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Samra Wealth Management | 2026 Q3 Market Outlook As we enter the second half of 2026, our outlook has become increasingly cautious. While equity markets remain remarkably resilient, we believe investors are becoming increasingly focused on the destination while overlooking the road that leads there. Artificial intelligence continues to dominate headlines, but we believe the more important story is unfolding beneath the surface. Rather than a single economic concern, today's market is being influenced by several interconnected forces: persistent inflation, higher interest rates, tariffs, geopolitical instability, artificial intelligence, and a changing labor market. Individually, each of these issues may prove manageable. Collectively, however, they have the potential to reinforce one another, creating what we refer to as the Inflation Flywheel. This view has influenced our portfolio positioning throughout the first half of the year. Earlier in 2026, we reduced exposure to technology as valuations continued expanding, while also lowering our allocation to consumer discretionary companies as concerns surrounding the health of the U.S. consumer increased. Following significant appreciation within the energy sector, we reduced exposure to the Energy Select Sector ETF (XLE), choosing to realize gains rather than assume elevated commodity prices would continue indefinitely. We also reduced our exposure to industrials. Our initial investment in the Vanguard Industrials ETF (VIS) was intended to capture broad industrial and infrastructure growth; however, the position experienced swift appreciation during the Iran conflict, with top holdings heavily concentrated in defense contractors such as RTX, Boeing (BA), and Lockheed Martin (LMT), prompting us to scale back exposure. Today, many client portfolios maintain our highest allocation to investment-grade fixed income in several years, alongside elevated cash balances—up to approximately 20% in select accounts. This positioning is not a prediction that markets must decline. Rather, it reflects our belief that preserving flexibility has become increasingly valuable. The Consumer Remains the Story Despite the attention surrounding artificial intelligence and market performance, our primary concern remains unchanged: the American consumer. Consumer spending represents approximately 68% of U.S. Gross Domestic Product (GDP), making it by far the largest driver of economic growth (U.S. Bureau of Economic Analysis, 2026). Although first-quarter GDP expanded at an annualized 2.1%, consumer spending grew only 0.5%, suggesting that the engine powering the U.S. economy is beginning to lose momentum (BEA, Q1 2026 Advanced Estimate). At the same time, household balance sheets continue showing signs of strain. Credit card balances have climbed to approximately $1.25 trillion, while the percentage of credit card balances transitioning into serious (90+ days) delinquency has reached 13.1% among certain demographics—marking the highest level in roughly fifteen years (Federal Reserve Bank of New York, Center for Microeconomic Data, 2026). Additionally, retirement stress is becoming more visible. Recent industrial data suggests that approximately 6.0% of employer-sponsored 401(k) plan participants have made emergency hardship withdrawals over the past year—up from 5.0% previously—while roughly 13% maintain outstanding loans against their retirement balances (Vanguard Research, "How America Saves," 2026). Both figures serve as key indicators that households are increasingly relying on long-term savings to manage short-term financial pressures. This does not inherently signal an imminent recession, but it does suggest that an increasing number of households are relying on high-interest debt and retirement savings to maintain current spending levels. We believe this deserves considerably more attention than it is currently receiving. When consumption slows, corporate revenues, hiring, and ultimately economic growth often follow. Inflation Has Changed Much of the market continues to view inflation primarily through the lens of gasoline prices. We believe inflation has evolved. Higher energy prices remain important, but they are increasingly acting as the first link in a much larger chain. Transportation costs rise. Manufacturers face higher input costs. Packaging, chemicals, industrial materials, and shipping become more expensive before those increases ultimately reach consumers. Recent Producer Price Index (PPI) releases demonstrate that wholesale input inflation is passing directly through to final goods faster than core demand figures would imply (U.S. Bureau of Labor Statistics, 2026). Artificial intelligence is creating another layer of demand. The rapid build-out of AI infrastructure has accelerated demand for semiconductors, enterprise storage, memory chips, networking equipment, electrical infrastructure, and specialized industrial components. As manufacturers prioritize higher-margin enterprise demand, costs continue moving through the supply chain, eventually finding their way into consumer electronics, automobiles, industrial equipment, and other everyday products. We also continue monitoring the effects of tariffs and labor availability. Tighter immigration policies may reduce the supply of lower-skilled workers in industries such as construction, agriculture, hospitality, and logistics, increasing labor costs in sectors that directly influence consumer prices. At the same time, changes affecting H-1B visa programs may reduce the availability of highly skilled workers in technology, engineering, healthcare, and scientific research. While these policies pursue broader objectives, they also influence labor supply, production costs, innovation, and ultimately consumer spending. In our opinion, inflation is becoming increasingly driven by production costs rather than excessive consumer demand, making it potentially more persistent than many investors currently anticipate. Why We Continue to Favor Quality One question we've received frequently this year is why we've increased exposure to investment-grade bonds while also maintaining elevated cash balances. The answer is that each serves a different purpose. Cash provides stability and flexibility. It allows us to respond quickly should markets present more attractive long-term opportunities. However, cash also carries reinvestment risk. If short-term interest rates begin declining, today's attractive money market yields may disappear quickly. Investment-grade bonds provide a different opportunity. Although higher interest rates can pressure bond prices in the short term, investors continue receiving coupon payments that may be reinvested at those higher yields. If rates eventually stabilize or decline, those bonds may benefit from both higher income and capital appreciation. For long-term investors, we believe this creates a compelling balance between current income and future return potential. Looking Forward We recognize that remaining patient while markets continue advancing can feel uncomfortable. We also recognize that patience has historically been one of the most valuable disciplines in investing. Berkshire Hathaway currently holds $397.4 billion in cash and short-term U.S. Treasury securities—the largest cash hoard in the company's history, representing roughly 59% of its investable asset portfolio (Berkshire Hathaway Inc., Q1 2026 10-Q Filing). While management has not publicly stated that markets are broadly overvalued, Berkshire's willingness to allow liquidity to accumulate reinforces a philosophy we have long shared: attractive investments are defined not only by the quality of the business, but by the price paid to own it. Investing in the Web We believe the greatest risk facing investors today is not inflation, artificial intelligence, tariffs, immigration policy, or geopolitics individually. It is the interaction of these forces occurring simultaneously while equity markets continue pricing a relatively benign economic outcome. History reminds us that periods of uncertainty often create the greatest long-term opportunities. Our responsibility is not to participate in every rally. It is to protect our clients' capital when risks become elevated, maintain the flexibility to act when opportunities arise, and remain disciplined when markets become overly optimistic or overly pessimistic. That philosophy continues to guide every investment decision we make. Disclosures: This material is provided as a courtesy and for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. Investing involves risk including loss of principal. Investment advisory services offered through Samra Wealth Management, a Member of Advisory Services Network, LLC Berkshire Hathaway Inc. (2026). Form 10-Q Quarterly Report for the Period Ended March 31, 2026. Available via the U.S. Securities and Exchange Commission (SEC) EDGAR system. Documenting the consolidated cash, cash equivalents, and short-term U.S. Treasury bills balance of $397.4 billion. Federal Reserve Bank of New York. (2026). Quarterly Report on Household Debt and Credit (Q1 2026). Center for Microeconomic Data. Explaining the expansion of revolving debt structures to a nominal baseline of $1.25 trillion and the 13.1% transition rate of credit card obligations into serious delinquency (90+ days) among distressed cohorts. Federal Reserve Bank of St. Louis. (2026). Total Loans and Leases, All Commercial Banks (BUSLOANS). Federal Reserve Economic Data (FRED). Documenting commercial credit levels crossing the $13.8 trillion threshold. Goldman Sachs Global Investment Research. (2026). The Macro Framework: Consumption Elasticity and Credit Friction in Low-to-Mid Income Segments. Macro Research Briefing Papers. J.P. Morgan Research. (2026). 2026 Mid-Year Outlook: The Convergence of Labor Reallocation and High-Yield Unsecured Debt. Asset Management Strategy Note. U.S. Bureau of Economic Analysis. (2026). Gross Domestic Product (Advanced Estimate) and Personal Income and Outlays: First Quarter 2026. U.S. Department of Commerce. Detailing the 2.1% annualized real GDP expansion versus the 0.5% real personalconsumption expenditure deceleration. U.S. Bureau of Labor Statistics. (2026). Producer Price Index (PPI) and Consumer Price Index (CPI) Databases: April/May 2026 Annualized Matrices. U.S. Department of Labor. Confirming the 3.8% headline CPI trajectory and the underlying 6% year-over-yearwholesale final demand pressure within supply chains. Vanguard Research. (2026). How America Saves: 2026 Mid-Year Special Report on Plan Member Liquidity. Vanguard Group Institutional Division. Tracking the increase in non-concessional 401(k) hardship withdrawals to 6.0% of active participants and the 13% structural baseline of outstanding plan loans used for non-discretionary liquidity gaps.

2026 Q2 As we transition into the second quarter of 2026, Samra Wealth Management is maintaining its most conservative posture since the 2020 pandemic. Our tactical defensive pivot, which began in the latter half of 2025, has been accelerated by the Kinetic Fracture currently unfolding in global energy markets. While our initial reallocation in September and October 2025 was slightly premature, the subsequent volatility triggered by the escalation in the Middle East has validated our mandate. For select client accounts, we have increased liquidity to as much as 20% in cash, a strategic decision intended to dampen volatility as we navigate a fractured geopolitical landscape and an increasingly fragile domestic consumer (Goldman Sachs, 2026; J.P. Morgan, 2026). The Core Thesis: The Impending Consumption Collapse Our primary concern for 2026 remains a fundamental collapse in Consumption Spending, which accounts for nearly 70% of U.S. GDP. While the broader equity market has remained relatively resilient, we believe the full impact of current economic stressors will not be fully realized until the end of Q2 or the beginning of Q3 2026. The domestic consumer is currently operating at a mathematical limit; consumer loans for credit cards and revolving plans have hit an all-time high of $1.07 trillion, suggesting that daily spending is being propped up by high-interest debt (FRED, 2026). This debt floor is highly sensitive to the energy-driven price hikes hitting the supply chain now, and the safety nets are fraying. A record 6% of 401(k) participants took hardship withdrawals in 2025, yet nearly half of the private-sector workforce lacks access to such plans entirely (World Economic Forum, 2026; CBS News, 2026). For these unshielded workers, there is no savings buffer, making the "C" component of the GDP equation far more sensitive to inflationary shocks than headline data suggests. When half the population is one missed paycheck away from insolvency, the aggregate resilience of the U.S. economy becomes a statistical mirage. Efficiency Attrition and Demographic Friction The market's current fixation on AI as a margin enhancer obscures a somber reality for the labor market: an era of efficiency-driven attrition. Corporations are no longer just using AI to supplement workers; they are using it to replace the entry-level and mid-tier white-collar roles that have historically driven suburban consumption. In sectors like SaaS and Finance, junior recruitment has plummeted by approximately 13% year-over-year (Cornell University, 2026). Concurrent with the AI shift is a tightening of the demographic faucet. Current federal policies, ranging from heightened border enforcement for lower-skilled labor to more restrictive H-1B visa processing, are creating a quantifiable demographic drain. The crackdown on migrant labor has sent a shockwave through construction and service industries, where nearly 30% of workers are foreign-born (AGC, 2025). This contraction in population inflow is estimated to weaken aggregate consumer spending by $60 billion to $110 billion over the 2025–2026 period (Brookings, 2026). The Helium Bottleneck: A New Crisis in Semiconductors The semiconductor supply chain disruption in 2026 has found a new pressure point: Helium. High-purity helium is essential for heat management during the chemical vapor deposition and etching stages of chip fabrication. The Iranian strikes on key energy hubs have exacerbated global supply constraints for specialized industrial gases (Investing.com, 2026). This has hit the storage sector with particular severity. NAND flash and DRAM prices have surged as manufacturers prioritize high-margin AI chips over conventional consumer storage. Despite these headwinds, certain companies are positioned to benefit from this supply-demand imbalance. Western Digital (WDC) has emerged as a top performer, with production capacity selling out due to surging demand for high-capacity hard disk drives in AI data centers (24/7 Wall St, 2026). SanDisk, now focused on flash memory, also remains a critical player, maintaining significant pricing power as hyperscale cloud providers scramble to secure the storage necessary for the AI build-out. The Molecular Spillover: Industrial Trickle-Down The military conflict involving Iran has fundamentally decoupled energy prices from early-year projections. Following the closure of the Strait of Hormuz on March 4, 2026, Brent crude has experienced historic volatility, recently trading near $116 per barrel (Semafor, 2026). The industrial trickle-down is manifest in the fertilizer fuse, where natural gas feedstocks for nitrogen-based fertilizers have pushed global prices 20% higher. This is baking in higher food costs for the Q3 harvest (Texas A&M, 2026). Simultaneously, petroleum derivatives like Methanol and Toluene are seeing 30% price hikes, impacting industrial coatings and EV battery adhesives (McKinsey, 2026). Strategic Evolution: Our Defensive Roadmap Our strategic evolution has been deliberate, focused on capital preservation and the anticipation of a recessionary regime. The Q4 2025 Pivot: In late 2025, we began a large-scale reallocation out of Technology, where valuations appeared increasingly disconnected from labor realities, moving into Energy, Industrials, High Yield, and Aggregate Bonds. The Q1 2026 Move: We have begun reducing exposure to Energy. Although prices remain on the rise, the sector has seen a 40%+ increase year-to-date, and our concern regarding a total consumption collapse outweighs the potential for further tactical gains. Refining Industrials via Proxy: While we do not hold direct equity in individual aerospace names, we maintain significant exposure through targeted Exchange-Traded Funds (ETFs). These vehicles provide concentrated access to GE Aerospace, RTX, Boeing (BA), and Lockheed Martin (LMT), primary beneficiaries of the defense requirements stemming from the Iran conflict. However, we have reduced exposure to broad industrials and increased exposure to Infrastructure. This seeks the stability of long-term contract cash flows as a hedge against broader industrial volatility. The Shift to Quality: In the fixed-income space, we have reduced exposure to high yield, while increasing exposure to Aggregate Bonds and Cash. Despite the uptick in yields, we believe the priority must remain on quality and liquidity as geopolitical shocks increase the potential for credit stress. We expect to remain overtly conservative until Jerome Powell hands over the baton on May 15, 2026 (Brookings, 2026). Our strategy is not to time the bottom, but to ensure our clients are positioned to survive the kinetic fracture and capitalize on the eventual recovery of a structurally reformed economy. References Goldman Sachs. (2026). Global Investment Outlook and Consumer Risk Assessment.https://www.goldmansachs.com/insightsLast accessed: March 13, 2026 J.P. Morgan. (2026). Market Volatility and Geopolitical Risk Update.https://www.jpmorgan.com/insightsLast accessed: March 13, 2026 Federal Reserve Bank of St. Louis (FRED). (2026). Consumer Credit Outstanding.https://fred.stlouisfed.org/series/TOTALSLLast accessed: March 13, 2026 World Economic Forum. (2026). Global Risks Report 2026.https://www.weforum.org/reports/global-risks-report-2026Last accessed: March 13, 2026 CBS News. (2026). 401(k) hardship withdrawals reach record levels.https://www.cbsnews.comLast accessed: March 13, 2026 Cornell University. (2026). AI and Labor Market Displacement Trends.https://www.ilr.cornell.eduLast accessed: March 13, 2026 Associated General Contractors of America (AGC). (2025). Construction Workforce Data.https://www.agc.org/learn/construction-dataLast accessed: March 13, 2026 Brookings Institution. (2026). Immigration Policy and Economic Impact.https://www.brookings.eduLast accessed: March 13, 2026 Investing.com. (2026). Helium supply constraints and semiconductor impact.https://www.investing.comLast accessed: March 13, 2026 24/7 Wall St. (2026). AI-driven storage demand and pricing trends.https://247wallst.comLast accessed: March 13, 2026 Semafor. (2026). Oil volatility and Strait of Hormuz disruption.https://www.semafor.comLast accessed: March 13, 2026 Texas A&M University. (2026). Fertilizer pricing outlook.https://agrilifeextension.tamu.eduLast accessed: March 13, 2026 McKinsey & Company. (2026). Industrial and chemical supply chain analysis.https://www.mckinsey.comLast accessed: March 13, 2026 Disclosures: This material is provided as a courtesy and for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. Investing involves risk including loss of principal. Investment advisory services offered through Samra Wealth Management, a Member of Advisory Services Network, LLC

2026 Q1 As we move through early 2026, our outlook remains constructive but increasingly selective. While we believe the S&P 500 can deliver low double-digit returns over the full year, we also expect periods of early-year turbulence as markets reconcile elevated valuations, uneven consumption trends, and a shifting monetary and geopolitical backdrop. Many of the themes we highlighted last quarter around a repricing of risk and reality are not behind us. They are evolving. Valuation Discipline and Market Psychology The primary tension we see in early 2026 centers on valuation discipline, particularly within select areas of the technology sector. Palantir has become emblematic of this debate. The company continues to execute exceptionally well operationally, yet trades at valuation levels that leave little margin for error. Research coverage reflects this divide. CFRA maintains a constructive stance, emphasizing strong revenue growth, margin expansion, and improving free cash flow generation. Morningstar, by contrast, views the shares as meaningfully overvalued, arguing that even optimistic long-term growth assumptions require substantial multiple compression to justify current prices. At the time of writing, Palantir was trading at approximately 417 times trailing earnings. This distinction between trailing valuation metrics and forward earnings expectations is critical. A trailing price-to-earnings ratio measures how much investors are paying today for each dollar of earnings generated over the prior twelve months. At levels such as these, it is clear that the stock’s valuation is driven overwhelmingly by expectations of future earnings rather than current profitability. Supporters of Palantir point to forward earnings estimates, which assume rapid revenue scaling and sustained margin expansion over the coming years. Under those assumptions, valuation multiples compress meaningfully as earnings grow into today’s price. However, forward-based valuation frameworks introduce a different category of risk. They require near-flawless execution, continued customer adoption, favorable competitive dynamics, and a stable macro environment. Any deviation, whether from slower contract growth, pricing pressure, or a broader market re-rating, can lead to sharp multiple compression even if the business itself continues to grow. This contrast becomes more pronounced when Palantir is compared with established technology leaders such as Amazon, Alphabet, Apple, Meta, Microsoft, and Nvidia. These firms trade at materially lower multiples, generally ranging from the high 20s to mid-40s, because a greater share of their valuation is supported by current earnings and free cash flow rather than future expectations alone. Even Nvidia, the central beneficiary of the AI infrastructure buildout, trades at a fraction of Palantir’s trailing multiple. Intel provides a useful counterpoint from the opposite end of the valuation spectrum. Unlike high-multiple growth names, Intel enters 2026 priced for skepticism rather than exuberance. Its valuation reflects competitive pressures, execution risk surrounding its foundry strategy, and a longer timeline for returns on capital-intensive investments. At the same time, research points to improving fundamentals, including stabilizing revenues, early signs of margin recovery, rising free cash flow, and meaningful strategic support through U.S. government incentives and external partnerships. In Intel’s case, the market is demanding proof before re-rating the stock, rather than pricing perfection in advance. At Samra Wealth Management, portfolios are built on research-driven conviction, grounded in both fundamental research and technical analysis. Markets, however, are ultimately shaped by investor behavior. Periods of heightened retail participationand momentum-driven trading can push prices well beyond fundamental anchors, often quickly and emotionally. Our concern in 2026 is not missing opportunity because we failed to invest wisely, but the pressure to abandon discipline in order to keep pace with momentum-driven valuation expansion. We have seen this dynamic before. Episodes such as GameStop rewarded timing and crowd behavior rather than research and valuation. While such moves can generate short-term excitement, they are inconsistent with our mandate. Our objective is not to chase episodic outperformance or speculative rollercoasters, but to deliver consistent, repeatable outcomes while managing downside risk across full market cycles. Valuation alone is not a timing tool, but when expectations become tightly compressed into price, it remains one of the most important inputs for risk management. Labor Markets, AI, and the Next Structural Shift Recent labor market data highlights a subtle but meaningful transition underway. According to ADP, the U.S. private sector added a net 41,000 jobs in December, below expectations and following a net loss in November. Hiring was concentrated among mid-sized firms, while small businesses, often the most sensitive to tariffs, financing conditions, and regulatory pressure; have sharply slowed their pace of hiring since April. Large businesses added very few jobs on balance, underscoring a shift toward more cautious labor demand. Job growth remains concentrated in services, particularly education, healthcare, and leisure and hospitality. By contrast, employment declined in information and professional services, while manufacturing continued to shed jobs. This composition matters. It suggests that employment growth is increasingly skewed toward sectors less exposed to automation today, while white-collar and industrial roles face growing efficiency pressure. Concerns around artificial intelligence have historically focused on job losses. That concern is understandable, but incomplete. We recently met with Pramod Attarde, Chief AI Innovation Officer at ApexDeFi Labs, following his AI in Business panel in Dubai at the Global Entrepreneur Conclave. One takeaway was clear: AI-driven automation is no longer theoretical. Cities such as Jersey City, New Jersey are already deploying drones and robotics for grocery and food delivery, embedding automation into everyday logistics with little fanfare. We believe 2026 will be remembered as a transition year. With Tesla’s humanoid robot, Optimus, already in production, adoption is likely to begin in environments where labor shortages, safety considerations, and repetitive tasks intersect. Warehouses, distribution centers, grocery store back rooms, and night-shift operations are logical early adopters. While widespread public-facing use may take time, behind-the-scenes deployment is likely to accelerate. As with every prior industrial transformation, this shift will create opportunity while displacing certain roles. History shows that those who embraced the internet, social media, and AI early benefited disproportionately. While past industrialrevolutions improved working conditions, it is also worth acknowledging that few people grow up aspiring to perform physically repetitive or low-mobility labor indefinitely. Automation may reduce certain job categories, but it also reallocates human capital toward higher-value work, entrepreneurship, and new forms of economic participation. AI Infrastructure and the Real Economy Importantly, valuation concerns do not imply that the U.S. technology sector is in a systemic bubble. Across major research institutions, there is broad agreement that today’s environment differs materially from the late-1990s cycle. Market leaders generate substantial free cash flow, maintain strong balance sheets, and return capital to shareholders. Bank of America reinforces this view, noting that equity performance remains closely tied to earnings growth rather than speculative price expansion. Hyperscalers are reinvesting heavily in AI infrastructure and data centers, but capital expenditures represent a far smaller share of operating cash flow than during the telecom boom of the early 2000s. What was once criticized as excess ultimately laid the foundation for the modern internet economy. The large-scale buildout of AI compute infrastructure; including data centers, power networks, and embodied AI systems such as humanoid robotics, is poised to underpin productivity gains and new business formation for decades. In that sense, today’s investment cycle more closely resembles the Federal-Aid Highway Act of 1956 than speculative overreach. Energy Markets, Venezuela, and Supply Risk Energy markets remain another area where surface narratives obscure deeper structural risk. Securing and rehabilitating Venezuela’s oil infrastructure would likely require three to five years at a minimum, and more realistically closer to a decade. The capital required would be substantial, as extraction, refining, transportation, and distribution systems have deteriorated significantly. While Venezuela officially reports approximately 303 billion barrels of proven oil reserves, among the largest globally. This figure has been widely debated. Until 2007, Venezuela’s self-reported reserves stood near 100 billion barrels. The subsequent increase followed a reclassification of heavy oil fields under PDVSA, despite production remaining largely flat. This has led analysts to question the reliability of self-reported reserve data. Geopolitically, oil is no longer the sole strategic lever. Energy revenues account for roughly a quarter of Russia’s federal revenue base, underscoring their importance but also their limits. As Jack Mallers has noted, Venezuela representsa unique convergence point where Chinese supply chain influence, Iranian manufacturing capability, and Russian military presence overlap. From this perspective, oil becomes secondary to broader objectives around supply chain control, military influence, and strategic positioning close to U.S. borders. For markets, the implication is straightforward. If Venezuelan reserves prove overstated or remain economically inaccessible, expectations for future supply could be mispriced. In that scenario, energy markets could face renewed supply constraints, leading to upward pressure on WTI prices. At Samra Wealth Management, we maintained an elevated allocation to the energy sector throughout 2025 and increased exposure in September as a hedge against broader market volatility. While energy underperformed for much of the year, this positioning provided portfolio resilience. Should global supply assumptions unwind, particularly around Venezuela, energy could re-emerge as a source of asymmetric upside rather than simply a defensive allocation. Positioning Forward Adaptability remains central. We are neither retreating from growth nor chasing momentum. Instead, we continue to emphasize valuation discipline, diversification, and downside-aware portfolio construction. If early-year volatility materializes, we are positioned defensively. If markets continue higher, our exposure to technology, infrastructure, and energy ensures participation. As we enter a lower interest rate environment: still historically normal, and by recent standards arguably elevated, we expect technology to remain a primary beneficiary, particularly as lower discount rates continue to support long-duration cash flow assets. At the same time, easing monetary policy has broader implications. Lower interest rates tend to pressure the U.S. dollar, which can create opportunity to selectively rebalance or liquidate foreign assets and convert proceeds back into U.S. dollars at favorable exchange levels. This dynamic reinforces the importance of global awareness even within U.S.-centric portfolios. The path through 2026 is unlikely to be linear. But for long-term investors, periods of uncertainty often sow the seeds of future opportunity. At Samra Wealth Management, our mandate remains unchanged: to navigate complexity with clarity, discipline, and alignment with your long-term financial objectives. Disclosures: This material is provided as a courtesy and for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. Investing involves risk including loss of principal. Investment advisory services offered through Samra Wealth Management, a Member of Advisory Services Network, LLC References AllianceBernstein (2025) Global Macro Outlook: Fourth Quarter 2025 (Web Edition). AllianceBernstein L.P. Available at:https://www.alliancebernstein.com/corporate/en/insights/economic-perspectives/global-macro-outlook-fourth-quarter-2025.html (Accessed: 7 January 2026). Bank of America Global Research (2025) The RIC Report: Year Ahead 2026 – The Adopters and the Dollar. Bank of America Merrill Lynch, December. Client distribution copy accessed via Bank of America Global Research platform (Accessed: 7 January 2026). Bank of America Institute (2025) Consumer Checkpoint: Merry but Measured. Bank of America Corporation, December. Available at:https://institute.bankofamerica.com/content/dam/economic-insights/consumer-checkpoint-december-2025.pdf (Accessed: 7 January 2026). Bloomberg Markets (2026) Palantir Technologies Inc. (PLTR:US) Equity Overview. Bloomberg L.P. Available at:https://www.bloomberg.com/quote/PLTR:US (Accessed: 7 January 2026). Bloomberg News (2025) AI Trade’s Next Leg Is All About Tech’s Pick-and-Shovel Stocks. Bloomberg L.P., 30 December. Available at:https://www.bloomberg.com/news/articles/2025-12-30/ai-trade-s-next-leg-is-all-about-tech-s-pick-and-shovel-stocks (Accessed: 7 January 2026). Boockvar, P. (2026) What Has Really Stood Out to Me Over the Past Few Years. The Boock Report, 2 January. Substack publication (Accessed: 7 January 2026). Boockvar, P. (2026) Where Those Barrels Should Go / Other Notables. The Boock Report, 7 January. Substack publication (Accessed: 7 January 2026). Corporate Finance Institute (2025) Trailing P/E Ratio: Definition and Interpretation. Corporate Finance Institute. Available at:https://corporatefinanceinstitute.com/resources/valuation/trailing-p-e-ratio/ (Accessed: 7 January 2026). CFRA Research (2025) Intel Corporation Equity Research Report. CFRA, December. Client research report (Accessed: 7 January 2026). CFRA Research (2025) Palantir Technologies Inc. Equity Research Report. CFRA, 27 December. Client research report (Accessed: 7 January 2026). Federal Reserve Bank of St. Louis (2026) Delinquency Rate on All Commercial and Industrial Loans, Finance Companies (DRSFRMACBS). FRED Economic Data. Available at:https://fred.stlouisfed.org/series/DRSFRMACBS (Accessed: 7 January 2026). Goldman Sachs Global Investment Research (2025) AI in a Bubble? Goldman Sachs Group, Inc., December. Available at:https://www.goldmansachs.com/pdfs/insights/goldman-sachs-research/ai-in-a-bubble/report.pdf (Accessed: 7 January 2026). Goldman Sachs Global Investment Research (2025) The U.S.–China Tech Race. Goldman Sachs Group, Inc., December. Available at:https://www.goldmansachs.com/pdfs/insights/goldman-sachs-research/the-us-china-tech-race/report.pdf (Accessed: 7 January 2026). Morningstar Research Services (2025) Intel Corporation Equity Analyst Report. Morningstar, Inc., December. Institutional research report (Accessed: 7 January 2026). Morningstar Research Services (2025) Palantir Technologies Inc. Equity Analyst Report. Morningstar, Inc., November–December. Institutional research report (Accessed: 7 January 2026). Reuters (2026) What’s the Status of International Oil Companies in Venezuela After Maduro’s Capture? Reuters, 5 January. Available at:https://www.reuters.com/business/energy/whats-status-international-oil-companies-venezuela-after-maduros-capture-2026-01-05/ (Accessed: 7 January 2026). University of Michigan Surveys of Consumers (2025) Current versus Pre-Pandemic Long-Run Inflation Expectations. December preliminary release. Available at:https://data.sca.isr.umich.edu/fetchdoc.php?docid=80123 (Accessed: 7 January 2026). Wall Street Journal (2025) Inside Elon Musk’s Optimus Robot Project. Dow Jones & Company. WSJ.com feature article (Accessed: 7 January 2026).

As the quarter comes to a close the financial markets have served a cold reminder to investors, as bond and equity markets fall in tandem, there are few places to hide. Year-to-date we’ve seen a decline in the S&P 500 of -23.62% while U.S. Government Bonds fell -14.93% and Investment Grade -16.77%. The decline in what investors believe to be conservative assets with lower exposure to risk, has left many investors questioning on whether the financial markets have found the floor. Unfortunately, research suggests the worst is yet to come. In this month’s issue of The Samra Report we discuss factors impacting the markets and share potential areas of opportunity. With Federal Reserve Chairman, Jerome Powell, attempting to tame inflation with the only tool at his disposal: interest rates. FOMC meetings have turned into a game of Russian Roulette as each rate hike causes financial markets to test new lows. What started with inflation being transitory, has prompted the Fed to back-peddle, flipping the script on the definition of transitory, causing fear-induced fund outflows. A tight monetary policy: hiking interest rates to combat run-away inflation only impacts the demand side the equation, resulting in real negative economic impact. Similar to how recessions are not uniform geographically or by sector, this blanket response to inflation could negatively impact key areas: Widening the Wealth Gap Low-income households who may have had their sights set on a home purchase in the near future will be priced out of the real estate market. A recent NY Times article stated: the typical monthly mortgage payment is now roughly $2,352, up 66 percent from $1,416 a year ago, taking both higher home prices and interest rates into account. Not accounting for potentially higher closing cost, property taxes, insurance and mortgage insurance which is often required on down payments of less than 20 percent. Foreign Trade On the most fundamental level in economics, when a domestic economy raises interest rates relative to foreign economies. This action leads to an influx of capital purchasing financial instruments of the domestic economy, resulting in a stronger domestic currency. A strengthening dollar not only weakens foreign trade, however, can negatively impacts domestic corporations yielding revenue from abroad. Aging population and COLA For conservative investors, typically those retired or nearing retirement age, with a greater allocation towards fixed-income investments like bonds. The impact of rising inflation and lost bond valuations due to increases in interest rates have served a 1-2-punch of lower wealth and higher costs. In August 2021, Samra Wealth Management reiterated our concerns: “Conservative investors in search of yield, in an interest rate environment where the 10-year fell below 1.14% in July, and the real interest rate (10-year U.S. Treasury indexed for inflation) fell to -1.19%, a multi-decade low, need to rethink their investment strategy.” Technically, the United States is not in a recession as recessions are officially declared by the National Bureau of Economic Research. At Samra Wealth Management we believe the worst is yet to come, as the Fed may reach it’s 4% Federal Funds rate target during their November meeting, and it is unlikely they would deviate from the plan with rate reductions in 2023. Foreign trade has already shown signs of weakness, with international orders decreasing due to a strong dollar, however, the situation in Russia could wreak havoc on supply chain and availability of materials. The Russian squeeze on natural gas could see parts of Europe go into a government mandated lockdown, in an effort to sustain reserves. According to Eurometaux in a letter to EU Commission President, Ursula von der Leyen, about 50% of EU aluminum and zinc production capacity has already been forced offline due to the power crisis.” Although the United States may see increased volatility in energy, building and manufacturing supplies, we believe the impact to consumers will be transitory. With Union favorability at a 60-year high, a case could be made for higher wages for longer, however, with U.S. corporations painting a bleak picture for 2023, industry leaders have signaled hiring freezes and layoffs, countering the impact of wage inflation. At Samra Wealth Management, we believe risk of recession to be imminent in the first half of 2023, however, with recession indicators being lagging, there’s reason to believe we may be out of recession territory prior to a recession being announced. With inflation at levels not seen since 1981, eroding the value of consumer savings, investors are having to pick their poison: losing value in the stock or bond markets, or holding cash as purchasing power erodes. For concerned investors, we believe there are a number of opportunities, however, we expect market gains to be paired with greater than average volatility. If you are a conservative investor, you may want to consider investing in a 1-5 year municipal bond ladder, through a separate account manager. For investors with a greater appetite for risk, consider diversifying in Technology, Healthcare, Consumer Staples, Materials, Energy, Industrials, decreasing allocations towards financials and real estate. According to Factset “industry analyst project more than 25% increase in the S&P 500 over the next 12 months”, and the article predicts select areas can expect to see greater gains (Communication Services 37.6%, Information Technology 31.3%, Real Estate 30.8%). You should always consult with your investment professionals for specific guidance pertaining to your situation In the near term the Fed, the Russian squeeze on natural gas, the Chinese real estate crisis and the sterling in freefall will undoubtedly cause shockwaves for global markets, however, we believe these factors will provide an opportunity for global diversification, later in 2023. Disclosures: This material is provided as a courtesy and for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results.
All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC.
Investing involves risk including loss of principal.
Investment advisory services offered through Samra Wealth Management, a Member of Advisory Services Network, LLC References Alliancebernstein.com. 2022. Global Macro Outlook. [online] Available at: <https://www.alliancebernstein.com/content/dam/global/insights/insights-gmo/global-macro-outlook-2022-q3.pdf> [Accessed 30 September 2022]. Boivin, J., Li, W. and Brazier, A., 2022. Weekly market commentary | BlackRock Investment Institute. [online] BlackRock. Available at: <https://www.blackrock.com/us/individual/insights/blackrock-investment-institute/weekly-commentary> [Accessed 26 September 2022]. Butters, J., 2022. Earnings Insight. [online] Advantage.factset.com. Available at: <https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_092322.pdf> [Accessed 30 September 2022]. Mericle, D. and Briggs, J., 2022. Top of Mind: Will Slaying Inflation Require Recession?. [online] goldmansachs.com. Available at: <https://www.goldmansachs.com/insights/pages/will-slaying-inflation-require-recession.html> [Accessed 30 September 2022]. Samra, I., 2022. Laissez-Faire. [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/laissez-faire> [Accessed 30 September 2022]. Samra, I., 2022. The Samra Report: The Road Ahead.... [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/the-road-ahead> [Accessed 30 September 2022]. Siegel Bernard, T., 2022. Mortgage Rates Jump Above 6% for First Time Since 2008. [online] Nytimes.com. Available at: <https://www.nytimes.com/2022/09/15/business/mortgage-rates.html> [Accessed 30 September 2022]. Wall St. Journal. 2022. Tracking Bond Benchmarks. [online] Available at: <https://www.wsj.com/market-data/bonds/benchmarks> [Accessed 30 September 2022]. Woodard, J. and Glascock, J., 2022. RIC Report. [online] ML.com. Available at: <https://olui2.fs.ml.com/MDWSODUtility/PdfLoader.aspx?src=%2Fnet%2Futil%2FGetPdfFile%3Fdockey%3D6208-12458504-1%26segment%3DDIRECT> [Accessed 30 September 2022].

CPI may rise, but not because there is a true inflation process—rather, because some of the prices of goods in the CPI basket have gone up. The average of all prices will rise if some prices increase by a lot, even if most prices do not rise and some even fall a bit. If incomes do not rise to match, these relative price changes are actually deflationary. - Carl Weinberg With Federal Reserve Chairman, Jerome Powell, attempting to tame inflation with the only tool at his disposal: interest rates. FOMC meetings have turned into a game of Russian Roulette as each rate hike causes financial markets to test new lows. What started with inflation being transitory, has prompted the Fed to back-peddle, flipping the script on the definition of transitory, causing fear-induced fund outflows. In this month’s issue of The Samra Report we examine the probability of a recession and make the case for economic expansion. The world of finance is like the world of medicine, in that there are an infinite number of variables. However, in addition to these variables are parties, typically investment firms, with a vested interest for providing bias research and guidance. This explains the confusion of digesting research from Wall St analysts, and the dispersion of equity opinions amongst investments firms. Marco Kolanovic of J. P. Morgan has an S&P 500 price target of 4,900 for 2022, Mike Wilson with Morgan Stanley forecasts a 4,400, Goldman Sachs 4,700 and Bank of America’s Savita Subramanian forecasts 4,500, a far cry from the current sub 3,800 level. At Samra Wealth Management we believe the market is oversold, and although the Federal Reserve is laser-focused on reducing inflation by reducing demand, we believe the U.S. economy to be resilient. As we enter Bear market territory, the financial media shows blatant disregard for data, causing panic amongst investors with talks of recession, “as the correlation between stock returns and economic growth across countries can be negative.” The definition of a recession according to the National Bureau of Economic Research (NBER), which officially declares recessions, defines a recession as: “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” At Samra Wealth Management we believe the US economy is likely to experience a decline in GDP, however, the duration of which would be short-lived and probability of a recession low. With 2021 U.S. GDP growth of 5.7% and an S&P 500 gain of 26.89%, the Feds monetary policy stance should be viewed as a speedbump, as opposed to an attempt to derail the economy or financial markets. According to Factset, “although analysts were decreasing EPS estimates in aggregate for the second quarter, they were also increasing EPS estimates in aggregate for the next two quarters by small margins,” suggesting a return to trend in the S&P 500 by year-end. In addition, factset provides supporting evidence for an oversold market with the following statements, backing Benjamin Graham’s belief that investors are irrational. S&P 500 companies that have reported negative EPS surprises have seen a much larger negative price reaction than average reported by S&P 500 companies for a quarter since Q2 2011 (-8.0%). The largest average negative price reaction to positive EPS surprises reported by S&P 500 companies for a quarter since Q2 2011 (-2.1%). Of the 491 companies in the S&P 500 that have reported earnings to date for 22Q1, 77.6% have reported earnings above analyst estimates, according to Refinitiv. This compares to a long-term average of 66% and prior four quarter average of 83.1%. Should a recession be eminent, we would expect to see a deviation in key indicators. The Federal Reserve Bank of Philadelphia produces a monthly coincident index for each of the 50 states: The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP. The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for April 2022. Over the past three months, the indexes increased in all 50 states, for a one-month diffusion index of 100. For compassion purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index increased 1.1 percent over the past three months and 0.3 percent in April, shown below. The image suggests; if a recession was eminent, we would expect to see economic slowdown in some states. According to Merrill Lynch: “Macroeconomic stress could cause the Fed to slow rate hikes.” However, we believe a deviation from the Feds plan would show a lack of confidence and could send markets into turmoil. Alternatively, we expect corporations to streamline operations; implementing cost-cutting measures including layoffs, followed-up by a significant increase in stock buybacks. As interest rates continue to rise, we further expect dividend-paying stocks to increase dividend ratios to compete against the “risk-free” return of owning treasuries, potentially setting up U.S. markets for a return to 2021 highs. In the short-term the idea of an economic expansion or return to financial market highs may appear improbable due to supply-chain issues, labor-shortages, and energy inflation. At Samra Wealth Management we believe these issues are transitory: We expect supply-chain issues to alleviate by the fourth quarter for most industries and expect an increase in retail sales due to increased inventories. We further expect labor-shortages to decrease from an increased labor force participation rate, stemming from wage increases to attract talent. Although we believe the volatility will continue until Q4, our sector rotational strategy remains intact, weighted highest towards technology, healthcare, financials, industrials and select e-commerce companies. We expect to reduce our tactical allocation towards energy, increasing allocations towards real estate, high yield fixed-income, and private equity. Finally, at Samra Wealth Management we strongly believe most of the burden will weigh heaviest on those on the lower end of the income spectrum. Although we’ve previously written about low interest rates serving as a tax on the wealthy, returning risk-free returns lower than inflation. Increased interest rates serve as a tax on the poor, and we expect to see many first-time homebuyers priced out of the market. Disclosures This material is provided as a courtesy and for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. Nasdaq is a global electronic marketplace for buying and selling securities. Originally an acronym for "National Association of Securities Dealers Automated Quotations"—it was a subsidiary of the National Association of Securities Dealers (NASD), now known as the Financial Industry Regulatory Authority (FINRA). Indexes are unmanaged and do not incur management fees, costs or expenses. It is not possible to invest directly in an index. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are unmanaged and do not incur management fees, costs, or expenses. It is not possible to invest directly in an index. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. Investing involves risk including loss of principal. Investment advisory services offered through Samra Wealth Management, a Member of Advisory Services Network, LLC. References Adinolfi, J., 2022. Why a top Wall Street quant sees S&P 500 taking back all its losses by year's end. [online] MarketWatch. Available at: <https://www.marketwatch.com/story/why-a-top-wall-street-quant-sees-s-p-500-taking-back-all-its-losses-by-yearend-11654117457> [Accessed 14 June 2022]. Alliancebernstein.com. 2022. Global Macro Outlook - Second Quarter 2022. [online] Available at: <https://www.alliancebernstein.com/gb/en-gb/adviser/insights/economic-perspectives/global-macro-outlook-second-quarter-2022.html> [Accessed 14 June 2022]. Butters, J., 2022. EARNINGS INSIGHT. [online] Advantage.factset.com. Available at: <https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_061022A.pdf> [Accessed 14 June 2022]. Dhillon, T. and Alonso, T., 2022. This Week in Earnings 22Q1 | May 20, 2022 | Lipper Alpha Insight | Refintiv. [online] Lipper Alpha Insight. Available at: <https://lipperalpha.refinitiv.com/2022/05/this-week-in-earnings-22q1-may-20-2022/> [Accessed 15 June 2022]. Insight.factset.com. 2022. Analysts Lowering EPS Estimates for Q2 2022 but Not Lowering EPS Estimates for 2H 2022. [online] Available at: <https://insight.factset.com/analysts-lowering-eps-estimates-for-q2-2022-but-not-lowering-eps-estimates-for-2h-2022> [Accessed 14 June 2022]. Lipperusfundflows.com. 2022. US Fund Flows Data Services. [online] Available at: <https://www.lipperusfundflows.com/#create:home:Home:/php/signup_trial.php> [Accessed 14 June 2022]. Msci.com. 2010. Is There a Link Between GDP Growth and Equity Returns?. [online] Available at: <https://www.msci.com/documents/10199/a134c5d5-dca0-420d-875d-06adb948f578> [Accessed 13 June 2022]. Philadelphiafed.org. 2022. State Coincident Indexes. [online] Available at: <https://www.philadelphiafed.org/-/media/frbp/assets/surveys-and-data/coincident/2022/coincidentindexes0422.pdf> [Accessed 14 June 2022]. Philadelphiafed.org. 2022. State Coincident Indexes. [online] Available at: <https://www.philadelphiafed.org/surveys-and-data/regional-economic-analysis/state-coincident-indexes> [Accessed 14 June 2022]. Weinberg, C., 2022. The worst of "inflation" is behind us - High Frequency Economics. [online] High Frequency Economics. Available at: <https://www.hifreqecon.com/the-worst-of-inflation-is-behind-us/> [Accessed 14 June 2022]. Zara, C., 2022. Crypto layoffs loom as tokens crash: Coinbase, Crypto.com, and others cut staff. [online] Fast Company. Available at: <https://www.fastcompany.com/90760988/crypto-layoffs-loom-as-tokens-crash-coinbase-crypto-com-and-others-cut-staff> [Accessed 14 June 2022].

What started as a strong tone from the Fed, has translated to turmoil in the global financial markets, as Federal Reserve Chairman Jerome Powell and James Bullard, President of the Federal Reserve Bank of St. Louis unleash panic, verbalizing the need for rapid rate hikes to combat inflation. Although 2021 closed out with the S&P 500 up 26.89%, 2022 has served a wake-up call to conservative investors, as U.S. Government Bonds believed to provide immunity from volatility, are down year-to-date over 10%, while the S&P 500 has fallen -12.8%. Recessionary fears are no longer a headline, as Q1 GDP declines to 1.4%, a sharp reversal from a 6.9% annual growth rate in the fourth quarter. Since 1977, the Federal Reserve has operated under a mandate from Congress to "promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates". With the Fed focused on run-away inflation, an issue at Samra Wealth Management we believe to be transitory and to subside later this year, they have pivoted to fight inflation and reducing demand, demand investors believed would be pent-up from covid lockdowns. As the Fed focuses on combatting inflation by increasing key interest rates, investors should understand the cause of recent inflation was related to supply-chain and the incursion into Ukraine, not related to low-interest rates, as the chart below depicts. Although the U.S. economy has shown resilience, Powell’s two-dimensional strategy is overcompensating, from doing too little too late. In our August 2021 issue of The Samra Report we wrote the following forecasting the strength of the U.S. Dollar, short-term inflation, and the impact of interest rate hikes: In a domestic economy, should the central bank raise interest rates, relative to foreign economies. The domestic economy in this case would experience an influx of capital, pushing up the relative strength of the domestic economy’s currency, offsetting foreign trade. In our current scenario, low interest rates help to ensure domestically produced goods are accessible in global trade. At Samra Wealth Management, we believe interest rates will start to tick-up in November, due to an announcement by the Treasury, it could begin cutting the size of government debt sales in the fall, as funding needs for economic relief efforts ease, in a move that would pave the way for the first reductions in five years. We believe the Fed is likely to follow suit in its April meeting, as talks of tapering start to solidify. A rise in interest rates, combined with a tax increase could deal a blow to select sectors in the near term, specifically: Healthcare, Technology, financials, industrials, and consumer discretionary, prompting a change in our sector rotational strategy. However, although we expect interest rates to rise moderately in Q4 into Q12022, we believe the Fed’s plan will be contingent on unemployment, as it emphasizes returning to pre-pandemic levels, while keeping an eye on run-away inflation. We expect short-term inflation to increase, given pent up demand and supply-chain constraints due to logistics and shortages. We further expect the above-mentioned sectors to recover swiftly given the go-ahead of an infrastructure spending bill, and increased stimulus measures. Conservative investors in search of yield, in an interest rate environment where the 10-year fell below 1.14% in July, and the real interest rate (10-year U.S. Treasury indexed for inflation) fell to -1.19%, a multi-decade low, need to rethink their investment strategy. (Fred.stlouisfed.org) A conservative allocation weighted heavily towards fixed income, places these investors at increased risk, as interest rates start to rise while prices of bonds fall. At Samra Wealth Management, we expect increased volatility across asset classes over the next 12-months, suggesting a managed strategy is likely to outperform that of passive investments. In April we stated: “we believe the Fed’s approach to monetary policy is too little, too late, and an attempt to play catch-up could send the US economy into a recession.” While the Fed focuses-in on controlling inflation, at Samra Wealth Management we believe there are two components flying under the radar: (1) a strengthening dollar, and (2) the U.S. Labor market. Year-to-date the dollar has surged 8% to its highest levels in two decades, as investors ramped up bets that aggressive interest rate rises from the Federal Reserve will leave other central banks trailing far behind. The dollar's appreciation is leaving a trail of destruction in its wake, exacerbating inflation in other countries, and tightening financial conditions just as the world economy confronts the prospect of a slowdown in growth. (Reuters) Domestically, the United States in the short-term could benefit, as a stronger dollar benefits the buy-side of the equation with regards to foreign trade, however, as U.S. exports become more expensive in relative terms, global demand for U.S. goods and services could fall to a multi-decade low. In our January edition of The Samra Report, we issued a “recommendation focusing on domestic holdings with little exposure to foreign exchange risk.” A strengthening dollar not only weakens trade, however, impacts domestic corporations yielding revenue from abroad. This becomes concerning for corporations accepting foreign currency, where the cost of bringing dollars back to the US becomes more expensive. Think of companies such as Walmart, McDonalds, and Starbucks, with vast international operations, there is significant risk in foreign exchange. This scenario also impacts foreign trade as American goods become more expensive to foreign consumers. According to the Wall St. Journal: “The Labor Department on Tuesday reported a seasonally adjusted 11.5 million job openings in March, an increase from 11.3 million the prior month. The number of times workers quit their jobs rose to 4.5 million in the same month, slightly higher than the previous record in November of last year.” Although enhanced unemployment benefits may have delayed some employees from returning to the workforce, at Samra Wealth Management we believe the “great resignation” is fueled by the work from home and hybrid models. During the lockdown, employees were afforded the freedom of time, time saved commuting to the office and no-longer having someone looking over your shoulder. Although speculation, we believe this may have increased the pace employees converted their part-time gigs to full-time business operations. We do not believe there has been a mass exodus from the workforce, and alternatively we are seeing mass migration by entrepreneurs, our consensus strengthened with the below data from the Bureau of Labor Statistics. As employers incentivize the workforce, we may end up experiencing the textbook definition of wage-push inflation: the general increase in prices caused by wages rising in society, prompting the Fed to again tighten the money supply, testing the resilience of the U.S. financial markets. Disclosures This material is provided as a courtesy and for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. Nasdaq is a global electronic marketplace for buying and selling securities. Originally an acronym for "National Association of Securities Dealers Automated Quotations"—it was a subsidiary of the National Association of Securities Dealers (NASD), now known as the Financial Industry Regulatory Authority (FINRA). Indexes are unmanaged and do not incur management fees, costs or expenses. It is not possible to invest directly in an index. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are unmanaged and do not incur management fees, costs, or expenses. It is not possible to invest directly in an index. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. Investing involves risk including loss of principal. Investment advisory services offered through Samra Wealth Management, a Member of Advisory Services Network, LLC. References Census.gov. 2022. Business Formation Statistics. [online] Available at: <https://www.census.gov/econ/bfs/index.html> [Accessed 29 April 2022]. Chaney Cambon, S., 2022. U.S. GDP Falls 1.4% as Economy Shrinks for First Time Since Early in Pandemic. [online] WSJ. Available at: <https://www.wsj.com/articles/us-economy-gdp-growth-q1-11651108351> [Accessed 28 April 2022]. Chatterjee, S. and Rao, S., 2022. Dollar surge leaves trail of destruction. [online] Reuters.com. Available at: <https://www.reuters.com/business/dollar-surge-leaves-trail-destruction-2022-04-29/> [Accessed 29 April 2022]. Fred.stlouisfed.org. 2022. Federal Funds Effective Rate. [online] Available at: <https://fred.stlouisfed.org/series/FEDFUNDS#0> [Accessed 29 April 2022]. Fred.stlouisfed.org. 2022. FRED Graph | FRED | St. Louis Fed. [online] Available at: <https://fred.stlouisfed.org/graph/?g=rocU#> [Accessed 29 April 2022]. Mena, B., 2022. U.S. Job Openings, Quits Reached Records in March. [online] WSJ. Available at: <https://www.wsj.com/articles/job-openings-us-growth-labor-market-turnover-march-2022-11651529531> [Accessed 3 May 2022]. Reuters.com. 2022. U.S. Treasury sees economy still expanding in 2022 despite Q1 GDP drop. [online] Available at: <https://www.reuters.com/world/us/us-treasury-sees-economy-still-expanding-2022-despite-q1-gdp-drop-2022-05-02/> [Accessed 2 May 2022]. Samra, I., 2022. Collateral Damage. [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/collateral-damage> [Accessed 29 April 2022]. Samra, I., 2022. The Year Ahead. [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/the-road-ahead> [Accessed 29 April 2022]. Samra, I., 2022. 2022: The Year Ahead… (Post Fed Meeting). [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/2022-the-year-ahead-post-fed-meeting> [Accessed 29 April 2022]. Stubbington, T., 2022. Dollar surges to highest level in 20 years. [online] Ft.com. Available at: <https://www.ft.com/content/54f5231e-6157-4312-b3e4-a74335ca9bcc> [Accessed 28 April 2022]. *Last Updated May 4, 2022.

“There is no instance of a nation benefitting from prolonged warfare.” --Sun Tzu Contrary to the Russian ceasefire, the invasion of Ukraine shows little signs of slowing, and although consumers are feeling the impact of inflation at the gas pump, this pales in comparison to the impact of European nations. As global central banks follow the Feds lead of combating inflation with a limited toolkit, this balancing act may drive the US economy into a recession. In this month’s issue of The Samra Report we focus on policy mistakes with regards to inflation and our plan to hedge against volatility. As we close out the first quarter, the media has been quick to plant the seed of concern around inflation. With headlines from the Wall St. Journal reading “U.S. Inflation Rises to 40-Year Peak in February by Fed’s Preferred Measure.” At Samra Wealth Management we believe core Personal Consumption Expenditures (PCE), inflation excluding volatile food and energy, may have already peaked. Investors with a foundational understanding of economics grasp that in the short-term this trend is transitory, caused less by economic growth or expansion of the money supply, and more correlated towards supply-chain shortages driving up prices. Investors have reason to be confused, as hiking rates will not solve the supply-chain dilemma. According to Goldman Sachs there are two major growth risks against the backdrop of alarmingly high inflation: (1) the prospect of a policy mistake as the Fed embarks on a tightening cycle to rein in inflation, and whether the Fed will be able to pull off a soft landing in a challenging macro environment. (2) The prospect that the Russian-Ukraine conflict deals a crippling economic blow to Europe, given Europe’s dependency on Russian energy. In our March issue of The Samra Report, we recommended a systematic rotation out of treasuries into technology, increased exposure towards energy, real estate and precious metals, and an emphasis on investing in US Stocks. With US bond funds experiencing large outflows the week of March 9th, in the amount of $7.8 billion with $4.49 billion in purchases of equity funds, institutional investors recognize the negative real returns, when factoring in inflation and are opting towards riskier assets. Our recommendation is to invest in quality companies and hold throughout the volatile market cycle, and do not attempt to time the market. Investors may find themselves confused, as many of the mega-cap technology companies are trading far below their recent all-time highs. Investors should understand that select equities may be trading below all-time highs, however, this does not place them in the category of value. At Samra Wealth Management we recommend investors look towards quality, and our sector rotation strategy has seen little change, weighted highest towards Technology, Healthcare, Financials, industrials and select consumer discretionary stocks. With the volatility in energy prices, energy has become a tactical component as revenues of energy companies are strongly correlated to their underlying commodities. Furthermore, we expect little hesitation from Congress approving additional funds for defense and expect defense contractors and cybersecurity firms to benefit in the near-term. Conservative investors, those invested in treasuries may continue to see their portfolios shed value throughout the remainder of the year. With the Federal Reserve Chairman, Jerome Powell, stating the US economy has exhibited resilience, signaling further rate hikes. We believe the Fed’s approach to monetary policy is too little, too late, and an attempt to play catch-up could send the US economy into a recession, an issue that could negatively impact the Biden administration’s chances for a second term. At Samra Wealth Management, we believe it is unlikely President Biden can secure a second term in office without some form of the Build Back America bill, and a comprehensive immigration policy to help alleviate the labor shortage. Disclosures
This material is provided as a courtesy and for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results.
Nasdaq is a global electronic marketplace for buying and selling securities. Originally an acronym for "National Association of Securities Dealers Automated Quotations"—it was a subsidiary of the National Association of Securities Dealers (NASD), now known as the Financial Industry Regulatory Authority (FINRA). Indexes are unmanaged and do not incur management fees, costs or expenses. It is not possible to invest directly in an index.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are unmanaged and do not incur management fees, costs, or expenses. It is not possible to invest directly in an index. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. Investing involves risk including loss of principal. Investment advisory services offered through Samra Wealth Management, a Member of Advisory Services Network, LLC. References Edelberg, W., 2022. What does current inflation tell us about the future?. [online] Brookings. Available at: <https://www.brookings.edu/blog/up-front/2021/11/16/what-does-current-inflation-tell-us-about-the-future/> [Accessed 31 March 2022]. Guilford, G., 2022. U.S. bond funds see large outflows in the week to March 9. [online] Reuters. Available at: <https://www.reuters.com/business/finance/us-bond-funds-see-large-outflows-week-march-9-2022-03-11/> [Accessed 31 March 2022]. Guilford, G., 2022. U.S. bond funds see large outflows in the week to March 9. [online] Reuters. Available at: <https://www.wsj.com/articles/annual-inflation-measure-accelerates-to-6-4-highest-since-1982-by-feds-preferred-measure-11648733717?mod=pls_whats_news_us_business_f> [Accessed 31 March 2022]. Mankiw, G., Ball, L. and Romer, D., 2022. The New Keynesian Economics and the Output- Inflation Trade-off. [online] Brookings.edu. Available at: <https://www.brookings.edu/wp-content/uploads/1988/01/1988a_bpea_ball_mankiw_romer_akerlof_rose_yellen.pdf> [Accessed 31 March 2022]. Rosengren, E. and Hildebrand, P., 2022. Top of Mind: Stagflation Risk. [online] Goldman Sachs. Available at: <https://www.goldmansachs.com/insights/pages/gs-research/top-of-mind-stagflation-risk/report.pdf> [Accessed 31 March 2022]. Samra, I. and Chawla, P., 2022. The Samra Report" 2022 The Year Ahead. [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/2022-the-year-ahead-post-fed-meeting> [Accessed 31 March 2022]. Seddon, M., 2022. Russia no longer requesting Ukraine be ‘denazified’ as part of ceasefire talks. [online] Ft.com. Available at: <https://www.ft.com/content/7f14efe8-2f4c-47a2-aa6b-9a755a39b626> [Accessed 31 March 2022]. The Economist. 2022. The Biden administration’s defence-spending proposal is a muddle. [online] Available at: <https://www.economist.com/united-states/2022/04/02/the-biden-administrations-defence-spending-proposal-is-a-muddle> [Accessed 1 April 2022]. Wittenstein, J., 2022. Meta Trades Like Value Stock After $500 Billion Rout. [online] Bloomberg.com. Available at: <https://www.bloomberg.com/news/articles/2022-03-24/meta-trades-like-value-stock-after-500-billion-rout-tech-watch> [Accessed 31 March 2022]. Woodard, J. and Deverey, J., 2022. The RIC Report: Peace through strength. [online] ML.com. Available at: <https://olui2.fs.ml.com/MDWSODUtility/PdfLoader.aspx?src=%2Fnet%2Futil%2FGetPdfFile%3Fdockey%3D6208-12389551-2%26segment%3DDIRECT> [Accessed 31 March 2022].

The Russian incursion into Ukraine has swiftly stolen the headlines from the inflation story, as President Vladimir Putin’s bluff has turned into a tantrum against Ukraine and Democracy. Shocked global markets were not expecting a war scenario, as algorithms and model portfolios appear to be confused, with some investors turning to the Pentagon’s War Game outcomes. At Samra Wealth Management, we double-down on our February 2022 consensus, the year-to-date volatility is a reminder to investors of the fragility of the financial markets. With Putin playing his hand, it is now over to Fed Chair Jerome Powell, as the stability of the global financial markets has become a geopolitical game of poker. What was expected to be a swift take-over of Ukraine has resulted in heavy early losses, questioning Russia’s military capabilities. With Russia dedicating 4.3% of GDP to military spending, an untested military favoring rockets over precision guided missiles prompts a greater concern. Vladimir Putin wrote the doctrine on “escalate to deescalate”, creating concerns of a low-yield nuclear attack. Russian foreign policy may have caused irreparable damage to the Russian economy and financial markets, as Russia cancelled trading of stocks in Moscow, on Monday. Global sanctions against Russia caused the (Ruble denominated) Russian stock market (MOEX) to decline -45.66%, causing greater concerns for foreign investors as the Ruble fell -28.36% against the US Dollar YTD. With Russia’s credit called into question, the Bank of Russia has hiked its key interest rate to 20% from 9.5%. With Russian stocks on the London Stock Exchange plummeting, a prolonged closure of Russian markets, may present a déjà vu scenario, creating an environment of illiquidity and hyperinflation where currency becomes worthless, and Russians re-live trading vodka for bread through the remainder of winter. As global banks, governments and corporations shun Russia, Robinhood strategies from hacking organizations such as Anonymous are disrupting Russian infrastructure. With the S&P 500 falling into correction territory and the NASDAQ in a Bear Market, investors should invest with a great deal of caution, as what has worked in the past may not work this time. As global investors seek safe havens, we would typically see a rotation towards tech behemoths. With the Fed expected to raise rates in March the tech sector has priced in lower future valuations and as the bond yield rises, bond prices find themselves on a downward trend, as investors rotate out of “risky” assets, into cash and fixed income. The Fed now has a balancing act, finding an equilibrium between raising rates and sending the US economy into a recession. During a typical recession, the Fed would lower the key interest rate to help stimulate the economy, however, with rates still near all-time highs, this is not an option. At Samra Wealth Management, we believe the recent Russian incursion may slow, not stop, the Fed’s interest rate strategy, and investors should discuss with their advisors about: A systematic rotation out of treasuries, into technology: we believe a slowing of the Fed’s interest rate policy will see positive repricing of Technology, Consumer Discretion and Communications. According to Merrill Lynch: Stock splits historically are bullish for the companies that enact them. Average returns one year later are 25% (vs. 9% for the market). Recently, splits have become scarce with returns more subdued, but still well above benchmarks. A benefit to large corporations changing their names, for example Google to Alphabet and Facebook to Meta, may be viewed more positively amongst law makers, spawning the potential for future growth. Increased exposure into Energy, Real Estate and Precious Metals: In the near-term we forecast oil consumption to outpace oil demand, however oil consumption could decline in the coming months causing downward pressure on prices in late Q2 to early Q3. We expect inflation to positively impact real estate and precious metals. America First Harsher sanctions will likely follow from both Europe and the US, however, given the lack of exposure the United States has to Europe, domestic investments may provide a sense of immunity to investors. Given the fluid situation in Ukraine, we believe a strong offense is the best defense and recommend investing in US stocks. Although the Russian invasion of Ukraine will likely have little disruption to the US economy, we believe the Fed would be wise to slow their interest rate policy, increasing no-more than 1.50% in 2022. As supply chains disruptions ease and demand for semiconductors settle, we expect inflationary fears to dissipate by Q3, as consumption for energy falls. Investors of multinational corporations deriving their income from Europe should be concerned with the lack of returns, as the dollar strengthens or consider investing utilizing a currency hedged strategy. Disclosures This material is provided as a courtesy and for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. Nasdaq is a global electronic marketplace for buying and selling securities. Originally an acronym for "National Association of Securities Dealers Automated Quotations"—it was a subsidiary of the National Association of Securities Dealers (NASD), now known as the Financial Industry Regulatory Authority (FINRA). Indexes are unmanaged and do not incur management fees, costs or expenses. It is not possible to invest directly in an index. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are unmanaged and do not incur management fees, costs, or expenses. It is not possible to invest directly in an index. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. Investing involves risk including loss of principal. Investment advisory services offered through Samra Wealth Management, a Member of Advisory Services Network, LLC. References Amundi US Institutional Investors & Consultants. 2022. Russia attacks Ukraine: Markets will have to adjust to the shock. [online] Available at: <https://www.amundi.com/usinstitutional/Local-Content/News/Russia-attacks-Ukraine-Markets-will-have-to-adjust-to-the-shock> [Accessed 28 February 2022]. BlackRock. 2022. Global Weekly Commentary - Insights | BlackRock: Upgrading Stocks, Downgrading Credit. [online] Available at: <https://www.blackrock.com/us/financial-professionals/insights/weekly-commentary#> [Accessed 28 February 2022]. Borger, J., 2022. US staged 'limited' nuclear battle against Russia in war game. [online] the Guardian. Available at: <https://www.theguardian.com/world/2020/feb/24/limited-nuclear-war-game-us-russia> [Accessed 28 February 2022]. Easton, J. and Maki, S., 2022. Russian Stocks Plummet in London with Moscow Exchange Shut. [online] Bloomberg.com. Available at: <https://www.bloomberg.com/news/articles/2022-02-28/russian-stocks-plummet-in-london-with-moscow-exchange-shut> [Accessed 28 February 2022]. Harris, E. and Bhave, A., 2022. US Economic Week: Fading the Russian Shock. [online] Merrill Lynch. Available at: <https://olui2.fs.ml.com/MDWSODUtility/PdfLoader.aspx?src=%2Fnet%2Futil%2FGetPdfFile%3Fdockey%3D6208-12387613-1%26segment%3DDIRECT> [Accessed 28 February 2022]. Kendall-Taylor, A. and Trenin, D., 2022. Top of Mind: Russia Risks. [online] Goldman Sachs. Available at: <https://www.goldmansachs.com/insights/pages/gs-research/russia-risk/report.pdf> [Accessed 28 February 2022]. Reuters.com. 2022. Russian Central Bank Hikes to 20% in Emergency Move Tells Firms to Sell FX. [online] Available at: <https://www.reuters.com/business/finance/russia-hikes-key-rate-20-tells-companies-sell-fx-2022-02-28/> [Accessed 28 February 2022]. Samra, I., 2022. The Samra Report: 2022: The Year Ahead… (Post Fed Meeting). [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/2022-the-year-ahead-post-fed-meeting> [Accessed 28 February 2022]. Woodard, J., Devery, J. and Harris, D., 2022. THE RIC REPORT: Bullish stock splits, bearish rate hits. [online] Merrill Lynch. Available at: <https://olui2.fs.ml.com/MDWSODUtility/PdfLoader.aspx?src=%2Fnet%2Futil%2FGetPdfFile%3Fdockey%3D6208-12378019-1%26segment%3DDIRECT> [Accessed 28 February 2022].

Barely out of the gates in 2022 and the volatility is reminiscent of Q1 2020, serving as a reminder to investors the fragility of the financial markets. Although 2021 closed out with the S&P 500 up 26.89%, January provided a chilling glimpse of what may lie ahead in the coming months, as Federal Reserve Chairman, Jerome Powell dampened sentiment with some strong remarks. As investors flock towards safety, according to Merrill Lynch “safe assets don’t look so safe. High-quality government bonds, corporate bonds, munis, and growth stocks all face serious risk as the Fed raises rates.” In this month’s issue of The Samra Report, we analyze some of the underlying causes of the volatility, and highlight areas of potential concern and opportunity. The keyword as of late has been inflation, caused by a prolonged low interest rate environment, irresponsible government stimulus, in a low tax climate. These factors have caused a domino effect spilling over into sectors such as real estate, as investors and economist brace for the potential bubble to burst. But why now? Aiding the recent inflation hike has been fewer workers in the labor force with an appetite for higher wages, combined with supply chain disruptions and the increasing cost of fuel. Although inflation is not uniform across sector and geography, neither is wage inflation, leading to a wider gap in inequality, further exacerbated with the expiration of monthly child tax credits. Early pandemic responses led to a widening income gap, as skilled workers continued to work remotely, earning a salary while decreasing expenditures such as travel, dining, and childcare. Unskilled workers however collected unemployment benefits, without an option for remote employment. The Feds primary tool to help dampen inflation is Monetary Policy: increasing interest rates. Low interest rates have served as a tax on the wealthy, peaking this past October as PCE inflation reached 4.59%, while the Federal Funds rate hovered at a low of 0.08%. Although Chairman Powell has cited data exhibiting the strength and resilience of the economy, at Samra Wealth Management we believe the Fed’s interest rate decisions missed the boat, and conservative rate increases should have commenced in early 2019. Analyst now speculate whether the fed will raise rates 4 to 7 times over the next 7 meetings by 0.25%, or is it just rhetoric from the Fed, enough to spook the markets. Although the past few weeks have seen an increase in interest rates and a fall in equities from their all-time highs, it’s important consumers and investors understand the difference between expectation and reality. Although the Fed has signaled a rate hike as early as March, the market has priced in this information causing bond yields to rise, a concern for all investors regardless of risk appetite. Conservative investors, those who predominantly hold fixed-income investments, understand the inverse relationship between rising interest rates, and declining bond prices. What may be less familiar, is the Discounted Cash Flow (DCF) model used to determine valuation. According to McKinsey: Discounted-cash-flow valuation, though it may sound stodgily old school, works where other methods fail, since the core principles of economics and finance apply even in uncharted territories, such as start-ups. The truth is that alternatives, such as price- to-earnings or value-to-sales multiples, are of little use when earnings are negative and when there aren’t good benchmarks for sales multiples. More important, these shorthand methods can’t account for the unique characteristics of each company in a fast-changing environment, and they provide little insight into what drives valuation. A hike in interest rates in the DCF model causes an increase in the denominator, causing valuations to plunge, exhibited shortly after the summary by Chairman Powell January 26th. At Samra Wealth Management we believe the volatility is likely to continue into late Q2, and caution investors to rethink their investment strategy, since the top 8 S&P 500 companies by market capitalization are Technology companies, making up over 26% of total S&P 500 capitalization. (We included Amazon and Facebook as Technology companies, although GLICS classifications do not). We recommend focusing on domestic holdings with little exposure to foreign exchange risk. On the most fundamental level in economics, when you raise interest rates in a domestic economy, relative to foreign economies. Demand increases for the domestic economy’s financial instruments, becoming the recipient of increased investment, strengthening the currency of the domestic economy’s currency on a relative basis. This becomes concerning for corporations accepting foreign currency, where the cost of bringing dollars back to the US becomes more expensive. Think of companies such as Walmart, McDonalds, and Starbucks, with vast international operations, there is significant risk in foreign exchange. This scenario also impacts foreign trade as American goods become more expensive to foreign consumers. Over the past 5 years, our sector rotational strategy has seen little change: Health Care Health Care as a sector is in expensive Federal government spending for health care grew 36.0% in 2020, significantly faster than the 5.9% growth in 2019. This faster growth was largely in response to the COVID-19 pandemic. Prescription drug spending increased 3.0% to $348.4 billion in 2020. According to the Centers for Medicare & Medicaid Services National health spending is projected to grow at an average annual rate of 5.4 percent for 2019-28 and to reach $6.2 trillion by 2028. Wearable technology and smart phone apps collecting real time health data, is providing healthcare providers with vast amounts of data that could be monetized. Financials Beneficiary of rising interest rates Lower dependence on labor from the inclusion of fintech, reduced usage of brick and mortar for retail banking. Increased M&A activity in 2021 rose by 102 percent vs the previous year, totaling $2.1T in US-to-US transactions. Increased loan growth due to inflation pushing up prices, and as companies replenish inventories. Recent volatility in markets is likely to push some self-directed investors to seek professional management. Energy Revenues of energy companies are strongly correlated to their underlying commodities, oil & gas, providing a natural hedge against inflation. Recent cold weather bouts across the United States have caused utilities companies to move natural gas from storage. In January, the price of natural gas increased in a single day by 72%, with a year-to-date increase of 34%. According to the late Senator John McCain, “Russia is a Gas Station masquerading as a country”. Although Russia has come a long way since this quote, President Putin has plenty of monetary motivation to cause havoc in Europe. With sanctions in place, Putin’s pipeline, Nord Stream 2, could paralyze much of Europe. Combining this with a conflict in Ukraine could see the price of Brent surpass $100 a barrel. With Shell and BP cutting dividends, expect fixed income investors to rotate out of bonds, into energy with the return of dividends. In the near-term we forecast oil consumption to outpace oil demand, however oil consumption could decline in the coming months causing downward pressure on prices. Technology Although the sector has fallen into correction territory, we believe Monetary Policy will be accommodative, and technology will prove resilient. Although neutral on the sector, we believe select areas of technology will outperform, and investors should be selective, with a focus on cloud, cybersecurity and companies collecting and utilizing vast amounts of data for automation, robotics, fintech and healthcare related. As EV’s become mainstream, increased usage, infrastructure, and tax credits could be greatly beneficial to new entrants, as recent margins have been attractive. The semi-conductor space is transforming; however, this move is too little too late, and companies such as Intel will need large government grants and tax credits to compete with Asian rivals. Although domestic chip manufacturers may be able to provide silicon for a vast array of computers and household appliances, advanced semi-conductor independence could be a decade away. At Samra Wealth Management, we believe large scale immigration reform and legislation focused on tech start-ups is key. Industrials Although we project inflation to be a problem up through late Q2, we believe the Infrastructure Bill, pent up demand, and improvements in supply chain will alleviate downward pressure. Less dependence on labor and utilizing technology will increase profit margins. Ecommerce Select e-commerce companies Amazon, Walmart, Shopify, Mecardo Libre stand to benefit from global internet penetration and smartphone adoption. With rising rates on the horizon, bond portfolios are already feeling the impact, similar to our January 2020 Samra Report, “we recommend hedging portfolio risk with exposure to Net Lease Commercial Real Estate and following social migration patterns for multifamily residential real estate, specifically around metro areas of D.C., Charlotte, Atlanta and Tampa”, as real estate provides inflation protection. We are bearish on treasuries and prefer high-yield and emerging market debt for those able to hedge currency risk. Disclosures This material is provided as a courtesy and for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. Investing involves risk including loss of principal. Investment advisory services offered through Samra Wealth Management, a Member of Advisory Services Network, LLC. References Armenta, A., 2022. Global Macro Outlook - First Quarter 2022. [online] https://www.alliancebernstein.com. Available at: <https://www.alliancebernstein.com/library/global-macro-outlook-first-quarter-2022.htm> [Accessed 30 January 2022]. Chang, J., 2022. Vaccines, Recovery and Innovation in the Healthcare Sector. [online] Goldman Sachs. Available at: <https://www.goldmansachs.com/insights/pages/from_briefings_20-may-2021.html> [Accessed 30 January 2022]. Cms.gov. 2022. NHE Fact Sheet | CMS. [online] Available at: <https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet#:~:text=Federal%20government%20spending%20for%20health,the%206.3%25%20growth%20in%202019.> [Accessed 29 January 2022]. Divisino, S., 2022. Explainer: Why U.S. natural gas prices spiked by a record 70% on Thursday. [online] Reuters. Available at: <https://www.reuters.com/business/energy/why-us-natural-gas-prices-spiked-by-record-70-thursday-2022-01-28/> [Accessed 29 January 2022]. Eia.gov. 2022. Short-Term Energy Outlook - U.S. Energy Information Administration (EIA). [online] Available at: <https://www.eia.gov/outlooks/steo/report/global_oil.php> [Accessed 31 January 2022]. Fred.stlouisfed.org. 2022. FRED Graph | FRED | St. Louis Fed. [online] Available at: <https://fred.stlouisfed.org/graph/?g=1ED0> [Accessed 30 January 2022]. Lebenthal, J., 2022. Interest Rates and the Effect on Technology Stocks - Cerity Partners. [online] Cerity Partners. Available at: <https://ceritypartners.com/thought-leadership/interest-rates-and-the-effect-on-technology-stocks/> [Accessed 30 January 2022]. Markowicz, S., 2022. Which equity sectors can combat higher inflation?. [online] Which equity sectors can combat higher inflation?. Available at: <https://www.schroders.com/en/insights/economics/which-equity-sectors-can-combat-higher-inflation/> [Accessed 30 January 2022]. McKinsey. 2022. Valuing High-Tech Companies. [online] Available at: <https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/valuing-high-tech-companies> [Accessed 30 January 2022]. Pew Research Center’s Social & Demographic Trends Project. 2022. Trends in U.S. income and wealth inequality. [online] Available at: <https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/> [Accessed 30 January 2022]. Rubin, G., 2022. Why Do Prices Keep Going Up and What’s the Cause of Inflation?. [online] WSJ. Available at: <https://www.wsj.com/articles/what-is-inflation-cause-stock-market-11637623703> [Accessed 30 January 2022]. Samra, I., 2022. The Samra Report 2020:The Year Ahead. [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/2020-the-year-ahead> [Accessed 29 January 2022]. Seigel, R., 2022. Fed ready to tackle inflation with interest rate increase in March, pointing to strong job growth amid pandemic. [online] The Washington Post. Available at: <https://www.washingtonpost.com/us-policy/2022/01/26/fed-powell-interest-rate/> [Accessed 31 January 2022]. Woodard, J., 2022. The RIC Report: Get Paid to Wait A Primer on Prudent Yield. [online] Olui2.fs.ml.com. Available at: <https://olui2.fs.ml.com/MDWSODUtility/PdfLoader.aspx?src=%2Fnet%2Futil%2FGetPdfFile%3Fdockey%3D6208-12364366-1%26segment%3DDIRECT> [Accessed 30 January 2022].

As Goldman Sachs raises its 2021 target on the S&P 500 from 4,300 to 4,700, further fueling investor sentiment, concerns of new cases and hospitalizations caused by the Delta variant have taken a backseat under a new norm. (Mozee) Although a hybrid work model may avert the need for an economic shutdown, the road ahead could reveal fragility in the U.S. economy. This month’s issue of The Samra Report focuses on several variables and provides insight as to their impact on the U.S economy and Global Financial System. At Samra Wealth Management our outlook for the next several years is bullish, however, strained trade relationships with China and the Delta variant have exposed vulnerabilities. According to the Center for Infectious Disease Research and Policy: With vaccinations reaching a critical point, declines earlier this year serves as proof that the virus and variants can be stopped, but confusion, complacency, and inconsistently applied public health measures are driving transmission. Dr. Anthony Fauci warned that upcoming coronavirus mutations could be even more contagious than delta, which has a viral load about 1,000 times higher than the alpha variant. With a Delta Plus variant detected in South Korea, Americans should consider themselves on notice to fear the unknown. Numerous factors play a role in the spread of covid, for example proximity to a travel hub and state population density. A positive correlation between state vaccination rates and new covid cases by population indicates those states with conservative leadership, prioritizing constitutional rights and religious freedoms over science and human rights, have experienced the greatest uptick in new cases as a percentage of population. A deeper dive into the numbers further indicates a correlation between state education ranking and vaccinations, where New Jersey, Connecticut and Massachusetts, the highest ranked states for education by Education Week Research Center, average 12 new covid cases per 100,000, whereas Mississippi, Louisiana, Alabama and neighboring Florida average 68.5 new cases per 100,000. Further concerning as the latter states have a statistically significant lower population density. As the Delta variant continues to rage, the Biden Administration’s plan to stimulate the economy focuses on an infrastructure spending bill, and student loan deferment. In a low interest rate environment, where skilled and intermediate workers are profiting from the hybrid work environment, the refinancing of debt and ability to reroute student loan payments towards mortgage principal payments, aids in widening the wealth gap. The hybrid work environment has also spawned a shift from real estate in urban areas to the suburbs, prompting the question, “are we in a real estate bubble?” With negative real rates, and an under supply of single-family homes, investors are less concerned with a housing bubble, and focused on how long rates can stay low. Although there’s little rationale for the argument, that rates must go up, at Samra Wealth Management, we believe low rates have been necessary given the fragility of the economy. In a domestic economy, should the central bank raise interest rates, relative to foreign economies. The domestic economy in this case would experience an influx of capital, pushing up the relative strength of the domestic economy’s currency, offsetting foreign trade. In our current scenario, low interest rates help to ensure domestically produced goods are accessible in global trade. At Samra Wealth Management, we believe interest rates will start to tick-up in November, due to an announcement by the Treasury, it could begin cutting the size of government debt sales in the fall, as funding needs for economic relief efforts ease, in a move that would pave the way for the first reductions in five years. We believe the Fed is likely to follow suit in its April meeting, as talks of tapering start to solidify. A rise in interest rates, combined with a tax increase could deal a blow to select sectors in the near term, specifically: Healthcare, Technology, financials, industrials, and consumer discretionary, prompting a change in our sector rotational strategy. However, although we expect interest rates to rise moderately in Q4 into Q12022, we believe the Fed’s plan will be contingent on unemployment, as it emphasizes returning to pre-pandemic levels, while keeping an eye on run away inflation. We expect short-term inflation to increase, given pent up demand and supply-chain constraints due to logistics and shortages. We further expect the above-mentioned sectors to recover swiftly given the go-ahead of an infrastructure spending bill, and increased stimulus measures. Conservative investors in search of yield, in an interest rate environment where the 10-year fell below 1.14% in July, and the real interest rate (10-year U.S. Treasury indexed for inflation) fell to -1.19%, a multi-decade low, need to rethink their investment strategy. (Fred.stlouisfed.org) A conservative allocation weighted heavily towards fixed income, places these investors at increased risk, as interest rates start to rise while prices of bonds fall. At Samra Wealth Management, we expect increased volatility across asset classes over the next 12-months, suggesting a managed strategy is likely to outperform that of passive investments. Last Revised: August 5, 2021 Disclosures: This material is provided as a courtesy and for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation. All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. Investing involves risk including loss of principal. Investment advisory services offered through Samra Wealth Management, a Member of Advisory Services Network, LLC References BlackRock. 2021. Global Weekly Commentary - Insights | BlackRock. [online] Available at: <https://www.blackrock.com/us/financial-professionals/insights/weekly-commentary> [Accessed 29 July 2021]. Brynjolfsson, E., 2021. Top of Mind: THE POST-PANDEMIC FUTURE OF WORK. [online] GoldmanSachs.com. Available at: <https://www.goldmansachs.com/insights/pages/top-of-mind/post-pandemic-future-of-work/report.pdf> [Accessed 29 July 2021]. Centers for Disease Control and Prevention. 2021. COVID Data Tracker. [online] Available at: <https://covid.cdc.gov/covid-data-tracker/#vaccinations_vacc-people-onedose-percent-pop12> [Accessed 29 July 2021]. Cha, S., 2021. S.Korea on alert for new Delta Plus COVID-19 variant. [online] Reuters. Available at: <https://www.reuters.com/world/asia-pacific/skorea-detects-its-first-two-cases-delta-plus-covid-19-variant-2021-08-03/> [Accessed 5 August 2021]. Education Week. 2021. In National Ranking of School Systems, a New State Is On Top. [online] Available at: <https://www.edweek.org/policy-politics/in-national-ranking-of-school-systems-a-new-state-is-on-top/2019/09> [Accessed 29 July 2021]. Fred.stlouisfed.org. 2021. Consumer Loans: Credit Cards and Other Revolving Plans, All Commercial Banks. [online] Available at: <https://fred.stlouisfed.org/series/CCLACBW027NBOG> [Accessed 29 July 2021]. Fred.stlouisfed.org. 2021. 10-Year Treasury Inflation-Indexed Security, Constant Maturity. [online] Available at: <https://fred.stlouisfed.org/series/DFII10> [Accessed 29 July 2021]. Knutson, R., 2021. Anthony Fauci: Delta Variant Has 'Exposed Our Vulnerability' - The Journal. - WSJ Podcasts. [online] WSJ. Available at: <https://www.wsj.com/podcasts/the-journal/anthony-fauci-delta-variant-has-exposed-our-vulnerability/a12a5fcf-0afd-433c-92bb-7b5159ff54ed> [Accessed 5 August 2021]. Mayo Clinic. 2021. U.S. Coronavirus Map: Tracking the Trends. [online] Available at: <https://www.mayoclinic.org/coronavirus-covid-19/map?mc_id=google&campaign=12619887048&geo=9003941&kw=us%20covid%20map&ad=509662149025&network=g&sitetarget=&adgroup=120372570216&extension=&target=kwd-1126203074153&matchtype=e&device=c&account=7470347919&placementsite=enterprise&gclid=Cj0KCQjwu7OIBhCsARIsALxCUaNSA1_QR8MV_8HXDJnYhQTx8lZGxwkYwgCQcihOuAcUvRQ0In8KiuYaAk9nEALw_wcB> [Accessed 29 July 2021]. Mozee, C., 2021. Goldman Sachs is now the biggest stock bull on Wall Street after adjusting its S&P 500 target to forecast a 7% gain by year-end. [online] markets.businessinsider.com. Available at: <https://markets.businessinsider.com/news/stocks/stock-market-outlook-goldman-sachs-sp-500-price-targets-2021-2021-8> [Accessed 5 August 2021]. Sandler, R., 2021. Credit card use is still declining compared to pre-pandemic levels | Consumer Financial Protection Bureau. [online] Consumer Financial Protection Bureau. Available at: <https://www.consumerfinance.gov/about-us/blog/credit-card-use-still-declining-compared-to-pre-pandemic-levels/> [Accessed 29 July 2021]. Schirring, L., 2021. WHO: Growing COVID-19 surge hits critical point. [online] CIDRAP. Available at: <https://www.cidrap.umn.edu/news-perspective/2021/04/who-growing-covid-19-surge-hits-critical-point> [Accessed 29 July 2021]. Smith, C., 2021. US sets stage for first Treasury sales reduction in five years. [online] Ft.com. Available at: <https://www.ft.com/content/01af0d56-572e-42cd-8375-1cc4e8d0cc58> [Accessed 29 July 2021]. Wessel, D. and Milstein, E., 2021. What does the Federal Reserve mean when it talks about tapering?. [online] Brookings. Available at: <https://www.brookings.edu/blog/up-front/2021/07/15/what-does-the-federal-reserve-mean-when-it-talks-about-tapering/> [Accessed 29 July 2021]. Woodard, J., 2021. The RIC Report If you want less of something, tax it. [online] ml.com. Available at: <https://olui2.fs.ml.com/MDWSODUtility/PdfLoader.aspx?src=%2Fnet%2Futil%2FGetPdfFile%3Fdockey%3D6208-12291545-2%26segment%3DDIRECT> [Accessed 29 July 2021].

As coronavirus cases in October surged to end the month at 99,784, the financial markets paid little attention shedding only 1.96% for the month, shrugging off lockdown warnings from the UK, the Netherlands, Germany, Austria, Spain, Italy and Israel. As financial markets appear to be distracted by the election, at Samra Wealth Management we are deeply concerned about the upwards trend in new Covid-19 cases, of 120,504 (updated November 6th, 2020) that appear to be flying under the radar. This month we highlight factors that may significantly impact your portfolio. In October we asked, “If a vaccine was available would you take it? Would you allow your children to take it?” Prior to answering, we ask you take the following factors into consideration: There is an increased likelihood the administration of a covid-19 vaccine would require multiple doses. A vaccine would require refrigerated storage and logistics capabilities, within a specific temperature range. Logistics capabilities at this point in time do not exist for effective wide-scale distribution. FDA EUA (Emergency Use Authorization) would approve a vaccine for emergency use that may not have passed FDA approval under normal circumstances, where vaccines are tested on a larger population, with diversification in age, ethnicity and pre-existing conditions. With the election behind us, we believe there is a heightened probability individual states are likely to mandate further lockdowns. In October’s issue of The Samra Report we shared unemployment figures reflect a state of recovery, we believe the structural changes made causing temporary unemployment, are likely to become permanent. The United States as well as other economies are in the midst of an economic revolution: concerts, professional sporting events and other large gatherings have more than close proximity in common. They support many other ancillary services including janitorial services, printing, tourism, food and beverage, as well as many others. Last month Goldman Sachs and J. P. Morgan announced they were preparing for their employees to return to their offices across the globe. However, days after returning to work, J. P. Morgan sent some employees home. Since October, a number of companies have followed suit, As the election smoke clears, we expect an abundance of economic data to make headlines. Should the election outcome result in a new administration, we believe it is highly unlikely the Trump Administration will release a new stimulus bill. We caution investors that a second lockdown would not only impact hourly low-skilled positions as we saw earlier this year, a second lockdown would likely see a furlough of skilled employees. Removing non-essential salaried employees from private payrolls to that of government unemployment. In October Disney and major airline carriers announced layoffs, following trend in the last few days, ESPN, ExxonMobil, Chevron, Charles Schwab, Nike and Raytheon have announced plans to cut thousands of white-collar jobs. That's on top of major layoffs already announced or reported in the press at Wells Fargo, Goldman Sachs, Salesforce, Allstate and CNN owner WarnerMedia. In our November 2019 issue of The Samra Report: “Winter is Coming” we stated: “consumption spending makes up 68% of the United States GDP equation, insinuating a reduction in wages translates to a reduction in economic output. Although economic data does little to support our view, we remind investors that economic data did little to predict the last financial crisis.” 2020 has shown a disconnect of epic proportion when comparing Unemployment (U-6) to the stock market (S&P 500). With stocks riding near all-time highs, investors may not be aware of what’s to come, however, corporations are taking measures to dampen the impact of a prolonged recession. Disclosures: All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. The information and material contained herein is of a general nature and is intended for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Before investing or using any strategy, individuals should consult with their tax, legal, or financial advisor. Investing involves risk including loss of principal. No investment strategy, such as rebalancing, can guarantee a profit or protect against loss. Rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are unmanaged and do not incur management fees, costs, or expenses. It is not possible to invest directly in an index. References Business Insider. 2020. The Coronavirus Outbreak Has Triggered Unprecedented Mass Layoffs And Furloughs. Here Are The Major Companies That Have Announced They Are Downsizing Their Workforces.. [online] Available at: <https://www.businessinsider.com/coronavirus-layoffs-furloughs-hospitality-service-travel-unemployment-2020#maersk-the-shipping-giant-announced-that-it-will-cut-at-least-2000-jobs-in-restructuring-on-october-13-in-september-the-company-said-that-up-to-27000-jobs-or-roughly-a-third-of-its-global-workforce-could-be-impacted-by-the-changes-1> [Accessed 30 October 2020]. Egan, M., 2020. From Exxon To Charles Schwab, White-Collar Job Cuts Are Mounting. [online] CNN. Available at: <https://www.cnn.com/2020/10/30/business/jobs-white-collar-layoffs/index.html> [Accessed 30 October 2020]. Fda.gov. 2020. Development And Licensure Of Vaccines To Prevent COVID-19 Guidance For Industry. [online] Available at: <https://www.fda.gov/media/139638/download> [Accessed 30 October 2020]. Nytimes.com. 2020. Covid In The U.S. Latest Case Count. [online] Available at: <https://www.nytimes.com/interactive/2020/us/coronavirus-us-cases.html> [Accessed 5 November 2020]. Samra, I., 2020. The Samra Report: Winter Is Here. [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/winter-is-here> [Accessed 30 October 2020]. Samra, I., 2020. The Samra Report: Winter Is Coming. [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/winter-is-coming> [Accessed 5 November 2020]. U.S. Food and Drug Administration. 2020. Emergency Use Authorization For Vaccines To Prevent COVID-19. [online] Available at: <https://www.fda.gov/regulatory-information/search-fda-guidance-documents/emergency-use-authorization-vaccines-prevent-covid-19> [Accessed 30 October 2020]. U.S. Food and Drug Administration. 2020. Pooled Sample Testing And Screening Testing For COVID-19. [online] Available at: <https://www.fda.gov/medical-devices/coronavirus-covid-19-and-medical-devices/pooled-sample-testing-and-screening-testing-covid-19#pooled> [Accessed 30 October 2020].

"Bank of America Sector Analysts estimate it could be 2024 before spending volumes on Airlines and Lodging are at 2019 levels, and a full recovery is dependent on a vaccine being available and widely administered”. A sentiment we strongly disagree with; although financial markets are in the green for the year, at Samra Wealth Management, it is our belief that an FDA fast-tracked vaccine will do little to dampen the economic blow Covid-19 has served. The key premise of this month’s issue of The Samra Report is: If a vaccine was available today, would you take it? Would you allow your children to take it? Although unemployment figures reflect a state of recovery, we believe the structural changes made causing temporary unemployment, are likely to become permanent. The United States as well as other economies are in the midst of an economic revolution: concerts, professional sporting events and other large gatherings have more than close proximity in common. They support many other ancillary services including janitorial services, printing, tourism, food and beverage, as well as many others. Last month Goldman Sachs and J. P. Morgan announced they were preparing for their employees to return to their offices across the globe. However, days after returning to work, J. P. Morgan sent some employees home. In our November 2019 issue of The Samra Report: “Winter is Coming” we stated: “consumption spending makes up 68% of the United States GDP equation, insinuating a reduction in wages translates to a reduction in economic output. Although economic data does little to support our view, we remind investors that economic data did little to predict the last financial crisis.” 2020 has shown a disconnect of epic proportion when comparing Unemployment (U-6) to the stock market (S&P 500). With stocks riding near all-time highs, investors may not be aware of what’s to come, however, corporations are taking measures to dampen the impact of a prolonged recession. Firms are not ramping up for the holiday season, this past week: Disney said it will lay off 28,000 employees across its parks, experiences and consumer products divisions Royal Dutch Shell said it’s cutting between 7,000 and 9,000 jobs, while Dow Inc. said it will reduce its workforce costs by 6% United Airlines, Alaska Airlines, American Airlines announced furloughs to over 60,000 employees. At Samra Wealth Management we expect heightened volatility for the remainder of 2020, carrying-over into the first quarter of 2021. We believe the risk of a resurgence of Covid-19 would be seriously exacerbated during cold and flu season, creating a risk-off consensus. We recommend investors looking to invest in gold do so tactically, as the price of gold and other commodities is measured in US Dollars. Fundamentally speaking, lower interest rates lead to a weaker US Dollar, impacting the price of gold. With news of President Trump testing positive for Covid-19 and his transfer to Walter Reed National Military Hospital, the uncertainty of the Presidents health solidifies these times are unprecedented. With less than a month left until the Presidential election, the risk of invoking the 25th Amendment, voters and investors questioning the President’s ability to govern and campaign, and a recent surge in Covid-19 in global hotspots such as Paris, London and New York, are leading to further restrictions. Restrictions that could cause the economy a second, more destructive, blow, should the government fail to pass a timely stimulus bill. Politicians concerned about the federal deficit would be wise to familiarize themselves with Modern Monetary Theory (MMT) by reading the Deficit Myth by Stephanie Kelton. * Last edited October 4, 2020. Disclosures: All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed. All economic and performance data is historical and not indicative of future results. All views/opinions expressed herein are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. The information and material contained herein is of a general nature and is intended for educational purposes only. This does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities. Before investing or using any strategy, individuals should consult with their tax, legal, or financial advisor. Investing involves risk including loss of principal. No investment strategy, such as rebalancing, can guarantee a profit or protect against loss. Rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Indexes are unmanaged and do not incur management fees, costs, or expenses. It is not possible to invest directly in an index. References Beilfuss, L., 2020. Temporary Layoffs Are Starting To Look Permanent. That’S Bad For The Recovery.. [online] Barrons.com. Available at: <https://www.barrons.com/articles/temporary-layoffs-are-starting-to-look-permanent-thats-bad-for-the-recovery-51599256801> [Accessed 29 September 2020]. Chaney, S., 2020. U.S. Job Gains Slow As More Layoffs Become Permanent. [online] WSJ. Available at: <https://www.wsj.com/articles/september-jobs-report-unemployment-rate-2020-11601593020> [Accessed 30 September 2020]. Fisher, I. and Yang, Y., 2020. New York Cracks Down On Hot Spots As Cases Surge: Virus Update. [online] Bloomberg.com. Available at: <https://www.bloomberg.com/news/articles/2020-10-03/new-york-surge-rises-third-senator-tests-positive-virus-update> [Accessed 4 October 2020]. Harris, D. and Hopkins, T., 2020. Global Research Highlights: Atom & Steve. [online] Olui2.fs.ml.com. Available at: <https://olui2.fs.ml.com/MDWSODUtility/PdfLoader.aspx?src=%2Fnet%2Futil%2FGetPdfFile%3Fdockey%3D6208-12192145-1%26segment%3DDIRECT> [Accessed 30 September 2020]. Nathan, A., 2020. COVID-19: Where We Go From Here. [online] Goldman Sachs. Available at: <https://www.goldmansachs.com/insights/pages/covid-19-where-we-go-from-here.html> [Accessed 30 September 2020]. Samra, I., 2020. The Samra Report: The Calm Before The Storm.... [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/the-calm-before-the-storm> [Accessed 30 September 2020]. Samra, I., 2020. The Samra Report: Winter Is Coming. [online] Samrawealthmanagement.com. Available at: <https://www.samrawealthmanagement.com/post/winter-is-coming> [Accessed 30 September 2020]. Stevens, P., 2020. Disney Leads Companies Announcing Layoffs; Big Airline Job Cuts Loom. [online] CNBC. Available at: <https://www.cnbc.com/2020/09/30/disney-leads-companies-announcing-layoffs-big-airline-job-cuts-loom.html> [Accessed 30 September 2020].