Are We There Yet?


I recently had the great fortune of taking a vacation to Europe, our first major excursion in nearly seven years. It was a wonderful change of scenery, culture and most importantly, climate! The summer heat had not quite hit the
Mediterranean, and it seemed that the moderate temperature coincided with the sanguine attitude of the Croatian people. We toured towns and castles along the Adriatic that had been fought over since the 4th century BC. While
traversing the beautiful coastline, engaging with the locals, eating fabulous seafood (and sampling sumptuous wine), it became obvious why this small country has traded hands so many times throughout the centuries; it is
clearly worth fighting for. The Croatians know it too and are an extremely proud and patriotic people. Their red, white, and blue flag flies high throughout the country and the seaside.

It was a refreshing contrast to what feels like a more tepid enthusiasm from the American public, even on the dawn of our nation’s birthday. In fact, last year’s Gallup poll marked the lowest rating on record, at 38% of people who
said they were “extremely proud to be American.” Believe me, there’s plenty of people at the border that will take the other 62%! So, what gives? Perhaps it is rising interest rates, inflation, Covid overhang, or our divided political
system, but the whole world is experiencing the same thing. While overseas, I did not hear one complaint about these current issues; people were just happy to be out and about — to be living life. And maybe therein lies the real
problem. Americans watch too much tv, work too hard, and simply “live” less…at least that’s what the Europeans think!

At home, we continued to watch the Fed hike rates yet another 25 basis points to 5.25%, despite steadily falling inflation data (CPI fell to 4.0% in May vs. 8.6% the year before). Manufacturing continues to be in decline, with PMI data showing seven consecutive months of contraction. Credit continues to tighten in the wake of the regional banking crisis, just as excess consumer savings is running off. This should continue to worsen, with the expiration of the pause in student loan interest, which has been in place since March 2020 (Americans owe roughly $1.8 Trillin in student debt). In “good news”, unemployment actually rose to 3.7%, although the Fed still huffed that they were “overachieving” their goal of maximum employment, sending stock markets railing after what had been a fairly strong quarter (the S&P is up roughly 8.7%). The much-anticipated debt ceiling debate was all bark and no bite, with neither side really winning or losing. New home sales surged despite mortgage rates at 7%, and consumer
confidence appears to have brightened a bit.

Meanwhile overseas, the news was a bit louder, as there was a twist in the ongoing Russian/Ukraine conflict. Putin was forced to take a double take when his former close, confidant and leader of the Wagner Group, Yevgeny
Prigozhin, launched a coup d’etat on the Russian army. Wagner is a Russian state-backed mercenary group that was supporting the Russian army and leading most of its successes. Due to lack of military leadership and direction,

Prigozhin publicly decried Russian government justifications for the invasion of Ukraine and accused the Russian Defense Ministry of “trying to deceive society and the president and tell us how there was crazy aggression from
Ukraine and that they were planning to attack us with the whole of NATO”. He then switched team jerseys and staged a mutiny, marching his troops towards Moscow, exposing Putin’s vulnerabilities and creating the biggest threat to his position of power in 23 years.

Prigozhin proceeded to shoot down a military plane and several helicopters (“Kaboom”) and seized a major Russian military hub, while Russian military troops seemingly “stepped aside”. Some soldiers even welcomed him with their own red, white, and blue flags and began requesting selfies with the rogue leader.

This short-lived mutiny came to a halt roughly 100 miles outside of Moscow when President Lukashenko of Belarus managed to negotiate a deal that allowed Prigozhin and a few other military leaders to retreat gracefully
to his country, leaving Putin to fight another day. Putin may be licking his wounds; however, a caged animal can be more dangerous than a healthy one, so let’s hope this Siberian Tiger doesn’t push the red button.

Finally, let’s not forget about the ongoing antics of the fiery, “Little Kim” Jong Un who has been ramping up tensions in the Korean Peninsula and test-firing short-range weapons. The US responded by sending its largest,
nuclear-armed submarine to South Korea (an ally, also bearing the red, white, and blue) for the first time in four decades. Together, the US and South Korea have been conducting joint exercises further fueling China’s fury.

Closing Thoughts
On the backside of our European excursion we decided to exit via France; yet another country that shares our banner’s color scheme. We hit Paris, the home of haute couture, on the eve of Fashion week. This city sets the stage for what will define “the look” for the coming season and based on my limited window shopping I can tell you this year’s color palette is no other than red, white, and blue. Not surprising since Paris will be hosting the 2024 Olympic Games and felt the need to feed a little patriotism into their country’s wardrobe. Who can blame them?

Just like flags, our clients come in all shapes and colors. They have different needs and goals, but at the end of the day they are all human. In times of uncertainty and volatility, being human can sometimes be the hardest
job of all. At Ulrich, we are here to guide you and hoist and lower your flag to adjust and adapt to the changing winds of time.

In closing, we wish everyone a Happy 4th of July, and lest we forget, while many countries may share our sovereign colors, we’ll take the freedom of our stars and stripes over any other pattern!

John P. Ulrich, CFP®

Whitney E. Solcher, CFA®
Chief Investment Officer