Market Commentary – January 28, 2019

by | Jan 28, 2019 | Weekly Stock Market Commentary

Like competitors who’ve completed a difficult section in an endurance race, U.S. stock investors took a breather last week.

The Standard & Poor’s 500 Index, which has gotten off to its best start since 1987, ended the week with a slight loss, while the Dow Jones Industrial Average and Nasdaq Composite finished slightly higher, reported Ben Levisohn of Barron’s.

News the U.S. government shutdown would end, albeit temporarily, appeared to be of little interest to investors. Barron’s suggested the markets’ muted response to the government reopening was in balance with its response to the shutdown – there wasn’t much of one. In fact, the S&P 500 has gained 10 percent since the federal government closed.

Despite apparent disinterest, the shutdown could negatively affect sentiment, according to Sam Fleming and Brooke Fox of Financial Times. They reported:

“The record-breaking US government shutdown is triggering ripple effects across the US economy and risks denting confidence among companies that have already been fretting about trade disputes and stock market turbulence. Shutdowns have historically had only fleeting economic effects, but Jay Powell, the Federal Reserve chairman, warned last week that a dispute that outlasts past impasses could begin to change the picture for the worse.”

Last week, stock investors weren’t all that impressed by earnings, either. Earnings indicate how profitable companies were in the previous quarter. At the end of last week, 22 percent of companies in the S&P 500 had reported earnings and, overall, they were 3 percent above estimates, according to John Butters at FactSet.

However, indications the Federal Reserve may decide to keep more Treasuries on its balance sheet than originally anticipated gave U.S. stocks a boost late in the week, reported Nick Timiraos of The Wall Street Journal. The Fed began shrinking its balance sheet in 2017 by letting Treasury and mortgage bonds mature. We’ll know more after this week’s Fed meeting.

What is going on across the pond? Last November, BBC commentator Chris Mason reflected the frustration of a nation with his report on the rapidly approaching deadline for the British exit from the European Union (EU). He said:  “So, where are we in all of this Brexit process…people like me are paid, aren’t we, to have insights and foresights and hindsight about these things, to be able to project where we’re going to go. To be quite honest, looking at things right now, I haven’t got the foggiest idea what is going to happen in the coming weeks. Is the prime minister going to get a deal with the EU? Dunno. Is she going to be able to get it through the Commons? Don’t know about that, either.”

The report went viral. Since then, we’ve gotten some answers. The Prime Minister did indeed negotiate a deal with the EU and, on January 15, the British Parliament soundly rejected it. Heather Stewart of The Guardian reported it was, “…the heaviest parliamentary defeat of any British prime minister in the democratic era.”

The lack of an agreement in combination with a looming Brexit deadline – it’s just 9 weeks out – has created tremendous uncertainty about the future of British trade with the EU. One response has been stockpiling goods. Last week, Sarah Butler of The Guardian reported three-fourths of warehouse space in the United Kingdom is at capacity.

One intrepid entrepreneur has been marketing Brexit survival kits that provide 30 days of food rations for £295 ($380). Reuters reported the kit includes, “…60 portions of freeze-dried British favorites: Chicken Tikka, Chili Con Carne, Macaroni Cheese and Chicken Fajitas, 48 portions of dried mince and chicken, firelighter liquid, and an emergency water filter.”

As they say, necessity is the mother of invention.

Weekly Focus – Think About It
“Courage is like – it’s a habitus, a habit, a virtue: you get it by courageous acts. It’s like you learn to swim by swimming. You learn courage by couraging.”
–Marie M. Daly, Chemist

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.

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.

Most Popular Financial Stories

No Results Found

The page you requested could not be found. Try refining your search, or use the navigation above to locate the post.

* 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.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* 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.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* 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.barrons.com/articles/the-s-p-500-goes-nowhere-after-its-big-runup-51548462969?mod=hp_DAY_8
https://www.ft.com/content/b4970904-1907-11e9-9e64-d150b3105d21
https://insight.factset.com/earnings-season-update-january-25-2019
https://www.wsj.com/articles/fed-officials-weigh-earlier-than-expected-end-to-bond-portfolio-runoff-11548412201
https://www.washingtonpost.com/world/2018/11/14/bbc-reporter-replaced-his-brexit-analysis-with-exasperated-noises-now-hes-hero/?utm_term=.d696c195120b (Watch brief video)
https://www.theguardian.com/politics/2019/jan/15/theresa-may-loses-brexit-deal-vote-by-majority-of-230
https://www.theguardian.com/politics/2019/jan/21/uk-warehouse-space-nears-capacity-firms-stockpile-for-brexit
https://www.reuters.com/article/us-britain-eu-boxes/brexit-survival-kit-helps-britons-face-the-worst-with-freeze-dried-fajita-idUSKCN1PG1G4
https://femaleentrepreneurs.institute/15-amazing-female-scientists/

Market Commentary – January 22, 2019

by | Jan 22, 2019 | Weekly Stock Market Commentary

We’re off to a good start.
Investors who remained steady during December’s wild ride are probably pleased with their decision as stocks have gotten off to a strong start in 2019. Unfortunately, those who reduced their exposure to the asset class may be feeling the sting of missed opportunity.

Last week, the Dow Jones Industrial Average gained about 3 percent. The Index is up 5.9 percent year-to-date, which is its best start in more than a decade, according to Ben Levisohn of Barron’s. The Standard & Poor’s 500 Index (S&P 500) and NASDAQ Composite also moved higher last week.

Barron’s reported investors were encouraged by positive news about trade talks between the United States and China, as well as stronger-than-expected fourth quarter earnings. Eleven percent of S&P 500 companies have reported so far and, altogether, their earnings have beaten expectations by 3.2 percent, according to FactSet. (Quarterly earnings indicate how profitable a company was during the period being reported.)

The FTSE All-World Index also moved higher last week. It is up almost 8.5 percent for the year.

Richard Henderson, Emma Dunkley, and Robin Wigglesworth of Financial Times offered the opinion investors could have been overly pessimistic during December, and their change in attitude might be attributed to a more dovish tone at the U.S. Federal Reserve, as well as evidence the U.S. economy remains strong.

While investor confidence appears to be strengthening, consumer confidence wavered. The University of Michigan Survey of Consumers showed consumer confidence was lower in January 2019 than it was in January 2018. The Survey’s Chief Economist Richard Curtin wrote, “The loss was due to a host of issues including the partial government shutdown, the impact of tariffs, instabilities in financial markets, the global slowdown, and the lack of clarity about monetary policies.”

How much would those burgers cost in britain? Purchasing power parity, or PPP, is a straightforward idea with a tongue twister of a name. When two countries have PPP, people pay the same amount for the same goods, after adjusting for the exchange rate. For example, if one British pound is worth 50 U.S. cents, then an item that costs one British pound in the United Kingdom should cost 50 cents in the United States.

The Economist developed ‘The Big Mac Index’ to measure burger parity. It’s an engaging way to look at local prices and exchange rates. The index measures the price of the seven-ingredient, double-decker burger in different countries and offers a rough estimate of whether a country’s currency is overvalued or undervalued relative to the U.S. dollar.

In January 2019, the index served up the news that almost every currency, in developed and emerging economies, is undervalued relative to the U.S. dollar. The only countries with currencies that appear to be overvalued are Switzerland, Norway, and Sweden.

So, how undervalued are other countries’ currencies?

  • The Canadian dollar is 8.9 percent undervalued
  • The European Union’s euro is 16.8 percent undervalued
  • The British pound is 27 percent undervalued
  • The Chinese yuan is 45.3 percent undervalued
  • The Russian ruble is 70.4 percent undervalued

The Economist explained, “It is not unusual for emerging-market currencies to look weak in our index. But, today the dollar towers over rich and poor alike. The pound, for example, looked reasonably priced five years ago. Today, Americans visiting Britain will find that [burgers] are 27 percent cheaper than at home.”

The U.S. dollar is stronger than usual because higher interest rates and tax cuts made American assets more attractive to investors than other assets in 2018, reported The Economist.

A strong dollar is a boon to travelers, who get more for their money in other countries. It also can make imports from other countries more attractive price-wise. There are disadvantages to a strong dollar, too. For example, it makes the United States a more expensive destination for travelers from other countries, which could discourage tourism. In addition, a strong dollar makes exports more expensive and that could make U.S. goods less competitive in overseas markets.

Weekly Focus – Think About It

“Wealth begins in a tight roof that keeps the rain and wind out; in a good pump that yields you plenty of sweet water; in two suits of clothes, so to change your dress when you are wet; in dry sticks to burn; in a good double-wick lamp; and three meals; in a horse, or a locomotive, to cross the land; in a boat to cross the sea; in tools to work with; in books to read; and so, in giving, on all sides, by tools and auxiliaries, the greatest possible extension to our powers, as if it added feet, and hands, and eyes, and blood, length to the day, and knowledge, and good-will.”
–Ralph Waldo Emerson, American 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.

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.

Most Popular Financial Stories

No Results Found

The page you requested could not be found. Try refining your search, or use the navigation above to locate the post.

* 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.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* 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.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* 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.barrons.com/articles/dow-gains-3-for-its-best-start-since-1997-51547857364?mod=hp_DAY_10
https://insight.factset.com/earnings-season-update-january-18-2019
https://www.investopedia.com/terms/e/earnings.asp
https://www.ft.com/content/e5e72cbc-157b-11e9-a581-4ff78404524e
http://www.sca.isr.umich.edu
https://www.economist.com/news/2019/01/10/the-big-mac-index
https://www.economist.com/graphic-detail/2019/01/12/the-big-mac-index-shows-currencies-are-very-cheap-against-the-dollar
https://www.investopedia.com/articles/forex/051415/pros-cons-strong-dollar.asp
https://emersoncentral.com/texts/the-conduct-of-life/wealth/

Okay, let’s all take a deep breath

by | Jan 9, 2019 | Noteworthy

It was a rough fourth quarter of 2018 for the markets. It seems like week after week, the major indexes – like the Dow and S&P 500 – get hammered by volatility. These days, just about every news website you can find is packed with breathless headlines about plummeting stocks, photos of nervous-looking traders, government shutdowns and editorials about a possible bear market sometime in 2019.

Frankly, it’s true. One major index was brushing up against a bear already, and it’s possible volatility will continue for the foreseeable future. But does that mean we should panic?

Nope.

Okay, take another deep breath. Market volatility is unpleasant, and here at Research Financial Strategies, we certainly take it seriously. But panic? Never. Let’s break this down objectively by discussing:

Five Things to Know about Market Volatility

1. The definition of a bear market.
A bear market is defined as a 20%-or-greater decline from a recent peak. As of this writing, the Nasdaq, an index largely comprised of technology stocks, is flirting with bear market territory.1 The other two main indexes, the Dow and the S&P, are still some distance away. Instead, the Dow and the S&P are hovering around what’s known as a market correction, which is a 10%-or-greater drop from a recent peak. Whether that correction will eventually turn into a bear is impossible to say, but regardless, here’s what investors need to remember:

2. Corrections – and even bear markets – are a normal part of investing.
On average, a market correction occurs about every 1-2 years. In fact, both the Dow and the S&P 500 endured brief corrections earlier this year before soaring to new heights. Bear markets are less common, but far from rare. Between 1900 and 2015, the markets encountered 32 bears – roughly one every 3.5 years.2
Pleasant? No.  Normal? Absolutely.
In a sense, a market correction is like the common cold. Annoying – but you tend to get one every year, and it hardly stops you from living your life. A bear market is more like influenza. It makes the average investor feel miserable, and you certainly should treat it seriously. But for most people, it’s nothing to panic about. You get some rest, follow your doctor’s orders, and wait to get better.
Right now, the markets have a cold. Do colds sometimes turn into the flu?  Sure, and it’s possible the current correction will develop into a bear. But it’s not unusual and it’s nothing to freak out about.

3. Panic only makes things worse.
Imagine you got sick and then didn’t get better as quickly as you wanted. Would you start panicking?  No. You would probably go see a doctor, but you wouldn’t resort to extreme measures like using leeches or asking for an operation.

Unfortunately, investors aren’t always so rational.  The fact is, many investors do panic during corrections and bear markets, especially if they last for a long time.  They sell all their investments without forethought, or move everything over into bonds, or any of a hundred other things.  It’s reckless – and recklessness has destroyed more wealth than any bear market.
History shows that it takes around four months for the markets to recover from a correction, and twentytwo months from a bear.3  Some are shorter, some are longer, but regardless of the duration, our own emotions are the bigger problem.
When we get sick, we understand that it might take a while before we feel entirely normal.  It’s a healthy acceptance of reality – and it’s a key part of getting better.
As investors, we need to bring the same acceptance to the markets.

4. The best way to combat panic is to increase our own knowledge.
When you’re sick, you go to the doctor and ask questions.  Or you research your symptoms online, hoping to find answers there.  Maybe you fire up an old episode of The Magic School Bus. Either way, you seek to understand exactly what’s going on in your body – and what your body’s doing to fight the infection.  And if you’ve ever known anyone with a chronic illness, you’ve probably heard them say that simply understanding what was going on made them feel much, much better.
Let’s do that right now by looking at what’s causing this current market malaise. In this case, there are four main factors:

Interest rates. The Federal Reserve raised the country’s key interest rate on Wednesday, December 19.4  This was expected. Part of the Fed’s mandate is to raise interest rates when the economy is strong – as it currently is – because a strong economy mixed with low rates often leads to inflation.  However, the markets don’t always appreciate higher interest rates, because it makes borrowing more expensive.  This, in turn, reduces spending and can slow economic growth. Which leads me to the next factor.

The economy may be slowing down anyway. Make no mistake, the economy is currently strong – but there are signs that it might be weakening a little.  Corporate earnings are slowing, many corporations are deeply in debt, oil prices have fallen dramatically, and the housing market is coughing, too.  Some analysts even believe the U.S. is due for a recession in 2020 or 2021.  This has many calling for the Fed to cut back on raising interest rates, and the Fed itself predicted it would only do it twice in 2019. 4
Another possible reason for a slowing economy is the third factor, which is:

The trade war. Trade tensions with China continue, and while new tariffs are on hold for now, there’s no immediate end in sight. It’s not hard to understand why the markets worry about this so much. Tariffs – essentially a tax on imported goods and services – often hurt businesses. That’s because higher tariffs often lead to higher prices, which in turn lead to higher expenses. For example, if companies must pay more for the raw materials they need, that can significantly eat into their own profits. This, in turn, can lead to shipping delays, supply chain problems, higher prices for consumers, a resulting loss of business, you name it. All these issues, of course, are then reflected in the stock prices of the various companies affected.

Investor psychology. We already talked about the dangers of panicking. With any market correction, fear is always a factor. In this case, pundits have been proclaiming for months that the bull market may be ending, and that a bear isn’t so far away. This often becomes a self-fulfilling prophecy, because bearphobic investors will soon see bear tracks everywhere they look. This fear leads to panic, panic leads to sell-offs, and sell-offs lead to corrections.

So, what can we do with this information? We can use it to understand there are reasons for the current market volatility, just as there are reasons we get sick. Neither, however, spells certain disaster or the end of the world.

5. Accepting market volatility as normal doesn’t mean we don’t have a plan for dealing with it.
The final thing you should know about bear markets is also the most important.

Here at Research Financial Strategies, we believe strongly in the use of technical analysis. That means we decide when to buy and when to sell based on supply and demand, not storylines in the media or emotion. We have long been prepared to “go on defense” when necessary, and we understand that protecting your money is just as important as growing it.

Using technical analysis, we look at market trends. Is the market trending up or down? What about different sectors of the market? What about your individual investments? As you know, we have rules in place specific to you that determine at what point in a trend we decide to buy, and at what point we decide to sell. For example, if an investment trends down below a certain price, we follow the rules and sell. Period. If an investment trends up above a certain price, we buy. This allows us to make investment decisions based on what makes sense for you rather than just following the herd. And the best part about this kind of approach? It works whether we’re in a bull market or a bear! Other investment philosophies, like buy-and-hold, can’t say the same.

It’s cold-and-flu season here in the United States…and apparently in the markets as well. That’s why you should focus on living and let us do the worrying. We’ll continue to monitor the markets and the economy. We’ll continue researching your investments to make sure they continue to make long-term sense for your goals. We’ll continue focusing on keeping your finances healthy. As always, contact us if you have questions or concerns. Our team stands ready, our door is open, and so is our inbox! In the meantime, have a great 2019!

Market – Commentary January 7, 2019

by | Jan 7, 2019 | Weekly Stock Market Commentary

Investors will think of the last quarter of 2018 for years to come, but they won’t remember it fondly.
The Economist described it like this, “After a rotten October and limp November, the S&P 500 tumbled in value by 15 percent between November 30th and December 24th. Despite an astonishing bounce of 5 percent the day after Christmas, the index finished the year 6 percent below where it started…”

Last quarter’s volatility and the slide in share prices owed much to uncertainty about economic growth. Investors were concerned about a variety of issues, including:

  • The Federal Reserve making a mistake. Many in financial markets worried the Fed would raise rates too high, too quickly and stifle economic growth. Last week, the Fed put those fears to rest when its Chair, Jerome Powell, suggested the Fed was willing to stop increasing rates during 2019 if there were signs of economic weakness. Investors rejoiced and the three major U.S. indices experienced significant gains on Friday.
  • Weaker corporate profits. Companies were remarkably profitable during the first three quarters of 2018, in part because of the boost from tax reform. However, there were worries fourth quarter earnings would be weaker as the effects of the stimulus faded. Last week, John Butters of FactSet reported, after three quarters of 25 percent or higher earnings growth, the estimated earnings growth rate for fourth quarter 2018 is 11.4 percent.
  • A slowdown in global economic growth. Trade wars and tariffs clouded the outlook for global growth throughout the year. The Economist reported there were signs of economic slowdown in China, and one American technology firm attributed a sharp downturn in its profitability to weaker economic growth in China. There were also signs of economic weakness in Europe.
  • A slowdown in domestic economic growth. Investors have been worried that trade issues, the government shutdown, and other matters could negatively affect economic growth at home. If the government shutdown is resolved quickly, these worries may prove overblown. Last week, Taylor Telford of the Washington Post reported, “…According to interviews with several analysts: The economy is fundamentally strong, and the stock market has overreacted to concerns about a modest slowing.”

As anxiety rose during the fourth quarter of 2018, some investors rushed to the perceived safety of bonds. High demand pushed the yield on 10-year Treasury bonds lower. It dropped from 2.99 percent to 2.69 percent during December, according to Yahoo! Finance.

While increasing bond exposure may have been a prudent portfolio adjustment for investors who were taking more risk than they could bear, those who moved out of stocks on fear missed out. The Standard & Poor’s 500 Index and the Dow Jones Industrial Average posted their biggest one-day point gains on record on December 26, reported Emily McCormick for Yahoo! Finance.

At this point, some investors feel overwhelmed and worried about their ability to reach personal financial goals. If you’re one of them, please give us a call. Sometimes, reviewing life and financial goals, and the reasoning behind portfolio choices, may be reassuring. We look forward to hearing from you.

What is midwest nice?
The Economist recently explored whether there was a basis for the idea that Americans who live in mid-western states are more congenial than people from other states. The publication explained ‘Midwest nice’ this way,  “It is apologizing involuntarily when scooting past someone, both to warn of your presence and to express regret for any inconvenience your mere existence may have caused. It is greeting people as they step into a lift and wishing them well as they leave. It is a strong preference for avoiding confrontation.”
The Economist found it all depends on how you measure ‘nice.’

If the standard is volunteerism, the Corporation for National and Community Service reported three of the five states where people volunteer the most are in the Midwest:
1) Utah (West)
2) Minnesota (Midwest)
3) Wisconsin (Midwest)
4) South Dakota (Midwest)
5) Idaho (West)

If the standard is personality, the Midwest shares the blue ribbon for friendliness. A group of researchers from the United States, Britain, and Finland mapped the psychological topography of the United States and found people in Middle America and the South to be friendly and conventional, while those on the West Coast, in Rocky Mountains, and along the Sunbelt were relaxed and creative. Americans in the Mid-Atlantic and Northeast regions were temperamental and uninhibited.

When it comes to charitable giving, Utah and the Southern states come out on top. Southerners give the highest percentage of earnings to charities. The money primarily goes to churches.

The preponderance of the data considered by The Economist suggest that ‘Midwest nice’ has a basis in reality.

Weekly Focus – Think About It
“The wind comes across the plains not howling but singing. It’s the difference between this wind and its big-city cousins: the full-throated wind of the plains has leeway to seek out the hidden registers of its voice. Where immigrant farmers planted windbreaks a hundred and fifty years ago, it keens in protest; where the young corn shoots up, it whispers as it passes, crossing field after field in its own time, following eastward trends but in no hurry to find open water. You can’t usually see it in paintings, but it’s an important part of the scenery.”
– John Darnielle, Musician 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.

 

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.

 

* 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 percent 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.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* 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.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* 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.economist.com/finance-and-economics/2019/01/05/what-the-market-turmoil-means-for-2019
https://www.bloomberg.com/news/articles/2019-01-04/powell-says-fed-ready-to-adjust-policy-if-needed-can-be-patient
https://www.cnn.com/2019/01/04/investing/dow-stock-market-today/index.html
https://www.nytimes.com/2018/12/27/us/politics/trump-tax-cuts-jobs-act.html
https://insight.factset.com/sp-500-2018-earnings-preview-highest-earnings-growth-in-eight-years
https://insight.factset.com/largest-cuts-to-quarterly-sp-500-eps-estimates-since-q3-2017 (download report)
https://www.cnbc.com/2019/01/04/stock-market-comeback-is-now-in-the-hands-of-china-us-trade-talks.html
https://www.washingtonpost.com/business/2019/01/04/stock-market-has-been-going-down-down-down-so-why-do-so-many-analysts-think-itll-go-way-up-this-year/?noredirect=on&utm_term=.59bd81bd0720
https://finance.yahoo.com/quote/%5ETNX/history?p=%5ETNX
https://finance.yahoo.com/news/stock-futures-rise-christmas-eve-sell-off-134312777.html
https://richardlangworth.com/success
https://www.economist.com/graphic-detail/2018/12/27/is-there-any-truth-to-the-idea-of-midwestern-nice
https://www.nationalservice.gov/vcla/state-rankings-volunteer-rate
https://www.apa.org/pubs/journals/releases/psp-a0034434.pdf
https://www.goodreads.com/quotes/tag/midwest

Market Commentary – December 31, 2018

by | Dec 31, 2018 | Weekly Stock Market Commentary

Investing during the month of December was like traversing an icy mountain stream. It delivered a staggering shock to the senses that triggered the instinct to, “Get Out!”
When it comes to investing, that instinct is called loss aversion. For many people avoiding a loss is more important than realizing a gain. Simply put, not losing $100 is more important than gaining $100.  Erica Goode of The New York Times talked with psychologists Daniel Kahneman and Amos Tversky about a series of experiments they had conducted to measure loss aversion. The pair found relatively few people would bet money on a flip of a coin unless they stood to win at least twice as much as they might lose. The desire to avoid losses is the reason many people sell stocks when the value of the stock market is declining. Unfortunately, it may be a poor choice for a variety of reasons. For example,

  • Downturns are temporary. The Schwab Center for Financial Research evaluated the performance of the Standard & Poor’s 500 Index since 1966 and found, “the average bull ran for more than four years, delivering an average return of nearly 140 percent. The average bear market lasted a little longer than a year, delivering an average loss of 34.7 percent.”

While past performance is no guarantee of future results, understanding the history of gains and losses in bull and bear markets is critical because it can help investors avoid potentially costly mistakes.

  • Markets rebound. Consider December 26. It was the best day for stocks in nearly a decade. The Dow Jones Industrial Average rose 1,000 points, posting its biggest daily gain in history.

Investors who were not invested in stocks missed an opportunity to participate in a market rebound. Despite significant gains late in the month, there is a chance this will be the worst December performance since 1931, reported MarketWatch.

  • Your long-term life and financial goals haven’t changed. Sometimes, investors have to traverse an icy stream, or muck across a muddy patch, as they move toward their goals. Your portfolio should be built to help you pursue specific life and financial goals. It may be well diversified to help moderate losses when you encounter challenging market conditions. Consequently, if your long-term goals have not changed, selling during a downturn could make it more difficult to reach your goals.

However, if you’re experiencing a high level of discomfort as the stock market fluctuates, it may be important for you to re-evaluate your risk tolerance and make any changes necessary to your asset allocation.

One of the most important aspects of our work as financial advisors has little to do with asset management or investment selection. It has everything to do with helping our clients make better financial decisions. We try to provide information and advice – coaching, if you will – that may help our clients avoid mistakes that may make it more difficult to achieve their goals. We also encourage clients to embrace choices which are likely to help them work toward their goals.

If you find yourself debating whether to hold your investments or sell them, please give us a call before you do anything. We welcome the opportunity to talk with you about what’s happening and offer some context which may help set your mind at ease.

If changes are necessary, we can help you identify options and weigh the pros and cons of each. Our goal is to help you work toward your goals.

synaptic pruning and habit stacking…If you have some New Year’s resolutions you would really like to keep then you may want to try habit stacking. It’s an idea that harnesses brainpower to help you achieve your goals.

Brains are powerful tools. They help us form connections and, when those connections are no longer used, our brains conduct synaptic pruning to get rid of the connections, according to James Clear author of Atomic Habits.

As a result, our brains are full of strong connections that support certain skills. That’s the good news. The bad news is, by a certain age, we’ve trimmed a lot of neurons, which can make it challenging to form new habits. Clear wrote,

“When it comes to building new habits, you can use the connectedness of behavior to your advantage. One of the best ways to build a new habit is to identify a current habit you already do each day and then stack your new behavior on top. This is called habit stacking… For example:

  • After I pour my cup of coffee each morning, I will meditate for one minute.
  • After I take off my work shoes, I will immediately change into my workout clothes.
  • After I sit down to dinner, I will say one thing I’m grateful for that happened today…”

Once you’ve mastered habit stacking, you can begin to form chains of habits. Imagine where that could take you!

Weekly Focus – Think About It
“Excellence is an art won by training and habituation: we do not act rightly because we have virtue or excellence, but we rather have these because we have acted rightly…”
–Will Durant, American philosopher

 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.

 

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.

 

* This newsletter and commentary expressed should not be construed as investment advice.
* There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* 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 95percent 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.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* 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.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* 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:
[1] https://www.nytimes.com/2002/11/05/health/a-conversation-with-daniel-kahneman-on-profit-loss-and-the-mysteries-of-the-mind.html?pagewanted=all&src=pm&module=inline
[2] https://www.schwab.com/active-trader/insights/content/7-tips-weathering-bear-market
[3] https://www.cnbc.com/2018/12/26/us-futures-following-christmas-eve-plunge.html
[4] https://www.marketwatch.com/story/stock-market-ends-wild-week-in-negative-territory-as-dow-sp-500-set-for-worst-december-since-1931-2018-12-28
[5] https://jamesclear.com/habit-stacking
[6] http://blogs.umb.edu/quoteunquote/2012/05/08/its-a-much-more-effective-quotation-to-attribute-it-to-aristotle-rather-than-to-will-durant/

6Lc_psgUAAAAAA9c7MediJBuq3wAxIyxDSt73c9j