August 2015 Monthly Outlook – What is money?

“What is money? Money is the most successful story ever told, because it is the only story everyone believes. Money is not an objective reality, it has no objective value.  Take this green piece of paper, the dollar bill – you cannot eat it or wear it but then come along these master storytellers and they tell us this green piece of paper is actually worth 10 bananas and if I believe it and you believe it and everybody believes it, it actually works ”  Yuval Noah Harari  as excerpted from TED talk on What explains the rise of humans.

A rather interesting concept.  I view money as a tool, as a means to an end.  It’s significance comes for providing the means for you to enjoy the things that are most important to you, be that family, career, hobbies, recreation, etc.

Ok enough deep thinking. Let’s get back to reality.

July was a busy month around the world.  The U.S and Cuba agreed to reopen embassies in each country’s capital city, U.S. Women’s soccer team won the World Cup over Japan,  Greece managed to avoid a complete debt default, the Chinese stock market (Shanghai Composite) fell some 32% over 18 trading days, and a deal was signed between 6 nations and Iran on nuclear sanctions.

Domestically,  the end of July saw the Federal Reserve issue a more upbeat report on the U.S. economy and the Bureau of Economic Analysis reported that the initial reading of Gross Domestic Product (GDP) grew by 2.3% annually in the 2nd quarter of 2015 and revised the 1st quarter from a negative 0.2% to a positive 0.6%.

The situation in Greece and China created some heightened volatility in financial markets early in the month but as of 7/30/15 the equity market (basis S&P 500) is just 2% below the high for the year. The fixed income market (basis US 10yr Treasury) saw interest rates increase to 2.47% then fall back to 2.29%.

As of 7/29/15,  263 out of 500 companies in the S&P 500 had reported 2nd quarter 2015 earnings, with 73% beating analyst estimates, 8% meeting and 19% missing.  Based on the trend in the reported earnings to date, total S&P 500 earnings for 2Q15 will be up 0.8% compared to an estimate of down 3.0%.  Energy is the worst performing sector, while financials and healthcare are the best sectors (CNBC).

My outlook is that US equities will continue to trend higher, albeit at a slower pace (see chart below courtesy of RiverFront Investment Group).  A moderate pullback, say 5% – 10%, would not surprise me and would be a buying opportunity in my opinion. Internationally, I favor developed Europe (Germany, UK) and Japan.  I am worried about China, but more so about the slowing growth in their economy than about the volatility in their stock market.

Aug 15 chart

I expect the Federal Reserve to increase short-term interest rates in September.  This should have a minimal impact on fixed income investments and the financial markets in general as the increase will be small (likely 0.25%) and has been well telegraphed.

Please let me know if you have any questions or concerns.

August Calendar of Events   (comments and additions for future months are always welcome)

  • August is National Traffic Awareness month – let’s all try to be safer drivers

Aug  1st             Boomers Making a Difference – check out volunteer opportunities at

Aug  8th            My birthday!  It’s also Happiness Happens Day

Aug 13th           International Left-Handers Day

Aug 14th           Social Security Act signed in 1935 by Pres. Franklin D Roosevelt

Aug 19th           Beatles first US tour in 1964

Aug 25th            Women’s Equality Day

Aug 29th           My daughter Satya’s anniversary

Hopefully this information is useful for you.   Feel free to share this information with family, friends and colleagues.

Sources: RiverFront Investment Group

July 2015 Monthly Outlook – “Crisis”

In the Chinese language the word “crisis” is composed of two characters, one stands for danger and the other opportunity. As we reach the mid-point of the year, we have certainly seen our fair share of “crisis” this year  – a significant slowdown in US economic activity early in the year, racial unrest in the US, terrorist attacks in Paris and Yemen, and the Greek debt default on 6/30/15.

Overall, the financial markets have reacted benignly, with both stocks and bonds little changed year-to-date. The initial response to “crisis” so far this year has been a shallow pullback quickly followed by a rebound.  Danger then opportunity.

I use a number of resources to guide my approach and actions as I manage investments.  As we move into the 2nd half of 2015, my outlook is most in line with that from BlackRock.  Here is a recap of their Mid-Year Update.

 5 Things to Know

  1. Central bank policies will diverge, with the Federal Reserve starting to raise interest rates while Japan, China and European Central banks will continue to be in easing mode.
  2. Federal Reserve will lift off (probably in September), and the World will not end.
  3. U.S. economy slow, but continues to move forward.
  4. Inflation still at low levels.  The US dollar should remain strong, putting downward pressure on inflation and commodity prices.
  5. With Fed in play, expect more volatility.

5 Things to do

  1. Favor stocks over bonds, but be choosy.  (stocks are less expensive than bonds on a relative basis)
  2. Look overseas for opportunities (Europe & Japan have outperformed U.S.  year-to-date)
  3. Watch your step in bonds (remember bonds lose value when interest rates go up)
  4. Resist the urge to exit  (American Association of Individual Investors – AAII – Bullish sentiment has declined to level not seen since Jan 2009)
  5. Seek growth in a low-growth world (asset allocation is critical)


These are the themes I am following as we start into the back half of 2015. As always I will be on the lookout to avoid danger and take advantage of opportunities.

July Calendar of Events   (comments and additions for future months are always welcome)

  • July is National Picnic and National Parks month – why not go to a national park and have a picnic – a 2 for 1

July 1st             Bureau of Internal Revenue (the IRS) founded in 1862– betcha nobody celebrates this birthday

July  4th             Independence Day

July 11th            my daughter Ryan’s birthday!

July 29th            National Lasagna Day

I hope this report is useful to you.   Feel free to share this information with family, friends and colleagues.

Sources: BlackRock, Yahoo Finance, Raymond James

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.


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