Baler Twine, Mid-Year 2025 Update

Recent Videos

I shared a very specific video last month about the increasing examples of fees on credit card transactions. This month the personal finance video is more philosophical in nature. Each of the advisors in the office have a milestone wedding anniversary this year - Dave and his wife Laurie at 40 years, Corie and I at 30 years, and Brian and Sarah at 20 years. This first video then, is an opinion on how, financially, a successful marriage can last. Without stealing completely from the video, the punchline is that it's “Our Money.”: https://www.kellettwealth.com/videos/v/our-money

The second video is with respect to the big decisions being made inside 401k accounts - should you or should you not use the Roth option when you contribute to your 401k?: https://www.kellettwealth.com/videos/v/roth

Finally, I included a 3rd video this month. P&G recently announced they will be laying off 7,000 employees over the next two years. I personally made the decision to retire from P&G and took the “retirement package.” This video explores some of the considerations and emotions. “P&G Retirement”: https://www.kellettwealth.com/videos/v/package

For those of you who are active on social media, you may have noticed we are posting videos like the ones above on Facebook, Instagram and LinkedIn. You can friend me on Facebook, follow me on Instagram, or connect with me on LinkedIn.

———————————————————————————————————————————————————————————————————————————————————————————————————-

“Baler Twine”

My dad grew up in Alpena, MI. Actually 14 miles outside of Alpena. Dairy farm, Holstein cattle, gravel roads, hay fields. My uncle Alvin continued the farm for a second generation. By junior high school, we spent each 4th of July in Alpena visiting the family. We made a long journey around Toledo, up State Route 23/I-75 to Standish, and then along Lake Huron to Alpena. Mom, dad and the rest of my siblings stayed at grandpa’s house. I stayed at uncle Alvin’s because their youngest son Jim was my age.

It’s one of my favorite memories growing up. On the 4th, after the milking was done, uncle Alvin built a huge bonfire, started with baler twine. I knew the fire was starting when he would get a handful of baler twine from the barn, put it in a pile, and stack wood on top of it.

Once the fire was going, we roasted hot dogs. Jim and I rode our bikes around while the older cousins and adults talked. They might even play a round of horseshoes while chewing their RedMan and Skoal chewing tobacco. When dusk came, the older cousins pulled out the big fireworks - Roman candles, bottle rockets, cherry bombs, etc. Fireworks were illegal in Michigan, so they had brought them on their motorcycles on a road trip from a visit to Tennessee. Jim and I usually got our hands on a couple bricks of firecrackers which we used to experiment with blowing up different things, including cow pies and the neighbor’s mailbox. As we got older we even happened our way into some M-80s, bigger firecrackers, if you will. Frankly, they looked like small sticks of dynamite.

We had a great time acting like 12 year old boys. Eventually the night ended, and farm life returned to the grind of milking the next morning at zero dark 30. In fact, my next memory after each fireworks evening was uncle Alvin’s voice as he yelled up at us to get out of bed to help the next morning at 6 am. Either way, it didn’t dim my memory of a great time celebrating our nation’s independence.

———————————————————————————————————————————————————————————————————————————————————————————————————

Mid-Year Market Update

The market experienced a full recovery after a significant drop. The S&P 500 initially fell over 17% from February 18th to April 7th, but has since rebounded to surpass its February level, now up over 5% for the year. Technology and growth stocks, exemplified by the NASDAQ 100's 7.5% gain, are leading the US market. Bonds have also performed well, with the aggregate up 3.6%. Small-cap stocks, however, are lagging, with the Russell 2000 down almost 2%. International stocks, such as the ETF IPKW, have been the strongest performers, gaining over 24% year-to-date.

The stock market continues to move up despite headwinds from tariffs and other perceived risks such as geopolitical tensions. There are 4 primary reasons for this:

1. The price of oil continues to decline. You can see from the chart below that the price of crude oil peaked in early 2022 at $104/barrel and today is under $70/barrel. A gallon of gas was $4.20 when oil peaked and was over $5/gallon in mid-2022. Today the national average is $3.34/gallon. This is despite the tensions in Iran which caused oil to spike briefly in June.

2. Treasury rates have dropped. After touching 5% on three different occasions since January 2023, the 2-year Treasury rate is now under 4%. This tends to be stimulative for the economy. This often is a tailwind for the stock market.

3. The US dollar continues to weaken against other currencies. This makes the profits of multi-national companies rise. When the dollar weakens, US goods become cheaper for buyers abroad. This benefits American companies that export products or earn revenue overseas, as their goods effectively go “on sale” globally. The US dollar, vs a basket of currencies and captured by the symbol DXY, is down almost 8% since mid-2022 as is shown in the chart below.

4. Finally, Artificial Intelligence continues to gain traction, pushing stocks like Nvidia and Microsoft higher, while opening all kinds of new technologies to the world. I will offer one tangible example for us here at Kellett Wealth. When we do a “Google Meet” video conference, Google records the meeting, creates a summary with key bullet points and next steps. I recently did a meeting with a client where it captured our conversation about recent concerts we’ve been to, recognizing that I recently attended a Bruce Springsteen concert while the client was on his way to Chicago to see Guns N Roses. This is a game changer for our ability to accurately and efficiently capture notes and next steps as we look for ways to enhance our ability to serve each of you.

The headlines are often negative, but at the same time, the march of technology continues onward and upward, as oil and interest rates moderate. As long as that scenario holds, the simple threads of baler twine will continue to bind our economy and stock market, holding strong against any headwinds.

Jared

What’s Your Financial Story?

All YCharts graphs are created by me, Jared Kline.

Kellett Wealth Advisors LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Kellett Wealth Advisors LLC and its representatives are properly licensed or exempt from licensure. This website is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Kellett Wealth Advisors LLC unless a client service agreement is in place.