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Weekly Market Commentary (September 18, 2017)

 

 

Weekly Market Commentary (September 18, 2017)

 

The Markets

 

We all have our pet peeves, and if there is one thing markets do NOT like, it is uncertainty. Unfortunately, we entered 2016 with a lot of unanswered questions:

  • How much has China's growth slowed? How will the country's slower growth affect companies and investments around the globe?
  • How will the Federal Reserve's changing monetary policy affect the U.S. economy? How many times will it raise rates during 2016? Will the Fed change course?
  • Will oil prices continue to move lower? Will they move higher? How could changing oil prices affect economic growth?
  • How is the sharing economy (renting rooms in a home, offering rides for a price, sharing goods like automobiles and bikes) affecting economic growth in the United States?  
  • How will demographics - particularly the changing ratio of working people to retired people - affect economic growth?
  • How will geopolitical risks affect markets during 2016?

Amidst all of this uncertainty, the words 'market correction' (a drop of at least 10 percent in the value of the market) and 'bear market' (a drop of 20 percent or more in the value of the market) are being bandied about frequently. According to Barron's, the Standard & Poor's 500 Index finished last week in correction territory. So, are we headed for a bear market? That remains to be seen.

 

Bear markets often are accompanied by recessions, and few experts believe a recession is likely in the United States during 2016. Historically, there have been bear markets which have occurred without a recession. These have lasted, on average, for about five months. That's far shorter than the 20-month average length of bear markets that come in tandem with recessions.

 

One expert cited by Barron's commented on the market downturn, "If there's a silver lining, it's that the market is a lot cheaper than it was a few months ago. The S&P 500 trades at 15.9 times 12-month forward earnings forecasts...back where valuations were at the beginning of 2014. That means there are values to be had."

 

 

Data as of 1/15/16

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

-2.2%

-8.0%

-5.6%

8.5%

7.7%

3.9%

Dow Jones Global ex-U.S.

-3.4

-9.3

-14.1

-4.1

-3.3

-0.7

10-year Treasury Note (Yield Only)

2.0

NA

1.8

1.8

3.4

4.3

Gold (per ounce)

-0.7

3.0

-13.1

-13.3

-4.3

7.1

Bloomberg Commodity Index

-4.2

-6.5

-27.8

-19.3

-14.6

-8.0

DJ Equity All REIT Total Return Index

-2.7

-5.6

-8.5

7.4

10.0

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.

 

Investing during the past couple years has been likedriving down a rutted dirt road in a car with worn shock absorbers: fraught with jarring ups and downs. At times like these, it can be helpful to look back and realize we have weathered difficult markets in the past.

 

A good starting point may be August 1979 when the headline on the cover of BusinessWeek declared equities (stocks) were dead. The accompanying article explained, "The Dow Jones industrial average set its all-time high of 1051 in 1973, but since then it has sunk nearly 20 percent to its current 830." More recently, Bloomberg discussed the circumstances that led to the article:

 

"At the time the story was written, the stock market had sustained serious losses and the long-term health of the U.S. economy was a significant concern. The story has aroused some controversy over the years, as the stock market staged a strong comeback in the decades that followed its publication. But few, if any, market forecasters were willing to call such a recovery at the time, and the story provides a telling look at how inflation had ravaged the market landscape - and investor psychology - at the close of the 1970s."

 

Since the 1970s, we've weathered a few other crises of note:

  • On Black Monday, October 19, 1987, the Dow lost 22.6 percent of its value in a single day. Major U.S. indices finished the day at about:
    • o   Dow:1,739
    • o   Standard & Poor's 500 Index (S&P 500): 225
    • o   NASDAQ: 360
  • When the Dotcom bubble burst, the value of the NASDAQ Composite Index (which is sometimes considered a proxy for technology companies) bottomed on October 9, 2002. The major indices finished the day at:
    • o   Dow: 7,286
    • o   S&P 500: 777
    • o   NASDAQ: 1,114
  • On June 30, 2009, the month the Great Recession ended, the major indices closed at about:
    • o   Dow: 8,447
    • o   S&P 500: 919
    • o   NASDAQ: 1,835
  • Last week, after the worst start to a year on record, the major indices finished the week at about:
    • o   Dow: 15,988
    • o   S&P 500: 1,880
    • o   NASDAQ: 4,488

It's an uncomfortable fact, but stock markets can be volatile. They move up and down, although historically, market values have tended to increase over time. That's one reason it's important to build and maintain a well-allocated, diversified portfolio grounded in your risk tolerance and financial goals. Diversification does not assure a profit or protect against losses, but it may help reduce the impact of market fluctuations on the value of your portfolio over time.

 

Weekly Focus - Think About It

 

"The most difficult thing is the decision to act, the rest is merely tenacity. The fears are paper tigers. You can do anything you decide to do. You can act to change and control your life; and the procedure, the process is its own reward."

--Amelia Earhart, Aviation pioneer

 

Best regards,

 

Lee Barczak

President

 

* 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.

 

 

Morgan Kenwood Advisors

5130 West Loomis Road, Greendale, Wisconsin 53129

Phone: (414) 423-4020

 

 

 
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Weekly Market Commentary (September 11, 2017)

 

 

Weekly Market Commentary (September 11, 2017)

 

The Markets

 

Last week, the aftermath of Hurricane Harvey and potency of Hurricane Irma dominated hearts and minds, but there were some diversions and some welcome news, too.

 

The NFL kicked off its 2017 season with the Chiefs' win over the Patriots. The men's U.S. soccer team tied Honduras to stay in the running for a World Cup spot. And, Sloane Stephens made the jump from 957th best on the women's tennis tour to U.S. Open Champion.

 

Also, last week, President Trump signed a bipartisan bill authorizing relief for victims of Hurricane Harvey. The damage from Harvey has been estimated at about $50 billion, reported Yahoo! Finance, and the damage from Hurricane Irma may be even greater.

 

The signed bill also raised the debt ceiling, avoided a U.S. Treasury default, and funded the government for three months. These aspects of the legislation may have been more important to stock markets, according to a source cited by Barron's:

 

"Dubravko Lakos-Bujas, head of U.S. equity strategy and global quantitative research at JPMorgan, observes that the S&P 500 has dropped about 2 percent when hurricanes make landfall, as sectors that get slammed - think insurance companies, hotels, and cruise lines - are offset by ones that benefit, like autos, energy and equipment services, and basic materials for construction. A failure to raise the debt ceiling or pass a budget, though, has typically caused the market to drop 3 percent to 5 percent. 'In essence, the market risk associated with the failure of passing the budget and addressing the debt ceiling has been pushed out for now...'"

 

Major U.S. stock markets finished the week slightly lower. The Standard & Poor's 500 Index remains less than 1 percent below its all-time high.

 



Data as of 9/8/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

-0.6%

9.9%

12.8%

7.1%

11.5%

5.4%

Dow Jones Global ex-U.S.

0.6

18.1

14.1

1.0

5.0

-0.2

10-year Treasury Note (Yield Only)

2.0

NA

1.6

2.5

1.7

4.3

Gold (per ounce)

2.0

16.2

0.2

2.3

-4.9

6.7

Bloomberg Commodity Index

-0.3

-3.1

-0.5

-12.0

-10.5

-6.7

DJ Equity All REIT Total Return Index

0.6

7.7

1.8

8.4

9.9

7.0

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.

 

how do you protect personal data? Last week, Equifax, one of three major consumer credit reporting agencies, was hacked. The New York Times reported the company had data on more than 820 million consumers and more than 91 million businesses worldwide. Estimates suggest 143 million Americans may have been affected.

 

It's no surprise new ways to safeguard personal data are on the horizon. Some involve blockchain technology, which underlies cryptocurrencies but has many other potential applications. PCMag.com described it like this:

 

"People often get bogged down in technological complexity when trying to understand blockchain, but the basic concept is a simple and universal one. We have facts and information we don't want accessed, copied, or tampered with, but on the Internet, there's always a chance it could be hacked or modified. Blockchain gives us a constant - a bedrock we know won't change once we put something on it and where a transaction will be verified only if it follows the rules."

 

In July, The Economist reported startup companies have begun using blockchain to register valuable assets, manage personal information, and provide 'truth' services that ensure research data integrity. Governments are embracing blockchain applications to manage land registries and corporate recordkeeping, among other things. Another potential application for blockchain is maintaining immutable personal data:

 

"One of the first things done for a baby could be to give the newborn an entry in a blockchain, the crypto-equivalent of a birth certificate. This sounds Orwellian, but it does not have to be. On the contrary, if people's identity is anchored in one or several blockchains, this would give them more control over it and their personal data."

 

If blockchain applications are successful, it may become easier to keep personal data safe online.

 

Weekly Focus - Think About It

 

"I'm not much but I'm all I have."

--Philip K. Dick, Author of Martian Time-Slip

 

 

Best regards,

 

Lee Barczak

President

 

* 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 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.

 

 

Morgan Kenwood Advisors

5130 West Loomis Road, Greendale, Wisconsin 53129

Phone: (414) 423-4020

 

 

 
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Weekly Market Commentary September 5, 2017

The Markets

 

When it comes to economic growth, the government doesn't measure twice. It measures three times.

 

Last week, the Bureau of Economic Analysis revised its initial estimate that the gross domestic product (GDP), which is the value of all goods and services produced by a country or region, grew by 2.6 percent during the second quarter of 2017. The second estimate indicated the economy grew by 3.0 percent from April through June. The third and final GDP estimate for the second quarter will become available near the end of September. 

 

The New York Times reported:

 

"If the economy were to sustain the current pace of expansion, it would be a significant uptick from the 2 percent annual growth rate that has mostly prevailed since the recovery began. A difference of a single percentage point may not sound like much, but the stakes are huge in a $19 trillion economy. The acceleration could also help lift wage growth, which has been frustratingly slow for years despite steady hiring, a surging stock market, and rising home prices."

 

While second quarter's growth spurt was welcome news, it was overshadowed by the devastation wrought by Hurricane Harvey in Texas and across a swath of the Gulf Coast. Initial estimates of the property damage inflicted by the storm stand between $30 and $40 billion, reported Yahoo! Finance. 

 

Historically, hurricanes have impacted U.S. economic growth and Harvey is likely to be no different. An economist from Goldman Sachs explained the usual progression of economic consequences to Yahoo! Finance:

 

"...major hurricanes in the past have been associated with a temporary slowdown in retail sales, construction spending, and industrial production, as well as a pickup in jobless claims...However, GDP effects are ambiguous, as the level of economic activity typically returns to its previous trend - or even somewhat above - reflecting a boost from rebuilding efforts and a catch-up in economic activity displaced during the hurricane."

 

We send our thoughts and prayers to all of those affected by Hurricane Harvey.

 

 

Data as of 9/1/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

1.4%

10.6%

14.1%

7.3%

12.0%

5.2%

Dow Jones Global ex-U.S.

0.7

17.4

16.0

0.6

5.5

-0.5

10-year Treasury Note (Yield Only)

2.2

NA

1.6

2.4

1.6

4.6

Gold (per ounce)

2.7

13.9

0.8

0.9

-4.8

7.0

Bloomberg Commodity Index

2.0

-2.9

3.5

-12.1

-10.3

-6.5

DJ Equity All REIT Total Return Index

0.7

7.0

2.2

8.5

9.7

6.5

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.

 

If you don't live near your parents and older family members, you may want to learn more about Social Security's Representative Payment Program (RPP). The Center for Retirement Research at Boston College (CRRBC) published a brief in August that provided some insight into the need for the program:

 

"Many older individuals with cognitive impairment, including the vast majority of people with dementia, need help managing their finances. For retirees receiving Social Security benefits, the Representative Payee Program can serve as one source of this help. In the Representative Payee Program, a retiree's benefit is sent to another person (often a relative) who spends it on the retiree's behalf and submits records to Social Security documenting that the expenditures were in the beneficiary's best interest." 

 

Currently, not many people take advantage of the program. More than 10 percent of people who are age 65 or older have dementia, but just 9 percent of that group has a payee.

 

That doesn't mean retirees aren't getting the help they need. Most are, according to CRRBC. Ninety-five percent of people with dementia have someone to help - an unimpaired spouse, nursing home staff, or adult children. Two-thirds have assigned power of attorney to a trusted party.

 

If your parents are older and you haven't talked with them about how to handle issues related to finances and aging, it may be a good time to open a dialogue. Daily Caring suggests you, "Approach the conversation around the most important considerations for older adults: safety, freedom, peace of mind, social connection, and being able to make choices."

 

Weekly Focus - Think About It

 

"Best thing about being in your 90s is you're spoiled rotten. Everybody spoils you like mad and they treat you with such respect because you're old. Little do they know, you haven't changed. You haven't changed in [the brain]. You're just 90 every place else...Now that I'm 91, as opposed to being 90, I'm much wiser. I'm much more aware and I'm much sexier."

--Betty White, American actor and comedienne

 

Best regards, 

Lee Barczak

President

* 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

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Weekly Market Commentary August 28, 2017

The Markets

Hope floats.

Optimism about possible pro-growth economic policies, including tax reform and deregulation, helped U.S. stock indices finish higher last week, reported Barron’s. It wasn’t all smooth sailing, though. Stocks bobbed up and down as investors’ optimism was weighted by concerns about a possible debt-ceiling battle and government shutdown. 

CNN offered some insight to the historic economic impact of government shutdowns on productivity: 

“The last time the government was forced to close up shop – for 16 days in late 2013 – it cost taxpayers $2 billion in lost productivity, according to the Office of Management and Budget. Two earlier ones – in late 1995 and early 1996 – cost the country $1.4 billion.”

For investors, it’s important to distinguish between a shutdown’s potential effect on the U.S. economy and its possible impact on U.S. stock markets. A source cited by The New York Times reported: 

“…during all 18 government shutdowns, starting in 1976…the Standard & Poor’s 500-stock index averaged just a 0.6 percent loss over the course of those closures. Early on in shutdown history, investors reacted very negatively. Closures in 1976 and 1977 coincided with 3 percent declines in the [S&P 500].

 

As investors grew more accustomed to shutdowns, they seemed to become more blasé about them. During the mid-1990s and the 2013 closure, for instance, stocks actually rose. They gained 3.1 percent during the 2013 stoppage.” 

Bond investors were relatively calm last week, according to Financial Times. Although, there were signs of “debt ceiling jitters.” Yields on U.S. Treasuries that mature in October (when a shutdown may occur) rose on concerns investors might not be repaid in a timely way. 

No matter what happens in September and October, keep your eyes on the horizon and your long-term goals. 


Data as of 8/25/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.7%

9.1%

12.5%

6.9%

11.6%

5.2%

Dow Jones Global ex-U.S.

1.0

16.6

14.7

0.4

5.1

-0.4

10-year Treasury Note (Yield Only)

2.2

NA

1.6

2.4

1.7

4.6

Gold (per ounce)

-0.8

10.9

-2.7

0.0

-5.1

6.8

Bloomberg Commodity Index

0.1

-4.8

-2.1

-12.8

-10.5

-6.6

DJ Equity All REIT Total Return Index

2.1

6.3

1.3

8.5

9.9

6.8

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

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

millennials are killing it! A recent article in Buzzfeed listed headlines announcing the various things Millennials have “killed” or are “killing.” The list included Big Oil, the NFL, the workday, the cereal industry, and bar soap. 

Here’s another industry that is being undermined by millennials’ preferences: cable and satellite television. Millennials are leading a viewing revolution. They are unwilling to ante up for cable and satellite subscriptions, preferring less expensive Internet and streaming services that provide content via the World Wide Web.

A 2017 survey from Videology found more than half of millennial men (ages 18 to 34) have stopped paying for cable, and Forbes reported: 

“…on average, the 30-and-under crowd's primary means of consuming content is through mobile devices, streaming, and online. That's in sharp contrast to the over-30 crowd who still rely on television for an average of more than 80 percent of their film and TV show viewing.”

The waning popularity of cable and satellite TV appears to have a lot to do with cost. The typical household paid more than $1,200 a year, on average, for cable and satellite television in 2016, according to Nerdwallet – and the cost increased in 2017. Consumer Reports wrote, “Most pay TV companies have announced modest price hikes, but there are also new hidden fees.”

Budget-minded millennials may be having an influence on older generations whose preferences appear to be changing, too. GfK, a market research company, reported: 

“New findings…show that U.S. TV households are embracing alternatives to cable and satellite reception. Levels of broadcast-only reception [a.k.a. antenna reception] and Internet-only video subscriptions have both risen over the past year, with fully one-quarter (25 percent) of all U.S. TV households now going without cable and satellite reception.” 

So, what kind of savings can be generated when you cut the cable? It all depends on what you currently pay, but it may be worth crunching the numbers. 

Weekly Focus – Think About It

“I find television very educating. Every time somebody turns on the set, I go into the other room and read a book.”

 

--Groucho Marx, American comedian

Best regards,
 
Lee Barczak
President
 
* 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 coversapproximately 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.
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Weekly Market Commentary August 21, 2017

The Markets 

Here, there, and everywhere…

Markets around the world appear to be benefitting from global economic recovery.

After pointing out the United States’ economy is the heart of the global financial system, Barron’s reported:

“The Standard & Poor’s 500 index has tirelessly amassed 30 record closes this year, but is up just 1.2 percent since March 1. Meanwhile, nearly every foreign stock market has sprinted ahead…We wrote on March 25 about how a global recovery should goose smaller, fresher bull markets abroad. By now, it is firmly becoming the consensus view – metals are rallying, with copper up 18 percent this year; the MSCI All Worlds Index has risen for eight straight months.” 

Emerging markets haven’t performed too shabbily either. Through the end of last week, the MSCI Emerging Markets Index was up 22.88 percent year-to-date. Franklin Templeton’s Mark Mobius wrote improved performance in emerging markets is the result of “…encouraging economic data in China, investor inflows, and corporate earnings growth.” 

So, global stock markets have been delivering relatively robust performance this year.

What have bonds been up to? They’ve gained value year-to-date, too.

Bond markets continue to tell a different story than stock markets. The Federal Reserve raised its benchmark interest rate for the third time in June. In theory, interest rates should be moving higher, yet the yield on 10-year Treasury bonds was lower (2.19 percent) at the end of last week than it was at the start of the year (2.45 percent).


Data as of 8/18/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

-0.7%

8.3%

10.9%

7.2%

11.3%

5.3%

Dow Jones Global ex-U.S.

0.3

15.4

12.5

0.2

4.8

-0.1

10-year Treasury Note (Yield Only)

2.2

NA

1.5

2.4

1.8

4.6

Gold (per ounce)

0.8

11.8

-4.0

0.0

-4.3

7.0

Bloomberg Commodity Index

-0.6

-4.9

-4.1

-12.7

-10.4

-6.4

DJ Equity All REIT Total Return Index

0.3

4.1

-0.8

7.6

9.5

6.5

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.

Have you tried taco mode? In March, the Harvard Business Review (HBR) offered some ideas about innovation in America. It’s a topic that deserves some attention as “…recent data suggests that innovation is getting harder and the pace of growth is slowing down. A major challenge in business and policy spheres is to understand the environments that are most conducive to innovation.” 

One place to look for examples of innovation is the sharing economy where innovations often echo the late 1800s. Back then, according to HBR, innovation primarily occurred outside of companies. In contrast, today, the majority of patents go to inventors who are associated with companies.

Let’s take a look at a couple recent ideas that may or may not gain traction:

·         Taco Mode. Ridesharing – arranging for a ride via an app – has changed transportation and become one of the industry’s fastest growing market segments, according to data from Statista reported by TechCrunch.com. 

The latest rideshare innovation is Taco Mode. Hungry passengers can request rides that include stops at a fast food chain drive-throughs. One company executive described the option as ‘inverse delivery.’ The hungry are delivered to the food rather than vice versa.

·         Just-in-time watch rentals. The demand for Swiss watches has fallen off in the United States. The Federation of the Swiss Watch Industry reported exports to the United States dropped steadily (-9.6 percent) between 2015 and June 2017.

Could the culprit be luxury watch rentals? Barron’s Penta reported luxury watch rentals are a relatively recent sharing-economy innovation. For a monthly membership fee of $149 to $999, watch lovers have opportunities to “…access experiences and embark on journeys otherwise unattainable – without having to spend a major chunk of their savings.” 

·         Neighborhood networks. It’s a straightforward concept: A social network that connects neighbors so they can share tools, leftovers, playgroups, and more. It’s big in Brazil, according to Forbes. One company has more than 140,000 registered users across 3,800 cities.

But, anyone who has ever watched Homer Simpson borrow Ned Flanders’ tools and not return them understands why some aspects of this idea may not catch on. 

What innovations would you like to see in the sharing economy? 

Weekly Focus – Think About It 

“One word sums up our country’s achievements: miraculous. From a standing start 240 years ago – a span of time less than triple my days on earth – Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers.”

 

--Warren Buffett, Oracle of Omaha

Best regards, 

Lee Barczak

President

 

* 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 coversapproximately 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.  

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