By Logan Gilland, CFP®
| Yard sales can be a man’s best friend, especially when you’re hunting for patio furniture and have no intention of spending thousands of dollars. This past Saturday I found myself wandering through a neighborhood-wide sale, picking through piles of old stuff, racks of clothes, and boxes of anything you can think of. My wife, walking alongside me, had one request: can we just shop one time without you turning everything into a finance lesson? I tried. I really did. But here’s the thing. Yard sales are basically the stock market. Just in mini form. Every seller has a price they’re willing to accept. Every buyer has a price they’re willing to pay. And that neon circle sticker with the sharpie price? That’s just the asking price, not the real one. When I spotted an old softball glove for $10 (I’ve got a church league game coming up), I knew my number was $8 or less. I offered $6. They countered at $7. Kumbaya, we had a deal. That’s it. That’s how markets work. A stock isn’t some abstract number blinking on a screen. It’s a piece of something real. A business. And just like that softball glove, what investors are willing to pay for it changes constantly, driven by perception, news, and emotion as much as by the underlying value. The difference is we constantly see the updated price in real time, like if an auctioneer was constantly shouting out the updated yard sale prices as the morning went on. This week the auctioneer got put to work. Several headlines had the price tags bouncing around on Wall Street. First, inflation data came in hotter than forecasters expected. The Consumer Price Index (CPI), which tracks what everyday consumers pay for goods, rose 3.8% year-over-year, above forecasts. But the number I watched more closely was the Producer Price Index (PPI), which measures what businesses are paying upstream, and it jumped 6% for the month. Think of PPI as the price the yard sale seller paid for the glove before they ever put a sticker on it. When their costs go up, ours eventually will too. In our opinion, both numbers were inflated by the ongoing conflict in Iran and its upward pressure on energy prices. We think the domino effect is that the Federal Reserve may stay put on interest rates, and the conversation has quietly shifted from “when do they cut?” to “could the next move actually be a hike?” For most of the week, investors seemed unbothered. The glove still looked like a deal to them. Strong earnings from AI infrastructure player Cisco appears to have added optimism, and there was real hope heading into a US-China summit that some meaningful progress might be made between the two countries. Friday told a different story. The summit wrapped with little to show for it, no real announcements and no deals. Markets sold off significantly, ending down over 1% on the day. It might seem like a distant issue, but remember that China sources roughly 80% of its oil through the Strait of Hormuz. In today’s markets, everything is connected. Despite the ugly Friday, the market ended essentially flat on the week. The glove still says $10 on the sticker, but we’re starting to notice some wear and tear on a market that has looked pretty good lately. The yard sale lesson is worth keeping close right now. Don’t let the weekly noise or the auctioneer distract you from what something is actually worth. Great investors block out the day-to-day and stay focused on underlying value. The seller of the glove doesn’t panic and take $4 just because a couple people walked past without a look. And the buyer doesn’t overpay just because someone else is circling the table. We’re watching the inflation data, the Fed, and the geopolitical picture closely. We have some concerns and, from our perspective, there seems to be an underlying weakness beneath the market’s recent strength. But we also believe this is part of the process and the ups and downs may not change the long-term value of being an investor. |
Talk again soon.