Weekly Market Notes – October 29, 2018

Weekly_Market_Notes

For the Week of October 29, 2018

The Markets

U.S. stocks fell sharply Friday. Amid disappointing corporate results, continued concerns over trade tariffs and rising wages and borrowing costs, the S&P 500 and the Dow Jones turned red for the year. For the week, the Dow fell 2.97 percent to close at 24,688.31. The S&P lost 3.93 percent to finish at 2,658.69, and the NASDAQ dropped 3.78 percent to end the week at 7,167.21.

Returns Through 10/26/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) -2.97 1.65 7.89 14.68 12.34
NASDAQ Composite (PR) -3.78 3.82 9.31 12.49 12.69
S&P 500 (TR) -3.93 0.98 5.85 10.94 10.86
Barclays US Agg Bond (TR) 0.54 -1.93 -1.17 1.03 1.91
MSCI EAFE (TR) -3.87 -11.16 -8.29 2.76 1.51

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.

 

National Expenditures — Sixty-two percent of the $4.108 trillion of total outlays for the U.S. government during the recently completed fiscal year 2018 was in just four categories – Social Security ($988 billion), National Defense ($665 billion), Medicare ($589 billion) and Net Interest Expense ($325 billion) (source: Treasury Department, BTN Research).

Equity — The average loan-to-value ratio in the U.S. housing market as of June 30, 2008, was 55 percent (i.e., the average home mortgage had 45 percent of equity behind it). The average loan-to-value ratio in the U.S. housing market as of June 30, 2018, was 40 percent (i.e., the average home mortgage had 60 percent of equity behind it) (source: Federal Reserve, BTN Research).

Bull Return vs. Long-Term Average — The S&P 500 has gained 18.2 percent per year (total return) during the bull market run that began on March 10, 2009, and has continued through Friday, Oct. 19, 2018, larger than the index’s trailing 50-year (1968-2017) average annual return of 10.1 percent (source: BTN Research).

 

WEEKLY FOCUS – Weathering Volatile Times

Experiencing market volatility is a normal part of investing in stocks. Still, when the market dips, it’s natural to feel apprehensive and wonder how long the slide will last or what you should do. But just because the markets have been shaky the last few weeks, your knees don’t have to be. Certainly, it’s daunting to watch your investments go up and down – and even more unnerving when they stay down. After all, no one actually knows whether a decline is temporary or the beginning of a bear market.

Although no one can predict the future, panicked selling during a downturn is often the worst thing you can do. Think of investors who sold their stocks during the 2008-2009 market dive; they missed a massive comeback in the next five years that could have obliterated their losses.

To ride out the storm, focus more on your goals than the current news. Over the last century, the stock market has averaged around a 10 percent annual return. While past performance is not a guarantee of future results, most financial experts recommend adopting a long-term strategy when investing in the stock market. Investors trying to time the market by jumping in and out of it run the risk of selling low and missing periods of exceptional returns.

Turbulent times are a good reminder, however, to review your plan regularly. Consider how well it fits your investment time frame, your need for growth and the level of risk you’re willing to take. Is your portfolio diversified adequately? Spreading investments over a variety of classes, assets and markets won’t guarantee you won’t incur losses, but it may limit them. You may want to make plans now to rebalance some of your holdings when the time is right, or you might view a downturn as an opportune time to purchase investments at reduced prices.

If you’re still working, don’t let temporary setbacks discourage you from making regular contributions to your retirement plan. Continue to invest a fixed amount at regular periods over the years, and you’ll buy more shares of each asset when prices are low and fewer when they are high. Using this technique, your average purchase price should be lower than the average market price over the same period.

Finally, be patient. Although it may take some time, markets generally rebound. In the meantime, please feel free to call our office and set up a time to review your portfolio to ensure it suits your long-term goals and includes a plan for 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 October 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#  2296796.1

Market Update – 10/25/2018

My mom taught me that when you are wrong – admit it, learn from the mistake, and move forward positively.

Well, I was wrong in my assessment of the recent market pullback. My analysis indicated that we were in a garden variety pullback within an overall bull market.  I fully expected another decline to the area of 2,710 on the S&P 500, which was the low point from earlier this month.  However, yesterday’s (10/24) decline fell well below that level.  Essentially, the bears (sellers) overwhelmed the bulls (buyers).  The battle for control of the market is now leaning towards to bears.

As the market is extremely oversold, I do expect a bounce-back rally.  However, I am no longer as confident that rally will hold.  Time will tell.

In the meantime, I will be adjusting your portfolio to be a bit more defensive until I get more confident about the market’s direction.

On a long-term basis, I still believe we remain in a positive position based on economic conditions and financial fundamentals.  I still see no signs of an economic recession or major market correction (defined as a 20% decline from previous high) over the next 12 – 18 months.

As always, feel free to call with any questions or concerns.

Jim

 

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.

 

Market Update 10-23-18

The rollercoaster ride is on the move again.  While it may feel new and frightening, the reality is that the recent declines in the stock market are not extraordinary or new.  In fact, we experienced almost the exact same pattern in late January into early February 2018.

  • Earlier this year, the S&P 500 hit an all-time high on 1/26/18, only to tumble 11.9% through 2/5/18.  This time, the S&P 500 hit a new all-time high on 9/20/18 only to tumble 7.5% through 10/11/18.
  • While the February 2018 downturn was a “correction”, which is generally defined as a 10% decline from a previous high, the current decline has not reached that level.  While concerning, corrections occur once a year, on average.  We hadn’t seen a correction in over two years (2016-2017).  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_UPDATE_2

From a technical perspective this week’s activity has a normal pattern during a correction (and again almost a mirror image of February 2018).  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 pullback has played out.  Two weeks ago, the S&P 500 declined 152 points (5.28%) between 10/9– 10/11 in swift and massive selling. It then rallied 38 points (1.42%) by the end of that week. Last week, the S&P again bounced back 59 points (2.15%) on Tuesday 10/16.  Yesterday and today, we have more selling and a decline of 76 points (2.5%) as of 10:19am EST 10/23/18, to almost exactly the intra-day low on 10/11.  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  (2,710 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, Yahoo Finance

 

 

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.

Weekly Market Notes – October 22, 2018

Weekly_Market_Notes

For the Week of October 22, 2018

The Markets

Amid continued concerns over rising interest rates and trade tensions, stocks were mixed on Friday; the S&P and the NASDAQ dropped while the Dow Jones rose. For the week, the Dow rose 0.45 percent to close at 25,444.34. The S&P gained 0.05 percent to finish at 2,767.78, and the NASDAQ dropped 0.64 percent to end the week at 7,449.03.

Returns Through 10/19/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) 0.45 4.76 12.36 16.73 13.27
NASDAQ Composite (PR) -0.64 7.90 12.78 14.94 13.73
S&P 500 (TR) 0.05 5.11 10.13 13.13 11.95
Barclays US Agg Bond (TR) -0.37 -2.46 -2.21 0.87 1.88
MSCI EAFE (TR) -0.07 -7.58 -5.25 4.62 2.41

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.

 

Paying Most of the Bill — As of March 2018, employers in the private sector paid, on average, 67 percent of the health care premiums for their employees with families. State and local government employers paid, on average, 71 percent of the health care premiums for their employees with families (source: Department of Labor, BTN Research).

Up and Down — Congress has raised the top individual marginal tax rate seven times since 1950, most recently in 2013, when it raised the top rate from 35 percent to 39.6 percent. Congress has lowered the top individual marginal tax rate 13 times since 1950, most recently in 2018, when it dropped the top rate from 39.6 percent to 37 percent (source: IRS, BTN Research).

Get Ready — A 65-year old American male in 2018 is expected to live another 19.2 years (to 84.2 years old), an increase of five years in the last 40 years. A 65-year old American female in 2018 is expected to live another 21.6 years (to 86.6 years old), an increase of three years in the last 40 years (source: Social Security Administration, BTN Research).

 

WEEKLY FOCUS Are You Making the Most of Your Employment Benefits?

It’s no wonder a recent study found nearly six in 10 middle-income Americans feel more secure because of financial and insurance benefits received through their employer.1 According to U.S. labor statistics, the average amount employers spend on their employees’ benefits is $11.31 per hour – compared to $24.33 in hourly wages or salaries.2

The study also indicated only a quarter of employees are offered financial education or planning at work.3 Other research suggests this leaves many workers stressed about the choices they must make regarding their benefits. This is particularly true in the areas of health care and retirement plans – both crucial components of financial wellness.

Half of employees say making health insurance decisions is “very stressful.” Forty-one percent think the open-enrollment process at their company is “extremely confusing.” And 20 percent say they often regret the benefit choices they make.3 All too often, employees seem to be overwhelmed with plan descriptions that are difficult to understand and compare. That may be why statistics show 46 percent of Americans spend less than 30 minutes to make benefits decisions, and 89 percent of people default to the same plan as the year before.4

Difficult as they may be, choices regarding health insurance pale in comparison to the depth, breadth and potential impact of decisions related to company retirement plans. And compared to the popular defined-benefit pension plans of the past, which were often managed by hired professionals, workers are usually left to make their 401(k) plan decisions with minimal support.

In addition to traditional 401(k) plans, 70 percent of employers now offer Roth 401(k)s – requiring employees to decide whether tax breaks would benefit them more now or later. Participants who are overwhelmed by plans overstuffed with funds may defer to less diversified company stock options. Sponsors often push target-date funds that don’t address individual risk tolerances. Unless automatic rebalancing is available, the desired allocation percentages may change.

Need help choosing the best health care options for your family? Would you like assistance making 401(k) decisions? I’m happy to review these crucial elements of your financial plan with you.

1MassMutual Workplace Benefits Study, 2Employer Costs for Employee Compensation news release, 3MassMutual Workplace Benefits Study, 4Survey from IT firm Jellyvision

 

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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 October 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#  2287587.1

Weekly Market Notes – October 15, 2018

Weekly_Market_Notes

For the Week of October 15, 2018

The Markets

Following a week of steep losses, stocks rose Friday. Although the technology and other growth sectors rose, advances were restrained by continued concerns over U.S. – China trade tensions and rising interest rates. For the week, the Dow fell 4.17 percent to close at 25,339.99. The S&P lost 4.07 percent to finish at 2,767.13, and the NASDAQ dropped 3.74 percent to end the week at 7,496.89.

Returns Through 10/12/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) -4.17 4.29 13.45 16.78 13.42
NASDAQ Composite (PR) -3.74 8.60 13.74 15.71 14.61
S&P 500 (TR) -4.07 5.07 10.58 13.42 12.48
Barclays US Agg Bond (TR) 0.44 -2.10 -1.83 1.12 2.06
MSCI EAFE (TR) -3.93 -7.52 -4.70 4.57 2.98

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.

 

More Money — In the first quarter of 2018, 618 U.S. employers surveyed anticipated offering a starting base salary of $65,000 to college graduates with a bachelor’s degree, $85,000 to workers coming direct from industry and $105,000 to MBA graduates (source: Corporate Recruiters Survey Report 2018, BTN Research).

Healthy Returns — Six of the top 10 performing individual stocks within the S&P 500 during the third quarter of 2018 (i.e., trading from July 1, 2018, through Sept. 30, 2018) are in the health care sector (source: BTN Research).

Skittish — A greater percentage of millennials have all their pretax retirement money invested in cash and bonds (20 percent) than those who have all of their pretax retirement money invested in stocks (19 percent). 2,593 millennials (ages 20-36 in 2017) were surveyed in the fourth quarter of 2017 (source: Transamerica Retirement Survey, BTN Research).

 

WEEKLY FOCUS – When You Should Update Your Estate Plans and Will

Estate planning and wills are not a one-and-done affair. They aren’t documents you write, tuck away in your important papers, file and forget about. They are subject to inevitable life events and circumstances. Think of them as you would your car. It needs an oil change or maintenance every so often. So, too, your estate plans and will. When is the best time to think about reviewing? Here are some events that may necessitate an update:

  • Changes in state and federal laws: Has the state you live in enacted new laws which could impact your will and finances? Have you moved to another state? A new federal tax law doubles the threshold for estate taxes, raising the bar for estate taxes to exclude all but the nation’s richest households – those with estates that exceed $11.8 million per person or $22.36 million per couple. State tax laws vary.
  • Major life events such as the birth of a child or grandchild, an adoption, marriage, divorce or death all affect your will and estate.
  • In addition to events in your own life, consider events in the lives of your heirs, representatives, trustees or executors. Have your relationships with the people named in your will changed? Their circumstances may have also changed, which could also impact your estate planning and will.
  • A substantial increase or decrease in the value of your estate. Have you bought or sold a major asset? Have you started a new business?
  • You’re approaching your 70½ birthday and have an IRA, 401(k) or other qualified plan that requires you to begin taking distributions at that age.

These are just some of the things that could impact your future financial plans. But even if you’re not aware of anything that could trigger an automatic update, the passage of time alone would matter. You should review your will and estate planning documents every three to five years.

Don’t let life hand you unwanted surprises. Contact our office today. We can help you review your finances and determine if your plans need updating.

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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 October 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#2279010.1

Market Update – Perspective on the Recent Selloff

Corporate earnings have surged year over year. The stock market is near an all-time high. So too are political tensions in the US. The US  economic landscape appears strong. Yet, investors are extremely skeptical of financial markets.  What does all of this mean? Is it the beginning of a major correction or just a “buy the dip” kind of pullback? Large US equity market declines have almost exclusively occurred in and around economic slowdowns. That is not the case today. In my opinion, the declines are still within the context of a normal correction and I have highlighted on several occasions that we expected to see an increase in volatility ahead of the mid-term elections, which are now less than one month away.

History has repeatedly shown that weakness ahead of mid-term elections is a buying opportunity for those investors with a reasonable time horizon. The worst two quarters of the four-year Presidential Cycle are the second and third quarters of the mid-term year. Ironically, in 2018 both the second and third quarters were positive.

We are now in the part of the calendar where the presidential cycle’s seasonal trends have historically transitioned from its two worst quarters to its two best. Dating back to 1946, the S&P 500 has advanced by an average of 7.51% and 6.61% respectively during the fourth quarter of the mid-term year and the first quarter of the following year. (source: Clark Capital Management)

Ultimately, it is “time in the market” not “timing the market.  You may recall that the S&P 500 hit an all-time high on 1/26/18 only to tumble 10.2% by 2/8/18.  From that point the market regained all of the decline to reach a new all-time high on 9/20/18, some 2% higher than the previous all-time high.   By not over-reacting to that downturn, we allowed your portfolio to participate in the rebound.

As in the past, in the midst of this market volatility, we remain focused on your long-term goals and objectives.  We continue to focus on balancing the risk and return potential in your portfolio and will make any appropriate adjustments as conditions evolve.

Please call us if you have any questions or concerns.

MARKET_UPDATE_1

Putnam Investments

 

 

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.Market Update – Perspective on the recent selloff

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

Market Update – Early October Cross-Currents

Early October has seen volatility pick back up in the financial markets.  Ironically, it is some recent strong economic reports that are the primary cause.

The September 2018 jobs reports showed unemployment falling to 3.7%, a level not seen since December 1969.  The Institute of Supply Management non-manufacturing index hit a 20 year high.  Inflation remains low by historical standards.  This news that the US economy is firing on almost all cylinders, coupled with the Federal Reserve latest 0.25% increase in short-term interest rates, led to a swift uptick in longer-term interest rates as reflected by the US 10 year Treasury, which jumped from 3.06% on 10/2/18 to 3.23% as of 2:30pm on 10/8/18.

The speed of that move over the last 3 days has created a knock-on effect in equities.  The S&P 500 had just seen a new all-time high reached on 10/3/18 but is now on pace to decline for a 3rd straight day – something it hasn’t done since March 2018.  However, from the all-time high to the intra-day low (11:46am today) the S&P has only declined 2.6%.

While fast and sharp moves like the last 3 days can be concerning, I do not believe the underlying trends of positive economic growth and increasing corporate profits have changed.

We want you to know we are monitoring the situation closely and will take appropriate actions as necessary.  Please call us if you have any questions or concerns.