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Words to Live By #1 – Perseverance

by Jim Streight | Oct 8, 2018 | Learning

A major part of my job – perhaps the most important part – is helping people reach their financial goals in life. Over the course of my career, I’ve discovered that while things like planning, saving, and investing are crucial, it’s equally important to look beyond the numbers. Achievement is about more than just spreadsheets or quarterly statements. It’s about perseverance. Hard work. Willingness to change. Gratitude. Teamwork.
Sometimes, whenever the road to our goals seems long or daunting, it’s good to follow the example of those who came before. So, over the next few months, I would like to share a few quotes that have inspired me in my own personal journey. I call it Words to Live By, and I hope they’ll move you as much as they’ve moved me.

Let’s start with:

Perseverance

What is perseverance?
“Perseverance is failing nineteen times and succeeding the twentieth.” – Julie Andrews “Perseverance is the secret of all triumphs.” – Victor Hugo

I can’t tell you how many times I’ve seen a client work so hard at something, only to come up short. A degree. A promotion. A new job. An award. Retirement. You name it, I’ve seen it. What I can tell you is that the clients who then pick themselves up, dust themselves off, and try again – and who do it every time – are the same ones enjoying their achievements right now. What good does perseverance do?

“Patience and perseverance have a magical effect before which difficulties disappear and obstacles vanish.” – John Quincy Adams

In our lives, we will face almost constant obstacles. Financial hardship, poor health, unfortunate circumstances, even other people will stand in the way of who we want to be, where we want to go, and what we want to do.

“A lot of people are going to try to do the same thing you want to do. You just have to decide if you’re one of the people who quits.” – Shea Serrano

The road to our goals will often seem treacherous. The obstacles will seem insurmountable, and the going unbearably slow. But if the destination is what we truly want, it will be worth the mileage. That’s why my favorite quite about perseverance comes from none other than Abraham Lincoln, who said: “I may walk slowly, but I never walk backward.”

As you progress towards your goals in life, always remember that the ability to keep walking, no matter how slowly, is what will get you there. It matters more than talent. It matters more than wealth. Those things can certainly make the road easier. But perseverance is what makes the distance shorter.

Weekly Market Commentary – September 10, 2018

by Jack Reutemann | Sep 10, 2018 | Weekly Stock Market Commentary

Remember: Volatility is normal.
Major U.S. stock market indices climbed into record territory during August. They gave back some gains last week. Peter Wells of Financial Times explained: “Speculation about a fresh round of tariffs on Chinese imports from the Trump administration weighed on U.S. stocks, handing the S&P 500 its first four-day losing streak in a month. A strong jobs report only hardened expectations that the Federal Reserve views the U.S. economy as healthy enough to withstand a probable interest rate rise later this month.”

Strong economic growth and rising wages have the potential to push inflation – increases in prices of everyday goods – higher than the Fed’s 2 percent target. The Fed battles inflation and promotes financial stability by raising the Fed funds rate. Usually, higher rates make borrowing more expensive and slow economic growth, reported Katherine Reynolds Lewis at Bankrate.com.

Rising rates in the United States have an effect on emerging markets, too. Colin Dwyer of National Public Radio reported higher interest rates in the United States have enticed investors and they have moved money out of riskier emerging markets investments.

Last week The Wall Street Journal reported, “Emerging markets tipped into bear territory…The MSCI Emerging Markets Index’s 0.3 percent decline Thursday, led by selloffs in Russia and the Philippines, pushed that gauge of stocks in poorer countries 20 percent below its recent peak, the common definition of a bear market.”

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

Why are Nordic countries at the top of the world happiness report?
It’s a question Freakonomics Radio explored in August. They asked Jeff Sachs, a professor at Columbia University, who is also a special adviser to the United Nations Secretary General on the Sustainable Development Goals.
The World Happiness Report ranks 156 countries by the happiness of their citizens. The countries that top the list tend to have high scores in all six of the variables considered to measure well-being. These include income, healthy life expectancy, social support, freedom, trust, and generosity.

Currently, the happiest countries in the world are:

Finland
Norway
Denmark
Iceland
Switzerland
Netherlands
Canada
New Zealand
Sweden
Australia

The United States is ranked number 18. That has something to do with our priorities, according to the interview with Sachs. “We have the paradox that income per person rises in the United States, but happiness does not…the United States is falling behind other countries, because we are not pursuing dimensions of happiness that are extremely important: our physical health, the mental health in our community, the social support, the honesty in government.”

Helen Russell, author of The Year of Living Danishly, also participated in the interview. She offered this example to illustrate a key difference between the United States and Denmark: “…there was a story, in New York a few years ago, of a Danish woman who was there, who left her child sleeping outside in a pram, which is what you do in Denmark, and was arrested for child neglect. And lots of people in Denmark didn’t understand why it was such a fuss, because in Denmark people trust most people. And this plays into everything. You are not anxious if you trust the people around you, you’re not scared they’re going to rob you to put food on their table.”

What makes you happy?

Weekly Focus – Think About It
“If I were to ask all of you to try and come up with a brand of coffee – a type of coffee, a brew – that made all of you happy, and then I asked you to rate that coffee, the average score in this room for coffee would be about 60 on a scale of 0 to 100. If, however, you allowed me to break you into coffee clusters, maybe three or four coffee clusters, and I could make coffee just for each of those individual clusters, your scores would go from 60 to 75 or 78. The difference between coffee at 60 and coffee at 78 is a difference between coffee that makes you wince and coffee that makes you deliriously happy. That is the final, and I think most beautiful lesson…that in embracing the diversity of human beings, we will find a surer way to true happiness.”
–Malcolm Gladwell, Journalist and author

Best regards,
John F. Reutemann, Jr., CLU, CFP®

P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Sources:

https://www.marketwatch.com/story/the-divergence-between-us-stock-performanceup-19-trillion-in-2018and-foreign-markets-may-make-investors-uneasy-2018-08-25

https://www.ft.com/content/7628f254-b2d7-11e8-8d14-6f049d06439c (

https://www.federalreserve.gov/faqs/money_12848.htm

https://www.bankrate.com/finance/mortgages/fed-affects-banks-rates-prices-and-jobs-1.aspx

https://www.npr.org/2018/09/05/644973465/turbulence-roils-emerging-markets-in-the-shadow-of-a-strengthened-u-s-dollar

https://www.wsj.com/articles/investors-weed-out-weakest-links-in-emerging-market-tumult-1536233901

http://freakonomics.com/podcast/happiness/

http://worldhappiness.report/ed/2018/

https://s3.amazonaws.com/happiness-report/2018/WHR_web.pdf (Pages 20-21)

https://www.ted.com/talks/malcolm_gladwell_on_spaghetti_sauce/transcript?referrer=playlist-what_makes_you_happy

Weekly Market Commentary – August 13, 2018

by Jack Reutemann | Aug 13, 2018 | Weekly Stock Market Commentary

Let’s talk Turkey!
So, how did a country that represents just about 1.4 percent of the world’s economy spark a global selloff? Turkey was once a rising star. The country’s Prime Minister Recep Tayyip Erdogan took office in 2003 and his “conservative, pro-business policies helped pull the country back from an economic crisis,” reported Financial Times. As Turkey’s economy strengthened, investors saw opportunity. Investments from outside the country averaged about $13 billion a year, according to World Bank figures cited by Financial Times, although investment slowed after terror attacks in 2015.

Bloomberg reported Prime Minister Erdogan has become more authoritarian since being re-elected in 2018, giving himself power to name the head of Turkey’s central bank. Financial Times reported the Prime Minister’s “…unorthodox views on interest rates…has proved disruptive for monetary policy, leaving…Turkey’s central bank, struggling to contain inflation that is running at close to 16 percent.”

Lack of central bank autonomy concerned investors. The Turkish lira began to weaken against the U.S. dollar, making it costly for businesses to repay dollar-denominated debt. Politics have factored into the situation, as well. During 2018, negotiations were underway to secure the release of an American pastor who was arrested on “farcical terrorism charges,” reported The Economist. However, talks collapsed early in August. Asset freezes and sanctions followed, along with promises of additional tariffs on Turkish goods imported by the United States. The subsequent steep drop in the value of Turkish lira sparked concerns that rippled through global markets. Financial Times reported: “Turkey’s deepening crisis punished emerging market currencies and sparked a global pullback from riskier assets on Friday…The S&P 500 fell 0.7 percent in New York on Friday. Treasury yields also moved lower, with the 10-year dipping below 2.9 percent for the first time this month, as investors sought safe assets…Investors’ shift from risky assets knocked equities across Europe, with Germany’s Dax, France’s CAC 40 and Spain’s Ibex all about 2 percent weaker.”

For quite some time, investors have appeared immune to geopolitical risks. Perhaps that is beginning to change.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

3 things to consider Before claiming social security benefits: timing, spousal benefits, and work status. Most Americans understand they can choose when to begin receiving Social Security benefits. The choices are fairly straightforward:

Early (age 62 to full retirement age). People who decide to collect benefits early typically receive a smaller monthly benefit than they would if they waited until full retirement age. The reduction in monthly income may be as large as 30 percent. However, they receive benefits for a longer period of time.

Normal (full retirement age). An American’s full retirement age is determined by his or her date of birth. For someone born in 1960 or later, full retirement age is 67 years. The amount of income a person receives at normal retirement age is determined by the amount earned during his or her working years.

Delayed (after full retirement age to age 70). By delaying the start of Social Security benefits, a person can increase his or her monthly benefit by accruing delayed retirement credits. For Americans born in 1943 and after, credit accrues at a rate of 8 percent each year.

While it’s important to understand timing options for Social Security benefits, choosing when to take benefits may not be the most important decision you make, especially if you’re married.

There are several different claiming strategies that may help married couples optimize their benefits and the benefits available for children who are minors or have special needs. These options should be carefully considered before filing for benefits.

Your filing decision may also be affected by your work status and income. If you file early while still working, and your earnings exceed established limits, then a portion of your benefit may be withheld. In addition, your income will help determine whether your Social Security benefit is taxable.

If you would like to discuss your options for claiming Social Security benefits, give us a call.

Weekly Focus – Think About It
“Take time for all things: great haste makes great waste.”
–Benjamin Franklin, Founding Father

Best regards,
John F. Reutemann, Jr., CLU, CFP®

P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

Investment advice offered through Research Financial Strategies, a registered investment advisor.

* This newsletter and commentary expressed should not be construed as investment advice.

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Stock investing involves risk including loss of principal.

* Consult your financial professional before making any investment decision.

* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Sources:

https://tradingeconomics.com/turkey/gdp

https://www.ft.com/content/686f156c-9a36-11e8-9702-5946bae86e6d

https://www.bloomberg.com/news/articles/2018-07-10/erdogan-gives-himself-power-to-appoint-central-bank-governor

https://www.economist.com/europe/2018/08/11/turkeys-diplomatic-crisis-is-hastening-an-economic-one

https://www.ft.com/content/7e1ddc8e-9c77-11e8-ab77-f854c65a4465

https://www.marketwatch.com/story/commodities-are-beating-the-stock-market-as-geopolitical-risk-returns-2018-04-11

https://www.ssa.gov/oact/quickcalc/early_late.html

https://www.ssa.gov/oact/ProgData/nra.html

https://www.ssa.gov/oact/COLA/Benefits.html

https://www.ssa.gov/pubs/EN-05-10147.pdf

https://www.ssa.gov/planners/taxes.html

https://www.brainyquote.com/quotes/benjamin_franklin_122639?src=t_haste

Weekly Market Commentary – August 6, 2018

by Jack Reutemann | Aug 6, 2018 | Weekly Stock Market Commentary

Capital gains tax reform comes with a big price tag: $100 billion over 10 years.
A capital gain is any increase in the value of an asset, such as an investment, a home, land, etc., between its purchase and its sale. The amount of a gain is determined by subtracting the purchase price from the sale price. Last week, the White House proposed capital gains be adjusted or ‘indexed’ for inflation before they are taxed. Princeton Professor Alan Blinder explained the idea in The Wall Street Journal: “Why index gains? Suppose you own a stock for many years, during which time overall prices have doubled because of inflation. Over the holding period, the value of your stock also has doubled. When you sell, the proceeds have precisely the same purchasing power as the original purchase. There’s no gain, no loss. But under current tax law, you owe taxes on the phantom ‘gain.’ Worse, if your stock went up by less than the cumulative inflation, you’ll still get taxed despite your loss. This is unfair and dysfunctional.”

While the suggestion is appealing to many investors, it’s not without controversy. For example, the White House suggested the Treasury Department change the tax code without Congressional approval by modifying enforcement regulations. However, the legislative branch – Congress – is constitutionally responsible for tax law.

In addition, adjusting capital gains for inflation without doing the same for interest expense and depreciation may allow some taxpayers to be able to generate significant losses on paper. Current tax law includes provisions that limit this kind of tax strategy, but indexing capital gains would reopen the door, reported the Tax Policy Center.

Another consideration is the impact of the change on the deficit and the national debt. The Congressional Budget Office estimates suggest 2017 tax reform will increase “…the total projected deficit over the 2018-2028 period by about $1.9 trillion.” Adjusting capital gains for inflation could increase the shortfall by about $100 billion over a decade, reported Naomi Jagoda for The Hill.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

The millennial way. From social media to housing options to banking, every generation has had its own preferences. Today, millennials (individuals between the ages of 18 and 34) are having a profound influence on lifestyle and culture. Here are three trends to watch:

Millennials are moving to smaller cities. “Mid- or second-tier cities, loosely defined as those under a million people that aren’t regional powerhouses like Austin or Seattle, are increasingly seen as not just places to find a lower cost of living, easier commute, and closer connections with family, but also a more approachable, neighborhood-oriented version of the urban lifestyle that sent many to the larger cities in the first place,” reported Patrick Sisson for Curbed.com.
Millennials like point-of-sale loans. Point-of-sale loans are catching on. The Economist reported, “Consumers who might previously have financed big-ticket purchases such as furniture, electronics, or home-improvement projects with a credit card are now opting to borrow at the checkout, often with an initial 0 percent interest rate. These short-term credit products were once the domain of big banks…[and] store-branded credit cards. Now tech startups are entering the market with innovative techniques for underwriting and approving potential borrowers, often in seconds.”
Millennials tend to prefer healthier lifestyles. “For millennials, wellness is a daily, active pursuit. They’re exercising more, eating smarter, and smoking less than previous generations. They’re using apps to track training data and online information to find the healthiest foods. And, this is one space where they’re willing to spend money on compelling brands,” reported Goldman Sachs.

Weekly Focus – Think About It
“The changes in our life must come from the impossibility to live otherwise than according to the demands of our conscience, not from our mental resolution to try a new form of life.”
–Leo Tolstoy, Russian writer

Best regards,
John F. Reutemann, Jr., CLU, CFP®

P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.
Investment advice offered through Research Financial Strategies, a registered investment advisor.

* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

Sources:
http://thehill.com/policy/finance/399953-trump-asked-treasury-to-look-into-capital-gains-tax-cut-sanders-says
https://www.merriam-webster.com/dictionary/capital%20gain
https://www.wsj.com/articles/index-capital-gains-but-not-without-congresss-consent-1533163465
https://www.taxpolicycenter.org/taxvox/should-treasury-index-capital-gains
https://www.house.gov/the-house-explained/branches-of-government
https://www.cbo.gov/publication/53787
https://www.statista.com/topics/2705/millennials-in-the-us/
https://thoughtcatalog.com/jae-schaefer/2017/05/14-reasons-why-millennials-are-amazing-and-will-change-the-world/
https://www.curbed.com/2018/5/1/17306978/career-millennial-home-buying-second-city
https://www.economist.com/finance-and-economics/2018/08/04/tech-startups-are-reviving-point-of-sale-lending
https://www.goldmansachs.com/our-thinking/pages/millennials/
https://www.brainyquote.com/quotes/leo_tolstoy_153949

Weekly Market Commentary – July 9, 2018

by Jack Reutemann | Jul 9, 2018 | Weekly Stock Market Commentary

What a rollercoaster of a quarter!
When it comes to the American Association of Individual Investors (AAII) Sentiment Survey, respondents tend to be more bullish than bearish about U.S. stock markets. The survey’s historical averages are:

38.5 percent bullish
31.0 percent neutral
30.5 percent bearish

As the second quarter of 2018 began, investors were feeling less optimistic than usual. (About 36.6 percent were bearish and 31.9 percent bullish.) Their outlook was informed by a variety of factors, according to an early April article in The New York Times, which said: “First there was the risk that the economy might be growing too fast, which could prompt central banks to hike interest rates sooner than expected. Then there was the risk of a trade war ignited by the White House imposing tariffs on certain products, an action that quickly prompted countries like China to erect trade barriers of their own. Next came the threat of a government crackdown on technology companies, after revelations of their misuse of customer data.”
As the quarter progressed, investor optimism increased on signs of economic strength. In early June, CNBC reported the economy appeared to be “operating close to full employment, with an unemployment rate at 3.8 percent, inflation still hovering at or below 2 percent, and business and consumer confidence strong.”

Robust corporate earnings helped spur optimism, too. FactSet Insight wrote, “The S&P 500 reported earnings growth of 25 percent for the first quarter – the highest growth since Q3 2010.” In mid-June, the AAII survey showed 44.8 percent of respondents were feeling bullish, 21.7 percent were bearish, and 33.5 percent were neutral.

As talk of tariffs and trade wars resumed, investor optimism plummeted. By the end of June, just 27.9 percent of respondents were bullish and more than 39 percent reported they were feeling bearish. AAII explained: “Many – but not all – individual investors anticipate continued volatility and/or think that the current political backdrop could have a further impact on the stock market. Trade policy is influencing some individual investors’ sentiment as well. While many approve of the Federal Reserve’s plan to continue gradually raising interest rates, some AAII members are concerned about the impact that rising rates will have. Also influencing sentiment are valuations, tax cuts, earnings growth, and economic growth.”

Despite a downturn in bullishness, major U.S. stock indices moved higher last week.

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S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

There’s a carbon dioxide (CO₂) shortage. really, it’s true. Many people agree the world has too much CO₂. It’s the reason representatives from countries around the world signed the Paris Climate Agreement. They committed to “adopt green energy sources, cut down on climate change emissions, and limit the rise of global temperatures,” reported National Public Radio. The effort has been less successful than many had hoped, according to the International Energy Association (IEA). After several years without increases, energy-related emission rose by 1.4 percent in 2017. That’s the rough equivalent of putting 170 million more cars on the road, reported Scientific American. Emissions rose primarily in Asia, although the European Union (EU) saw increases, too. The biggest decline was in the United States. There’s a certain irony there, since President Trump announced he would withdraw from the agreement in June 2017, reported The Washington Post. Despite realizing a 1.5 percent increase in emissions, the EU is experiencing a shortage of food-grade CO₂. The Economist reported: “Food-grade CO₂ is a vital ingredient: it puts the fizz in carbonated drinks and beer, knocks out animals before slaughter and, as one of the gases inside packaging, delays meat and salad from going off. A shortage of the stuff has therefore created havoc in food makers’ supply chains.” The EU’s food-grade CO₂ is a harvested by-product of processes for making ammonia and other chemicals, reported The Economist. Three of Britain’s five ammonia plants have been closed because farmers are using less fertilizer, and CO₂ does not deliver enough revenue to keep the plants running. Let’s hope the shortage of CO₂ doesn’t affect the supply of beverages available to World Cup fans.

Weekly Focus – Think About It
“My garden is an honest place. Every tree and every vine are incapable of concealment, and tell after two or three months exactly what sort of treatment they have had. The sower may mistake and sow his peas crookedly; the peas make no mistake, but come up and show his line.”
–Ralph Waldo Emerson