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Weekly Market Commentary (February 12, 2018)

Weekly Market Commentary (February 12, 2018)

 

The Markets

 

Back to reality...

 

After months of eerie calm, stock market volatility has returned. The CBOE Volatility Index (VIX) - a measure of how turbulent investors expect stock markets to be during the next 30 days - appeared to fall asleep in November 2016. For more than a year, a level of serenity that is rarely associated with stock markets prevailed and U.S. share prices moved steadily higher.

 

It appears that time is behind us. Barron's wrote:

 

"With February's swift stock market correction, volatility has arrived and will probably stay awhile. The downturn last week ended a streak of 404 trading days without a 5 percent drop in stock prices from the previous high - the longest such streak in market history.

 

The last correction came in February 2016, when stocks dropped 15 percent. Investors then fretted that Chinese economic growth might be slowing, which turned out to be a false alarm. Long term, the latest nose dive might yet become just a bull speed bump, but there's already been plenty of pain."

 

So, is this a speed bump or is it the beginning of a bear market? A bear market, generally, is a decline of 20 percent or more, and it is normally accompanied by a recession, which is a significant decline in economic activity.

 

In general, financial firms and publications do not anticipate a recession in 2018, but forecasting recessions can be challenging.

 

No matter what happens, the key is keeping your head. At times like these, emotion grabs investors by the throat, and it can be difficult to recall markets and economies tend to move in cycles. Historically, bull markets lead to bear markets, which lead to bull markets. Likewise, economic expansions are followed by contractions (recessions), which are followed by expansions.

 

U.S. stock markets rallied on Friday, but the Standard & Poor's 500 Index, Dow Jones Industrial Index, and NASDAQ all finished the week more than 5 percent lower.

 

 

Data as of 2/9/18

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

-5.2%

-2.0%

13.5%

8.6%

11.5%

6.9%

Dow Jones Global ex-U.S.

-6.3

-2.7

16.0

4.4

3.7

0.9

10-year Treasury Note (Yield Only)

2.8

NA

2.4

2.0

2.0

3.6

Gold (per ounce)

-1.3

1.4

6.3

2.0

-4.5

3.7

Bloomberg Commodity Index

-3.9

-2.9

-3.3

-6.1

-9.4

-8.0

DJ Equity All REIT Total Return Index

-4.2

-9.6

-2.9

1.9

6.7

7.3

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.

 

market downturns are not a destination. Markets and economies are cyclical. For instance, from 1945 through 2009 (the start of the current expansion), the United States experienced 11 economic cycles. The average recession lasted for about 11 months and the average expansion persisted for about 58 months, reported the National Bureau for Economic Research.

 

After the recent market decline, many people are concerned the bull market may have run its course, and a bear market may be ahead. Since bear markets usually mark the beginning of recessions, let's take a look at what some leading financial companies and publications have to say about their expectations for 2018:

 

"The U.S. expansion is on course to become the longest on record, stirring concerns it is about to run out of steam. But is it? The recently enacted tax overhaul and higher federal spending could add 0.8 percentage point to U.S. GDP [gross domestic product] growth in 2018, we estimate. This could tip the balance toward accelerating growth. Such a boost could shorten the cycle's expiration date to two or three years."

--BlackRock Investment Institute, February 7, 2018

 

"Most analysts think that while profits are growing and the economy is healthy, the stock market will be supported. But there is scope for a lot more choppiness as investors await the Federal Reserve's rate decisions and look for data to indicate whether inflationary pressures are rising."

--The Economist, February 8, 2018

 

"Perhaps the over-arching risk is complacency. While the current conjuncture might appear to be a sweet spot for the global economy, prudent policymakers must look beyond the near term...The next recession may be closer than we think, and the ammunition with which to combat it is much more limited than a decade ago, notably because public debts are so much higher."

--IMF Blog, January 22, 2018

"While we expect volatility will be higher this year than in 2017, with company fundamentals looking solid and synchronized global economic growth set to continue, it seems reasonable to expect that stocks will move higher over the coming year."

--J.P. Morgan Asset Management, February 5, 2018

 

"An overheating global economy could mean a more rapid shift by central banks to rein in stimulus, often a precursor to recession. Yet, we still believe a recession is not on the near-term horizon."

--Schwab market commentary, February 9, 2018

 

Forecasting is a difficult task. Time will tell.

 

Weekly Focus - Think About It

 

"Stock market goes up or down, and you can't adjust your portfolio based on the whims of the market, so you have to have a strategy in a position and stay true to that strategy and not pay attention to noise that could surround any particular investment."

--John Paulson, Investment manager

 

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 (January 29, 2018)

 

The Markets

 

The numbers are coming in.

 

Publicly-traded companies report their earnings and sales numbers for the previous quarter in the current quarter. For example, fourth quarter's sales and earnings are reported during the first quarter of the year, and first quarter's sales and earnings will be reported during the second quarter, and so on.

 

Through last week, about one-fourth of the companies in the Standard & Poor (S&P)'s 500 Index had reported actual sales and earnings for the fourth quarter of 2017. As far as sales go, a record number - 81 percent - of companies sold more than expected during the fourth quarter. That was quite an improvement. FactSet reported:

 

"During the past year (four quarters), 64 percent of the companies in the S&P 500 have reported sales above the mean estimate on average. During the past five years (20 quarters), 56 percent of companies in the S&P 500 have reported sales above the mean estimate on average."

 

The mean is the average of a group of numbers.

 

The money a company makes through sales is called revenue. For instance, if a lemonade stand sells 100 glasses of lemonade for $1 each, then the proprietors have earned $100. That is the stand's 'revenue.' Of course, as every parent who has financed a lemonade stand knows, revenue doesn't include the cost of the product. 'Earnings' are what the company has left after expenses - the bottom line. If every glass of lemonade cost 50 cents, then the stand's earnings are $50.

 

Companies in the S&P 500 are doing pretty well on earnings, too. About three out of four companies have reported earnings higher than expected. Overall, earnings are 4.5 percent above estimates.

 

Through Friday, annual earnings growth for S&P 500 companies was 10.1 percent. It's still early in the fourth quarter earnings season, but the data so far seem likely to confirm that 2017 was a bright, sun-shiny year for U.S. companies.

 

 

Data as of 1/26/18

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

2.2%

7.5%

25.1%

11.8%

13.9%

7.8%

Dow Jones Global ex-U.S.

1.9

7.0

28.2

7.8

5.5

1.6

10-year Treasury Note (Yield Only)

2.7

NA

2.5

1.8

2.0

3.6

Gold (per ounce)

1.4

4.4

13.7

1.8

-4.0

3.9

Bloomberg Commodity Index

2.6

3.0

2.9

-3.4

-8.4

-7.1

DJ Equity All REIT Total Return Index

1.7

-2.8

4.6

2.8

8.2

7.4

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.

 

certain parts of the circular economy probablyadapttocities andtowns better than they do to rural areas.

 

What is the circular economy?

 

It is "a system that reduces waste through the efficient use of resources. Businesses that are part of the circular economy seek to redesign the current take/make/dispose economy, a model which relies on access to cheap raw materials and mass production. For example, car sharing addresses the inefficiency of privately owned cars - which are typically used for less than one hour a day," explains Morgan Stanley.

 

Imagine not owning a car.

 

Clearly, it's not something that would work everywhere. However, if you live in a city or town that has public transportation, ride sharing, car rentals, and bicycles, it's possible. If you're retired and you can organize your days in the way you like, it may even be sensible because owning a car is expensive. Transportation costs are the second highest budget item for most households, reports U.S. News. Housing costs top the list.

 

Giving up a car could help households save a lot of money.

 

According to AAA, owning and operating a new car in 2017 cost about $8,469 annually, on average, or $706 a month. Small sedans are the least costly ($6,354 per year), on average, and pickup trucks are the most expensive ($10,054 per year), on average, of the vehicles in the study. The calculations include sales price, depreciation, maintenance, repair, and fuel costs.

 

AAA's estimate does not include insurance. In 2017, the national average premium for a full-coverage policy was $1,318 annually, according to Insure.com. Auto insurance premiums are highest in Michigan ($2,394) and lowest in Maine ($864).

 

Combining the averages, the cost of auto ownership is almost $10,000 a year. It's food for thought.

 

Weekly Focus - Think About It

 

"Conservation is a state of harmony between men and land."

--Aldo Leopold, American author and conservationist

 

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 (January 16, 2018)
 
 
The Markets
 
Inflation, inflation, where's the inflation?
 
The U.S. Federal Reserve has been raising interest rates in anticipation of higher inflation.
 
In its 2018 forecast, Goldman Sachs indicated it expected to see "a gradual increase in global core inflation, albeit to levels that are still below central bank targets in most places."
 
At year-end 2017, Barron's wrote:
 
"Economists have raised the specter of inflation for several years, only to be disproved time and again. There's reason to believe, however, that 2018 will be different - that prices will finally rise in a more sustained pattern, forcing stock- and bond-market investors to react to a new trend. 'An unanticipated acceleration in inflation is probably the biggest risk for markets in 2018,' says Larry Hatheway, chief economist at GAM Investments...Economists like Hatheway aren't expecting runaway inflation, as in the days of disco and leisure suits, when prices rose by double digits. They're girding for an annual increase of 2 percent to 2.5 percent at the most."
 
Last week, data released by the Department of Labor showed U.S. inflation, as measured by the Consumer Price Index, ticked higher (0.1 percent) during December. With food and energy excluded, the index was up 0.3 percent. Shelter, which reflects the cost of rent, rose the most (0.4 percent). The indices for medical care, new vehicles, used vehicles, and vehicle insurance all increased during December.
 
Some publications are predicting December's uptick in inflation will lead to a March rate hike by the Federal Reserve. It's difficult to say with certainty, however, until January's inflation report is released on February 14.
 

Data as of 1/12/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
1.6%
4.2%
22.7%
11.2%
13.6%
7.0%
Dow Jones Global ex-U.S.
0.9
3.7
26.1
7.8
5.0
0.6
10-year Treasury Note (Yield Only)
2.6
NA
2.4
1.9
1.9
3.8
Gold (per ounce)
1.2
2.8
10.6
2.9
-4.4
4.0
Bloomberg Commodity Index
1.0
0.7
0.3
-4.5
-8.7
-7.5
DJ Equity All REIT Total Return Index
-3.1
-5.1
2.9
3.1
8.1
8.0
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 LONG DO YOU WANT TO LIVE? In 2013, the Pew Research Center asked Americans about the ideal lifespan. More than two-thirds (69 percent) gave an age between 79 and 100. Four percent wanted to live to be anywhere from 101 to 120, and another four percent wanted to live beyond 120.
 
It's interesting to note the lifespans named by survey respondents generally matched to some scientists' predictions about the hardiness of humans. One of the authors of a much-debated article in the journal Nature reported, "It seems highly likely we have reached our ceiling...From now on, this is it. Humans will never get older than 115."
 
A slew of billionaire investors falls into the dissenting camp. They're starting companies and funding research with the goal of making death optional, reported The New Yorker.
 
LiveMint wrote:
 
"Death is an old technology but, like the umbrella, it has endured...Most of the billionaires who have waged the war against ageing and death are from Silicon Valley because they are the sort of people who have been trained to believe that a problem, because it is a problem, must have a solution."
 
While human longevity is interesting to think about, it also has some practical applications. For instance, the life expectancy chosen for a retirement plan should be carefully considered. It influences the amount saved, the investments chosen, and the retirement income withdrawn.
 
If you would like to talk about your retirement and how it factors into your financial plans, give us a call.
 
Weekly Focus - Think About It
 
"It's paradoxical, that the idea of living a long life appeals to everyone, but the idea of getting old doesn't appeal to anyone."
--Andy Rooney, American 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

Weekly Market Commentary (November 27, 2017)

 

The Markets

 

There was a lot to be thankful for last week.

 

Stock markets around the world may have ripened to full-slip sweetness this year. Emerging markets have delivered the most attractive returns year-to-date. The MSCI Emerging Markets Index was up 34 percent year-to-date, last week. The United States and Europe have marched higher, too. The Standard & Poor's 500 Index was up about 16 percent year-to-date, while the Euro Stoxx Index was up 11.3 percent, reported Barron's and The Wall Street Journal.

 

The question is, "Have markets become overripe?' As you might expect, opinions on the matter vary:

 

  • Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC, "I don't see the elements of a bear market but I certainly think 2018 can bring us a correction or at least just a more challenging market."

 

  • David Lebovitz, global market strategist with J.P. Morgan Asset Management, wrote in Barron's, "Healthy earnings growth suggests that there is still upside in U.S. equities, but this area of the global equity market is most expensive relative to its long-term average. However, history has shown us that expensive stock markets can get more expensive before they get cheaper, as multiples tend to expand in the final stages of a bull market."

 

  • Peter Boockvar, chief market analyst at the Lindsey Group, told CNBC, "This boat is now standing room only...I still can't figure out why some think there is no euphoria in markets when one has to go back 30 years to see this wide a spread between bulls and bears."

 

Boockvar was referring to an early November Investors Intelligence Sentiment Survey, which gauges the attitudes of U.S. advisors. CNBC reported 63.5 percent of those surveyed were bullish and just 14.4 percent were bearish. A gap of 30 points is a sign of elevated risk, while a 40-point difference suggests defensive measures may be appropriate.

 

Individual investors aren't quite as confident. Last week's AAII Sentiment Survey showed 35.5 percent were bullish, 29 percent were bearish, and the remainder were neutral. It's important to note, there was a distinct shift toward bullishness and away from bearishness in last week's survey.

 

 

Data as of 11/24/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.9%

16.2%

17.6%

7.9%

13.1%

6.3%

Dow Jones Global ex-U.S.

1.8

23.0

25.8

4.1

5.5

-0.3

10-year Treasury Note (Yield Only)

2.3

NA

2.4

2.3

1.7

3.9

Gold (per ounce)

0.5

11.3

8.8

2.5

-5.9

4.5

Bloomberg Commodity Index

0.3

-0.6

2.3

-9.5

-9.5

-7.1

DJ Equity All REIT Total Return Index

0.5

9.8

14.5

8.1

10.9

8.1

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.

 

and some people worry about zombies. Turkeys have played a central role in the history of the United States. In a letter to his daughter, Ben Franklin offered praise for the bird, which he called, "...a true original native of America...(though a little vain and silly tis true, but not the worse emblem for that) a bird of courage, and would not hesitate to attack a grenadier of the British guards who should presume to invade his farm yard with a red coat on."

 

He was correct about turkeys' aggressive streaks, but lately they haven't been after the British. Nope. Turkeys have been terrorizing Americans. WBUR in Boston reports turkeys, which had disappeared from New England in the 1800s, have been successfully reintroduced to the region.

 

The victory isn't being celebrated in all quarters, though. According to reports, turkeys seem to prefer suburbia where they've been "clashing with residents who say they destroy gardens, damage cars, chase pets, and attack people."

 

The problem isn't unique to Massachusetts.

 

In fact, turkey aggression has become so acute wildlife officials have offered the equivalent of a wild turkey survival guide. First, they recommend, cover windows and shiny objects (turkeys may respond aggressively to sparkly items and their own reflections). Second, Americans who are being intimidated by turkeys should not "...hesitate to scare or threaten a bold, aggressive turkey with loud noises, swatting with a broom, or water sprayed from a hose. A dog on a leash is also an effective deterrent."

 

Climbing trees is not an effective way to escape the menacing fowl. Domestic turkeys cannot fly, but wild turkeys can soar at speeds of up to 55 mph for short distances, according to LiveScience.com. Next time you spot a rafter of turkeys, remember: "Turkeys in the wild are far stronger and faster than the ones that land on Thanksgiving tables."

 

Weekly Focus - Think About It

 

"Three econometricians [people who prepare economic statistics] go hunting, and they spot a large deer. The first econometrician fires but his shot goes three-feet wide to the left. The second econometrician, he fires also, but he misses. His shot goes three feet to the right. The third econometrician starts jumping up and down shouting: We got it! We got it!"

--Planet Money, radio show

 

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 (November 27, 2017)

 

The Markets

 

There was a lot to be thankful for last week.

 

Stock markets around the world may have ripened to full-slip sweetness this year. Emerging markets have delivered the most attractive returns year-to-date. The MSCI Emerging Markets Index was up 34 percent year-to-date, last week. The United States and Europe have marched higher, too. The Standard & Poor's 500 Index was up about 16 percent year-to-date, while the Euro Stoxx Index was up 11.3 percent, reported Barron's and The Wall Street Journal.

 

The question is, "Have markets become overripe?' As you might expect, opinions on the matter vary:

 

  • Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC, "I don't see the elements of a bear market but I certainly think 2018 can bring us a correction or at least just a more challenging market."

 

  • David Lebovitz, global market strategist with J.P. Morgan Asset Management, wrote in Barron's, "Healthy earnings growth suggests that there is still upside in U.S. equities, but this area of the global equity market is most expensive relative to its long-term average. However, history has shown us that expensive stock markets can get more expensive before they get cheaper, as multiples tend to expand in the final stages of a bull market."

 

  • Peter Boockvar, chief market analyst at the Lindsey Group, told CNBC, "This boat is now standing room only...I still can't figure out why some think there is no euphoria in markets when one has to go back 30 years to see this wide a spread between bulls and bears."

 

Boockvar was referring to an early November Investors Intelligence Sentiment Survey, which gauges the attitudes of U.S. advisors. CNBC reported 63.5 percent of those surveyed were bullish and just 14.4 percent were bearish. A gap of 30 points is a sign of elevated risk, while a 40-point difference suggests defensive measures may be appropriate.

 

Individual investors aren't quite as confident. Last week's AAII Sentiment Survey showed 35.5 percent were bullish, 29 percent were bearish, and the remainder were neutral. It's important to note, there was a distinct shift toward bullishness and away from bearishness in last week's survey.

 

 

Data as of 11/24/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.9%

16.2%

17.6%

7.9%

13.1%

6.3%

Dow Jones Global ex-U.S.

1.8

23.0

25.8

4.1

5.5

-0.3

10-year Treasury Note (Yield Only)

2.3

NA

2.4

2.3

1.7

3.9

Gold (per ounce)

0.5

11.3

8.8

2.5

-5.9

4.5

Bloomberg Commodity Index

0.3

-0.6

2.3

-9.5

-9.5

-7.1

DJ Equity All REIT Total Return Index

0.5

9.8

14.5

8.1

10.9

8.1

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.

 

and some people worry about zombies. Turkeys have played a central role in the history of the United States. In a letter to his daughter, Ben Franklin offered praise for the bird, which he called, "...a true original native of America...(though a little vain and silly tis true, but not the worse emblem for that) a bird of courage, and would not hesitate to attack a grenadier of the British guards who should presume to invade his farm yard with a red coat on."

 

He was correct about turkeys' aggressive streaks, but lately they haven't been after the British. Nope. Turkeys have been terrorizing Americans. WBUR in Boston reports turkeys, which had disappeared from New England in the 1800s, have been successfully reintroduced to the region.

 

The victory isn't being celebrated in all quarters, though. According to reports, turkeys seem to prefer suburbia where they've been "clashing with residents who say they destroy gardens, damage cars, chase pets, and attack people."

 

The problem isn't unique to Massachusetts.

 

In fact, turkey aggression has become so acute wildlife officials have offered the equivalent of a wild turkey survival guide. First, they recommend, cover windows and shiny objects (turkeys may respond aggressively to sparkly items and their own reflections). Second, Americans who are being intimidated by turkeys should not "...hesitate to scare or threaten a bold, aggressive turkey with loud noises, swatting with a broom, or water sprayed from a hose. A dog on a leash is also an effective deterrent."

 

Climbing trees is not an effective way to escape the menacing fowl. Domestic turkeys cannot fly, but wild turkeys can soar at speeds of up to 55 mph for short distances, according to LiveScience.com. Next time you spot a rafter of turkeys, remember: "Turkeys in the wild are far stronger and faster than the ones that land on Thanksgiving tables."

 

Weekly Focus - Think About It

 

"Three econometricians [people who prepare economic statistics] go hunting, and they spot a large deer. The first econometrician fires but his shot goes three-feet wide to the left. The second econometrician, he fires also, but he misses. His shot goes three feet to the right. The third econometrician starts jumping up and down shouting: We got it! We got it!"

--Planet Money, radio show

 

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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