Weekly Market Commentary November 21, 2016

This time it’s the end. Really. Possibly.

It seems like experts have been forecasting the end of the bull market in bonds for years – and they have been doing so. In July 2010, bond guru Bill Gross predicted the 28-year bull market in bonds was near an end and, as interest rates moved higher, bond values would move lower. The Federal Reserve’s first round of quantitative easing had ended in March 2010, and he couldn’t know a second round, which would keep interest rates low, would begin in November 2010.

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4 Components in Pricing LongTerm Care Insurance

By GARDNER SHERRILL |Investor’s Column

November 15, 2016

November is National Long-term Care Awareness month, so in memory of my father who had Alzheimer’s, I thought I’d dedicate an article to this important subject. What is the cost of long term care insurance? As always in any complicated transaction – the answer is always “It depends”. There are four primary determinants that I will address: Which company, What type of policy, the Owner’s personal factors and how much coverage.

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Weekly Market Commentary November 14, 2016

Surprise!

Markets were remarkably sanguine following the election of Donald Trump to the presidency of the United States.

There was a moment of panic. As election results rolled in on Tuesday, Gold prices rose and Treasury yields fell, as investors sought safe havens. Dow Futures, a measure of overnight sentiment, fell by 4 percent, and Standard & Poor’s 500 futures dropped 5 percent. (When index futures trade lower before the market opens, it is an indication investors expect the actual index to trade lower when the market opens.)

The losses triggered market circuit breakers, forcing investors to take a moment. They listened to President-elect Trump’s conciliatory acceptance speech, reassessed the political and economic landscape, and liked what they saw, according to Barron’s. Financial Times offered this assessment:

“Fear and loathing was the overriding sentiment of fund managers and analysts contemplating the market implications of an unlikely Donald Trump presidency…But when confronted by the reality of his election win, stock investors swiftly switched back to their more natural state of optimism, focusing on the prospect of growth-boosting stimulus, tax cuts and tax reform, and the rollback of industry-inhibiting regulation. Simultaneously, bad policies were dismissed as campaign rhetoric.”

Bond markets weren’t enthusiastic about the President-elect’s fiscal stimulus plans. Barron’s reported:

“The 30-year bond climbed 0.3 percentage point to 2.94 percent, resulting in a 6.3 percent decline in price. (Bond prices move inversely to yields.)…It wasn’t just Treasuries. Municipal bonds, corporate bonds, and preferred securities all fell. Bloomberg estimates $1 trillion in the value of bonds evaporated last week after the election.”

There was speculation Mr. Trump’s win would cause the Federal Reserve to delay the next rate hike. However, in a speech on Friday, Federal Reserve Vice Chairman Stanley Fisher said the Fed seems reasonably close to achieving its inflation and employment targets. “Accordingly, the case for removing accommodation gradually is quite strong, keeping in mind that the future is uncertain and that monetary policy is not on a preset course.” It appears rates may move higher in December.


Data as of 11/11/16
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) 3.8% 5.9% 4.3% 6.9% 11.4% 4.6%
Dow Jones Global ex-U.S. -0.9 -0.6 -2.7 -3.5 1.6 -1.0
10-year Treasury Note (Yield Only) 2.1 NA 2.3 2.8 2.1 4.6
Gold (per ounce) -5.1 16.4 13.9 -1.2 -7.0 -7.1
Bloomberg Commodity Index 0.1 6.1 -0.3 -12.3 -11.0 -6.7
DJ Equity All REIT Total Return Index -0.9 2.0 5.5 10.0 11.0 5.0

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.

It’s just not easy to do. Brexit came as a shock to many. So did the outcome of the U.S. election, but let’s face it – whether you’re trying to evaluate the potential of a company or the future of a country – predicting what may be ahead is never easy.

For instance, back in 1901, John Elfreth Watkins conferred with the “the wisest and most careful men in our greatest institutions of science and learning” to determine what might happen during the next 100 years. His predictions weren’t all accurate, but some were quite insightful:

“There will probably be from 350,000,000 to 500,000,000 people in America and its possessions...Nicaragua will ask for admission to our Union after the completion of the great canal. Mexico will be next. Europe, seeking more territory to the south of us, will cause many of the South and Central American republics to be voted into the Union by their own people.

The American will be taller by one to two inches. His increase in stature will result from better health, due to vast reforms in medicine sanitation, food, and athletics. He will live fifty years instead of thirty-five as at present – for he will reside in the suburbs.”

“Hot or cold air will be turned on from spigots to regulate the temperature of a house as we now turn on hot or cold water from spigots to regulate the temperature of the bath…”

“There will be no street cars in our large cities. All hurry traffic will be below or high above ground when brought within city limits...These underground or overhead streets will teem with capacious automobile passenger coaches and freight wagons, with cushioned wheels…Cities, therefore, will be free from all noises.”

Wireless telephone and telegraph circuits will span the world. A husband in the middle of the Atlantic will be able to converse with his wife sitting in her boudoir in Chicago. We will be able to telephone to China quite as readily as we now talk from New York to Brooklyn.”

The future is always ripe with possibility.

Think About It

Yesterday is not ours to recover, but tomorrow is ours to win or lose.”

--Lyndon B. Johnson, 36th President of the United States

Need some Personalized Advice?

Contact us and we will be happy to point you in the right direction.  No bull.

* 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 indices 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.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

Sources:

http://www.foxbusiness.com/markets/2016/11/08/stock-futures-pare-losses-as-trump-wins-white-house.html

http://www.barrons.com/articles/trump-agenda-could-promote-economic-growth-1478931198?mod=BOL_hp_highlight_1

http://www.investopedia.com/ask/answers/146.asp

http://www.marketwatch.com/story/as-stock-futures-plunge-heres-what-it-takes-to-trigger-circuit-breakers-2016-11-09

https://www.ft.com/content/a606181e-a7fb-11e6-8b69-02899e8bd9d1

http://www.barrons.com/articles/moves-to-make-as-the-bond-market-sinks-1478931249

https://www.federalreserve.gov/newsevents/speech/fischer20161111a.htm

https://upload.wikimedia.org/wikipedia/commons/0/0c/John_Elfreth_Watkins_Ladies_Home_Journal_Predictions_1900.jpg

https://www.brainyquote.com/quotes/quotes/l/lyndonbjo103549.html?src=t_positive

Weekly Market Commentary November 7, 2016

Markets hate uncertainty – and that may create opportunities.

Last week, investors experienced another bout of election jitters, and the Standard & Poor’s 500 (S&P 500) Index fell for the ninth straight session.

The CBOE Volatility Index (VIX), a.k.a. the fear gauge, which measures the expected volatility of the S&P 500 during the next 30 days, was up more than 40 percent for the week. The shift in the VIX reflected investors’ concerns about stock market performance after the election. Many think the next four weeks will offer a rough ride.

That may prove to be the case; however, all of the election hoopla and hyperbole has obscured some positive news. So far, the third quarter earnings season has been going well. According to FactSet, 85 percent of companies in the S&P 500 Index have reported earnings and the blended earnings growth rate for the Index is 2.7 percent. That means the S&P 500 Index is on track to experience its first quarter of earnings growth after five quarters of falling earnings.

A savvy portfolio manager or investor might wonder whether any of the companies with improving earnings have seen their share values decline because of election volatility and take time to evaluate whether any of those companies have become more attractive investments as a result.

If you’re too worried about the future of America to think about investment opportunities, it may help to remember the President of the United States doesn’t govern alone. An expert cited by Barron’s offered this insight:

“Regardless of who wins the White House…the new president will probably be playing between “the 40-yard lines” of the political gridiron against a Congress with at least one chamber controlled by the opposition. If both houses are held by the opposing party, the action probably could be stymied between “the 47-yard lines” – likely beyond even field-goal range to score any policy points.”

No matter how moving the election rhetoric, the next President may have a hard time getting much done.


Data as of 11/4/16
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) -1.9% 2.0% -0.8% 5.7% 10.7% 4.2%
Dow Jones Global ex-U.S. -1.8 0.3 -3.4 -3.5 1.6 -0.9
10-year Treasury Note (Yield Only) 1.8 NA 2.2 2.6 2.1 4.7
Gold (per ounce) 2.3 22.7 16.9 -0.5 -5.7 7.6
Bloomberg Commodity Index -3.1 6.0 -3.7 -12.2 -11.0 -6.9
DJ Equity All REIT Total Return Index -2.2 2.9 3.2 8.8 11.1 5.1

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.

Will the U.S. presidential election move the stock market? Elections often produce market volatility because markets hate uncertainty, and there is nothing certain about the outcome of the U.S. election. Election-induced volatility, however, often is relatively short-lived.

Remember, the downturn that followed the British vote to leave the European Union? Globally, markets lost about $3 trillion in two days following the late June vote. By the Fourth of July, many markets had recovered lost ground and made new gains, according to Financial Times.

So, what may happen after U.S. elections? Here are some thoughts:

“In the event of a very narrow Clinton win, it is all but guaranteed that Trump would claim the election had been “rigged” and would challenge the result via the courts. Civil disorder is also possible. Under those circumstances, the infamous 2000 election suggests that the uncertainty could persist for at least a month and could weigh heavily on the stock market during that time. It was not until December 12, more than a month after polling day, that a Supreme Court ruling effectively handed the 2000 election to George W. Bush.”

--Paul Ashworth, Capital Economics, cited by Barron’s

“After the silly season is over on November 8, about half the country will be elated and nearly half will be scared. And, both groups, research shows, are likely to tweak their investments accordingly. That’s when things really get risky. The key to your success this year is understanding that your emotional reaction to the election – not who actually wins it – is what truly matters.”

--Taylor Teppler, Time.com/Money

“Successful investors understand that markets are always moving, and there’s really no way to avoid the volatility that can come from uncertainty – even when it’s caused by a contentious political campaign. The trick is to create a portfolio that includes a diverse mix of assets and is based on your investing time frame and risk tolerance.”

--Schwab Survey: Investors Who Plan Don’t Fear Election Volatility

Markets may get bouncy following the election. That doesn’t change your long-term financial goals. If a portfolio review would help settle your election jitters, you may want to contact your financial professional.

Think About It

The thing about democracy, beloveds, is that it is not neat, orderly, or quiet. It requires a certain relish for confusion.”

--Molly Ivins, American newspaper columnist

Need some Personalized Advice?

Contact us and we will be happy to point you in the right direction.  No bull.

* 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 indices 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.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

Sources:

http://www.cnbc.com/2016/11/04/us-markets.html

http://www.investopedia.com/terms/v/vix.asp

https://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_11.4.16

http://www.barrons.com/articles/trades-big-role-in-the-presidential-election-1478322668?mod=BOL_hp_we_columns

https://www.ft.com/content/24124fe0-3d2e-11e6-9f2c-36b487ebd80a

https://www.ft.com/content/aa096aa6-7449-32d0-9673-3718b6d439b5

http://blogs.barrons.com/stockstowatchtoday/2016/11/04/that-sinking-feeling-sp-500-drops-for-9th-day-longest-losing-streak-since-1980/

http://time.com/money/page/2016-presidential-election-clinton-trump-affect-finances/

http://www.schwab.com/insights/market-commentary/schwab-survey-investors-who-plan-dont-fear-election-volatility?cmp=em-QYB

http://www.brainyquote.com/quotes/quotes/m/mollyivins390530.html

Weekly Market Commentary October 31, 2016

It’s almost over…

During July 2016, Pew Research reported almost 60 percent of Americans were suffering from election fatigue. They weren’t uninterested in the election. They were just worn out by never-ending news coverage that focused on candidates’ comments, personal lives, and standing in the polls rather than their moral character, experience, and stance on issues.

Last week, U.S. election news overshadowed positive economic data causing U.S. stocks to lose value as investors shifted assets into safe havens. Early on Friday, the Bureau of Economic Analysis released gross domestic product data, which reflects the value of all goods and services produced in the United States during the period. Initial estimates suggest the U.S. economy grew at an annual rate of 2.9 percent in the third quarter of 2016, an improvement on second quarter’s 1.4 percent growth. Consumer spending continued to be the primary driver of growth in the United States.

Markets moved higher on the news, only to retreat when the Federal Bureau of Investigation said it is looking at new evidence in the Clinton email investigation. Financial Times wrote:

“Mr. Trump, Mrs. Clinton’s Republican challenger, had fallen dramatically in the polls in recent weeks: market strategists said this had eased uncertainty given the real estate businessman’s controversial views on trade and immigration. However, the news of the new probe – just 11 days before the presidential election – has sparked fresh tumult.”

Financial Times indicated the CBOE Volatility Index (VIX), a.k.a. the fear index, moved higher on Friday. The index measures the anticipated volatility of the Standard & Poor’s 500 Index over the next 30 days. In addition, U.S. Treasury yields, which had been increasing on rumors the European Central Bank might begin to taper its quantitative easing program, dipped lower.

The next few weeks are likely to be bumpy for investors. During times like these, it’s critical to keep your eye on your long-term financial objectives. We’ve weathered volatile times before, and we will get through them again.


Data as of 10/28/16
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) -0.7% 4.0% 1.7% 6.5% 10.6% 4.4%
Dow Jones Global ex-U.S. -0.6 2.1 -1.5 -3.2 1.0 -0.6
10-year Treasury Note (Yield Only) 1.9 NA 2.1 2.5 2.3 4.7
Gold (per ounce) 0.6 19.8 7.9 -2.2 -6.1 7.7
Bloomberg Commodity Index -0.2 9.4 -2.0 -12.2 -10.7 -6.4
DJ Equity All REIT Total Return Index -3.3 5.2 5.4 9.1 11.1 5.0

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.

Ooooh! Some States’ estate taxes are scary! Most Americans aren’t too concerned about federal estate taxes. After all, 99.8 percent won’t have estates large enough to be subject to the tax. For 2016, the estate tax threshold is $5.45 million (double that amount for a married couple) and it is expected to be $5.49 million in 2017 (barring any changes to the tax code).

At the state level, it’s a different story. Kiplinger’s explained:

“However, state estate taxes, which kick in for estates valued at only $1.5 million or less in several states, could take a big bite out of your legacy. Your home and retirement accounts will be counted when your estate is valued for tax purposes, and proceeds from your life insurance could be counted, too, depending on how the policy is owned and who gets the money.”

The Tax Foundation reports, in all, 15 states and the District of Columbia have estate taxes. They included:

  • Connecticut ($2 million exemption and 7.2 percent to 12 percent estate tax rates)

  • Delaware ($5.4 million exemption and 0.8 percent to 16 percent estate tax rates)

  • Hawaii ($5.4 million exemption and 0.8 percent to 16 percent estate tax rates)

  • Illinois ($4 million exemption and 0.8 percent to 16 percent estate tax rates)

  • Maine ($2 million exemption and 8 percent to 12 percent estate tax rates)

  • Maryland ($1.5 million exemption and 16 percent estate tax rate)

  • Massachusetts ($1 million exemption and 0.8 percent to 16 percent estate tax rates)

  • Minnesota ($1.4 million exemption and 9 percent to 16 percent estate tax rates)

  • New Jersey ($675,000 exemption and 0.8 percent to 16 percent estate tax rates)

  • New York ($3.1 million exemption and 3.1 percent to 16 percent estate tax rates)

  • Oregon ($1 million exemption and 0.8 percent to 16 percent estate tax rates)

  • Rhode Island ($1.5 million exemption and 0.8 percent to 16 percent estate tax rates)

  • Tennessee ($5 million exemption and 5.5 percent to 9.5 percent estate tax rates)

  • Vermont ($2.75 million exemption and 0.8 percent to 16 percent estate tax rates)

  • Washington ($2.1 million exemption and 10 percent to 20 percent estate tax rates)

  • Washington DC ($1 million exemption and 0.8 percent to 16 percent estate tax rates)

While not all have estate taxes, Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania all have inheritance taxes. If you haven’t given much thought to estate planning, contact your financial professional. They can possibly help you find ways to minimize the taxes your estate and your heirs may owe.

Think About It

Success is not final; failure is not fatal: It is the courage to continue that counts.”

--Winston S. Churchill, Former British Prime Minister

Need some Personalized Advice?

Contact us and we will be happy to point you in the right direction.  No bull.

* 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 indices 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.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

Sources:

http://www.pewresearch.org/fact-tank/2016/07/14/most-americans-already-feel-election-coverage-fatigue/

https://www.ft.com/content/7e71f0f2-9d3d-11e6-8324-be63473ce146

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

http://www.cboe.com/micro/vix/faq.aspx#3

https://www.ft.com/content/eca532dc-9ce8-11e6-a6e4-8b8e77dd083a

http://www.usnews.com/news/politics/articles/2015/04/14/fact-check-estate-tax-hits-fewer-than-1-percent-of-estates

https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-estate-taxes?_ga=1.256260876.623466591.1477767498#amirequired

http://www.kiplinger.com/slideshow/taxes/T021-S003-states-with-the-scariest-death-taxes/index.html

http://taxfoundation.org/blog/does-your-state-have-estate-or-inheritance-tax

http://www.inc.com/jayson-demers/51-quotes-to-inspire-success-in-your-life-and-business.html

Weekly Market Commentary October 10, 2016

Was it good news or wasn’t it?

The U.S. unemployment rate ticked higher last week. The September jobs report showed the United States added 156,000 new jobs in September. That was 16,000 fewer than economists were expecting and 11,000 fewer than were added in August, according to Barron’s.

That doesn’t sound like good news, does it?

On the other hand, the report showed more people are working and looking for jobs. Also, wages increased so people are earning more. The Wall Street Journal wrote:

“The report – marked by a slight uptick in the unemployment rate to 5 percent – largely fit the narrative Fed Chairwoman Janet Yellen laid out for the labor market after the central bank’s September policy meeting. People are rejoining the labor force in search of work. Many of them are finding jobs, but not all…Ms. Yellen sees the return of workers to the job search process as a healthy sign.”

That sounds like good news, right?

The jobs report seemed to support the conclusion of The New York Times that there are two economic realities in the United States, “…healthy hiring and falling unemployment on the one hand, millions of economically sidelined Americans on the other…”

Uncertainty surrounding the jobs report caused U.S. stock markets to fall last week.


Data as of 10/7/16
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) -0.7% 5.4% 7.9% 8.7% 13.3% 4.8%
Dow Jones Global ex-U.S. -0.4 3.3 1.4 -1.6 3.5 -0.2
10-year Treasury Note (Yield Only) 1.7 NA 2.1 2.6 2.1 4.7
Gold (per ounce) -4.7 18.6 10.1 -1.6 -5.3 8.2
Bloomberg Commodity Index 0.4 9.0 -5.0 -12.6 -9.6 -6.2
DJ Equity All REIT Total Return Index -5.2 6.7 10.4 11.9 15.1 5.5

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.

is IT a cyclical rotation? Economic growth may not be predictable, but it tends to follow a pattern that is known as a business or economic cycle. Periods of recession (when the economy contracts) are followed by periods of growth (when the economy expands).

Some companies and market sectors tend to perform better during economic expansions. They’re known as cyclical companies, and they make goods or deliver services – entertainment, automobiles, vacations, and so on – that people want to buy when they’re feeling prosperous. Generally, people feel prosperous during periods of economic expansion. Other companies are called ‘defensive.’ They offer goods or services – food, beverages, personal products, and so on – that people need regardless of their wealth or economic conditions.

In recent months, we’ve seen what may be a rotation from defensive market sectors into cyclical ones. Financial Times explained the shift in U.S. markets:

“The shift signals investors are worrying about high prices for the defensive, dividend-paying stocks that were in heavy demand in the first half as worries over the outlook for the global economy dominated…Indications of a potential rate increase this year and hopes that economic growth was improving were making unloved, cyclical parts of the market look more attractive.”

If you look at returns for the first three quarters of the year, cyclical stocks and defensive stocks delivered almost the same performance. Through September 30, 2016, the MSCI ACWI Cyclical Sectors Index was up 4.8 percent and the MSCI ACWI Defensive Sectors Index was up 4.7 percent. The trend appears when you look at the numbers during the third quarter. During July, August, and September, cyclical sectors were up 8.2 percent and defensive sectors were down 0.7 percent!

It appears to be a cyclical rotation.

Think About It

“We know what we are, but know not what we may be.”

--William Shakespeare, British playwright

Need some Personalized Advice?

Contact us and we will be happy to point you in the right direction.  No bull.

*Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

* 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 MSCI all Country World Index is an unmanaged, free float- adjusted, market capitalization-weighted index composed of stocks of companies located in countries throughout the world. It is designed to measure equity market performance in global developed and emerging markets. The index includes reinvestment of dividends, net of foreign withholding taxes.

* 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.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

Sources:

http://blogs.barrons.com/incomeinvesting/2016/10/07/september-payrolls-disappoint-mildly-unemployment-rises-to-5/

http://www.wsj.com/articles/hilsenrath-jobs-data-ensures-no-fed-rate-increase-in-november-1475846564

http://www.nytimes.com/2016/10/08/business/economy/jobs-report-unemployment-wages.html?_r=0

http://www.nber.org/cycles/cyclesmain.html

http://www.telegraph.co.uk/sponsored/finance/investment-library/low-risk-investments/10911755/stock-sectors-cyclical-defensive.html

https://www.ft.com/content/724e9658-72d7-11e6-bf48-b372cdb1043a

https://www.msci.com/end-of-day-data-search

http://www.brainyquote.com/quotes/quotes/w/williamsha164317.html

Weekly Market Commentary October 3, 2016

Markets were relatively calm during the third quarter of 2016, yet they delivered some attractive returns overall.

In the United States, all three major U.S. indices posted record highs twice during a single 7-day period in August, reported CNBC.com. The Standard & Poor’s 500 Index (S&P 500) experienced a 51-day streak without at least a 1 percent decline. The index returned 3.3 percent in the third quarter.

Investors were fairly complacent until comments by Federal Reserve officials raised awareness the Fed might raise rates during 2016, possibly as early as September. The S&P 500 lost 2.5 percent and the VIX, known as the market’s fear gauge, rose 40 percent in a single day. The upheaval was short-lived and U.S. stocks rebounded quickly.

World markets were moved higher after the Fed opted to maintain its current policy. When the European Central Bank did the same – choosing not to implement further stimulus measures – markets moved lower. Markets were also less than enthused with the plans put forth by the Bank of Japan (BOJ). The central bank will attempt to control the yield curve by keeping 10-year Japanese government bonds at zero percent.

The BOJ’s goal is to push inflation to 2 percent, reported Reuters. However, some analysts believe the new policy may be less accommodative than the old one. Experts cited by Financial Times said, “On the face of it the BOJ has arguably, by setting the [Japanese Government Bond] curve at its current level, just announced a modest tightening in monetary conditions relative to where they were in the summer.”

Speculation about a September rate hike caused many emerging markets, which have been top-performers throughout the year, to give back some gains late in the quarter. When the U.S. central bank pushes rates higher, emerging market assets become relatively less attractive to investors seeking yield. In addition, a rate hike tends to strengthen the U.S. dollar, inflating the value of dollar-denominated debt held by emerging countries and potentially slowing economic growth.

Brazil has been a top performer during 2016, despite recession and political upheaval. President Dilma Rousseff was impeached in September. Her successor, Michel Temer plans to enact fiscal reforms he hopes will bring about a mild economic recovery by 2017. Director of Latin America Strategy for Templeton Emerging Markets Group Gustavo Stenzel explained, “We believe Brazil offers a salient example of how political change can accelerate a turnaround in an economy and stock market.”

Worries about China’s economic stability receded during the quarter, Reuters explained:

“Recent economic data has shown signs of recovery in China's economy. Industrial sector profits jumped 20 percent in August, the best showing in three years, while a Reuters poll showed manufacturing sector activity likely expanded modestly for a second straight month in September. But many investors remain skeptical about the sustainability of a recovery that they believe has depended on government stimulus.”

At the end of the quarter, emerging markets moved higher after OPEC announced a preliminary agreement to limit production. It was the first production cut in eight years. The agreement boosted oil and energy stocks in countries around the world.

The fourth quarter of 2016 may be a bumpy one. The U.S. election has the potential to cause some upheaval, as does a rate hike by the Federal Reserve.


Data as of 9/30/16
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) 0.2% 6.1% 12.9% 8.8% 13.9% 5.0%
Dow Jones Global ex-U.S. -0.9 3.8 7.4 -1.5 3.9 -0.2
10-year Treasury Note (Yield Only) 1.6 NA 2.1 2.6 1.9 4.6
Gold (per ounce) -1.2 24.5 18.7 -0.1 -4.0 8.2
Bloomberg Commodity Index 1.2 8.6 -2.8 -12.4 -9.5 -6.0
DJ Equity All REIT Total Return Index -1.7 12.5 21.2 13.9 15.9 6.4

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.

Laugh then think – HARDER. The Ig® Nobel Prizes were awarded last week. The prizes celebrate some of the most imaginative, unusual, and peculiar scientific achievements of the year. For 2016, the winners included:

  • Economics: Journalism and marketing professors from New Zealand and Britain for their work in marketing theory. The winning paper was entitled, “The Brand Personality of Rocks: A Critical Evaluation of a Brand Personality Scale.”

  • Physics: A slew of Hungarian, Spanish, Swedish, and Swiss researchers for dual discoveries. They explored and confirmed the reasons that white-haired horses are the most horsefly-proof, as well as the reasons dragonflies are fatally attracted to black tombstones.

  • Chemistry: A certain German automobile manufacturer for “…solving the problem of excessive automobile pollution emissions by automatically, electromechanically producing fewer emissions whenever the cars are being tested.”

  • Medicine: German researchers who authored a paper titled, “Itch Relief by Mirror Scratching. A Psychophysical Study.” Apparently, anyone with an itch on the left side of the body can relieve it by looking into a mirror and scratching the right side of the body, and vice versa.

  • Biology: A Brit who built prosthetic limb extensions with plastic hooves and wore a helmet to romp and butt heads with goats during the three days that he lived among them. His co-winner was another British Islander who lived in the wild as a badger, an otter, a deer, a fox, and a bird.

The winners’ accomplishments were celebrated at Harvard University where winners “physically receive their prizes and a handshake from genuine, genuinely bemused Nobel laureates.”

Think About It

“I have lived as a badger in a hole in a Welsh wood, as an otter in the rivers of Exmoor, an urban fox rummaging through the dustbins of London’s East End, a red deer in the West Highlands of Scotland and on Exmoor, and, most hubristically, a swift, oscillating between Oxford and West Africa…Why I did this is not an unreasonable question. There are many answers. One is that I wanted to perceive landscapes more accurately. We have at least five senses. By and large we use only one of them – vision. That’s a shame…I suspect it’s responsible for lots of our uncertainty about the sort of creatures we are, our personal crises, and the frankly psychopathic way in which most of us treat the natural world.”

--Charles Foster, Ig Nobel Prize winner

Need some Personalized Advice?

Contact us and we will be happy to point you in the right direction.  No bull.

* International debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. These risks are often heightened for investments in emerging markets. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

* 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.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. 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.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

Sources:

http://www.cnbc.com/2016/08/15/us-markets.html

http://www.schwab.com/public/schwab/nn/articles/Is-That-All

http://us.spindices.com/indices/equity/sp-500

http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_other

http://www.bloomberg.com/news/articles/2016-09-07/asian-stock-futures-deviate-as-s-p-500-ends-flat-crude-tops-46

http://www.reuters.com/article/us-japan-economy-boj-idUSKCN11W0E7

https://www.ft.com/content/f883a303-cd02-335f-b156-3996312c7bc7

http://www.cnbc.com/2016/08/29/emerging-markets-can-weather-a-rate-rise-expert.html

http://www.afr.com/opinion/the-higher-the-government-debt-the-slower-economic-growth-20160731-gqhl7y

http://country.eiu.com/brazil

http://mobius.blog.franklintempleton.com/2016/08/09/brazil-on-the-olympic-stage/

http://in.reuters.com/article/china-stocks-close-idINZZN2RUA00

http://www.bloomberg.com/news/articles/2016-09-29/emerging-market-assets-advance-on-opec-deal-as-ringgit-climbs

http://www.usnews.com/news/business/articles/2016-09-29/energy-shares-lead-asian-stocks-higher-on-opec-output-deal

http://www.improbable.com/ig/winners/

http://www.improbable.com/ig/2016/

http://www.improbable.com/2016/09/29/a-one-person-conversation-about-living-in-the-wild-a-la-several-different-animals/

Weekly Market Commentary September 26, 2016

As expected…

The U.S. Federal Reserve left rates unchanged last week and markets celebrated. Across the globe, national stock market indices finished the week higher. In the United States, the Standard & Poor’s 500 Index and NASDAQ gained more than 1 percent.

Not everyone was thrilled with the decision, however. Three Federal Reserve presidents cast dissenting votes. All believed interest rates should move higher. That’s the most dissents since December 2014 when even the dissenters were divided about what should happen.

Proceeding with caution is the right approach, according to Barron’s:

“A rate hike is usually aimed at preventing an economy from overheating, and there’s no sign of that – not even close. Housing activity has been disappointing, wholesale inflation is weak, retail sales are declining, and manufacturing activity is slowing. Such a confluence of negative data has never stopped the Fed from tightening rates – the central bank did so in December, even though the economic data looked even worse than it does now – but it isn’t exactly screaming for immediate action.”

While that may be true, Financial Times suggested markets are coming to the conclusion the influence of central banks may be limited, and those limits may be near.

We’ll find out eventually. In the United States, the new consensus is we’ll have a rate hike for the holidays, according to CNBC.com.


Data as of 9/23/16
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) 1.2% 5.9% 11.7% 8.4% 13.8% 5.0%
Dow Jones Global ex-U.S. 3.1 4.7 7.8 -1.5 4.5 0.2
10-year Treasury Note (Yield Only) 1.6 NA 2.1 2.7 1.8 4.6
Gold (per ounce) 2.3 26.0 18.3 0.4 -4.5 8.6
Bloomberg Commodity Index 1.3 7.3 -3.3 -12.9 -10.0 -6.0
DJ Equity All REIT Total Return Index 4.3 14.5 23.0 14.2 16.0 6.6

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.

It’s an election year! The influence of elections on markets, investors, and economies has been examined and re-examined over time. Theories have been developed. Ideas have been promoted. Some may be accurate; some may not be. Here are a few things to keep in mind especially if markets get volatile before the election:

  • Stock markets don’t care who is elected: You may have read markets perform best when Democrats win, or you may have read markets outperform when Republicans are elected. The numbers just don’t prove out either way, according to a white paper from BlackRock:

“…while many investors connect political alignment with equity market returns, very few of these patterns hold up to scrutiny. Historically, whether a Republican or Democrat occupies the White House has had no statistically significant impact on U.S. equity markets.”

  • Change tends to happen slowly, especially with divided government: We’ve all become familiar with the term, ‘gridlock.’ There are issues – taxes, immigration, energy – that have been debated for years. In general, policy changes have been relatively small. Sometimes, changes have been reversed. Morgan Stanley concluded, “Hence, election outcomes where one party controls both the White House and Congress are most conducive to expeditiously putting transformative policies into practice.”

  • The strength of the economy influences voters. According to Oppenheimer Funds:

“Decades of history prove that the state of the economy determines the president, not the other way around. In fact, the economy’s impact on elections can be stated in a fairly simple equation: Strong economy (declining [un]employment and inflation) = a win for the incumbent party candidate.”

If that’s the case, it will be pretty difficult to guess a likely winner. A Gallup poll found just as many Americans viewed the economy positively as those who viewed it negatively in early September. On the other hand, more Americans said the economy was getting worse than those who thought it was getting better.

Think About It

“We in Britain stopped evolving gastronomically with the advent of the pie. Everything beyond that seemed like a brave, frightening new world. We knew the French were up to something across the Channel, but we didn't want anything to do with it.”

--John Oliver, British comedian

Need some Personalized Advice?

Contact us and we will be happy to point you in the right direction.  No bull.

* 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.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. 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.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

Sources:

http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_other

https://www.stlouisfed.org/about-us/resources/a-history-of-fomc-dissents

http://www.barrons.com/articles/why-the-fed-should-raise-rates-slowly-1474693229?mod=BOL_hp_we_columns

https://www.ft.com/content/71218818-7fa1-11e6-bc52-0c7211ef3198

http://www.cnbc.com/2016/09/19/expect-a-december-not-september-hike-for-rates-fed-survey-respondents.html

https://www.blackrock.com/investing/literature/whitepaper/political-outlook-market-perspectives-january-2016.pdf?cid=blog:marketperspectives:blackrockblog:russ

https://www.morganstanleyfa.com/public/projectfiles/onthemarkets.pdf

https://www.oppenheimerfunds.com/investors/article/what-investors-need-to-know-about-the-2016-election/six-truths-about-washington-regardless-of-who-wins

http://www.gallup.com/poll/195689/economic-confidence-index-stable.aspx?g_source=ECONOMY&g_medium=topic&g_campaign=tiles

http://www.brainyquote.com/quotes/quotes/j/johnoliver579176.html

Weekly Market Commentary September 19, 2016

If it’s not one thing, it may be another.

Economic data released last week will factor into this week’s Federal Open Market Committee (FOMC) decision on whether to push interest rates higher in the United States. Some of the August data supports the idea economic growth was soft. For example, August retail sales fell more than expected, down 0.3 percent from July. Other data was as expected: U.S. producer prices were flat, which was in line with expectations.

However, the kicker may be inflation. It increased during August, “…offering fresh evidence that U.S. inflation may be firming after years of sluggish price growth,” wrote The Wall Street Journal. The Consumer Price Index, which is a gauge of inflation, rose more than economists had expected in August in large part because of higher healthcare costs, according to Reuters.

Stock markets steadied last week as the chances of a rate hike this week declined. Barron’s reported:

“The probability of a rate hike, as measured by the fed-futures market, sank to 20 percent from more than 30 percent a week earlier. Still, investors fear a September surprise… ‘The Fed’s in a tough spot,’ says Aaron Clark, a portfolio manager at GW&K Investment Management. ‘The governors want to hike but the window is closing.’ The Fed can cry wolf so many times before it loses credibility and dilutes the power of “Fedspeak” in the future.”

If the FOMC increases rates this week, there may be “knee-jerk selloff,” according to Barron’s, and if rates remain unchanged, a relief rally may ensue. Either way, the paper opined, much will depend on the FOMC’s explanation.

So, will the Federal Reserve raise rates or won’t they? We’ll find out soon.


Data as of 9/16/16
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) 0.5% 4.7% 7.2% 8.0% 12.0% 4.9%
Dow Jones Global ex-U.S. -2.5 1.5 0.5 -2.1 2.1 -0.2
10-year Treasury Note (Yield Only) 1.7 NA 2.3 2.9 2.1 4.8
Gold (per ounce) -1.7 23.2 17.1 -0.4 -6.1 8.5
Bloomberg Commodity Index -0.9 5.7 -6.7 -13.6 -12.0 -6.3
DJ Equity All REIT Total Return Index -0.7 9.8 18.8 12.8 12.9 6.1

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.

Is your state crafty? Oktoberfest is upon us and that means beer. In the United States, celebrations are likely to include craft-brewed drafts, which are a far cry from traditional American lager, according to the Brewer’s Association. The Economist wrote:

“Any American university student can inform you that much of the beer in the United States is utter swill. Those who graduate from the red Solo cup – the brand so synonymous with beer pong and college life – can afford to purchase better. And so they do. Craft beer, the stuff made by small and independent breweries, has exploded beyond just hipsters. Sales reached $22.3 billion in 2015, and volumes have climbed 13 percent over the past year, even as overall beer sales in America dipped somewhat.”

Craft brewers have been winning market share from big brand names for some time. Less than 50 years ago, more than 99 percent of the beer quaffed in the United States was lager produced by large domestic breweries, according to research cited by Forbes.

Since then, the drafts produced by microbreweries, brewpubs, regional craft breweries, and contract brewing companies have gained popularity. In 1994, there were 537 craft brewers in America. That number swelled over the next two decades and, by 2013, there were 2,800 craft brewers and more than 1,500 additional breweries in development.

Remarkably, Vermont, which is one of the smallest states, has the most craft breweries per capita – 44 of them. Oregon, Colorado, Montana, Maine, and Washington also boast a significant number of small breweries, while Mississippi, Louisiana, and Alabama have the fewest.

After tallying the numbers, the Brewer’s Association reported craft beer accounted for more than 12 percent of sales during 2015, and imports for almost 16 percent. The craft brewing industry contributed almost $56 billion to the U.S. economy in 2014, and has created more than 424,000 jobs.

Think About It

“My mission in life is not merely to survive, but to thrive; and to do so with some passion, some compassion, some humor, and some style.”

--Maya Angelou, American poet

Need some Personalized Advice?

Contact us and we will be happy to point you in the right direction.  No bull.

* 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.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. 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.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

Sources:

http://www.bloomberg.com/news/articles/2016-09-15/retail-sales-in-u-s-decline-in-august-by-more-than-forecast

http://www.cnbc.com/2016/09/15/us-producer-price-index-aug-2016.html

http://www.wsj.com/articles/u-s-consumer-prices-rose-0-2-in-august-1474029209

http://www.reuters.com/article/us-usa-economy-idUSKCN11M193

http://www.barrons.com/articles/dow-s-p-eke-out-slim-gains-as-rate-fears-flag-1474097390?mod=BOL_hp_we_columns

https://www.brewersassociation.org/brewers-association/history/history-of-craft-brewing/

http://www.economist.com/blogs/graphicdetail/2016/09/daily-chart-7

http://www.forbes.com/sites/adammillsap/2016/09/15/craft-brewing-has-brought-variety-to-oktoberfest/#7bbf14f2468f

https://www.brewersassociation.org/statistics/national-beer-sales-production-data/

https://www.brewersassociation.org/statistics/economic-impact-data/

http://www.brainyquote.com/quotes/authors/m/maya_angelou.html

Weekly Market Commentary September 12, 2016

Blame it on the central banks!

After 44 consecutive sleepy, summer days when Barron’s reported the Standard & Poor’s 500 Index opened and closed without a 1 percent move in either direction, the index tumbled last week – and so did indices in other markets around the world. What roused investors from complacency? Some experts pointed their fingers at central banks:

“Three central banks announced their monetary policy decisions during the week and all three maintained the status quo and did not change policy. The news disappointed the markets – they were looking for more stimulus. And, in some cases, good economic data was interpreted as bad news because it meant that there was less of a probability of more stimulus.”

The U.S. Federal Open Market Committee doesn’t meet until September 20, but markets reacted sharply after Boston Fed President Eric Rosengren (whom Thomson Reuters labels as a dove) said, “My personal view, based on economic data that we have received to date, is that a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy.” After his speech, Reuters reported the odds of a September Fed rate increase rose from 24 percent to 30 percent.

Expectations for market volatility moved higher, too, but markets weren’t too worried. The CBOE Volatility index (VIX) jumped 33 percent on Friday, reaching 16.56, according to MarketWatch. That was a big move, but significant market volatility is not indicated until the VIX moves above 20.


Data as of 9/9/16
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) -2.4% 4.1% 9.6% 8.4% 13.0% 5.1%
Dow Jones Global ex-U.S. 0.2 4.1 3.3 -0.6 2.8 0.2
10-year Treasury Note (Yield Only) 1.7 NA 2.2 2.9 1.9 4.8
Gold (per ounce) 0.5 25.3 19.9 -1.4 -6.4 8.5
Bloomberg Commodity Index 1.2 7.0 -4.8 -13.6 -12.2 -6.4
DJ Equity All REIT Total Return Index -3.8 10.6 24.6 13.5 14.0 6.3

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.

what’s changing in world markets? grocery shopping! Groceries may be mundane, but they’re big business. By 2020, the value of the world’s grocery market is expected to reach $11.8 trillion, according to The Institute of Grocery Distribution (IGD). The largest markets are expected to be China, United States, India, and Russia. That’s not the interesting part, though.

According to Morgan Stanley, fewer people will gather food by carting up and down the aisles of local grocery stores. Instead, in many countries, people will fill their baskets online. Globally, the share of shoppers buying groceries via the Worldwide Web and having them delivered is expected to grow from 21 percent in 2015 to 34 percent in 2016:

“Several factors may be driving the trend. Generally, more shoppers are accustomed to buying online, including a younger, more mobile generation of consumers. More specifically, boutique online-only grocery services in recent years have proven that the business model can work, overcoming logistical and consumer-behavioral barriers and building credibility for the category as a whole. Now, larger traditional players have entered the arena, offering more choices, services, and attractive prices, all within familiar eCommerce experiences and expectations for an even larger audience.”

Developed economies are expected to experience faster adoption rates. For instance, fewer than 10 percent of Americans bought fresh groceries online last year, but this year the percentage is expected to reach 26 percent. In Germany, just 10 percent of shoppers purchased groceries online. In 2016, that number is expected to rise to 36 percent.

In emerging markets, the expansion of online grocery shopping is dependent on the expansion of mobile networks. In countries like China and India, online grocers must leverage mobile networks to grow their market share.

Think About It

“People have been starting to focus less on the disability and more on the actual sport. I’ve had so many interviews that don’t even mention the backstory of how I became an amputee or whatever. I prefer that – I prefer being on the back pages with the rest of the sportsmen, not being just a heart-warming story.”

--Jonnie Peacock, British paralympic sprinter

Need some Personalized Advice?

Contact us and we will be happy to point you in the right direction.  No bull.

* 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.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. 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.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

Sources:

http://www.barrons.com/articles/worried-the-market-is-too-calm-bring-on-the-noise-1473485492?mod=BOL_hp_we_columns

http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html

https://graphics.thomsonreuters.com/F/10/scale.swf

https://www.bostonfed.org/news-and-events/news/top-takeaways-president-rosengrens-090916-economic-outlook.aspx

http://www.reuters.com/article/us-usa-fed-rosengren-idUSKCN11F1O9

http://www.marketwatch.com/story/wall-streets-fear-gauge-jumped-the-most-since-brexit-2016-09-09

http://www.investopedia.com/terms/v/vix.asp

http://www.igd.com/Research/Retail/Global-grocery-markets-our-forecasts-to-2020/

http://www.morganstanley.com/ideas/online-groceries-could-be-next-big-ecommerce-driver

http://www.standard.co.uk/lifestyle/london-life/jonnie-peacock-this-is-my-life-and-i-wouldn-t-change-it-8139211.html