How rising interest rates are affecting the markets

by | Oct 11, 2018 | Learning

It’s October, which means autumn is upon us. But this year, it’s not just the leaves that are falling. The markets have been falling, too. On Wednesday, October 10, the Dow slid more than 800 points. The S&P 500 fell for the fifth straight day. And the tech-heavy NASDAQ was hit hardest of all, dropping more than 4%.1 Both the Dow and the S&P continued sliding on Thursday, too.2

It sounds dramatic, but it’s not necessarily cause for alarm. Still, whenever market volatility rears its head, it’s useful to understand why. That’s because the more we understand the why, the less cause we have to fear it.

Before I delve into why, however, let me ask you a question. Do you remember the Greek myth of Theseus and the Minotaur? In the story, Theseus descends into a bewildering labyrinth to fight the half-man, half-bull Minotaur. But to find his way back, Theseus first ties one end of a ball of string to the entrance. Then, after slaying the beast, he follows the unwound string all the way back to the surface.

The reason I mention this story is because sometimes, navigating the markets can feel like wandering through an impenetrable labyrinth. There are so many headlines and narratives, each with their own twists and turns. The good news is that it’s possible to pick up a thread and follow it all the way back to its source, just like Theseus.

A ten-year journey
In this case, follow the thread back to the end of 2008. Seems like a long time ago, doesn’t it? Barack Obama had just been elected president. The academic paper that would lead to the creation of bitcoin had just been published. And people were just beginning to realize how bad the Great Recession would become.
To combat this, the Federal Reserve lowered the federal funds rate to almost zero.3 This is the interest rate that banks pay each other for overnight loans. Their reasoning was simple. By reducing the federal funds rate, banks could afford to lower their own interest rates to customers. Lower interest rates, of course, make it cheaper for businesses and individuals to borrow money, which spurs more investing and spending. This, in turn, could help revive America’s slumping economy. And with millions of jobs lost during the Great Recession, the economy needed all the help it could get.

Rates remained in the basement for years afterwards as the economy embarked on a long, slow healing process. In fact, it wasn’t until 2015 that the Fed finally raised rates at all.4

Now follow the string forward to 2018
The Fed has started lifting interest rates at a slightly faster pace in 2018. Recently, on September 26, the central bank announced they would raise the federal funds rate to a new range of 2.0 to 2.25%.5 Officials also suggested they might boost rates once more before the end of the year. It’s the third increase in 2018, and the eighth overall since 2015.

Why are interest rates going up? Because the economy is in a much stronger place!
Unfortunately, with that strength comes the risk of inflation. Inflation is the rate at which prices rise and purchasing power falls. For example, if the rate of inflation is 3%, then a candy bar that costs a dollar one year will cost $1.03 the next. It’s essentially the measure of how valuable your money is. And if inflation goes too high, it can make even basic living costs very expensive.

Historically, inflation goes up when interest rates are low. The Federal Reserve takes the risk of inflation very seriously. In fact, stabilizing inflation is one of the reasons the Fed was created in the first place. So, to prevent the economy from “overheating”, the Fed has slowly raised interest rates. This makes borrowing costlier and reduces spending, forcing the economy – and inflation – to grow at a slower rate.

Whew! Got all that? If so, congratulations! You’ve followed the string all the way back to the surface. We’ve finally reached the present day.

How higher interest rates affects the markets
There’s really no direct link between interest rates and the markets. The effect is more of the “ripple” variety. Despite this, higher interest rates tend to spook investors.
Remember, when the federal funds rate goes up, it costs more for banks to loan each other money. In response, banks raise their own interest rates. This makes borrowing more expensive for businesses and individuals, prompting them to cut back on spending. Less spending for businesses means less investment, less expansion – and less growth. And when investors think a company isn’t growing, they tend not to invest in that company. On the individual side, higher rates can also mean less disposable income for people to spend or invest.

There are other reasons why the markets are struggling. Falling bond prices (which are directly correlated with rising interest rates). Trade tensions between the U.S. and China. Like I said, the markets can be positively labyrinthine. But interest rates are one of the main drivers behind this sudden surge in volatility.
And now you know why.

So where do we go from here?
As important as interest rates are, they’re still just one thread. There are plenty of others that could cause the markets to rise or fall. For instance, a fresh bit of good economic news could transform this week’s fears into last week’s memories. And with the economy as strong as it is, would that really be a surprise?

This is why we don’t overreact whenever the markets lurch one way or the other. You see, when it comes to working toward your goals, we do everything possible not to fall into a labyrinth of twists, turns, and changes in direction. Instead, it’s better to keep things simple. To stay above ground. To follow our own path, not headlines or individual economic indicators.

In the story of Theseus and the Minotaur, Theseus was advised to “go forwards, always down, and never left or right” to reach his goal. The road to your goals isn’t quite so cut-and-dry. But the point is, Theseus had a plan. A strategy. And with the help of ball of string, he never deviated from it.

We also have a strategy: To diversify across a range of asset classes, choose fundamentally sound investments, and invest for the long term, not the short. And while you don’t have a ball of string, you have something even better: A team of experienced professionals dedicated to holding your hand while you work toward your goals.

It’s October. It’s a time for falling leaves, trick or treating, and an endless array of pumpkin flavored beverages. It’s not a time for stressing about the markets. So enjoy the season, remembering that here at Research Financial Strategies, we’ll keep watching Washington, Wall Street, and your portfolio. Every day, every week, every month, and every year. As always, please let us know if you have any questions or concerns. We’re always happy to talk to you! In the meantime, have a great month!

P.S. If you have any friends or family who are concerned about the markets, or don’t have a financial advisor to help them, please feel free to share this letter. Thanks!

Sources:
1 “Dow falls 832 points in third-worst day by points ever,” CNN Business, October 10, 2018. https://www.cnn.com/2018/10/10/investing/stock-market-today-techs-falling/index.html
2 “U.S. Stocks Seek Stability on Heels of Wednesday Rout,” The Wall Street Journal, October 11, 2018. https://www.wsj.com/articles/markets-tumble-across-asia-led-by-tech-as-growth-worries-dominate1539225820?mod=article_inline?mod=hp_lead_pos1
3 “Fed Cuts Key Rate to a Record Low,” The New York Times, December 16, 2008. https://www.nytimes.com/2008/12/17/business/economy/17fed.html
4 “Federal Reserve raises interest rates for second time in a decade,” The Washington Post, December 14, 2016. https://www.washingtonpost.com/news/wonk/wp/2016/12/14/federal-reserve-expected-to-announce-higher-interest-ratestoday/?noredirect=on&utm_term=.af1a4b1da520
5 “Fed Raises Interest Rates, Signals One More Increase This Year,” The Wall Street Journal, September 26, 2018. https://www.wsj.com/articles/fed-raises-interest-rates-signals-one-more-increase-this-year-1537984955

Words to Live By #1 – Perseverance

by | 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.

Market Commentary – September 24, 2018

by | Sep 24, 2018 | Weekly Stock Market Commentary

Did you hear the news?
A tech company introduced a microwave you can turn on using Wi-Fi – as long as you have one of the company’s voice assistants at home, reported Kaitlyn Tiffany of Vox. Soon, the voice assistants will be built with neural networks that will formulate hunches about whether their owners might like to be reminded to lock the door or turn off a device. Some people love the idea. Others don’t.

Internet-enabled appliances weren’t the only show in town last week. The strong performance of the U.S. economy earned a standing ovation from investors who pushed the Dow Jones Industrial Index and the Standard & Poor’s 500 Index to new highs. Many global stock markets moved higher, too. Ben Levisohn of Barron’s reported: “One need only look overseas for a sign that investors are feeling better about the state of the world – or at least better enough to do some bargain-hunting. China’s Shanghai Composite rose 4.3 percent this past week, though it is still down 21 percent from its January high…”

The news in a FactSet Insight written by John Butters may dampen some investors’ enthusiasm.

With the third quarter earnings season ahead, Butters reported 98 of the companies in the Standard & Poor’s 500 Index have issued guidance. The majority (76 percent) issued negative guidance, meaning they anticipate earnings will be lower than analysts’ mean earnings per share estimates. It’s important to remember that, historically, the U.S. economy has moved in cycles. We may be in the latter stages of this expansion. The next stage is contraction and no one can predict exactly when it may occur.

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.

Millennials don’t exist! Gen Xers and the Silent Generation get a lot less press than Millennials, but all three generations have one thing in common. According to comedian Adam Conover, “Generations in general don’t exist. They’re not real things that exist in nature. We made them up…Here’s what really exists: People who are alive at the same time.”  He may have a point.

The only generation that has been recognized officially by the U.S. government is the Baby Boom generation. At least, that’s what a U.S. Census Bureau spokesperson told Philip Bump of The Atlantic. The Baby Boom generation was recognized because its members were part of a demographic event. Encyclopedia Britannica explained the baby boom as:  “…the U.S. increase in the birth rate between 1946 and 1964; also, the generation born in the U.S. during that period. The hardships and uncertainties of the Great Depression and World War II led many unmarried couples to delay marriage and many married couples to delay having children. The war’s end, followed by a sustained period of economic prosperity (the 1950s and early 1960s), was accompanied by a surge in population. The sheer size of the baby-boom generation (some 75 million) magnified its impact on society…”

So, where did other generations originate?
Sarah Laskow of The Atlantic reported, until the 19th century, generations were thought of as biological relationships within families. For example, grandparents would be one generation, their children the next, and their grandchildren the next, and so on.

The idea of societal generations – people who live at the same time and experience the same things – came from European intellectuals in the 1800s and early 1900s who advised, “people do not react to their particular historical conundrums as a monolithic group.”
Every person is unique and individual.

Weekly Focus – Think About It
“The power of youth is the common wealth for the entire world. The faces of young people are the faces of our past, our present, and our future. No segment in the society can match with the power, idealism, enthusiasm, and courage of the young people.”
–Kailash Satyarthi, Nobel Prize winner and activist

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.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
* 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.vox.com/the-goods/2018/9/21/17886682/amazon-new-smart-home-microwave-speakers-internet-of-things
https://www.barrons.com/articles/dow-hits-record-amid-global-stock-rally-1537577592
https://www.barrons.com/articles/the-dow-hits-a-record-high-as-tech-sits-it-out-1537580378
https://insight.factset.com/highest-percentage-of-negative-eps-preannouncements-for-sp-500-since-q1-2016
https://www.youtube.com/watch?v=-HFwok9SlQQ (4:28 minute-mark)
https://www.theatlantic.com/national/archive/2014/03/here-is-when-each-generation-begins-and-ends-according-to-facts/359589/
https://www.britannica.com/science/baby-boom
https://www.theatlantic.com/technology/archive/2014/09/the-generation-of-generations/379989/
https://www.brainyquote.com/quotes/kailash_satyarthi_751646?src=t_youth

Weekly Market Commentary – September 10, 2018

by | 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:

  1. Finland
  2. Norway
  3. Denmark
  4. Iceland
  5. Switzerland
  6. Netherlands
  7. Canada
  8. New Zealand
  9. Sweden
  10. 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 20, 2018

by | Aug 20, 2018 | Weekly Stock Market Commentary

As Maxwell Smart used to say…
Missed it by THAT much! After a rocky start, the Standard & Poor’s 500 Index came within 1 percent of an all-time high last week, reported Ben Levisohn for Barron’s. It’s significant because the Standard & Poor’s 500 Index has been trading below its January record all year. The article suggested the lack of progress begs the question: Are we still in a bull market?
It’s the old ‘Shrink Global Markets with Corporate Buybacks’ trick. Last week, Robin Wigglesworth of Financial Times reported, “The global equity market is shrinking at the fastest pace in at least two decades, as a wave of corporate share buybacks swamps the overall volume of companies going public, issuing new stock or selling convertible debt.”

The value of the global equity market is increasing despite the reduction in volume. In part, this is because stock buybacks help push share prices higher.  There is a potential downside to buybacks, though. Nasdaq.com explained, “…rewarding current shareholders so liberally can lead to a systemic extraction of value from companies on a macroeconomic scale. Throw in dividends and little is left for growth and expansion.” 

Would you believe…the President asked for it?
“President Trump on Friday asked regulators to review a decades-old requirement that public companies release earnings quarterly, a change some executives support to promote longer-term planning but that some investors worry could reduce market transparency,” reported Dave Michaels, Michael Rapoport, and Jennifer Maloney of The Wall Street Journal.  While transparency is essential to investors, critics suggest quarterly reporting “distracts companies from focusing on longer-term financial and strategic goals and may deter companies from going public,” wrote Andrew Edgecliffe-Johnson and Mamta Badkar for Financial Times.
Stay tuned.

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.

Remember that saying about the forest and the trees?
Some pretty good numbers have been posted for 2018. They’re the type of numbers that inspire confidence. For example:
4.1 percent. The United States experienced strong economic growth during the second quarter. The advance estimate for U.S. gross domestic product (the value of all goods and services produced by a nation) during the second quarter of 2018 was 4.1 percent. That was the highest rate of growth since the first quarter of 2014.
24.6 percent. 2017’s tax reform, which lowered corporate tax rates from an average of 35 percent to an average 21 percent, boosted corporate earnings, reported Nasdaq.com. With 91 percent of companies reporting in, the blended earnings growth rate for the S&P 500 was 24.6 percent during the second quarter of 2018.
$1 trillion. What are companies doing with their tax windfall? U.S. companies are rewarding shareholders by buying back stock, reported Nasdaq.com, which suggested buybacks could total $1 trillion in 2018.
3,453 days. Depending on how precisely you define the last bull market, August 22 may be the day that marks this one as the longest bull market in history.

While positive economic and market numbers are nice to see, they are trees in a forest and don’t necessarily provide a full or an accurate picture. For instance, the length of a bull market is interesting, but it has no predictive value, reported Barron’s. The length of the current economic expansion is far more important.

Barron’s cited Dr. Ed Yardeni, chief investment strategist at Yardeni Research, who said, “All I’m interested in is how long the expansion lasts…Because the longer it lasts, the longer the bull market lasts.”
It’s important to understand which numbers are important and how they relate to one another. If you would like to learn more, give us a call.

Weekly Focus – Think About It
“There is no truth. There is only perception.”
–Gustave Flaubert, French novelist

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.

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Sources:
https://www.npr.org/templates/story/story.php?storyId=4865354
https://www.barrons.com/articles/will-jpmorgan-tank-when-jamie-dimon-leaves-1534433537
https://www.ft.com/content/5a359796-a18e-11e8-85da-eeb7a9ce36e4

https://www.wsj.com/articles/trump-directs-sec-to-study-six-month-reporting-for-public-companies-1534507058
https://www.ft.com/content/c1d133aa-a211-11e8-85da-eeb7a9ce36e4
https://www.bea.gov/data/gdp/gross-domestic-product
https://www.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_081018.pdf
https://www.brainyquote.com/quotes/gustave_flaubert_161911?src=t_perception

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