Weekly Market Notes – November 26, 2018

Weekly_Market_Notes

For the Week of November 26, 2018

The Markets

Stocks closed lower on the short post-holiday trading day. Thin trading, falling oil prices and continued concern over the trade conflict with China resulted in the indexes’ second week of declines. For the week, the Dow fell 4.40 percent to close at 24,285.95. The S&P lost 3.77 percent to finish at 2,632.56, and the NASDAQ dropped 4.26 percent to end the week at 6,938.98.

Returns Through 11/23/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) -4.40 0.26 5.56 13.66 11.27
NASDAQ Composite (PR) -4.26 0.52 1.04 10.79 11.69
S&P 500 (TR) -3.77 0.19 3.34 10.29 10.08
Barclays US Agg Bond (TR) 0.03 -1.92 -1.86 1.34 2.02
MSCI EAFE (TR) -1.09 -10.26 -8.54 3.74 1.81

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.

 

Just One Day of Trading — The S&P 500 was up 4.1 percent YTD (total return) through the close of trading on Friday, Nov. 16, the 223rd trading day of 2018. The best single trading day for the index so far this year was Monday, March 26, 2018, when the index gained 2.7 percent (source: BTN Research).

More Jobs — The number of national construction jobs grew by 330,000 in the 12 months preceding and through October 2018, reaching 7.3 million for the first time since April 2008, just before the global real estate crisis hit (source: Associated General Contractors of America, BTN Research).

Force Their Hand — 401(k) plans with auto-enrollment have an average participation rate of 85 percent vs. 63 percent for plans that do not have auto-enrollment (source: Alight Solutions LLC, BTN Research).

 

WEEKLY FOCUS – Making Gifts Do the Most Good

Charitable donations increase at the end of the year and really spike on Giving Tuesday, a day solely focused on charities following Black Friday and Cyber Monday’s intensive shopping days. Last year, #GivingTuesday raised $177 million, according to GivingTuesday.org — and this year, Giving Tuesday is expected to surpass that amount.

While donating to causes that matter most to you, it’s important to research and understand how a particular charity spends gifts. Many online tools are available to ensure your giving accomplishes the greatest good.

CharityNavigator.org is a great resource to see an organization’s previous work and the percentage of donations that directly benefit the cause. The site offers ratings based on two primary categories: financial health and accountability, and transparency. It includes 24 metrics to help you understand the charity’s work. Charitywatch.org is another long-established, assertive charity watchdog, which rates charities from A to F and provides financial specifications on each nonprofit. It also exposes nonprofit abuses and advocates for donors’ interests. These tools help ensure your hard-earned, generous donations do the most good. But what if you want to build a strategy around your philanthropic endowments?

The face of philanthropy is changing, particularly how donors and financial professionals connect with charities. A 2016 study by U.S. Trust and the Philanthropic Initiative called “High Net Worth Philanthropy: Charitable Practices and Preferences of Wealthy Households” revealed an increasing number of prosperous donors are seeking counsel, or would like to, from financial professionals.

More than 23 percent of wealthy individuals consulted with at least one professional about charitable donations. It also found nearly a third of all wealthy individuals surveyed would prefer to work with professionals who understand charitable giving. By working with professionals, you’ll get the best legal, tax and investment advice. Their objectivity can serve to caution against giving too much or going beyond your means. They can also find alternate ways to donate, such as real estate, vehicles and art.

The world of giving gets more complicated every day. Making a bad decision can reduce the impact you make. To ensure your gifts do the most good, call our office today. We can work with your tax or estate planning professional to create a plan that’s right for you. 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 November 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI#2327559.1

Market Update 11-20-18: More Volatility

Well the market isn’t taking a break for the Thanksgiving holiday.

After a decent rebound last week, the equity markets are back in sell mode so far this week.

Based on my analysis of the activity, it appears we are still in a “correction” process and that the long-term positive trend in the market has not changed.

I feel the volatility is primarily due to continuing worries about about Trade/Trump/China and the Federal Reserve raising interest rates.

Where appropriate, we made some adjustments to portfolios over the last couple of weeks. Presently, the market is severely oversold & due for a bounce. We will likely be making more adjustments when that happens (probably early next week).

Feel free to call us with any questions or concerns.

 

 

 

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 – November 12, 2018

Weekly_Market_Notes

For the Week of November 12, 2018

The Markets

The three major indexes fell Friday as oil prices dropped 1.0 percent amid a rising global supply and the Federal Reserve appeared on track to raise interest rates next month. Reports from China indicating falling domestic demand and manufacturing activity increased downward pressure. For the week, the Dow rose 3.00 percent to close at 25,989.30. The S&P gained 2.21 percent to finish at 2,781.01, and the NASDAQ climbed 0.68 percent to end the week at 7,406.90.

Returns Through 11/09/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) 3.00 7.17 13.33 16.42 13.24
NASDAQ Composite (PR) 0.68 7.29 9.73 13.28 13.58
S&P 500 (TR) 2.21 5.74 9.73 12.48 11.73
Barclays US Agg Bond (TR) 0.25 -2.41 -2.19 1.32 1.99
MSCI EAFE (TR) 0.23 -7.96 -5.55 4.81 2.67

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.

 

Waiting for the Right Person — Among Americans who married in 2017 for the first time, the median age for men was 29.5 years old and the median age for women was 27.4 years old (source: Census Bureau, BTN Research).

Super-Size It — Thirty-five percent of workers surveyed in the fall of 2017 who are participating in and contributing to a 401(k) or similarly defined contribution plan are deferring more than 10 percent of their pretax wages (source: Transamerica Retirement Survey of Workers, December 2017, BTN Research).

Tough October — The S&P 500 lost 6.8 percent in October 2018 (total return), its worst month in more than seven years (since a September 2011 loss of 7 percent) and its worst October since the index fell 16.8 percent in October 2008 at the beginning of the global real estate crisis (source: BTN Research).

 

WEEKLY FOCUS – Making It Easier for Future Caregivers

A person turning 65 today has a nearly 70 percent chance of needing some type of long term care in their remaining years. Of those who do, 20 percent will need it for more than five years. Given those odds, chances are pretty good you’re going to need a caregiver (or become one) at some point.

Health care often becomes one of the most expensive aspects of retirement years, and long term care can become the costliest element within health care. In 2016, the average cost of a private room in a nursing home was $92,000; a shared room was $82,000. The average cost for a home health aide at $20 per hour working approximately 30 hours per week was $31,000 annually. For assisted living, the 2016 average base rate was almost $46,000 per year. Yet, despite the statistics and long term care costs, few Americans are taking steps with their personal finances to provide for such an event.

While many people turn to family and friends for unpaid care, that doesn’t mean there won’t be costs involved. There will be. Caregiving can turn a family member’s life – and finances – upside down. Many caregivers reduce their work hours, take a less demanding job (with less pay) or give up their jobs entirely. They are also often hit with direct costs in addition to the loss of wages and benefits.

Here are some startling facts on the financial toll caregivers experience:

A Northwestern Mutual survey revealed 68 percent of family caregivers provided financial support. Of those who incurred expenses for caregiving, 67 percent had to reduce their own living expenses; 63 percent withdrew money from savings or cashed or sold assets; 32 percent stopped or reduced their contributions to savings; and 21 percent borrowed money to provide care.

Lack of planning can result in financial tolls on both you and your caregiver.

Preplanning today for long term care tomorrow can reduce the chances you or your caregiver will have to resort to such drastic measures. Call our office today. We can help you develop a financial plan that includes a caregiving situation, removing or reducing financial stress on both you and your potential caregiver.

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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 November 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2314201.1

Mid-Term Election – Potential Impact

Favorable policy conditions have supported US companies during 2018, including tax cuts, fiscal stimulus, and a lighter regulatory stance. However, economic policy may provide less of a tailwind in 2019 with the boost from corporate tax cuts fading, the likely continuing interest rate hikes by the Federal Reserve, and the cumulative drag from higher tariffs and unsettled trade policy.

 

Given the size of the tax-law changes and the stimulus boost this year, it was already unlikely that Congress would legislate anything nearly as meaningful for the markets or the economy in 2019. The divided nature of the midterm election results makes significant legislative action even less likely next year.

 

Overall, it appears that global economic momentum has peaked, and the US economy is facing the onset of late cycle dynamics. While US recession risk remains low and corporate fundamentals solid, the maturing business cycle—in addition to trade and monetary policy risks—could lead to greater market volatility. My biggest concern is the growing US deficit.

 

MARKET_UPDATE_1

Source: Fidelity Investments

 

However, the third year of a president’s term (the year after the midterm elections) has historically been the best year for U.S. market performance in the four‑year presidential cycle. For the 17 midterm election years in 1950 through 2014, in the year following a midterm election, the market gained an average of 19.9%. The S&P 500 did not decline in any of those years. (source: TRowe Price)

While the outlook for the overall market is positive, there will be winners and losers given the new makeup in Washington.

MARKET_UPDATE_2

In summary, economic and financial fundamental factors continue to outweigh politics in our investment outlook.  We will continue to monitor these factors and make adjustments to your portfolio as needed to keep you on track to achieve your goals.

Please call us if you have any questions or concerns.  Feel free to share this report with anyone you feel would benefit.

 

 

Sources:  TRowe Price, Fidelity Investments, Norther Trust

 

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 – November 5, 2018

Weekly_Market_Notes

For the Week of November 5, 2018

The Markets

Following three mid-week stock market rallies, stocks fell Friday. Trade concerns weighed on stocks after a White House official suggested no deal with China was at hand. On a positive note, the Labor Department’s October jobs report was well above expectations. For the week, the Dow gained 2.36 percent to close at 25,270.83. The S&P climbed 2.45 percent to finish at 2,723.06, and the NASDAQ rose 2.65 percent to end the week at 7,356.99.

Returns Through 11/02/18 1 Week YTD 1 Year 3 Year 5 Year
Dow Jones Industrials (TR) 2.36 4.05 9.89 15.12 12.80
NASDAQ Composite (PR) 2.65 6.57 9.56 12.79 13.41
S&P 500 (TR) 2.45 3.45 7.60 11.24 11.37
Barclays US Agg Bond (TR) -0.73 -2.65 -2.46 0.98 1.84
MSCI EAFE (TR) 3.36 -8.17 -6.26 4.20 2.49

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.

 

Half as Many — U.S. homebuilders started construction on 13.773 million single-family homes over the 10 years from 1998-2007, an average of 1.38 million per year. U.S. homebuilders started construction on 6.114 million single-family homes from 2008-2017, an average of 611,400 per year (source: Census Bureau, BTN Research).

Mom and Dad — The national median cost in 2017 for an assisted living facility (private one-bedroom accommodation) was $3,750 per month or $45,000 per year (source: Genworth, BTN Research).

Start Saving Now — A child born in 2018 who begins kindergarten in fall of 2023 would attend college between the years 2036 and 2040. If that child attended an average public in-state four-year college, and if the annual price increases for public colleges experienced over the last 30 years (5.4 percent per year) continue into the future, the aggregate four-year cost of the child’s college education (including tuition, fees, room and board) would be $237,262 or $59,315 per year (source: College Board).

 

WEEKLY FOCUS – The Challenge of Funding Long Term Care

Although nearly six in 10 Americans say saving for long term care (LTC) is a financial priority, three quarters of Americans have not planned for LTC needs.1 There are several possible explanations for this disconnect: costly premiums, steep premium hikes in the past, fewer providers, and insurers entering bankruptcy. Regardless of the challenges, it’s important to plan for potential long term care needs. Here is a broad survey of options to consider:

Self pay. This can come at a hefty price tag, but you don’t have to worry about premiums increasing, and you retain the funds if you don’t need them for LTC. Whether you’re using your 401(k), Roth IRA, annuities or savings, you need to understand the potential costs of home health care, assisted living and nursing homes.

Health savings accounts. Individuals who have an eligible high-deductible health insurance plan can make maximum contributions to an HSA (sometimes called a health IRA) and save them to fund long term care if they ever require it.

Traditional long term care insurance. Insurance companies are learning from past pricing mistakes, reducing the chances of future double-digit premium hikes. And with many policies, you can include an inflation rider to increase your daily benefit over time.

Short term care insurance.  These plans are similar to long-term care insurance policies but cap benefits at one year. They’re less expensive overall and may be available to older seniors or those who aren’t otherwise eligible for long term coverage.

Combined life insurance with long term care benefits. Life insurance policies combined with long term care benefits have grown by 50 percent since 2012. Rates don’t typically go up sharply, but policies also don’t guarantee you’ll earn market rates. As an added benefit, your beneficiaries receive a tax-free death benefit if you don’t use the benefits.

Shared care insurance. A couple takes out identical LTC plans with an option that allows each spouse to have a rider on their spouse’s benefits. While the rider involves an added charge, the total is less than both spouses buying higher levels of protection.

Funding long term care can be complicated. Let us help you explore your options. Call our office today. 1https://www.planadviser.com/three-quarters-americans-not-planned-ltc-needs

 

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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 November 2018. All rights reserved. Securities offered through Securities America, Inc., Member FINRA/SIPC. SAI# 2305497.1

November 2018 Monthly Outlook – Forest Fires

We will admit that corrections are not fun, but like forest fires, while being short-term destructive, they are long-term constructive.  Also, while the recent volatility is scary, it is not unusual.  During the current bull market that began on March 10, 2009, there have been 12 drops of at least 5%, including five corrections of at least 10%.

For this most recent market drop, there were two trade-related catalysts and one related to rising rates:

  1. Recent earnings outlooks, while still quite solid, started to indicate that input costs are increasing from a tight labor market and the impact of tariffs.
  2. There are concerns that increased pressure from US tariffs is exacerbating what would otherwise be a modest economic slowdown in China.
  3. Markets received news that foreign purchases of US Treasuries have slowed considerably in 2018, while at the same time there are more Treasuries because of balance sheet normalization and a growing deficit.

 

Last week (10/25/18) I wrote that I was getting concerned about how this correction was behaving.   It started to appear that traders and trading algorithms switched from ‘buying the dips’ to ‘selling the rally’s’.  Not only was the market not able to hold onto its early gains, we even witnessed acceleration to the downside in the critically important last hour and a half of the trading day.

This week has been entirely different.  While Monday 10/29 was a down day, the market rallied into the close. This spilled over into Tuesday, where the market vacillated all day before surging into the close.  Halloween saw the market build on the previous rally, and most importantly recapture the key 2,710 level on the S&P 500.  As I’m writing this report on the morning of November 1, 2018,  the market is continuing to build on the rally.  It’s too soon to say the correction is over, but as long as the S&P stays above 2,710 area I feel better that the worst is over.

There are numerous positive and negative indicators right now.  Overall, I see no signs of the US economy slowing significantly or any signs of a recession over the next 12 – 18 months.

Positive Indicators:

  • US GDP growth remains strong – 2Q 2018 revised up, 3Q 2018 initial reading above expectations
  • Leading Economic Indicators remain solidly positive @ 6.9% year-over-year  (see chart below)
  • Positive corporate sales and earnings growth

 

Negative Indicators:

  • Wage growth remains stagnant – this could eventually impact consumer spending
  • Housing market could be better – the increase in interest rates is definitely slowing housing
  • Signs that global growth may be slowing down – likely due to tariffs.

 

Leading Economic Indicators (LEI) and Recession

11.1.2018_MONTHLY_OUTLOOK_CHART_A

source: Ladenburg Thalmann Asset Management

 

Additionally, there are two specific investment indicators I follow – the “Smart Money / Dumb Money Confidence Spread” and the “High Yield Bond Spread”.

The Smart Money / Dumb Money Confidence Spread looks at the confidence expressed by institutional (smart money) and individual (dumb money) investors.  Well, now the “smart money” has made it all the way to bullish and the spread between the two measures has reached its widest point in favor of the “smart money” since early 2016. Over the last five years, whenever this spread has exceeded 0.5, as it is now, some sort of significant low has soon followed.

11.1.2018_MONTHLY_OUTLOOK_CHART_B

Source: Sentiment Trader

 

The bond/credit market is usually pretty good at sniffing out future economic and financial worries, with spreads like High Yield vs. US Treasury spreads typically spiking into recessionary and otherwise weak periods (like the end of the Dot-Com Bubble, the Financial Crisis, and the 2014-2016 oil collapse). The fact that spreads like this one are not yet flashing major caution helps support that the current stock market drop is not the beginning of something deeper.

11.1.2018_MONTHLY_OUTLOOK_CHART_C

Given all of the above, I remain concerned about the market on a short-term basis but reasonably confident that the long-term positive trend remains intact. We continue to balance the risk and reward in your portfolio and will make adjustments as necessary to help you stay on track for your goals.

 

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

  • November is National Family Caregivers Month.   Please consider reaching out to a family member or friend who is caring for a loved one. Why not offer to give them a day off.

 

November 1st           Healthcare open enrollment – runs through 12/15/18  – for coverage starting Jan 1, 2018  

                                    Note: Medicare open enrollment started 10/15/18 and ends 12/7/18

November 4th           Set those clocks back

November 6th           Election Day  – be sure to vote

November 11th         Veterans Day – says thanks a Vet

November 16th         Great American Smokeout – encourage a smoker to quit

November 22nd        Thanksgiving – have a wonderful holiday 

 

I hope you find this report useful.  Please share it with anyone who you feel would benefit from the information.

 

Sources:  Sentiment Trader, Ladenburg Thalmann Asset Management, 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.