Weekly Market Notes – February 26, 2018

Weekly_Market_Notes

For the Week of February 26, 2018

The Markets

Wall Street rallied Friday. The three major indexes closed a volatile week on an up note after the U.S. central bank predicted steady economic growth and eased concerns about the number of interest rate hikes for the year. Many investors expect three increases this year rather than four. For the week, the Dow rose 0.36 percent to close at 25,309.99. The S&P climbed 0.58 percent to finish at 2,747.30, and the NASDAQ gained 1.35 percent to end the week at 7,337.39.

Returns Through 2/23/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) 0.36 2.74 24.49 14.61 15.36
NASDAQ Composite (PR) 1.35 6.29 25.74 13.94 18.34
S&P 500 (TR) 0.58 3.05 18.54 11.51 15.00
Barclays US Agg Bond (TR) 0.00 -2.13 0.66 1.24 1.77
MSCI EAFE (TR) -0.44 0.91 20.15 6.11 7.31

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

 

At the Pump — The average price of gasoline peaked at $4.11 a gallon on July 17, 2008. The average price of gasoline was last above $3 a gallon on Oct. 31, 2014. Gas averaged $2.54 a gallon on Friday, Feb. 16 (source: AAA, BTN Research).

Big City People — Fifty percent of the U.S. population lives in just 143 counties; i.e., just 4.6 percent of the 3,142 counties throughout the nation are home to half our citizens (source: Census Bureau, BTN Research).

Top Ten — The top 10 percent of U.S. taxpayers (based upon 2015 tax data) reported adjusted gross income (AGI) of at least $138,031, received 47 percent of all AGI and paid 71 percent of all federal income taxes for the year (source: IRS, BTN Research).

 

WEEKLY FOCUS – Mistakes Millionaires Should Avoid

A nine-year bull market has produced a large number of 401(k) millionaires. Recently, financial services company Credit Suisse reported 1.1 million Americans crossed that line in 2017 alone. According to a Time article, this increase brought the total number of U.S. millionaires to 15,356,000, or approximately one in every 20 Americans. This means the U.S. has more millionaires than any other country (by far) – even though we rank 21st for median wealth, along with Austria and Greece.

As a wise man once said, “Making money is easy; keeping it is hard.” So these new millionaires must avoid common pitfalls to preserve their wealth. The biggest mistake they can make is emulating wealthy individuals who joke about spending their kids’ inheritance on second homes, luxury cruises and expensive automobiles.

Some wealthy people can afford to splurge in these ways without endangering their security. But individuals who attain $1 million need to remember that figure doesn’t go as far as it once did, and today’s life expectancies are longer. According to Market Watch, $1 million is likely to last the average retiree 25½ years in the most favorable state based on cost of living: Mississippi. For a retiree living in Hawaii, it could be depleted in a little over 13 years.*

Other emotional decisions can also crack a nest egg. It’s generally unwise to buy stocks based on gut feelings or sell due to negative predictions. Preretirees or early retirees with million-dollar portfolios who overly fear risk may lose ground if their conservative investments don’t keep pace with inflation. On the flip side, the euphoria of hitting the million-dollar mark can produce impulses to help the less fortunate, lend money to relatives or treat friends frequently. It’s nice to be generous, but it’s wise to prioritize and plan gifts.

Investing without defining long-term goals and creating a strategy to achieve them is another big mistake. A skilled financial advisor can help a new millionaire create a plan with a diversified portfolio, which isn’t a guarantee against loss but is a vital tool for managing risk. Not reviewing investments can prove to be yet another costly error. An advisor can respond to changes in the market or personal circumstances and suggest ways to rebalance assets.

Whether you hope to acquire a million-dollar portfolio, you already have or you’ve been blessed beyond that, our office is ready to design measures to help you preserve and grow your assets. Let us know how we can help.*  If you’d like to see where your state ranks, visit: https://www.marketwatch.com/story/got-1-million-to-retire-heres-how-long-it-will-last-by-us-state-2017-10-13

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright February 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2039434.1

Weekly Market Notes – February 19, 2018

Weekly_Market_Notes

For the Week of February 19, 2018

The Markets

The major indexes closed off their session highs following news a federal grand jury indicted 13 Russian nationals and three Russian entities for interfering with the 2016 presidential election. But only the NASDAQ closed lower, ending a five-day winning streak. The Dow closed higher for a sixth session, and the S&P posted its best weekly performance in five years. For the week, the Dow rose 4.36 percent to close at 25,219.38. The S&P gained 4.37 percent to finish at 2,732.22, and the NASDAQ climbed 5.31 percent to end the week at 7,239.47.

Returns Through 2/16/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) 4.36 2.37 25.20 14.70 15.32
NASDAQ Composite (PR) 5.31 4.87 24.50 13.94 17.80
S&P 500 (TR) 4.37 2.46 18.72 11.53 14.82
Barclays US Agg Bond (TR) -0.21 -2.12 1.04 1.23 1.80
MSCI EAFE (TR) 4.27 1.35 21.13 6.91 7.37

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

 

Short-Term — Forty-eight percent of Treasury debt at the end of fiscal year 2017 (Sept. 30, 2017) had a maturity of three years or less, i.e., debt that will mature by Sept. 30, 2020, and will either be rolled over or paid off (source: Treasury Department, BTN Research).

Expanding — If the expansion of the U.S. economy (i.e., no recession), now in its 104th month, continues into May 2018, it will rank as the second-longest expansionary period for the country in our history. Contractions and expansions for the United States have been tracked since 1854, i.e., the last 163 years (source: National Bureau of Economic Research, BTN Research).

Ups and Downs — The S&P 500 has gained 10.1 percent per year (total return) over the last 50 years (1968-2017) despite suffering through seven bear markets of at least a 20 percent  decline each time (source: BTN Research).

 

WEEKLY FOCUS – Planning Ahead for College

Planning for college is more important than ever as the need for and price of a degree continue to increase. According to Georgetown University, 65 percent of jobs will require a college education by 2020. At the same time, the College Board reports the average annual tuition, fees, room and board in 2017-2018 cost $20,770 for a degree from a public university and $46,950 for a private nonprofit university, more than double what they cost 30 years ago.

Most people pay for college through a combination of current income, loans, grants and scholarships, in addition to savings. Author Mark Kantrowitz found only three-tenths of 1 percent of students enrolled full-time at four-year colleges receive adequate grants and scholarships to pay for their education. This makes saving the foundation of college funding. But how much should you plan to save? And what are the best, tax-advantaged ways to save for college?

Kantrowitz suggests saving one-third of your child’s estimated college costs. Small amounts of money invested every month can become sizeable savings through smart planning and compounding. As FINRA points out, if you begin saving $200 a month for your newborn at a 6 percent annual rate of return, you will have more than $76,000 saved for college by the time your child turns 18.

There are a variety of college savings vehicles: 529 prepaid tuition plans at qualified institutions, general 529 savings plans, Coverdell Education Savings Accounts (ESAs) and “tax scholarships,” which shift assets to children over several years to take advantage of the children’s lower tax bracket.

Weighing the options for college saving can be overwhelming. Each has advantages and disadvantages. For example, a prepaid 529 plan only works if the child knows which school they’ll attend for certain, and only a limited number of states guarantee their prepaid tuition plans. Earnings in all 529 savings plans grow tax-deferred, and over 30 states also offer a state income tax deduction for all or part of a resident’s contribution. The maximum amount all sources can contribute to one ESA account is $2,000 annually, and contributors’ income must fall within guidelines. Shifting parental assets to a child may affect the child’s eligibility for federal aid at application time.

We can help you explore every avenue of saving for your child’s future. Call today for a no-obligation consultation. Securities America and its representatives do not provide tax advice; coordinate with your tax advisor regarding your specific situation.

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright February 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#2032452.1

Weekly Market Notes – February 12, 2018

Weekly_Market_Notes

For the Week of February 12, 2018

The Markets

After a dramatic week on Wall Street with stocks bouncing up and down, the major indexes climbed more than 1 percent Friday. Despite the day’s gains, the S&P saw its biggest weekly percentage drop since January 2016. For the week, the Dow fell 5.08 percent to close at 24,190.90. The S&P lost 5.10 percent to finish at 2,619.55, and the NASDAQ dropped 5.06 percent to end the week at 6,874.49.

Returns Through 2/09/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) -5.08 -1.90 22.79 13.75 14.36
NASDAQ Composite (PR) -5.06 -0.42 20.28 13.30 16.57
S&P 500 (TR) -5.10 -1.84 15.78 10.87 13.89
Barclays US Agg Bond (TR) -0.10 -1.92 1.04 1.22 1.83
MSCI EAFE (TR) -6.19 -2.80 17.94 6.15 6.37

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

 

Big Month — Seventy-five percent of the individual stocks in the S&P 500 were up in January, including 17 percent of the index (85 stocks) that were up at least 10 percent and 2 percent (eight stocks) that gained at least 20 percent (source: BTN Research).

Sales Price — The median sales price of existing homes sold in the United States in December 2017 was $246,800, down from an all-time peak median sales price of $263,300 in June 2017. The low point for this statistic during the 2008-2012 real estate crisis: $154,600 in January 2012 (source: National Association of Realtors, BTN Research).

Ties the Record — The S&P 500 gained 5.7 percent (total return) in January 2018, the index’s 15th consecutive up month. A 15-month streak has been achieved only one other time in the all-time history of the S&P 500, a record originally set between March 1958 and May 1959 (source: BTN Research).

 

WEEKLY FOCUS – What Goes Up Will Likely Come Down

We all knew it would happen sooner or later. The markets’ dizzying ride to the top couldn’t last forever. Financial strategists warned stocks were overvalued. On her last day as Chair of the Board of Governors of the Federal Reserve System, Janet Yellen expressed concern over how high the market surged under her watch. The S&P had gained 53 percent since she assumed the chair of the central bank in 2014. From President Trump’s election last November to its record closing high on Jan. 26, the Dow Jones Industrial gained 45 percent.

Shock waves interrupted Wall Street’s ascent on Feb. 2 when the Dow dropped 2.5 percent and stocks closed their worst week in two years. The wild ride continued last Monday when the Dow plunged 4.6 percent.

Ironically, it appears this negative shift was set off by a very positive jobs report. More jobs (200,000) were created than expected last month. The unemployment rate is the lowest since 2000, and Americans’ hourly earnings rose 2.9 percent over the last year. This seemed to lead investors to expect more interest hikes than previously predicted, making it costlier for businesses to borrow and making bonds more attractive investments. Some speculated businesses may be forced to pay still higher wages as fewer candidates are available for open positions.

Still others pointed to Treasury Secretary Mnuchin’s comments about devaluing the dollar at the World Economic Forum in late January, since a weaker dollar makes it less appealing for foreigners to buy U.S. debt. Regardless of the specific causes, the three major indexes rebounded Tuesday in the biggest one-day advance for the year, then slipped Wednesday, plunged Thursday and climbed more than 1 percent Friday.

Knowing a drop was coming doesn’t make it pleasant when it happens. After the long, positive run stocks have had, it’s easy to forget market volatility is normal and investors who have held a diversified portfolio for the long term have reaped rewards historically.

While market turbulence isn’t a reason in itself to sell quality investments, it can provide a reminder to ensure your portfolio is properly balanced for your current situation. Please feel free to contact our office if you’d like to review your investments to make sure they fit your long-term goals and address future market volatility.

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright February 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2025405.1

Market update 2/9/18 – Officially a Correction

With the declines on 2/8/18, the stock market has officially hit “correction” territory, which is generally defined as a 10% decline from a previous high.  While concerning, corrections occur once a year, on average.  We haven’t seen a correction in over two years.  Corrections also tend to be short and shallow.  “The average bull market ‘correction’ is 13 percent over four months and takes just four months to recover,” Goldman Sachs.

market_chart_market_update_post

From a technical perspective this week’s activity has a normal pattern during a correction.  There is usually a selling climax (swift and sizeable decline), followed by a throwback rally that doesn’t hold, leading to a retest of the previous low. That is exactly how this week has played out.  On Monday 2/5 the DJIA declined 1,175 points in swift and massive selling.  On Tuesday 2/6, the DJIA declined another 577 points intra-day, before reversing to rally 1,124 points.  Yesterday, 2/8, we saw more selling and a decline of 1,044 points, to almost exactly the intra-day low on 2/6.  If the pattern holds, the market will waffle between gains and losses for a period of time in a bottoming process.  As long as the recent intra-day lows  (23,778 on DJIA and 2,580 on S&P500) hold I anticipate we have seen the worst of this correction.

We do not think this is the beginning of meaningful and sustained weakness for markets, as fundamentals remain supportive (economic growth and corporate profitability are improving). However, volatility is back and likely here to stay. We continue to focus on balancing the risk and return potential in your portfolio and will make any appropriate adjustments as conditions evolve.

As always, we appreciate your confidence in us.  Please call us if you wish to discuss further.

Sources: Raymond James & Assoc., Goldman Sachs, CNBC.com

 

 

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.

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.

Stock Market Volatility – Bear Market?

Bear market?

The depth and speed at which the stock market (basis S&P500) has fallen in the last few days has many wondering if we are headed into a Bear market for stocks.  Generally, bear markets are defined as a decline of 20% from the previous high.

It’s worth putting the recent decline into perspective:

  1. The S&P 500 Index had risen 55% from Feb 8, 2016 to the all-time high on 1/26/18 closing of 2872.87 (source: Yahoo Finance)
  2. The S&P 500 had risen 7.5% in 2018 through 1/26/18.  The current pullback is 7.8%, essentially only giving back the year-to-date gains.
  3. We have seen an extended period of limited volatility in stocks.  Through 1/26/18 the market had gone over 340 days without even a 3% pullback from the previous high, the longest period ever.  Normally, the stock market experiences a 5% pullback 3 times per year, on average.
  4. The fact is that while these sharp sell-offs may seem to be more pronounced and scary in our modern world  of 24/7 media coverage and Apps, they’re actually not as rare as you might think. To this point, Ben Casselman of Fivethirtyeight.com did a fantastic job of summarizing recent events: “Set aside the psychological importance of the New Year and what we’re really talking about is a market that lost approximately 8 percent in 7 trading days (as of the end of 2/5/2018). That’s hardly unprecedented. We had equally bad 7-day stretches in 1950, 1955, 1957, 1962, 1966, 1970, 1973, 1974, 1978, 1979, 1981, 1987,1997, 1998, 2000, 2001, 2002, 2008, 2009, 2011 and 2015. That list includes some brutal recessions and memorable crashes, but also several incidents that proved little more than blips.”
  5. 10% declines, generally the level considered a “correction”, occur almost every year as the chart below shows.  We haven’t experienced one since Jan 2016, so we were overdue.

market_chart_market_volatility_post

When the financial markets hit periods of extreme volatility like this it is hard to predict when it will stop.  What we do know is:

  • The selling will exhaust itself but we can expect to hit lows, bounce from there, retest those lows, and eventually build a base (bottom) on which stock can start to rise again
  • The fundamentals of the equity market have not changed since last week
    • We are seeing the best Corporate sales reports since 2006
    • We are seeing the best Corporate earnings in 6 years
  • Economic fundamentals remain solid, with expanding global growth, improving personal incomes

So, bottom line, we see no signs of a bear market or significant slow down in economic growth.  However, while the fundamental picture remains positive, the technical picture in the equity markets has turned decidedly negative.  At the moment, the stock market is massively oversold but market participants are not responding to this.  The key levels I am watching are 2,575 on the S&P500, and 23,263 on the Dow Jones Industrial Average, which are the 150 day moving averages.  If these levels are breached then I will be implementing additional risk management steps across your portfolio.

I hope this eases some of your concerns.  Feel free to call me if you want to discuss further.

 

 

Sources: Macro Analytics for Professionals, Yahoo Finance.com, Seeking Alpha.com

Weekly Market Notes – February 5, 2018

Weekly_Market_Notes

For the Week of February 5, 2018

The Markets

A strong jobs report spurred speculation the Federal Reserve would raise interest rates more than expected, causing all three major stock indexes to fall sharply Friday. All three saw their worst weeks in two years. For the week, the Dow fell 4.11 to close at 25,520.96. The S&P lost 3.81 percent to finish at 2,762.13, and the NASDAQ dropped 3.53 percent to end the week at 7,240.95.

Returns Through 2/02/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) -4.11 3.34 31.42 16.59 15.55
NASDAQ Composite (PR) -3.53 4.89 28.47 15.69 17.90
S&P 500 (TR) -3.81 3.44 23.54 13.34 15.17
Barclays US Agg Bond (TR) -0.88 -1.82 1.53 0.90 1.89
MSCI EAFE (TR) -2.75 3.61 25.58 8.73 7.43

Source: Morningstar.com. *Past performance is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly. Three- and five-year returns are annualized. The Dow Jones Industrials, MSCI EAFE, Barclays US Agg Bond and S&P, excluding “1 Week” returns, are based on total return, which is a reflection of return to an investor by reinvesting dividends after the deduction of withholding tax. The NASDAQ is based on price return, which is the capital appreciation of the portfolio, excluding income generated by the assets in the portfolio in the form of interest and dividends. (TR) indicates total return. (PR) indicates price return. MSCI EAFE returns stated in U.S. dollars.

 

Really Rich — When measured in November 2017, the three wealthiest Americans (Bill Gates, Jeff Bezos and Warren Buffett) were worth $249 billion, more than the combined net worth of the bottom half of the U.S. population, i.e., 160 million Americans (source: The Guardian, BTN Research).

High Mark — Americans’ total outstanding credit card debt reached $1.023 trillion in November 2017, a record high, exceeding the previous record high of $1.021 trillion in April 2008 (source: Federal Reserve, BTN Research).

Top One — The top 1 percent  of taxpayers in tax year 2015 made at least $480,930 of adjusted gross income (AGI), received 21 percent of all AGI and paid 39 percent of all federal income tax (source: Internal Revenue Service, BTN Research).

 

WEEKLY FOCUS – Projecting Future Health Care Costs

It’s no wonder rising health care costs are a major concern among Americans. They have dramatically outpaced inflation for the past three decades and nearly doubled since 2002. And continued escalation is expected. According to the Peterson-Kaiser Health System Tracker, average per capita health spending is projected to grow at 4.5 to 4.9 percent annually from 2018 to 2025.

Soaring health costs are particularly daunting when contemplating reduced income during retirement. Since most seniors expect to live 20 or more years in retirement and health care expenditures typically increase with age, it can be difficult to envision an adequate savings target to cover future health prices.

Several organizations have given it a shot. Based on Fidelity Investments’ 2017 survey, a 65-year-old couple retiring today will need approximately $275,000 to cover Medicare Part B, D and Medigap premiums and out-of-pocket expenses not covered under Medicare. A 2016 HealthView Services’ report forecast more startling needs for those farther from retirement: $465,000 for a 55-year-old couple retiring ten years later and $590,000 for a 45-year-old couple retiring 20 years later.

As if prospective health care costs aren’t staggering by themselves, approximately 70 percent of adults over 65 will require long-term services and supports (LTSS). And the likelihood increases with age, with individuals 85 and older four times more likely to need LTSS than their 65- to 84-year-old counterparts. Like health care costs, LTSS services have been increasing disproportionately. Last year, Genworth’s Annual Cost of Care Survey reported average national monthly costs for a variety of LTSS services:

  • $4,099 for a home health aide
  • $3,750 for an assisted living facility
  • $7,148 for a semi-private nursing home room
  • $8,121 for a private nursing home room

Call our office for help with the complex nature of health care costs in retirement. Together, we’ll develop a strategy based on your time horizon, inflation, general health outlook, retirement goals and other factors – and help you adjust parameters as your needs or time frame change.

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* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America, Copyright February 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#2016893.1

February 2018 Monthly Outlook – Too Much of a Good Thing?

January 2018 proved to be one of the best starts to a year in the equity markets since 1997.  Fueled by the positive outlook for global economic growth, stock markets around the world posted positive results.

However, sometimes too much of a good thing can have consequences.

One of the consequences of improving economic growth is rising interest rates and inflation.  This can clearly be seen in the US 10yr Treasury which jumped from 2.40% on December 29,2017 to 2.84% as I am writing this outlook on February 2, 2018.   That is a huge move up in rates in just one month.  The bulk of that move came in the last 2 weeks of January 2018 and has led to a spike in volatility in the equity markets.

Growing investor confidence, positive momentum, and the fast start in January has gotten the equity markets a bit overheated and I expect February to see more volatility and a slight pullback in stocks.  My estimate is perhaps a 5% -10% pullback is likely over the near-term as the market digests the higher interest rate environment.

Another concern is the political disfunction in Washington DC.  The most recent short-term funding for the government ends on February 8th . Congress and the White House need to agree on a budget (not likely) or another short-term extension to keep the government open. On the heels of this, Washington must agree to increase the debt limit by early March 2018.  While the financial markets shrugged off the most recent government shutdown (January 19 – January 22, 2018), it will become less tolerant as time goes on.

Additionally, I am worried about potential US trade actions, such as a unilateral pull-out from NAFTA (North American Free Trade Agreement) or a trade war with China.  While I don’t expect either of these to occur, if they did it would damage the current global economic and financial expansion we are experiencing.

Longer-term, while the US economy has been growing for several years and is nearing its full potential, I believe it can continue to grow for the next 12-18 months based on historical expansionary cycles.

2.5.2018_MONTHLY_OUTLOOK_CHART_1

In summary, I expect to see higher volatility and perhaps a decline in the equity markets in February.  I expect this to be a short-term condition (1-2 months) as markets try to decipher the direction of interest rates and policy decisions in Washington and global Central Banks.  I continue to monitor your portfolio and will let you know if any adjustments are warranted.

Please call me if you have any questions on this report or your investments.  Please share this report with anyone you feel would benefit from the information.

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

  • February is Black History Month.  Let’s all strive for understanding and acceptance for people of all colors, nationality, and religions.

 

February  2nd                   Groundhog Day – unfortunately Punxsutawney Phil saw his shadow so its 6 more weeks of winter

February  19th                  Mardi Gras

February 14th                  Valentine’s Day

February 19th                  Presidents Day

 

Sources:  BlackRock Investment Institute, State Street Global Advisors