Inflation Expectations Rising

inflation

U.S. equities fell into the weekend despite strong manufacturing data, as inflation expectations weighed. Stocks dropped for a second straight week. Last week all indexes finished down. The Dow down 0.05%, S&P 0.55%, and Nasdaq 0.46%.

Last Week

The S&P 500 and Nasdaq finished down less than 1%. Volatility rose with the VIX closing at a 1-month high. U.S. manufacturing numbers surged, and optimism for the next 6 months remained high. The Empire State index leapt 16 points to 34.3 in September. The Philly Fed index rose 11 points to 30.7, above estimates. Industrial production increased 0.4% in August after a revised 0.8% gain the prior month. The miss was largely due to Hurricane Ida and supply chain inefficiencies. Capacity utilization climbed to 76.4%, the highest rate since December 2019. U.S. retail sales surprised with a 0.7% gain in August despite supply chain issues and escalating Covid-19 cases.

Consumer inflation still showed a significant bump but came in less than feared. A New York Fed household survey showed inflation expectations continued to ramp up in August. Internationally, August wholesale prices sustained gains in Germany and Japan on solid global demand. CPIs in Canada and the UK surged to multi-decade highs. Weak Chinese data also contributed to the market’s choppiness. Retail sales only grew 2.5% in August versus forecasts of 7%. Industrial production came in slightly below predictions at 5.3%. British retail sales fell for a fourth straight month in August, even as payrolls increased by a record 241,000. Australia’s employment dropped more than expected, supporting the Reserve Bank’s decision to delay a review of weekly bond purchases.

Week Ahead – Inflation Expectations

All eyes will be on the FOMC as they wrap up their two-day meeting on Wednesday. Pressure is mounting for more specifics on tapering given recent U.S. economic data. According to a Bloomberg survey of economists, tapering is expected to begin in November 2021. Chairman Powell has indicated the decision to taper is independent of any decision to raise interest rates. With unemployment still above 2019 levels, the Federal Reserve is expected to be patient with increasing rates.

U.S. housing reports will also drop this week. The NAHB Index reported positive numbers. Housing start data reports on Tuesday, existing home sales on Wednesday, and new home sales on Friday. The S&P 500 is only down about 2% this month. More volatility may be on the horizon if issues like the debt ceiling gain momentum. Treasury Secretary Yellen has urged Congress to increase the debt limit as soon as possible to avoid any economic turmoil. The debate could influence the Fed’s actions as well.

Investors will focus on next week’s Fed meeting and the timing of tapering. Tapering is often viewed as a potential negative catalyst in the near term. However, strong economic growth coupled with record corporate profits can potentially keep the market moving higher. Investors will also be watching to see if Evergrande, the Chinese real estate company with a mountain of debt, poses any systemic risks to global markets. Year-to-date index performance; Dow up 13.00%, S&P up 18.02%, and Nasdaq up 16.73% through the close on Friday.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Can a robot really help you financially?

robo advisor

We’re hearing a lot about robo advisors these days. Are they right for you?

The financial services industry is no stranger to developing new products and innovations. Years ago, it was different types of stocks and bonds, then mutual funds were launched. More recently, exchange-traded funds (“ETFs”) that mimic indexes were launched. These days, robo advice is a hot topic. While having features that are certainly attractive to some investors, robo advisors aren’t right for everyone.

But first, the “what?”

What are robo advisors?

The term “robo advisor” is actually a bit misleading. Advisors generally guide their clients through the financial planning process to help these individuals achieve their life goals.

Robo advisors are automated portfolio managers. They take a limited amount of information about a client and create a portfolio of holdings. These holdings usually include a basket of ETFs. Robo advisors require little human involvement once their algorithm has been set.


robo advisor

Pros and cons

Robo advisors are programmed to automatically buy and sell holdings based on a desired risk-return profile. As there is little human involvement or management, they tend to be cheaper to invest in than actively managed portfolios. They also tend to be “set-it-and-forget-it” solutions that require very little effort by individual investors.

These portfolios rise and fall according to market and macroeconomic conditions, they typically don’t make adjustments to reflect the market. Conversely, as your advisor I’ve gained a deeper understanding of your financial picture, including your long-term needs and goals. Our work together means that your portfolio is suited specifically to you. Not just to a lot of people who may simply be your age and have a similar amount of savings.

Example of robots investing versus humans investing

During periods of rising markets, robo advisors will tend to perform quite nicely. As they reflect the performance of the wider markets in which they invest.

That said, markets don’t always go up. When markets are falling, portfolios run by robo advisors will tend to drop to the same degree as their corresponding markets. Meanwhile, active portfolio managers tend to rebalance or otherwise adjust their funds to reduce the downside impact of this market weakness. Possibly even taking advantage of it. By doing so, these portfolio managers are able to negate the losses that could result from market weakness. Which is something robo advisors can’t do.

Robo advisors are also not equipped to provide all of the other services that an advisor can provide. Including access to tax and estate planning, lawyers, accountants and other professionals who can help me ensure you have a complete financial plan that truly reflects your short- and long-term needs.

Please feel free to reach out to me to learn more about the benefits of a human vs. robo advisor.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

How to Tame Market Volatility through Diversification

diversification

It’s that time of the year again. Whether it’s in person or virtually, the holidays are an opportunity for more conversations with loved ones. This year, let’s strive to put some positivity into our conversations. There is a lot to gripe about, but there’s more to look forward to.  And the more we talk, the better we plan, prepare, and progress. Discussing your financial strategies with loved ones can help reinforce them or pivot according to new circumstances. And I’m ready to hear you! Knowing what may have changed this year will help us become more successful in pursuing your financial goals.

One topic that is front of mind is how to diversify your portfolio. One way to help investors reach long-term financial goals is through an investment technique known as diversification. Diversification basically means spreading out your invested money across different investments types, industries, countries, etc. Diversification can smooth out volatility of your portfolio and potentially lead to stronger returns over the long term. Helping you take advantage of the benefits of diversification is a central part of my job as your advisor.

One guiding factor behind diversification is that not all investment categories perform well at the same time. As some are increasing in value, others may be decreasing. Market volatility is the movement of investment categories going up and down.

Maintaining a well-balanced portfolio

As your advisor, I help maximize returns and reduce the risks associated with market volatility. Essentially, your portfolio represents a collection of different investments that work in harmony to help you reach your goals. One way you can achieve portfolio diversification is to divide your investments among the major asset classes. Such classes include equities, fixed income and cash.

Asset classes – A range of risks and rewards

Each asset class comes with varying degrees of risk and return characteristics. Typically, each class performs differently in certain market environments. Here’s a quick summary of each.

  • Equities (e.g., stocks)
    Equities refer to buying stocks or shares of a business, making you a part owner. This means the investor is subject to stock appreciation when the company outperforms. But also subject to the risks of declining stock value if companies underperform.
  • Fixed income (e.g., bonds, Treasury bills)
    Fixed income investors lend capital in exchange for interest. Considered as creditors, bondholders often have a priority claim in case of company bankruptcy. This makes the investments less risky. Fixed income typically provides income at regular intervals.
  • Cash (e.g., money market funds, bank accounts)
    Cash investments provide low returns versus other asset classes, in the form of interest payments. These investments typically come with very low levels of risk.

Investment funds – One-stop diversification

I can also help achieve diversification through the use of investment funds; namely, mutual funds and exchange-traded funds (ETFs). These investment vehicles represent convenient and affordable ways to access a wide range of investments.

  • Mutual funds – These are made up of a pool of assets from many investors. Mutual funds are managed by a portfolio manager. The portfolio manager actively seeks to produce greater returns than a specific market benchmark, such as the S&P 500 Index. With the large scale of a mutual fund, you benefit from professional management and can get strong diversification by gaining access to investments that would normally be inaccessible or too expensive for most individuals.
  • ETFs – These are funds that track and seek to replicate the performance of select market indexes. ETFs represent a basket of securities based on the underlying index. This allows investors to gain broad diversification across entire markets, industries, regions or asset classes. ETFs are known to incur fewer administrative costs, therefore charging lower fees to investors.

Please feel free to contact me if you have questions on the terms discussed in this article, or on how your investment portfolio is diversified.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Elections And Strategy – Nothing To Fear – Focus on You

Elections and strategy nothing to fear

Halloween is right around the corner, and like everything else, it’s markedly different this year. Some people find it thrilling to dress up and decorate the house, others think it’s just plain scary. It’s the unknown that gives us that frisson of fear, and there are a lot of unknowns this year.

The U.S. election is days away, and we are being bombarded with predictions about the effects the winner will have on the economy. How concerned should we be? In balance, history shows that elections, just like daily market volatility, don’t affect long-term investors negatively. We have a long-term strategy in place to help you pursue your goals, so any uncertainty, whether market, political or otherwise, shouldn’t worry you. Simply tune out the noise, and turn your focus to your goals.

Taking a goals-based approach to investment risk

The real measure of risk is whether or not you reach your financial goals. While investors may view risk in a number of ways, the perspective you take should help guide you toward your long-term goals. Focus on you.

Typically, investors measure risk by comparing performance to a market index (or benchmark), such as the S&P 500 or NASDAQ. So, if it was a tough period and the benchmark was down 10% but your investment portfolio was down 8%, you “outperformed.”

Relatively speaking, that’s not bad. Yet the fact is you’ve experienced a considerable loss in capital, which may put one or more of your financial goals at risk. Especially for those fast approaching a major financial milestone, such as retirement, there’s not much comfort in that type of standard.

Goals-based investing keeps your future in sight – Focus on You

Another approach, likely to provide you with a more helpful long-term perspective, is to look at risk in a personal way. That is, risk can be based on your unique life goals, rather than the market alone. And the probability of meeting or falling short of those goals. This is better known in investment terms as a goals-based approach. After all, investing should be about achieving the future you want. Whether it’s affording a satisfying retirement, your children’s education or a major home renovation.

As your advisor, I can help you integrate this approach. First, we review your financial profile and short- and long-term objectives. From there, we can build a portfolio that puts you on track by, perhaps, funding and investing in each goal independently. Each goal could work in aggregate as part of a whole portfolio, while having unique time horizons, asset allocations or risk profiles. This is one possible approach, among others, to goals-based investing that we could use.

Gauging portfolio risk and performance, then, is a matter of tracking the total returns of your portfolio. Not the relative returns compared to an index, and determining whether or not your goals are within reach.

Navigating market volatility to meet your goals

Achieving your financial goals, especially your long-term goals, through investing requires a highly disciplined approach. And flexibility to navigate the ups and downs of the market. I can help you maximize returns and minimize losses by integrating a number of important investment techniques. A few such techniques include:

  • Diversification – Certain investments, asset classes or market segments perform better at different times. It’s important to avoid concentrating your portfolio in one particular area only, since you will risk missing out on attractive investment opportunities in other markets.
  • Investing early – To reach your long-term financial goals, you need to begin investing as early as possible and for the long term. This will help you compound your earnings as you generate more returns on your asset’s reinvested earnings over time.
  • Systematic investing – Making regular investment contributions, instead of random ones, can help build your wealth in a disciplined manner. All while keeping you invested through all market conditions to enhance your long-term growth potential.

Please feel free to contact me to discuss taking a goals-based approach in your portfolio, or if you’d like to review your financial objectives for the future. And be sure to vote on November 3rd!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief April 6 2020

Market Brief April 6 2020

With each passing day, we hope to be one day closer to the end of this ugly virus. Until that day arrives, continue the social distancing and best hygiene habits. The news ahead regarding the economic state and corporate guidance are likely going to be dismal. Economic numbers outside of jobs report will tell one tale. Company reports during earnings calls will tell another. This past week, unemployment rate jumped to 4.4%, from lows of 3.5%. Weekly unemployment claims surged north of 10,000,000 over the last two weeks. If you have a job, be thankful. The monthly employment numbers are usually the most important. They providing the first, in-depth perspective of the U.S. economy.

The most attention during the week is the weekly job report that comes out each Thursday morning. All eyes again will be watching very closely. Economists ahead of this downward spiral are predicting unemployment to reach as high as 17%! A depressing reality to think about. Jim Reid, a strategist for Deutsche Bank, stated “the contraction from the coronavirus this year is likely to rank among the 10 worst for many countries… that’s remarkable, given the size of the monetary and fiscal stimulus that governments have provided.”

What’s Ahead

The Dow, S&P, and Nasdaq indexes all finished down last week. Dow dropped 2.7%, S&P fell 2.1%, and Nasdaq down 1.7%. The Dow finished the first quarter, which ended last Tuesday, down 23%. The week ahead is mixed with important economic data, as well as, a couple corporate reports worth reading.

Tomorrow, Levi Strauss reports quarterly results. Usually, not a widely followed report, but given the impact of incomes and jobs, the report will provide impact on discretionary spending. On Wednesday, Costco Wholesale reports sales data for March. Another indication of recent spending impact since the virus began hitting U.S. and lock downs began mid-month of this report. Thursday reports include the Producer Price Index, a measure of inflation. Followed by the weekly job report, which comes after a week of 6.6 million claims. Friday reports also include the Consumer Price Index to see the impact of mainly retail prices for consumers in March. Friday the equity markets are closed in observance of Good Friday.

Year-to-date index performance; Dow down 26.2%, S&P down 22.9%, and Nasdaq up 17.8%.

Quarantine continues – have a fun and safe week!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief March 30 2020

Tiger King Market Update

Yes, Tiger King fans, this post is for you. Since the Tiger King rage went viral last week, the market has also hit record setting performance days! Is it safe to say Joe Exotic should be the next Fed Chairman? It’s not a bear market, not a bull market, but a Tiger market! I’m all in … to the show, not stocks…

OK, time to get serious. Market dip to market rip! The Dow soared by 21% over a 3-day span, closing up 12.77% for the week. The largest 3-day gain since October 8, 1931, during the Great Depression. The Dow’s weekly finish was the best weekly gain since 1938, despite losing 4% on Friday. The S&P and Nasdaq indexes also finished up for the week, 10.26% and 9.05%, respectively. The indexes ignored the record weekly unemployment claims of 3.28 million! A record setting number in it’s own right. The U.S. also passed China last week with the number of virus infection cases. The saving grace for markets last week was the announced $2.2 trillion relief plan.

Despite the market bounce that began last Tuesday and continued today, large and fast rallies are frequent characteristics of longer-term bearish periods in the market. The eventual recovery from this public health crisis will be gradual, similar to the financial crisis recovery. The recovery is still unknown, and according to Dr. Anthony Fauci, “the virus makes the timeline,” and that will probably determine the markets recovery as well.

The Bailout

Stimulus, bailout, virus relief, The CARES act, whatever you want to call, came to the rescue at the end of last week. The fiscal policy pumps trillions into the economy, aimed at providing liquidity to households and businesses. These include IRS checks, a major expansion in unemployment benefits, as well as a broad combination of grants, loans, and loan guarantees for businesses (large and small), hospitals, schools, and state and local governments. This stimulus is designed to buffer the economy in the short-term, as the virus hit the hard and fast across the country. Long-term the effects may linger for some time. The upcoming quarterly earnings season will provide investors better guidance on how hard companies have been hit.

The Week Ahead

Policymakers’ huge support has helped stabilize risk, but long-term market stability and declining volatility hinges on the apex of coronavirus infections being in the rear-view mirror. Economic reports for the week include a slew of data including manufacturing and employment. This week’s focus will be on the jobless claims number, showing a more clear picture of the economic state.

Year-to-date index performance; Dow down 24.2%, S&P down 20.96%, and Nasdaq down 16.4%. Volatility remains high and historically market rallies come back after volatility drops to normal range.

Have a safe week and remember to go for a walk outside (after finishing the Tiger King season on Netflix)!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Positive Investing News

Positive Investing News

Finding good news right now can be tough. The Q&A below highlights some of the positive investing news that can result from a crisis.

What is the one positive that you see coming out of this crisis
that is least expected?

Buying opportunity! Valuations have soared during the bull market run following the 2008-2009 recession, individuals interested in long-term investment growth should consider this as one of the best discount sales in recent years. Many people I speak to wish they could go back to the 2008-2009 time period and buy stocks. Today, some quality companies are down 30-80% year-to-date.

What new businesses will break into the marketplace, as a result of this crisis, that no one expected to grow so fast?

Technology has proven to be the winner. The S&P 500 Info Tech sector index has greatly outperformed the market. Included in this index are businesses supporting those working from home, such as, video conferencing and e-document companies. 

What existing industries do you feel will rebound the fastest
as things begin to return to normal?

The travel industry is taking an enormous hit. This will not last. Consider how many people will need a vacation after being stuck in their homes for a month (or longer). Or even had their trips postponed. Hotels, airlines, cruises, they are beaten down right now but will bounce back as the virus is contained. The stimulus will also aid, to some extent, discretionary spending for some. Travel is a huge component of discretionary spending.

Click here if you would like to learn more about our thoughts on Positive Investing News. Also, to discuss options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief March 23 2020

Market Brief March 23 2020

Last week was the worst week the stock markets have seen since 2008. Continued developments of the coronavirus dominated the news, as the number of cases in the U.S. surpassed 15,000. This news left the indexes in a downward free fall. The three major indexes all finished down between 14-17% for the week ending March 20. The increase in cases is also getting the attention of life insurance, as I wrote about last week and you can read it here. Forget gold and oil as great market hedges, the future is now in toilet paper and hand sanitizer! (Just kidding).

To no surprise, economic data last week disappointed. China sales and industrial production was down double digits compared to last year. German economic sentiment also fell to the lowest on record. The lone bright spot from last week, was U.S. sales. For the month of February, U.S. retail sales came in 4.35% higher compared to last year. New home sales dropped for the month, while existing home sales jumped 6.5%. The existing home sales grew to the highest level since 2007, proving the real estate market was on solid ground prior to the virus outbreak.

The Week Ahead

The week ahead will be focused on stimulus news in the U.S., as well as, the flattening of the coronavirus infection curve. Wednesday’s durable goods order report is expected to be positive. However, this could be the last positive report we see for awhile, as business and productivity slows during the state ordered or self-mandated quarantine phases. Thursday’s unemployment claim report will likely soar, as businesses cut staff and hours for workers.

Big Picture and Recovery

Year-to-date index performance; Dow down 32.81%, S&P down 28.66%, and Nasdaq down 23.3%. According to Wilshire, this is approximately $12 trillion of wealth that has evaporated. Due to the recent domestic productivity halt, most banks have cut 2nd Quarter growth outlooks significantly. Goldman Sachs has revised their 2nd Quarter outlook to -24%, while J.P. Morgan cut their outlook to -14%.

The consensus for recovery is based on three outcomes. First, how quickly will the virus be contained. Second, whether businesses will have access to enough liquidity, or capital, over the next 90-180 days. And lastly, whether the fiscal stimulus can stabilize growth forecasts. Until then, volatility looks to remain high and sensitive to the latest news stemming from the virus developments and economic impacts.

Keep your distance, share the TP, and continue to wash your hands this week!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief March 16 2020

Market Brief March 16 2020

Not sure where to start today? Every post seems to be outdated the minute it is published! Whether a virus update, Fed decision, a political speech, geo-political affairs, or another stock industry takes a dive downward. Volatility remains high, driving the big daily swings in the stock market.

Last week, President Trump initiated a travel ban and events across the country ceased immediately. Last night, the Fed stepped in with another rate cut. The reaction from the market was one of fear, driving indexes lower, and initiating the third trading halt in the last month to start the week. Despite the historic big rally on Friday, all indexes finished the week down. The Dow dropped 10.46%, the S&P 500 fell 8.86%, and the Nasdaq dropped 8.18%.

The Week Ahead

The week ahead includes Retail Sales, Industrial Production, and Housing Start data. There reports will provide a gauge of the consumer and business sentiment during this time of uncertainty. The mortgage rate drops may act as a tailwind for home buyers and those refinancing, in the near term, but the prevailing headwind of the coronavirus economic disruption remains front and center. Coronavirus focus will be on the growth of new cases, as well as, policies designed to identify and subdue the outbreak.

Big Picture

Year-to-date index performance; Dow down 18.7%, S&P down 16.0%, and Nasdaq down 12.2%. The media is publishing a lot of information regarding corrections, bear markets, and recessions. Let’s break those down. A correction is typically considered when the stock indexes drop 10% from the recent highs. A bear market typically is defined by a drop of 20% from recent highs. And a recession is 2 or more consecutive quarters of declining GDP growth. Our current economic state may be a recession, however, we will not know until the quarterly numbers are published after Q2 2020 is over. Yes, the markets corrected more than 20% from the highs on February 19, therefore, indexes are in bear market territory. Turnaround signs remain high correlated to virus improvement. The slowing of new cases, the decline of deaths, and the increasing number of recoveries. Until then, volatility remains here to stay. Corporate guidance up to this point is hard to judge. The next round of corporate earnings will be very important regarding the impact of the virus disruption and growth prospects going forward. Market volatility is inevitable when investing in the stock market.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Portfolio Management Perspective

Portfolio Management Perspective

Review of Benchmarks, Strategy, Risk, and Performance – Perspective from one of our Portfolio Manager’s – March 13, 2020

Whenever the topic of investing is discussed we are conditioned to think first of the New York Stock Exchange opening bell and Wall St. bankers in Brioni suits. And why shouldn’t we? Over the past 200 years, stocks have arguably been the most powerful generator of wealth.
 
That rosy conventional wisdom has the benefit of a perpetual time-horizon and an ambivalence towards risk. As we all know, stocks might be notorious for rising over time, but they also can produce nasty results if improperly managed. Very few of us are fortunate enough to be ambivalent towards risk or the trajectory of our investments – if we were, being 100% invested in the DOW or S&P 500 would be a fine strategy. That is where financial planning and asset management comes in.
 
As a conservative asset manager, we are tasked with two main objectives a) produce a rate of return that achieves an objective (generally retirement/self-sufficiency) and b) protect against downside and volatility.  Our definition of success in both goals is directly related to the specifics of your financial situation. 
 
Since the inception of our Total Return strategy in 2004, we’ve employed a mix of equities (stocks), commodities, fixed income, and cash to achieve the objectives stated above for clients. At any given point, we may be more dependent on one asset class or another to provide upside thrust or downside support for our clients’ portfolios. As you might expect, this asset mix is largely dependent on (among other things) the outlook for the economy, interest rates, and the inclination for risk in the markets.
 
In some environments, such as 2017, the stock market and high-quality individual equities genuinely are the best option for capital appreciation.  In other periods such as late 2018 and 2019, a choppy market and unclear fundamental prospects warranted a higher concentration in traditionally less economically sensitive asset classes like bonds, gold, and cash. No matter the environment, we are continually assessing our outlook and corresponding exposures.

In the client updates over the past week, we noted how our conservative positioning at the outset of this decline was yielding promising results. That remains the case, and when we evaluate client performance relative to equity benchmarks (DOW, S&P 500, NASDAQ), we are heartened by the fact that client accounts have a) declined substantially less than the benchmarks and b) exceeded the results previously experienced in similar periods of stress.
 
Since our inception, having a trained eye on risk management has allowed clients to generally experience asymmetric rates of upside and downside participation vs. equity benchmarks. In other words, we’ve consistently achieved more upside than downside through the course of market trends. 
 
Finally, we understand that the personal nature of the virus and the corresponding downside reaction in markets can be especially anxiety provoking.  And while this is everybody’s first time managing through a true pandemic, it is far from our first time managing through a panicked market.  We will get through this turbulent time and be prepared to deploy the capital we’ve preserved throughout the episode.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Update March 11 2020

Market Update March 11 2020

In light of sustained volatility in the markets, another market update is warranted. This is courtesy of one of our portfolio managers. Contact us directly for a portfolio review and discussion on how to manage risk during times of uncertainty.
 
A few of the main drivers of market volatility are laid out below.  If you have any questions about these items or the markets in general, please do not hesitate to reach out.
 
Oil Price War
Over the past week, negotiations between OPEC nations have taken place amid a backdrop of persistently low oil prices. The expectation going into last Friday’s final round of discussions was for a cut of between 750k to 1.5mm barrels per day of production. These cuts in production would have lowered the supply of global oil with the intent of sending prices higher.  But in the final hours of Friday’s session, Russia withdrew from the proposed deal, and the OPEC meeting concluded without any production cuts. 
 
On Sunday afternoon, news broke that the Saudis would open the taps and flood the market with cheap crude. This action has long been the ‘big stick’ that Saudi Arabia has wielded over other petroleum exporting countries, but this is the first time in decades that they’ve acted with such force. Oil prices dropped by as much as 35% Sunday night. Oil industry experts are still working through the numbers on how long the Saudis and Russians can stand to be engaged in a price war. But regardless of that conclusion, the price reaction has been swift. 
 
Traditionally lower oil prices have been met with cheers by consumers as prices at the pump plummet. But the shale revolution over the past ten years has more closely intertwined our economy with the price of oil. The most recent example of this was the 2015/2016 decline in oil prices that froze capital spending and forced many lower quality oil companies to fold.  A repeat of that experience during the Coronavirus growth scare would be very unfortunate timing.
 
Coronavirus & The Economy
As expected, the reporting on the economic and social impact of the Coronavirus remains fevered. While the infections and death totals are continuing to rise at a steady rate globally, the negative impact on macroeconomic data and individual companies remains a mystery. Since our last client update, the Federal Reserve has cut interest rates by 0.50% in an effort to stabilize markets and reignite demand for debt.
 
In the coming weeks, our Fed, as well as other central banks, will likely be forced into providing even more monetary accommodation. So far, fiscal authorities (Legislative & Executive branches) have been conspicuously absent from the debate on how to stem the negative economic impact. Both think tanks and market participants have drafted plenty of creative plans, but until the Administration/Congress begins to address the potential negative impact of this growth scare proactively, business confidence is likely to be fickle.

As we mentioned in our previous Coronavirus update, I’m sure you’re all finding plenty of Coronavirus coverage in your daily life.  But if you’re interested, we have plenty more material for discussion that we’d be happy to present at your convenience.
 
Intraday Limits and Trading Halts
If you paid close attention to the market action Monday, you likely heard/read some discussion of the limit-down trading halt. A trading halt refers to a set period in the day where no buying or selling can occur. For individual stocks, trading halts are relatively normal and happen daily.  Individual shares are typically halted because a significant news item is due to be announced during market hours. They also occur if a stock has moved sharply (higher or lower). Market-wide halts, on the other hand, are quite rare and occur when the S&P 500 has declined or advanced by a set percentage. In a market-wide halt, trading in all stocks and exchange-traded funds is halted for 15 minutes. Whether it is for the market as a whole or an individual stock, the logic behind a halt is to arrest any panic/euphoria and allow participants to reassess the market momentum. 
 
As always, we are working diligently to stay on top of the news cycle. We began this period of market tumult very well positioned but remain at the ready should we need to make further adjustments.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief February 24 2020

Market Brief February 24 2020

The last week in February is here and the markets have dropped on the news of the increasing spread of the coronavirus. Impact beyond health concerns is the slowdown in supply chains for companies, and the downward effect on economic activity. The US economic report of the Services PMI dropped to a 76-month low in February. This follows a January report that was at a 5-month high. The bright spots from last week are found in manufacturing confidence and housing reports. Both housing starts and building permits figures remain at decade highs, with housing starts at the highest level since 2006. WalMart’s earnings report was positive, in-line with expectations. Significant to the investor, as WalMart is a good gauge of the consumer strength, and sales were up 5.7% last year. With that said, the Dow, S&P, and Nasdaq indexes all finished down last week. The Dow down 1.4%, S&P 1.3%, and Nasdaq 1.6%.

This week will have plenty of economic reports to digest, but the coronavirus developments remain top priority. Tuesday’s consumer confidence report will shed light on whether consumers are concerned with the virus or not. Globally, Chinese banks may be on rocky ground. During the month of January, banks in China had loaned 3 times the amount that was loaned in December. Corporate loans also increased 7 times during the same time period. Debt levels this high could cause concern for long-term recovery and repayment issues.

Year-to-date index performance; Dow up 1.59%, S&P up 3.31%, and Nasdaq up 6.73%. I continue to encourage buy and hold investing for the long run and potential short-term disruptions can give investors long term opportunities.

Have a great week!

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Market Brief February 10 2020

Market Brief February 10 2020

Valentine’s Day is almost here, and the stock market continues to show investors plenty of love! The Dow, S&P, and Nasdaq indexes all finished up last week Dow up 3%, S&P 3.17%, and Nasdaq 4.04%. The coronavirus remains a serious threat, but markets shrugged off the virus news in favor of positive U.S. manufacturing data, strong jobs reports, and company earnings. The Dow and S&P index finished the week with the best performance since the 5 trading days leading up to June 7, 2019. The Nasdaq had it’s best week since November 30, 2018.

The number of coronavirus cases continue to grow and estimates of economic growth for China continue to fall. The coronavirus has spread to different industries at different times. Initially, the travel and oil industries took a hit, as obvious travel restrictions were put into place. Oil prices are down 20% since January. Retail chains, such as Starbucks, also took a hit as many stores in China were closed. Currently, the healthcare industry is taking it on the chin, due to cancelled surgeries and disruption in supply chain. Technology may be on the horizon, as companies like Apple look at their own supply chain and impact the virus will have on production. Throughout February corporate earnings calls, the theme was similar, it is too early to tell the impact, but keep a close eye on what is happening. As of last night, the coronavirus death toll has exceeded that of the SARS virus.

Enter Federal Reserve. After Wednesday’s meeting, Wall Street was leaning towards another rate cut. This belief evaporated by Friday when the jobs report was released and the results were very strong. In Germany, industrial production fell in December by 3.5%, the largest drop post-financial crisis. Global woes remain an area of concern.

Year-to-date index performance; Dow up 1.98%, S&P up 3.0%, and Nasdaq up 6.1%. What else? For the S&P companies reporting in January, no dividends were cut, same result as January 2019, and 41 companies increased their dividends, which is up from 36 a year ago. Due to low bond yields, investors are flocking to real estate mutual funds and REIT investments. As reported by EPFR Global, $11B of money flowed into mutual funds with a real estate focus in 2019, and another $3B has moved there in 2020.

Have a great week!

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This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief January 21 2020

Market Brief January 21 2020

The Dow, S&P, and Nasdaq indexes all finished up last week Dow up 1.8%, S&P 2.0%, and Nasdaq 2.3%. The indices continued to rise from solid economic reports coming from the housing, retail, and pricing reports, as well as, easing tensions between the U.S. and China. With the trade news somewhat behind us, focus turns towards corporate profits as Q4 earnings season is underway.

This week includes 58 more earnings reports by S&P 500 companies, along with home sales data and jobs numbers keeping investors attention. U.S. existing home sales have missed three consecutive months, so Wednesday’s report will be important. Inflation remains a major headwind for investors.

Caution ahead. The yield curve inversion in 2019 still lingers. As market history proves, the inverted yield curve foresees recession up to 2 years following the initial inversion. Wage growth and corporate earnings. As wages continue to rise and unemployment remains historically low, this puts companies in a tough position. As the expenses rise, the dilemma is whether to pass the cost to the customer, or eat it. Either way, this can lead to a negative outlook for stocks, as companies either will have shrinking margins, or contribute to inflation by way of rising prices. This is worth keeping an eye on going forward.

Have a great week!

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This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief January 13 2020

Market Brief January 13 2020

Happy Monday to you all! The markets quickly pushed aside the idea of increasing tension between the United States and Iran, as cooler heads prevailed. Global news is now instantly spread and processed by the markets, and being an election year, further geopolitical volatility should be expected. During an address last Wednesday, President Trump gave no signal of further escalation. The Dow, S&P, and Nasdaq indexes all finished up last week Dow up 0.6%, S&P 0.9%, and Nasdaq 1.7%.

The markets shook off the Middle East tensions and lower payroll figure released on Friday, the U.S. economy added 145,000 jobs in December. Despite being weaker than expected, the jobs report extended the streak of gains to 111 months in a row. The decade wrapped up with 10 straight years of job growth as well. Wage inflation reported a 2.9% increase year-over-year, outpacing current inflation levels. Europe economic reports were positive last week. The Eurozone’s December services PMI’s were revised higher and industrial production rose higher.

U.S. inflation, retail, and housing reports fill up the week of economic news. 2019 holiday sales were a record, so the attention is focused on the Retail Sales report released on Thursday.

From the Stock Trader’s Almanac – the first five trading days of the new year were positive, indicating an increased likelihood of an up year for the market. The Santa Claus rally was also positive. Whenever both the Santa Claus rally and first week of trading are positive, the Dow has gained an average 11.5% for the year and rose 80% of the time.

Year-to-date index performance will begin tracking once we have a month under our belt in 2020. The Oklahoma/Ohio State National title was suppose to be tonight! Since we don’t have a dog in the fight, we will take the Tigers to win the championship! And for the sports nuts reading this, I am referring to the Orange and White tigers!

Have a great week!

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This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief January 6 2020

Market Brief January 6 2020

Happy First Monday of 2020! 2019 was a great year for returns in the market, and I am certainly looking forward to what this next year brings. Following the down year in 2018, all the indexes finished above 20%. The Dow up 22%, S&P up 29%, and the Nasdaq up 35%. The year never felt that way. Many headlines focused on negative sentiment to the trade war, manufacturing struggles, and the inverted yield curve. Despite these concerns, a strong consumer, low unemployment, and a Fed willing to reduce interest rates pushed markets higher.

As we enter 2020, we are reminded that not only trade war, but real wars can also cause market corrections and possible recessions. This unfolded last week with tension between the U.S. and the Middle East quickly escalating. Other points of caution ahead include the political environment in the U.S., as well as, the U.K. and China, and the impact rising wages for workers will have on corporate earnings. Lastly, the repo market remains a question mark as to how the economy and markets respond to the Feds actions. A similar buying spree pushed markets on a tear in 1999, followed by the dot com bust.

The markets never act as expected. So where danger lies, is typically determined after the fact. I don’t make market predictions, the market will go up or down, and volatility along the way is to be expected. Planning around the timing of market fluctuations is not sound for reaching goals. A comprehensive strategy that offers options, organization, and structure can provide the best chance for accomplishing financial goals. Whatever your goals may be for 2020 and beyond, the most sound advice is to work with someone to help you get there!

Have a great week!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief Dec 23 2019

Market Brief Dec 23 2019

Finish strong! The market continues strength into the holiday season and finishing the year with new record highs! The Dow, S&P, and Nasdaq indexes all finished up last week Dow up 1.1%, S&P 1.7%, and Nasdaq 2.2%. The indices reach for record all-time highs as trade sentiment remains positive and economic reports remain strong from both the U.S. and China. Caution of weakness remain with Europe’s slowing economy and domestic manufacturing.

What a year it has been! Coming off a terrible Q4 of 2018, the question was how far or how much more could the market be beaten down. The market took a few more punches the first week of January, then the snap back rally began. Pullbacks came and went in May, August, and September, stirred up by the trade war uncertainty with China, and perceived economic weakness globally. All pullbacks were short lived, following the Fed’s stance of easing rates, which occurred three times in 2019, and the strength of the U.S. consumer. The theme for the year really is the U.S. Not just companies who primarily have revenues in the U.S, but the consumer and U.S. economy as well. Companies with more than 50% of revenues in the U.S. achieved much better earnings reports than companies selling globally. And the U.S. consumer is strong; unemployment is low, wages are rising, and debt delinquencies are low.

So how about them markets?! Year-to-date index performance; Dow up 22.0%, S&P up 28.5%, and Nasdaq up 34.5%. These numbers are great across the board, given recession fears were news headlines the entire year, impeachments news dominated the latter part of the year, and a trade war with China was never meant to end! Excellent match-up on the last MNF game of the season tonight, for entertainment purposes to keep the pick ’em streak alive its the Pack over the Vikings!

Thanks for reading this market brief, have a fun and safe holiday season, see you in 2020!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief December 16 2019

Market Brief December 16 2019

The Dow, S&P, and Nasdaq indexes all finished up last week Dow up 0.49%, S&P 0.77%, and Nasdaq 0.93%. The markets continued to march higher following the final Fed meeting of the year and trade optimism heading into the weekend. The Fed closed the final meeting of the year leaving interest rates unchanged due to favorable economic conditions, strong jobs reports, and low inflation. The U.S. and China reached a phase one trade deal on Friday, easing concerns on the tariff war.

The S&P 500 index has now closed higher in 9 of the last 10 weeks. The Fed meeting last Wednesday went pretty much as expected, no surprises. Fed Chairman Jerome Powell made clear that policies would remain accommodating, positive language for stock market bulls. Powell also reiterated that it would take a significant and sustained rise in inflation for the U.S. Central Bank to raise interests rates in the near term.

Economic reports coming out this week include Tuesday’s Housing Starts for November to give a pulse on the housing market. Wednesday will see the mortgage application report, also provide insight to the housing market, as will Thursday’s existing home sales report. And Friday, Q3 GDP numbers and University of Michigan Consumer Sentiment reports are released. Further details on domestic growth and consumer strength.

Year-to-date index performance; Dow up 20.6%, S&P up 26.4%, and Nasdaq up 31.6%. Stay positive, there are good things going on! Jobs and wages are moving up, companies and consumers continue to benefit from tax cuts, consumer balance sheets look healthy, and serious (90+ day) debt delinquencies are down substantially from post-recession highs. We have a good match-up on MNF tonight, for entertainment purposes to keep the pick ’em streak alive its the Saints over the Colts!

Have a great week! Good luck with your last minute holiday shopping 😉

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief November 25 2019

Market Brief November 25 2019

Happy Thanksgiving! A quick market brief for your reading pleasure before you pay the annual homage and devour a bird later in the week! Speaking of turkeys, the market was acting like one last week responding to continued political and trade news. The Dow, S&P, and Nasdaq indexes all finished down last week; Dow down 0.5%, S&P 0.3%, and Nasdaq 0.2%. The indexes briefly touched new highs before retreating by the end of the week. The drop ends the 6 week win streak. Despite concern overseas, notice that the U.S. is not alone in the stock market rally. The Euro Stoxx 50 index is up 19.4% in dollar terms so far this year (as of last Friday close) while Japan’s Nikkei is up 18.2%.

Reaction sentiment indicates there is a stabilization of U.S. manufacturing data, German manufacturing is still in contraction but at a 5-month high, and despite new orders falling, business confidence has turned positive for the first time in 4 months. Housing remains strong. Existing home sales climbed again, home building permits and housing starts posted their best gains in 2019. The building permits surged to the highest levels since August 2007. Overall, easier financial conditions, low unemployment, wage growth, and housing are all supporting the stability of the current economy.

Upcoming week highlights include consumer confidence report on Tuesday, which is expected to rise, and Wednesday’s preliminary Q3 Gross Domestic Product report. Year-to-date index performance; Dow up 19.5%, S&P up 24.1%, and Nasdaq up 28.4%. What else? I feel like a broken record in holiday snowstorms as Colorado is bracing for another storm. So, if you were dreaming of a white Thanksgiving, you might get it this year! Great match-up on MNF tonight, for entertainment purposes to keep the pick ’em streak alive its the high flying Ravens over the Rams!

Safe travels and good times this Thanksgiving week!

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This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief Nov 18 2019

Market Brief Nov 18 2019

Not a lot of market and economic changes over the last week. Much of the same continued geo-political and impeachment unrest. The Dow, S&P, and Nasdaq indexes all finished up last week Dow up 1.2%, S&P 0.9%, and Nasdaq 0.8%. The indices reach for record all-time highs. Recent recession concerns have calmed down as trade talks have simmered. Slowdowns from industrial production is drawing the latest concern. However, employment remains strong and the consumer continues to spend. The Friday retail sales data was the latest reading of consumer spending available and showed an October bounce-back after September saw a decline; the first in seven months. 

Industrial production continued to slow in October, as the GM strike dragged on. Manufacturing, excluding autos, had a smaller decline of 0.2% in October. It’s also important to remember that we had a similar slowdown in 2015-16 during the oil price crash, and no recession materialized. Looking ahead to next week, economic data is expected in housing, leading indicators, consumer sentiment and jobs. These are all direct measures of consumer health, which has been the cornerstone of recent market returns. At 3.97%, mortgage delinquencies fell to the lowest level in nearly 25 years, and those in serious delinquency fell to 1.81%, the lowest since Q4 1985! University of Michigan Consumer Sentiment Index showed a small gain over the prior month. It was the third consecutive month of improvement and further indication that the U.S. consumer is on solid footing.

Year-to-date index performance; Dow up 20.1%, S&P up 24.5%, and Nasdaq up 28.7%. What else? Redfin reported that U.S. homeowners are residing in their homes for roughly 13 years, five years longer than the average in 2010, according to The Wall Street Journal. The lack of turnover is contributing to the low inventory levels of homes for sale, now near its lowest point in 37 years, according to CoreLogic Inc. Economists point out that many baby boomers are staying healthier later in life and not downsizing. For entertainment purposes only, we will take the Chiefs over the Chargers in Mexico.

Thanks for reading, have a great week!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.