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Of Chocolate and AI


By Morgan Christen


With the Easter holiday behind us, those who celebrated may have noticed their See’s Eggs were markedly more expensive than last year. Cocoa has risen to $10,000 a ton, which is double last month’s price and triple compared with this time last year. The culprit: three straight years of bad harvests due to changing weather patterns and diseased plants. Interesting side note, if you track the one-year price of cocoa, it has mirrored the rise in NVDA (see chart).


Inflation has cooled, but there continue to be factors causing the Fed concern. Fed Governor Christopher Waller was quoted saying, “the risk of waiting a little longer (to lower rates) is significantly lower than acting too soon.” The markets seem to be coming to terms with higher for longer.

Of Chocolate and AI

On the positive side of inflation, Costco has held the price of hot dogs steady at $1.50. If they adjusted for inflation, they would be charging $4.50. Their loss is our gain, although - as we all know - that hot dog is a gateway, as we spend hundreds of dollars with every visit. Did you really need that 5-pound jar of mixed nuts? Maybe.




The first quarter finished with a broad-based rally, and not just for our AI friends. The S&P 500 logged its best start since 2019, with ten out of the eleven S&P 500 sectors clocking gains. The only laggard was real estate. We also saw small stocks and gold rise. Investors listened to their inner Benjamin Graham and “purchased stocks like they purchase groceries, not like they purchase perfume.” Meaning, they didn’t just go after the pretty companies, they bought the meat and potatoes. Some reports show a large number of stocks in the S&P 500 logging 52-week highs, another sign of market breadth. The Magnificent Seven is more like the Fab Five, with Tesla and Apple both down.


Larger growth stocks still led the pack last quarter, but we are pleased to see some broadening. The international markets saw positive returns, but were more in mid-single digit range, while emerging markets were in the low single digits. The US continues to be the leader, at least for now.

Period Returns (%)



Interest rates increased along the entire yield curve last quarter. As the chart shows, we continue with an inverted yield curve as short-term rates are higher than long term. After five years the curve is relatively flat. The Fed is the one to watch on the short end of the curve, with Fed Chair Powell signaling they are waiting for clearer signals of lower inflation before they begin to cut.

  US Treasury Yield Curve

Powell was quoted as saying, they will lower “at some point this year,” but they “do not expect that it will be appropriate to lower their policy until they have greater confidence that inflation is moving sustainably down toward 2%.”

In Conclusion

In Conclusion


The Fed is in no rush to lower rates, and we have noticed additional triggers that could keep inflation higher. The recent collapse of the Francis Scott Key Bridge in Baltimore is one of those issues, as that harbor - while not large compared to others - is a major hub for vehicles and commodities. Per CNN, that port handled a record 850,000 vehicles in 2023.


As stated earlier, markets seem to be fine with current interest rate levels, and we believe it is a good time to be an investor and saver. With a broadening investor mindset, market participants could become more rational – such as buying ‘groceries’ rather than the perfumed AI stocks, Bitcoin, and the latest meme stock. And with bonds offering attractive rates, the certainty of a 5% rate in a Treasury bill looks like a sweet deal.


Thank you for your continued support and we look forward to speaking with you soon. As always, our lines are open, and we encourage you to reach out.

Top U.S. ports for container imports in 2023*
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DISCLOSURES: Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. CPI data are available from the US Bureau of Labor Statistics. Stock is the capital raised by a corporation through the issue of shares entitling holders to an ownership interest of the corporation. Treasury securities are negotiable debt issued by the United States Department of the Treasury. They are backed by the government's full faith and credit and are exempt from state and local taxes. The indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Past performance is no guarantee of future results, and there is always the risk that an investor may lose money. Diversification neither assures a profit nor guarantees against loss in a declining market. The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the securities mentioned. The information contained herein, while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice.