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Weekly Market Commentary (December 10, 2018)

Weekly Market Commentary (December 10, 2018)
 
The Markets
 
We're off to a slow start.
 
December is usually the best month of the year for the stock market. It has been since 1950, according to Randall Forsyth of Barron's, but not so far this year.
 
Two issues made investors particularly uncomfortable last week which helped trigger a sell-off that pushed major U.S. stock indices lower.
 
  1. Fading optimism about an easing of trade tensions with China. It looked like the relationship between the United States and China might thaw, and Americans were feeling pretty optimistic about a trade truce. In fact, markets moved higher Monday in anticipation.
 
Unfortunately, on the same day that Presidents Trump and Xi Jinping shared a cordial dinner, the chief financial officer of a major Chinese telecommunications firm was arrested at the request of the United States. The Economist reported, "[The company] is a pillar of the Chinese economy - and Ms. Meng is the founder's daughter. The fate of the trade talks could hinge on her encounter with the law."
 
  1. A section of the yield curve inverted. Normally, Treasury yields are higher for longer maturities of bonds than for shorter maturities of bonds. Last week, yields on three-year and five-year bonds inverted, meaning yields for three-year bonds were higher than those for five-year bonds. Ben Levisohn of Barron's explained:
 
"Usually when people talk about an inversion, they're talking about the difference between two-year and 10-year Treasuries, or three-month and 10-year Treasuries, which have been useful, though not perfect, predictors of recessions and bear markets. Last week, though, everyone was talking about the three-year and the five-year Treasury inverting - something that usually doesn't get much notice...And for good reason."
 
Historically, these maturities have inverted seven times. In one instance, the country was already in recession. On the other six occasions, recession didn't occur for more than two years. Barron's reported the Standard & Poor's 500 Index gained an average of 20 percent over the 24-month periods following these inversions.
 
Investors' negative response to last week's news may have been overdone. Financial Timesreported European and Asian markets firmed up a bit Friday "...as buyers stepped back in after some savage falls on Thursday."
 

Data as of 12/7/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
-4.6%
-1.5%
-0.2%
8.2%
7.8%
11.2%
Dow Jones Global ex-U.S.
-2.2
-14.2
-11.3
2.6
-0.4
5.2
10-year Treasury Note (Yield Only)
2.9
NA
2.4
2.2
2.9
2.7
Gold (per ounce)
2.1
-4.1
-0.9
4.9
0.1
5.0
Bloomberg Commodity Index
1.1
-5.3
-0.4
1.6
-7.9
-2.7
DJ Equity All REIT Total Return Index
0.3
4.4
5.1
8.0
10.1
13.7
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.
 
ABOUT TIME AND MONEY. Elizabeth Dunn, associate psychology professor at the University of British Columbia in Vancouver, Canada, and Michael Norton, associate marketing professor at Harvard Business School, have been studying whether people should spend money differently. Their goal is to figure out how to get the most happiness for the dollars spent. In Happy Money: The Science of Happier Spending, they explained their experiments:
 
"...We started doling out money to strangers. But there was a catch: rather than letting them spend it however they wanted, we made them spend it how wewanted...changing the way people spent their money altered their happiness over the course of the day. And we saw this effect even when people spent as little as $5...Shifting from buying stuff to buying experiences, and from spending on yourself to spending on others, can have a dramatic impact on happiness."
 
In addition, buying time can improve happiness. How do you buy time? By paying someone else to do tasks you don't like to do - cleaning, grocery shopping, home maintenance, and other tasks. This can relieve time pressure and free up time to do what you really want to do - and that can make you happier.
 
The authors suggest individuals ask a simple question before making any purchase: How will this purchase change the way I use my time? Make sure the answer aligns with the goal of having an abundance of time.
 
Weekly Focus - Think About It
 
"Happiness is when what you think, what you say, and what you do are in harmony."
--Mahatma Gandhi, Leader of Indian independence movement
 
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.
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Weekly Market Commentary

Weekly Market Commentary (December 3, 2018)
 
 The Markets
 
Hold on to your hats!
 
Recently, stocks have delivered a wild ride. During Thanksgiving week, U.S. stock markets took investor uncertainty on the chin, suffering a 3.8 percent drop, which was the worst performance in eight months. Then, last week, stocks reversed course. The Standard & Poor's 500 Index and the Nasdaq Composite delivered their strongest weekly gains in seven years, reported Ben Levisohn of Barron's.
 
So, what changed?
 
Two things appear to have influenced investors last week:
 
  1. The Federal Reserve may be becoming more dovish on interest rates. Comments made by Fed Chair Jerome Powell were interpreted to mean the Fed could stop raising the fed funds rate after December. Thomas Franck of CNBC reported:
 
"Powell on Wednesday said that rates were 'just below' the level that would be neutral for the economy - meaning they would neither speed up nor slow down economic growth. The comment diverged from a previous remark from Powell that rates were a 'long way' from the bank's aimed neutral level."
 
Some analysts have pondered whether recent rate hikes have been a mistake that will lead to recession.
 

2.Trade tensions between the United States and China could be resolved. President       

   Trump and President Xi Jinping will have a confab following the Group of 20 (G-20)  

    meeting in Buenos Aires. Randall Forsyth of Barron's offered this insight:

 
"The best case that can be reasonably expected is for a truce to be declared between the United States and China, to allow talks to continue over the thorny issues of trade barriers and intellectual property. And, equally important, to avoid the consequences of the imposition of even more draconian tariffs on the world economy."
 
There is little doubt volatility feels a lot better when share prices move higher than when they move lower. While uncertainty remains elevated, we may see additional jolts up and down. It may be a good idea to ensure your portfolio is well allocated and diversified. Holding diverse assets and investments won't prevent losses during downturns but it can help minimize losses as investors pursue of long-term financial goals.
 

Data as of 11/30/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
4.9%
3.2%
4.3%
9.9%
8.9%
13.0%
Dow Jones Global ex-U.S.
1.5
-12.3
-10.3
2.8
-0.1
5.9
10-year Treasury Note (Yield Only)
3.0
NA
2.4
2.2
2.8
2.7
Gold (per ounce)
-0.5
-6.1
-4.9
4.7
-0.2
4.6
Bloomberg Commodity Index
1.3
-6.4
-3.7
0.6
-7.8
-3.5
DJ Equity All REIT Total Return Index
2.6
4.1
3.8
7.7
10.4
17.6
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.
 
FOUR FABULOUS HOLIDAY GIFT IDEAS FOR YOUR PET...If you're a pet owner - and most Americans are - you may be looking for the perfect holiday gift for your dog, cat, bird, bunny, or reptile. Some pet owners will spring for a heated pet bed, a sparkling holiday sweater, or a new grooming set. Others may opt for a decadent pet treat.
 
Here are some of the indulgences available for today's pets:
 
  • A stay at a luxury cat hotel. Why not give your favorite cat the holiday of his or her dreams? Five star catteries have been established in Yorkshire and Kuala Lumpur (and, possibly, elsewhere). The VIP package in England includes, "...bedtime stories, catnip experience, relaxing Spa package, or a juicy prawn plate from [the] a la carte menu."
 
  • A relaxing day at the guinea pig spa. The British really know how to spoil their pets. Guinea pigs who travel to the English countryside can receive, "...the full works: a body massage with oils; full shampoo, condition, and blow-dry; haircut and styling; feet and ear massage; nails trimmed and filed; and even a photo shoot of the transformed pet."
 
  • A case of pooch hooch. Breweries and pubs around the world have begun to accommodate our desire to share all aspects of our lives with our faithful canine companions. Patrons can bring their pets to the bar and buy them a drink or a case of dog beer. According to VinePair.com, "Dog beer is non-alcoholic, un-carbonated, and doesn't contain hops. It does contain malt extract, along with a bevy of other healthy-for-dogs ingredients, so you might think of it like a nutritional homebrew, without the fermentation."
 
  • A few bottles of feline wine. You know how it is. The hounds are happy with dog grog, but cats have more refined tastes. They may prefer a pack of 'MosCATo' or 'Pinot Meow' - and now they can have it. One animal wine provider described its mission this way: "Our cat wine and dog wine creations started like any other radical idea...a product designed to help bridge the social divide between humans and their pets." What better way to ring in the New Year?
 
Don't fret if you haven't found just the right gift yet. Pets are usually appreciative of whatever you give them.
 
Weekly Focus - Think About It
 
"Owners of dogs will have noticed that, if you provide them with food and water and shelter and affection, they will think you are a god. Whereas owners of cats are compelled to realize that, if you provide them with food and water and shelter and affection, they draw the conclusion that they are gods."
--Christopher Hitchens, author and journalist
 
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.
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Weekly Market Commentary (November 19, 2018)

The Markets
 
Keep your eyes on the horizon.
 
Motion sickness happens when your body receives conflicting signals from your eyes, ears, and other body parts. One way to manage the anxiety and queasiness that accompany the condition is by keeping your eyes on the horizon.
 
The motion of the stock markets has been causing some investors to experience similar symptoms. Surprisingly, the remedy is the same: Keep your eyes on the horizon - your financial planning horizon.
 
A planning horizon is the length of time over which an investor would like to achieve his or her financial goals. For instance, perhaps you want to pay off student loans by age 30, fund a child's college tuition when they reach age 18, or retire at age 60.
 
When stock markets are volatile, an investor may receive conflicting signals from various sources, which may induce anxiety and queasiness. When you start to worry about the effects of market volatility on your portfolio, remember stock markets have trended higher, historically, even after significant downturns.
 
For instance, in 2008, during the financial crisis, the Dow Jones Industrial Average lost about 33 percent. It finished the year at 8,776. The drop sparked tremendous anxiety among investors who wondered whether their portfolios would ever recover.
 
Last week, the Dow closed at 25,413.
 
While stock markets have trended higher historically, there is no guarantee they always will. That's why asset allocation and diversification are so important. A carefully selected mix of assets and investments can reduce the impact of any single asset class or investment on a portfolio's performance. Keep in mind, of course, past performance is no guarantee of future results.
 
Last week, stock markets finished lower. MarketWatch reported U.S. stocks moved higher on Friday after President Trump indicated he might not pursue tariffs against China.
 
 
Data as of 11/16/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
-1.6%
2.3%
5.8%
10.1%
8.8%
12.4%
Dow Jones Global ex-U.S.
-0.8
-12.4
-9.9
3.4
-0.3
5.6
10-year Treasury Note (Yield Only)
3.1
NA
2.4
2.3
2.7
3.7
Gold (per ounce)
0.9
-5.7
-4.5
4.1
-1.0
5.2
Bloomberg Commodity Index
1.2
-4.8
-2.0
0.6
-7.3
-3.8
DJ Equity All REIT Total Return Index
0.4
2.7
1.7
8.2
9.5
15.5
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.
 
what is an apology worth? John List, an economist at the University of Chicago and Chief Economist for a ride-sharing app, needed to go from his house to the hotel where he was a keynote speaker. So, of course, he called his ride-sharing company. The experience was less than stellar, as he explained to Steven Dubner of Freakonomics Radio:
 
"So I get in the back of the car and it says I'm going to be there in 27 minutes. So I go into my own land of working on my slides, because of course I'm doing things at the last minute. I lose track of time. I look back up about 25 minutes later, and I'm back in front of my house...And I said, 'Oh my god, what happened?' The driver said, 'I got really confused, and the GPS switched, and we turned around and I thought that you changed the destination, so I went back.' So I told her immediately, 'Turn around, go back.' I missed part of my panel."
 
List also missed an apology, which neither the driver nor the company offered.
 
He decided to investigate how much mistakes, like the one he experienced, cost the company and whether an apology would reduce the cost. As it turned out, the cost of 5 percent of trips that resulted in customers being 10 or 15 minutes late was 5 to 10 percent in lost revenue.
 
List enlisted the help of researchers Benjamin Ho of Vassar College, Basil Halperin of Massachusetts Institute of Technology, and Ian Muir of the ride-sharing company, and conducted a field experiment on clients of the ride-sharing company. They discovered apologies are not universally successful at reducing the costs associated with a bad experience. The most successful apologies had a monetary value. In their case, a $5 coupon produced a 2 percent increase in net spending.
 
The team discovered another important fact. Apologies lose value and can inflict reputational damage when a company has to apologize multiple times.
 
No surprise there.
 
Weekly Focus - Think About It
 
"When dealing with people, remember you are not dealing with creatures of logic, but creatures of emotion."
--Dale Carnegie, American writer and lecturer
 
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.
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Weekly Market Commentary (November 12, 2018)

The Markets
 
How are you feeling about financial markets?
 
Some votes are still being counted but investors appear to be happy with the outcome of mid-term elections. Major U.S. stock indices in the United States moved higher last week, and the American Association of Individual Investors (AAII) Sentiment Survey reported:
 
"Optimism among individual investors about the short-term direction of stock prices is above average for just the second time in nine weeks...Bullish sentiment, expectations that stock prices will rise over the next six months, rose 3.4 percentage points to 41.3 percent. This is a five-week high. The historical average is 38.5 percent."
 
Before you get too excited about the rise in optimism, you should know pessimism also remains at historically high levels. According to AAII:
 
"Bearish sentiment, expectations that stock prices will fall over the next six months, fell 3.3 percentage points to 31.2 percent. The drop was not steep enough to prevent pessimism from remaining above its historical average of 30.5 percent for the eighth time in nine weeks."
 
So, from a historic perspective, investors are both more bullish and more bearish than average. If Sir John Templeton was correct, the mixed emotions of investors could be good news for stock markets. Templeton reportedly said, "Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria."
 
While changes in sentiment are interesting market measurements, they shouldn't be the only factor that influences investment decision-making. The most important gauge of an individual's financial success is his or her progress toward achieving personal life goals - and goals change over time.
 

Data as of 11/9/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
2.1%
4.0%
7.6%
10.2%
9.4%
11.7%
Dow Jones Global ex-U.S.
-0.3
-11.7
-9.4
3.2
0.3
4.7
10-year Treasury Note (Yield Only)
3.2
NA
2.3
2.3
2.8
3.8
Gold (per ounce)
-1.7
-6.6
-5.7
3.6
-1.1
4.9
Bloomberg Commodity Index
-1.2
-6.0
-5.2
-0.5
-7.7
-4.4
DJ Equity All REIT Total Return Index
3.5
2.3
1.2
8.2
9.6
13.9
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
 
IS A ZEAL OF ZEBRAS A BETTER INVESTMENT THAN A BLESSING OF UNICORNS? Collective nouns are the names we use to describe collections or significant numbers of people, animals, and other things. The Oxford English Dictionary offered a few examples:
 
  • A gaggle of geese
  • A crash of rhinoceros
  • A glaring of cats
  • A stack of librarians
  • A groove of DJs
 
In recent years, some investors have shown great interest in blessings of unicorns. 'Unicorns' are private, start-up companies that have grown at an accelerated pace and are valued at $1 billion.
 
In early 2018, estimates suggested there were approximately 135 unicorns in the United States. Will Gornall and Ilya A. Strebulaev took a closer look and found some unicorns were just gussied-up horses, though, according to research published in the Journal of Financial Economics.
 
The pair developed a financial model for valuing unicorn companies and reported, "After adjusting for these valuation-inflating terms, almost one-half (65 out of 135) of unicorns lose their unicorn status."
 
Clearly, unicorn companies must be thoroughly researched. There is another opportunity Yifat Oron suggested deserves more attention from investors: zebra companies. Oron's article in Entrepreneur explained:
 
"Zebra companies are characterized by doing real business, not aiming to disrupt current markets, achieving profitability and demonstrating it for a while, and helping to solve a societal problem...zebra companies...are for-profit and for a cause. We think of these businesses as having a 'double bottom line' - they're focused on alleviating social, environmental, or medical challenges while also tending to their own profitability."
 
Including both types of companies in a portfolio seems like a reasonable approach.
 
If you were to choose a collective noun to describe investors, what would it be? An exuberance? A balance? An influence?
 
Weekly Focus - Think About It
 
"In his learnings under his brother Mahmoud, he had discovered that long human words rarely changed their meanings, but short words were slippery, changing without a pattern...Short human words were like trying to lift water with a knife."
--Robert Heinlein, American science fiction writer
 
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.
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Weekly Market Commentary November 5, 2018

The Markets
 
Stocks recovered some ground last week and then stumbled over unemployment.
 
Major U.S. stock indices faltered Friday after the Bureau of Labor Statistics (BLS) reported on a popular 'lagging' economic indicator - unemployment. (Remember, lagging indicators describe what has happened in the past.) The BLS reported:1, 2, 3
 
"The unemployment rate remained at 3.7 percent in October, and the number of unemployed persons was little changed at 6.1 million. Over the year, the unemployment rate and the number of unemployed persons declined by 0.4 percentage point and 449,000, respectively."
 
Reuters reported the number of Americans receiving unemployment benefits was at the lowest level in 45 years. That's good news, but it's old news. Again, unemployment is a lagging indicator and the report reflected what happened in October.4
 
The stock market, on the other hand, is a 'leading' economic indicator. It moves in response to investors' expectations for the future - and recent gyrations suggest investors aren't certain what to think. Barron's Daren Fonda wrote, "The market's 6.9 percent slide in October and the stock averages' wild swings are testing everyone's mettle."2, 5
 
Economists are uncertain about what's to come, too. Kevin L. Kliesen, in an Economic Synopseson the St. Louis Federal Reserve website, wrote, "Historically, a trough in the unemployment rate also tends to be a reliable predictor of a business recession...an economic analyst is nonetheless never sure that a trough has occurred. Indeed, the unemployment rate can move up and down over the expansion."6
 
There is one thing many analysts think is likely. They expect the Federal Reserve to increase the Fed funds rate so the U.S. economy does not overheat. Paul Kiernan at The Wall Street Journalreported, "Robust hiring and wage gains last month leave the Federal Reserve all but certain to raise interest rates in December and on course to continue gradually lifting them next year."7
Higher interest rates are expected to keep inflation in check by slowing economic growth.8
 
Despite Friday's stumble, major U.S. stock indices finished the week higher.1
 

Data as of 11/2/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
2.4%
1.9%
5.6%
9.0%
9.0%
10.9%
Dow Jones Global ex-U.S.
3.9
-11.4
-9.3
2.7
0.1
4.8
10-year Treasury Note (Yield Only)
3.2
NA
2.4
2.2
2.6
3.9
Gold (per ounce)
-0.1
-5.0
-3.7
2.8
-1.4
5.4
Bloomberg Commodity Index
-1.3
-4.9
-3.2
-1.2
-7.4
-4.4
DJ Equity All REIT Total Return Index
0.8
-1.1
0.2
5.0
7.9
12.0
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.
 
HERE'S AN UNEXPECTED RETIREMENT SAVING TRICK. If you're concerned your adult children are not saving enough for retirement, send them a photo of themselves that's altered so they appear to be older, perhaps age 60 or 70. (You can do this for yourself, too.)9
 
One reason Americans don't begin saving early enough, or save as much as they should for retirement, is 'present bias.' When asked to choose between two possible rewards, research shows that people tend to choose the one that will be received sooner.10
 
For instance, imagine you have chocolate and fruit salad. Which will you choose to eat today and which will you choose to eat next week? Researchers found that 83 percent of people chose chocolate today and fruit salad next week.11
 
Try this one.
 
You can watch one movie today and another movie tomorrow. Your choices include 'Anchorman,' 'Clear and Present Danger,' 'The Piano,' and 'Schindler's List.' What movie will you watch today? Which will you watch tomorrow?
 
Researchers found a higher percentage of participants chose to watch lighter films on the day they were asked and more intellectually taxing films later.12
 
When presented with the choice to vacation today or save for retirement, it's little surprise many people choose the former. The rewards associated with retirement are often far into the future. As a result, until a person is within a decade or so of retirement, it's easy to rationalize spending on other things and not setting aside money for the future.12
 
There is a way to overcome present bias. When people 'get to know' their older selves by spending time looking at altered photos, they tend to save more for the future.9
 
Weekly Focus - Think About It
 
"If we now care little about ourselves in the further future, our future selves are like future generations. We can affect them for the worse, and, because they do not now exist, they cannot defend themselves. Like future generations, future selves have no vote, so their interests need to be specially protected. Reconsider a boy who starts to smoke, knowing and hardly caring that this may cause him to suffer greatly fifty years later. This boy does not identify with his future self."
--Derek Parfit, British philosopher13
 
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.
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