S. stock markets marched higher all day on Monday, closing near their best levels as technology related sectors outperformed. The S&P 500 steadily rose from the open. It was a relatively quiet day heading into the start of earnings season which begins late next week, and there were no specific catalysts to explain Monday’s melt-up throughout the day, other than there was no bad news over the weekend.

Stock markets opened higher on Tuesday, but broke down quickly following more hawkish Fed commentary, this time from Governor Brainard. None of her comments were much different than what other Fed members have said in recent weeks, but it was enough to turn markets lower.

After closing at the highs most of the trading days over the last 2-weeks, major averages ended near the lows. The S&P 500 fell 1.26%, with the Nasdaq and Russell 2000 falling 2.26% and 2.36%, respectively. Speculation moved from Musk to the mortgage market, as 30-year fixed mortgage rates jumped above the 5% mark for the first time since 2013.

The selling continued on Wednesday morning. Treasury yields continued to spike upward from the previous day’s Fed comments, with the ten-year treasury yield hitting 2.64%. The markets also digested comments from Deutsche Bank, the first major bank to predict a U.S. recession in 2023.

Wednesday afternoon the minutes of the recent Fed meeting were released, surprising the markets with a bit more hawkish tone than they previously thought. The minutes indicated Fed officials “generally agreed” it should shrink its balance sheet by $95 billion per month. The minutes also mentioned officials were considering larger rate hikes than the usual 25-basis-point increments. Stocks dipped to session lows after the release of the minutes, but bounced back a bit, with the S&P 500 and NASDAQ ending 0.97% and 2.22% lower, respectively.

By Thursday morning, The Dow and S&P were trading at their lowest levels in 2-weeks while the Nasdaq slumped to its lowest level since March 21. Since the end of March, cyclical stocks, such as transportation (IYT) and housing (XHB) had dropped 11% and 10%, respectively. Retail (XRT) and banks (KBE) were also down 9%. But once Tiger Woods teed off at the Masters, stocks rallied to end in the green on Thursday. The chase for the green jacket had begun.

Equity indices rallied off pre-market lows on Friday, but still finished in the red. The S&P 500 rallied to see gains through early afternoon, but couldn’t hold on late in the day, while the NASDAQ never made it to positive territory and generally underperformed. The day was paced by energy names on the upside (S&P energy gained more than 3%) and by semiconductors to the downside (SOX and SMH both fading by about 2%).

Treasury yields again saw gains in the 10-year, trading again above 2.7% to the highest level since March 2019. All major stock averages declined for the week, with the S&P 500 closing down 1.27% and Nasdaq 3.86%. The Dow dipped 0.28% week-to-date, hitting back-to-back weekly declines. As for the Masters, we will see who is wearing the green on Sunday.

Quote O' the Week

Bryan Cranston

A.K.A. Mr. White, of Breaking Bad fame:

Financial LIFE Planning

The #1 Predictor Of Financial Success

Few of us would argue that the Russian invasion of the Ukraine and the domestic inflation that we're all feeling now are important issues worthy of our concern and consideration. But have you ever found yourself fixated on external issues like these, over which we have little-to-no control, more than those internal issues that we can actually influence?

We tend to spend more time bemoaning or applauding the action and inaction of those with less of a direct influence in our lives—especially legislators, Presidents, Fed Chairs, world leaders, and celebrities—than those who most directly impact our lives: US.

You are an entity. You and your spouse (if you’re married) and your children (if you’re a parent) are certainly beholden in part to other entities, like companies, cities, states, and countries, but you also enjoy a great deal of sovereignty. You decide where to live, what to eat, whom to befriend and marry, how to derive an income and how to spend it.

So please allow me to disabuse you--us--of a few “It’s their fault!” self-deception anthems especially common in the realm of personal finance:

• The arc of your career is not your boss or company’s responsibility. Good bosses and companies create environments in which good employees can flourish. Bad bosses and companies inspire good employees to join better companies or create new businesses. Bad employees play lots of video games and surf the web. At work.
• Regardless of your levels of income or net worth, your financial success or failure will be predicated primarily on the effectiveness of your cash-flow management system. I'll take it a step further--an effective cash-flow system, managing the money that comes and goes--is the #1 predictor of financial success. Not a high-paying job, a brilliant investment strategy, thousands of social media followers, or a creative CPA (all of which can be great, by the way). A simple willingness to live below your means and establish the discipline of saving is the foremost factor in financial success.
• Your long-term success in investing is not the responsibility of your financial advisor or investment manager (although they can help or hurt). There are innumerable (good and bad) variations on the portfolio creation and management theme, but if all you ever did was establish a simple, diversified, balanced portfolio (and stick with it), you’ll likely outpace most of your peers and many professional investment managers.
• Your ability to retire comfortably will be impacted by many factors—especially the three you just read—but none more so than your willingness to make regular contributions equal, or ideally greater, to 10% of your annual income.

Although politicians and pundits may attempt to convince us otherwise, the long-term trajectory of our lives is more a consequence of impulsion than compulsion—UNLESS we give someone or something else that control. If you rely more on outside influences than those within your control, you have ceded too much.

If we worry more about that which we can’t control (global macroeconomics, market volatility, tax rates, inflation, and the Master's leaderboard) than acting on that which we can, we do so only to our detriment. And maybe—just maybe—the reason we gripe so much about that which is holding us back is that we fear the consequences of being held accountable for our own decisions, our own lives.

Let's control what we can, and worry far less about that which we can’t.

What's one thing you can worry less about this weekend, and something else you can influence?

Tim

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Oh, and BTW, The information in this article is for educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. That should really come from your financial advisor. I'm thrilled to work for Triad Financial Advisors, but what I write is my opinion, and not necessarily theirs.