Turkey Financial Crisis Archives - Page 9 of 10 - Research Financial Strategies

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

8 Things to Know About the USA-China Trade Dispute

by Jack Reutemann | Apr 24, 2018 | Stock Market News

The headlines are filled with rumors of a trade war between the United States and China. You’ve probably heard by now that both nations have announced tariffs on many of each other’s goods. This has many economists concerned about a trade war. A trade war, in case you’re not familiar with the term, is “an economic conflict in which countries impose import restrictions on each other in order to harm each other’s trade.”
In response, the markets are doing their best impression of a see-saw – falling and then rising again. Because this story probably won’t go away any time soon, let’s break it down.

Eight Things to Know about the USA-China Trade Dispute

ONE: The U.S. has announced tariffs on almost $50 billion in Chinese exports.¹
The list, which stretches to over 1300 items, includes goods like medical equipment, chemicals, televisions, and automobile parts.¹ This is on top of an earlier spate of tariffs on Chinese steel and aluminum. However, many of the most commonly-used goods Americans use, like shoes, clothing, and phones, are not included.

TWO: China has retaliated with tariffs of their own.
On April 4, China announced plans to levy a 25% tariff on roughly $50 billion worth of American goods.¹ This includes airplanes, cars, soybeans, and other vegetables. Earlier, China had already declared tariffs on $3 billion worth of agricultural exports, like fruit, nuts, and pork.

THREE: The two countries aren’t actually in a trade war – yet.
Notice how often I’ve used the word “announced”? As of this writing, none of these tariffs have gone into effect yet. The U.S. intends to hold public hearings sometime in May, and has 180 days after that to decide whether to go through with the tariffs.² China, meanwhile, has avoided mentioning any specific dates. It’s possible both sides are hoping to engage in talks before the tariffs are in place. If successful, there’s a chance the tariffs never will.
In other words, a trade war has been declared, but the “fighting” hasn’t started yet.

FOUR: Both sides see the situation very differently.
It’s safe to say neither country wants a trade war – hence the delay. But that doesn’t mean negotiations will be simple or easy.

The issue, at least from the U.S. administration’s standpoint, is a $375 billion trade deficit²with China, which many see as being due to unfair or even illegal trade practices. China has a long history of forcing American companies to share their technology in order to do business there, making these companies less competitive than they might otherwise be. In some cases, Chinese companies are alleged to have outright stolen American intellectual property. The administration believes that tariffs will stop these practices and reduce the deficit. China, of course, doesn’t see it the same way. The Brookings Institution, a well-known think tank, describes it like this: “From Beijing’s perspective, the U.S.-China trade imbalance is a result of many factors—automation, evolving global supply chains, increased competitiveness of Chinese firms, the Federal Reserve’s normalization of interest rates, and the Congress’s deficit-increasing tax cuts. Because the trade balance is the difference between savings and investment, Beijing also views U.S. fiscal and monetary decisions as contributing to America’s overall trade deficit—including with China.”³

Overcoming this basic difference in opinion will probably need to happen before the two countries can strike a new deal.

FIVE: Trade wars can impact markets…
Again, we’re not yet in a trade war. But should these tariffs go through, history suggests it will have an impact on the markets.

Tariffs are a tax on imported goods and services. They essentially make it costlier and more difficult to import certain things, like metals, foodstuffs, consumer products, and so on. That can be a major boon to industries that produce those same things, because it forces consumers to buy domestically. On the other hand, China’s tariffs could make it harder for U.S. companies to sell their own goods. For those companies that do a lot of business in China, this can have a major effect on their bottom line. As a result, some companies’ stock price could suffer.

SIX: But that doesn’t necessarily mean the markets are going to plummet.
To give you an example, take this past Wednesday, April 4^th. When the markets opened, the news out of China caused the Dow to drop 510 points. But the Dow rallied later in the day, ending up 300 points.⁴

While a trade war can be unsettling for investors, it’s important to remember that the day-to-day movement of the markets is based on many factors. Trade is only one of these. The overall economy is still doing well, unemployment remains low, corporate earnings continue to be solid – you get the idea.

The point is, the U.S.-China trade dispute is important, but not the be-all and end-all. It’s something to keep an eye on, but not something to overreact to. And again, we’re not yet in an actual trade war! If history is any judge, there will be a lot more twists and turns to this story. A lot can change over the next few weeks and months.

SEVEN: This is an opportunity to practice discipline.
The markets are in the habit of jumping at the slightest sound – but we’re not. We rely on the news to stay informed and up-to-date, but not to dictate our every decision.

As a financial advisor, I can’t tell you what President Trump will do, or what China will do, or whether a trade war will happen. I can say that we’ll keep seeing a lot of headlines on this. Remember the see-saw metaphor? As the situation develops, it’s not unlikely the markets will continue to rise and fall as investors digest the news coming out of Washington. For that reason, it’s wise to expect more volatility – but let’s bear in mind that volatility doesn’t equal catastrophe.

All this means we have a wonderful opportunity to practice discipline. To avoid getting caught up in the day-to-day. To not let headlines – and the emotions they evoke – control us. The more we do this, the more we’ll keep moving toward our goals.

EIGHT: We here at Research Financial Strategies are monitoring your portfolio.
This is our job: to monitor your portfolio. If at any point we feel the trade situation could harm your holdings and impede your progress towards your goals, we’ll let you know immediately.

In the meantime, remember: My team and I love hearing from you! Please let us know if you have any questions or concerns. Our door is always open. Have a great month!

¹ “All the Goods Targeted in the Trade Spat,” The Wall Street Journal, April 5, 2018. https://www.wsj.com/articles/a-look-at-which-goods-are-under-fire-in-trade-spat-1522939292

² “U.S. Announces Tariffs on $50 Billion of China Imports,” The Wall Street Journal, April 3, 2018. https://www.wsj.com/articles/u-s-announces-tariffs-on-50-billion-of-china-imports-1522792030

³ “How to avert a trade war with China,” The Brookings Institution, February 27, 2018. https://www.brookings.edu/blog/order-from-chaos/2018/02/27/how-to-avert-a-trade-war-with-china/

⁴ “Trade war? Not so fast. Why stocks are rallying again,” CNN Money, April 5, 2018. http://money.cnn.com/2018/04/05/investing/stocks-rebound-trade-war-us-china/index.html

Weekly Market Commentary – April 2, 2018

by Jack Reutemann | Apr 2, 2018 | Weekly Stock Market Commentary

In like a lion…
Investors roared into 2018. During the first week of the first quarter of the New Year, the Dow Jones Industrial Average rose above 25,000 for the first time ever. Less than two weeks later, it closed above 26,000. The Standard & Poor’s (S&P) 500 Index and NASDAQ Composite also reached new all-time highs.

Strong performance was supported by strong fundamentals. In December 2017, Mohamed A. El-Erian wrote in BloombergView economic and policy fundamentals, including synchronized global recovery, progress on U.S. tax reform, improved certainty around Brexit, and orderly acceptance of changing U.S. monetary policy, “…reinforce the prospects for better actual and future growth, thereby increasing the possibility of improved fundamentals validating notably elevated asset prices.”

During the first quarter, the global economy remained robust, reported Forbes. American companies were profitable (profitability is measured by earnings) and earnings per share for the S&P 500 Index are expected to increase during 2018. FactSet reported analysts currently estimate the S&P 500 Index will deliver double-digit earnings growth (18.5 percent overall) during 2018. Here’s what the analysts anticipate each quarter:

Q1: Earnings growth of 17.3 percent
Q2: Earnings growth of 19.1 percent
Q3: Earnings growth of 20.9 percent
Q4: Earnings growth of 17.1 percent

Improving expectations for American companies can be credited, in large part, to tax reform, which lowered corporate tax rates significantly. In addition, rising oil prices may help companies in the Energy sector, and rising interest rates may give a boost to companies in the Financials sector.

Despite a robust global economy, strong earnings, and improving earnings per share (EPS) expectations, the major U.S. stock indices delivered negative quarterly returns for the first time since 2015. On March 29, the last trading day of the quarter, the Dow closed at about 24,100. If fundamentals are strong, why did major indices in the United States (and many indices around the world) finish the quarter lower? Financial Times suggested uncertainty might have something to do with the retreat:

“The tax cut has been achieved. We are no longer so sure that [President Trump’s] remaining ideas are so good, and most investors think his ideas about trade are downright terrible. And so the market has started reacting to presidential tweets… Most importantly, though, key assumptions have been stripped away. We can no longer rely on low volatility. And critically, the positive view of a low-inflation strong-growth future has been called into question – but only after the stock market had priced in that assumption as a done deal.”

Market declines may also reflect concern about valuations. One financial professional told Financial Times many asset classes have gone from being very expensive to being expensive. They haven’t yet gotten inexpensive.

Out like a lamb…
The last week of the quarter was a good one for U.S. stock markets, which pushed higher. However, the major indices were unable to overcome deficits accumulated earlier in the quarter. The Dow Jones Industrial Average gained 2.4 percent last week, finishing the quarter down 2.5 percent. The S&P 500 Index was up 2.0 percent last week, down 1.2 percent for the quarter. Likewise, the NASDAQ bounced 1.0 percent last week, but ended the quarter down 2.3 percent, reported Barron’s.

Data as of 3/29/18	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor’s 500 (Domestic Stocks)	2.0%	-1.2%	11.9%	8.2%	10.1%	7.2%
Dow Jones Global ex-U.S.	0.6	-1.5	13.6	3.9	3.9	0.6
10-year Treasury Note (Yield Only)	2.7	NA	2.4	2.0	1.8	3.4
Gold (per ounce)	-1.7	2.1	5.8	3.8	-3.5	3.6
Bloomberg Commodity Index	0.0	-0.8	2.4	-4.1	-8.5	-8.0
DJ Equity All REIT Total Return Index	3.7	-6.7	-0.3	2.7	6.7	6.9

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.

If you asked Artificial Intelligence (AI) to bake, what would it make? Janelle Shane at PopSci.com wrote, “When computers try to imitate humans, they often get confused. But simulated brain cells in so-called neural networks can mimic our problem-solving skills. An AI will look at a dataset, figure out its governing rules, and use those instructions to make something new. We already employ these bots to recognize faces, drive cars, and caption images for the blind. But can a computer cook?”

Shane addressed the question by training a computer’s neural network to write a recipe. The computer reviewed a dataset of more than 24,000 online recipes (647 of them began with the word chocolate and 8 included blood as an ingredient). After two days of processing, the network delivered a remarkable recipe that includes a title, category, ingredients, and directions, although the nonsensical word choices are likely to leave bakers uncertain about how to proceed:

CHOCOLATE BUTTERBROTH BLACK PUDDING
cheese/eggs
4 oz cocoa; finely ground
1teaspoon butter
½ cup milk
¼ teaspoon pepper
¼ cup rice cream, chopped
1 lb cream
1 sesame peel

– Date Holy –
1 large egg
1 powdered sugar serving barme
¼ cup butter or margarine, melted

Brown sugar, chocolate; baking powder, beer, lemon juice and salt in chunk in greased 9×2 inch cake. Chill until golden brown and bubbly. Place serve garlic half by pieoun on top to make more use bay. Place in frying pan in preheated oven. Sprinkle with fresh parsley for cooking. Eating dish to hect in pot of the oil, pullover half-and half…Yield: 1 cake”

AI seems to have missed an important governing rule for recipes: Instructions should not include unlisted ingredients and all ingredients should be included in the instructions. DATE HOLY is particularly baffling. The author suggested the neural network might have been trying for frosting. It is a cake, after all.

Weekly Focus – Think About It

“We are surrounded by hysteria about the future of artificial intelligence and robotics – hysteria about how powerful they will become, how quickly, and what they will do to jobs…Mistaken predictions lead to fears of things that are not going to happen, whether it’s the wide-scale destruction of jobs, the Singularity, or the advent of AI that has values different from ours and might try to destroy us. We need to push back on these mistakes.”

–Rodney Brooks, Australian robotics entrepreneur

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.

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