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A New Chapter: Northstar Financial

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We are pleased and excited to announce that we have agreed to a succession plan with Northstar Financial Companies, Inc.

Over recent years, we have been increasingly asked by clients what would happen to their accounts in the event I, or Joanne, became disabled, sickened by covid, or otherwise be unable to do our jobs. Frankly, we haven’t had a good answer to this question–until now.

Northstar Financial (NFCO) is an independent, fee-based investment advisor registered directly with the Securities and Exchange Commission. They are based in Conshohocken (Philadelphia), PA, and have an office in Denver. NFCO was founded in 1996 and currently has about $290 million under management. You can learn more about Northstar at:

Joanne and I have spent nearly three years talking to various advisors and firms looking for the successor that would best meet all our clients’ needs. Happily, Northstar checks all the boxes we had on our “must have” list.

Northstar places primary emphasis on the financial planning process with their clients, and have found in Praxis a synergy with our security analysis and technical analysis strengths. Combined, we are able to offer clients a holistic package that addresses their long-term planning needs with the security selection skills that will be important in navigating the financial markets in the post-quantitative easing (QE) era.

The thing that most impressed us about NFCO is their culture. Permeating the entire firm is a relentless focus on the client. Whether it is consistent reviews of financial plans, conversations about the future, assessing the investment environment, or simply listening, the client is the focus of Northstar’s world. Happily, our two firms will be continuing that culture of care with Praxis’ clients as we move forward in 2023.

As a full-time Northstar employee, I am excited to be working alongside Steve Girard, founder and CEO, and Alex Bastron, CFP, the Denver area advisor, and am looking forward to introducing them and the rest of the Northstar staff to clients and readers of the Market Outlook. Steve has asked that I continue to write this publication as he felt Northstar’s clients could also benefit from the insights and indicators it brings to readers, and I leaped at the opportunity. Thus, both figuratively and literally, we are looking forward to bringing a new chapter to clients and readers.

The Fed’s Unruly Children

One of the rites of passage as a parent is coping calmly with unruly children. This is especially true during the teenage years, when obstinately uncooperative attitudes toward parental authority become a way of life.

The US Federal Reserve has its own recalcitrant children to deal with in the form of disbelieving investors who are piling into stocks as if tightening monetary policy was an empty threat from a weak-kneed parent. Bullish investors have caused a vibrant rally on Wall Street to start the year, almost flaunting their behavior in the face of continued Fed warnings.

The catalyst for this bullishness is the narrative that we have reached “peak inflation” in the U.S. Having been frightened by the rapid rise of inflation, Wall Street is grasping at any evidence that is moderating. And while inflation has moderated over the last few months, it has not gone away.

The logical next step for the Fed, so the narrative goes, is for them to “pivot” from raising rates to stopping rate hikes or even begin reducing them. For a market that has become conditioned to the artificially low rates resulting from central banks’ QE experiment, this prospect is like manna from Heaven.

But to those willing to listen, the Fed is conveying a very different message. In repeated speeches and interviews, Fed chairman Powell and his minions are conveying their belief that interest rates will stay “higher for longer” than most on Wall Street seem to believe. Their oft-stated goal is to get inflation back to a stable 2% level before relaxing monetary policy. In mid-January, Powell echoed these beliefs when he said “…restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.” For a Federal Reserve bureaucrat, this appeared to be a refreshingly straightforward statement, but like a huffy teenager, it was roundly ignored by Wall Street.

The Fed means what they say. While investors are perhaps trying to front-run the “pivot” in the hopes of making up the losses they suffered in 2022, there are several reasons to expect interest rates to only grudgingly decline from here.

Were it simply a matter of clamping down on demand for loans, the answer would be easy. This has been the traditional role of monetary policy when consumer demand and the business cycle got overheated. The Fed would raise rates, making it much more expensive to borrow, thus dampening demand for cars and houses, and making inventories costly to finance. The economy would slow, and the Fed would cut rates to start the borrowing cycle all over again. Today, however, central banks kept rates very (artificially) low during the boom times. Now that inflation has jumped, they are faced with a Hobson’s choice between controlling inflation and allaying the temper tantrums of Wall Street. The Fed’s message is that inflation control is their top priority, and investors will have to cope with that decision.

Second, the sources of inflation are varied, and many are beyond the Fed’s control. The Fed can only control the demand for money by fiddling with the “price” of money (i.e., interest rates). Supply chain bottlenecks can only be resolved by the industries impacted by those bottlenecks. Moreover, a huge source of disinflation over the last 30 years, Chinese manufacturing, may be in its twilight as the era of cooperation with China is clearly giving way to antagonism and diplomatic sabre-rattling. Hardly the basis for a win-win attitude between the U.S. and China. Mutual benefit is out of fashion and national gain is in. A new era of zero-sum thinking is arising.

Labor is another area that has woken to the fact that inflation is rendering wages inadequate to maintain standards of living. Increasing efforts to unionize at Amazon and Starbucks underscore labor’s newfound restiveness. Even that bastion of negative interest rates, the European Central Bank (ECB), is feeling the heat–63% of ECB unionized members expressed doubt over whether the ECB could protect their purchasing power after receiving pay increases of just under 4% last year, or roughly half the measured increase in CPI. “We’re not happy,” growled Carlos Bowles, union vice president, in a Bloomberg interview.

Finally, the Fed is suffering from “institutional embarrassment” from having so blatantly ignored signs of nascent inflation in 2021. This is an underappreciated element of the Fed’s resolve, we believe. Having wrongly maintained that inflation was “transitory” for too long, they were forced into one of the most aggressive rate-hike responses ever. Having looked like clueless amateurs in their initial response to inflation, the Fed lost their credibility. With their reputation in tatters, and having repeatedly stated their goal of 2% inflation, are they likely to give up the inflation fight prematurely? We doubt it. Rather than risk further embarrassment, they are more likely to dig in their heels until the 2% target is realized, implying rates are likely to stay high for longer than investors expect.

Market bulls have taken heart, however, from numerous indicators that have turned bullish in January. Among them are our old friends, the NYSE advance/decline (a/d) line and the NYSE Bullish %. These are significant positive trend indicators for the bullish case, and open the door to the idea that perhaps forecasts of easing monetary policy are correct, or that markets can cope with interest rates at current levels.

The NYSE Bullish %, compiled by Investors Intelligence ( has given a buy signal as of late January. The Bullish % measures the percentage of stocks on the NYSE that are on buy signals as measured by their point-and-figure (p&f) charts. By their nature p&f charts provide unambiguous buy and sell signals. Thus, signals are easy to identify as buys or sells, and tally into a percentage format. A rising proportion of buy signals implies a stronger, or bullish, market and vice versa. Investors should tread carefully at this time, as the bear market has created several rallies that have created bullish signals for this measure, only to have them reverse as the bear ground lower.

“Battle of wills” is an oft-heard lament among commiserating parents at neighbor barbecues. Markets are facing a battle of wills of their own right now. Inflation has refocused the Fed on their primary mandate, price stability, and their resolve to achieve it is being underestimated by Wall Street. History is rife with examples of investors latching on to a sunny narrative, only to have reality turn out far differently than promised. In this case, we believe the “pivot” to easier monetary policy is much farther off than currently hoped, and the Fed, like exasperated parents everywhere, is saying to markets “You’ll have to learn the hard way.”

The opinions, ideas and strategies expressed herein are those of Northstar Financial Companies, Inc., a Registered Investment Advisor, are for educational purposes only, and should not be construed as financial advice or as a solicitation to buy or sell any security or financial instrument. Our information is based on sources believed to be reliable, but the information’s accuracy and completeness cannot be guaranteed. Advisory services can only be offered to clients or prospective clients where Northstar and its advisory representatives are properly registered or exempt from registration