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Author: Minich MacGregor Wealth Management

What makes Veterans Day so important?

When Dr. Harold Brown was young, he dreamed of flying.  So, he worked hard as a “soda jerk,” making ice cream sodas at the local drugstore every afternoon to save up enough money for flight school.  Eventually, he amassed a grand total of $35…enough for seven lessons. 

It was the early 1940s. 

While Harold didn’t know it, hundreds of young men like him were all doing the same thing.  Teaching themselves to fly, so that when their country called, they would be able to answer. 

That call came on December 7, 1941.  After the attack on Pearl Harbor, over 134,000 Americans rushed to enlist.1  Harold was no exception.  As soon as he graduated from high school, he applied to join a new, recently activated unit of airmen.  

But there was a major obstacle to overcome – Harold and many of these other pilots were Black. 

Due to the racial attitudes of the day, many in the military did not believe Black people could make good pilots.  During World War I, all African-American pilots were rejected from serving.  In 1925, a War Department report suggested Black soldiers were “cowardly, incapable of higher learning, and lazy.”2  Even by 1940, the U.S. Census counted only 124 Black pilots in the United States. 

Despite this prejudice, many, like Harold, had participated in civilian pilot training programs, and were eager to show what they could do in service to their country.  So, after sustained public pressure, the War Department finally created an all-Black unit called the 99th Pursuit Squadron.  (The 100th, the 301st, and the 302nd squadrons would come online later in the war.)  The pilots began training at facilities in Tuskegee, Alabama, where they were joined by thousands of other African-Americans, all training to be navigators, bombardiers, flight surgeons, mechanics, and engineers. 

These were the legendary Tuskegee Airmen. 

From the start, nothing was easy for these trailblazers. They were spat on and laughed at.  Abused and humiliated.  Passed over for promotion.  Denied entry into nearby clubs, movie theaters, and restaurants. Forbidden to train with white pilots.  Local laundries sometimes refused to wash their clothes.  One Black lieutenant was court-martialed after trying to enter the base Officer’s Club.  Most of the airmen experienced segregation and poor treatment just getting to Tuskegee.  Perhaps worst of all was the constant expectation they would fail.  As Harold later described it: “It was felt that this big experiment was going to fail and fall flat on its face.  ‘They’ll never make it as pilots.’  That was really one of our biggest motivations – that we cannot fail.  We just can’t.”2

Things weren’t any better in Europe.  Harold and the other pilots would have to fly from their base to a “white base” just to receive their orders.  And they would see enemy propaganda posters depicting them as gorillas or apes…as people somehow less than human. 

Despite these conditions, the Tuskegee Airmen became one of the most elite groups in the entire American military.  After their combat missions began in 1943, the records followed.  Number of enemy aircraft destroyed.  Number of sorties flown.  Number of missions completed.  Their ability to protect bomber formations from harm became the stuff of legend.  (There is a story that the Tuskegee Airmen never lost a bomber.  That’s not quite true – records indicate at least 25 bombers were shot down – but this was a much higher success rate than other units, which lost an average of 46 bombers.3)       

And, of course, they gave their lives in service to our country.  At least 66 of the Tuskegee Airmen were killed in action, while another 32 were captured as POWs.3  That includes Harold, who was shot down in Austria and nearly murdered by an angry mob.

When the Tuskegee Airmen returned home after the war, they came home to a country that was still in the grip of segregation.  Despite being ace pilots, many who left the military were prevented from flying commercially and had to turn to other jobs.  But without realizing it, they had changed the military.  They had changed the country.

Because of their example, the Tuskegee Airmen helped prove to the nation that it didn’t matter what color your skin was.  When it comes to serving your country, all that matters is what’s in your head and in your heart.  Courage, commitment, self-sacrifice…these are qualities that transcend any sort of category.  They were qualities the Tuskegee Airmen showed every day.  Qualities that helped lead to the desegregation of the military in 1948…and, eventually, the end of segregation everywhere. 

When World War II ended, there were nearly a thousand pilots who trained at Tuskegee.  Today, in 2023, there are less than 10.4  Harold himself passed away in January at the age of 98.  But, as we prepare to celebrate another Veterans Day, I think it’s important to remember the Airmen and their legacy.  Like all veterans, their choice to serve was not an easy one.  It was filled with danger and difficulty.  But because of their decision – because of their courage, their commitment – they not only helped win the war…they helped shape our country.  And that is what makes Veterans Day so important.  It’s a chance to truly give thanks to the men and women who not only defended our nation but made it what it is today. 

As Harold once said: “I always hoped that the country would change…and, of course, the country has changed.  Are there still problems?  Sure, there are still problems out there.  But even with the problems, we aren’t anyplace close to where we were 70-some years ago.  It’s a whole new world.”2 

A whole new world.  A world that the Tuskegee Airmen – and all our veterans – helped make for us.   
           
On behalf of everyone at Minich MacGregor Wealth Management, we wish you a happy Veterans Day…and a heartfelt “Thank you” to all who serve. 

1 “14 Interesting Pearl Harbor Facts,” Pearl Harbor Tours, https://click.mmwealth.com/e/877382/blog-facts-about-pearl-harbor-/bq6zqg/3744071557/h/PCwSZhbr4OGDqG34eO0jepsakDhStmAQCAjnyBLlL9Y
2 “Harold Brown, one of the last Tuskegee Airmen, recalls battling for victory,” The Plain Dealer, https://click.mmwealth.com/e/877382/-for-victory-and-equality-html/bq6zqk/3744071557/h/PCwSZhbr4OGDqG34eO0jepsakDhStmAQCAjnyBLlL9Y
3 “Tuskegee Airmen,” History.com, https://click.mmwealth.com/e/877382/s-world-war-ii-tuskegee-airmen/bq6zqn/3744071557/h/PCwSZhbr4OGDqG34eO0jepsakDhStmAQCAjnyBLlL9Y
4 “Harold Brown, Tuskegee Airman Who Faced a Lynch Mob, Dies at 98,” The NY Times, https://click.mmwealth.com/e/877382/ed-a-lynch-mob-dies-at-98-html/bq6zqr/3744071557/h/PCwSZhbr4OGDqG34eO0jepsakDhStmAQCAjnyBLlL9Y

Understanding the Market Correction – 2023

You probably saw the news: On October 27, the S&P 500 officially slid into a market correction.

A correction is when the markets decline 10% or more from a recent peak.  In the S&P’s case, the “recent peak” was on July 31, when the index topped out at 4,588.1  On Friday, the index closed at 4,117 – a drop of 10.2%.1 

Market corrections are never fun, and there’s no way to know for sure how long one will last.  Historically, the average correction lasts for around four months, with the S&P 500 dipping around 13% before recovering.2 Of course, this is just the average.  Some corrections worsen and turn into bear markets.  Others last barely longer than the time it took for us to write this message.  (On Monday, October 30, for example, the S&P actually rose 1.2% and exited correction territory.3) Either way, corrections are not something to fear, but to understand – so that we can come through it stronger and healthier than before. 

To do that, we must understand why the markets have been sliding since July 31.  We use the word “slide” because that’s exactly what this correction has been.  Not a sharp, sudden drop, but a gradual slide, like the bumpy ones you see on a playground that rise and fall on the way to the ground.   While the S&P 500 dropped “at least 2% in a day on more than 20 occasions” in 2022, that’s only happened once in 2023, all the way back in February.4    

At first glance, it may seem a little puzzling that the markets have been sliding at all.  Do you remember how the markets surged during the first seven months of the year?  When 2023 kicked off, we were still coming to terms with stubborn inflation and rising interest rates.  Many economists predicted higher rates would lead to a recession.  But that didn’t happen.  The economy continued to grow.  The labor market added jobs.  Inflation cooled off.  As a result, many investors got excited, thinking maybe the Federal Reserve would stop hiking rates…or even start bringing rates down. 

Fast forward to today.  The economy continues to be healthy, having grown an impressive 4.9% in the third quarter.5  Inflation is significantly lower than where it was a year ago.  (In October of 2022, the inflation rate was 7.7%; as of this writing, that number is 3.7%.6)  And the unemployment rate is holding steady at 3.8%.7  But the markets move based either on excitement for the future, or fear of it – and these cheery numbers no longer generate the level of excitement they did earlier in the year. 

The reason is there are simply too many storm clouds obscuring the sunshine.  While inflation is much lower than last year, prices have ticked up slightly in recent months.  (We mentioned the inflation rate was 3.7% in September; it was 3.0% in June.6)  As a result, investors are now expecting the Federal Reserve to keep interest rates higher for longer.  Seeking to take advantage of this, many investors have moved over to U.S. Treasury bonds, driving the yield on 10-year bonds to its highest level in 16 years.  Since bonds are often seen as less volatile than stocks, when investors feel they can get a decent return with less volatility, they tend to move money out of the stock market and into the bond market.

As impressive as Q3 was for the economy, there are cloudy skies here, too.  This growth was largely driven by consumer spending – but how long consumers can continue to spend is an open question.  Some economists have noted that Americans’ after-tax income decreased by 1% over the summer, and the savings rate fell from 5.2% to 3.8%, too.5  Mortgage rates are near 8%, a 23-year high.8  Meanwhile, home sales are at a 13-year low.9  All this suggests that the Fed’s rate hikes, while cooling off inflation, have been cooling parts of the economy, too.

Couple all this with violence in the Middle East, political turmoil in Congress, and a potential government shutdown later in November, and you can see the problem.  Despite the strong economy, investors just aren’t seeing a good reason to put more money into the stock market…but lots of reasons to think that taking money out might be the prudent thing to do.  It’s not a market panic; it’s a market malaise.    

So, what does this all mean for us? 

We mentioned how the markets operate based on excitement for the future, or fear of it.  But that’s not how we operate.  We know that, while corrections are common and often temporary, they can worsen into bear markets.  Furthermore, any decline can have a significant impact on your portfolio, and by extension, your financial goals.  So, while our team doesn’t believe in panicking whenever a correction hits, neither do we believe in simply standing still.  Instead, we’ll continue to analyze how both the overall market – and the various sectors within the market – are trending.  We have put in place a series of rules that determine at what point in a trend we decide to buy, and when we decide to sell.  This enables us to switch between offense and defense at any time.  This, we feel, is the best way to keep you moving forward to your financial goals when the roads are good…and the best way to prevent you from backsliding when they’re bad. 

In the meantime, our advice is to enjoy the holiday season!  Our team will continue to focus on investments, so our clients can focus on why they invest: To create happy memories and live life to the fullest with their loved ones.  Happy Holidays! 

  

SOURCES:

1 “S&P 500,” St. Louis Fed, https://fred.stlouisfed.org/series/SP500

2 “Correction,” Investopedia, https://www.investopedia.com/terms/c/correction.asp

3 “Stocks rebound to start week,” CNBC, https://www.cnbc.com/2023/10/29/stock-market-today-live-updates.html

4 “S&P falls into correction,” Financial Times, https://www.ft.com/content/839d42e1-53ce-4f24-8b22-342ab761c0e4

5 “U.S. Economy Grew a Strong 4.9%,” The Wall Street Journal, https://www.wsj.com/economy/us-gdp-economy-third-quarter-f247fa45

6 “United States Inflation Rate,” Trading Economics, https://tradingeconomics.com/united-states/inflation-cpi

7 “The Employment Situation – September 2023,” U.S. Bureau of Labor Statistics, https://www.bls.gov/news.release/pdf/empsit.pdf

8 “30-Year Fixed Rate Mortgage Average,” St. Louis Fed, https://fred.stlouisfed.org/series/MORTGAGE30US

9 “America’s frozen housing market,” CNN Business, https://www.cnn.com/2023/10/19/homes/existing-home-sales-september/index.html