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Weekly Market Commentary (February 11, 2020)

Weekly Market Commentary (February 11, 2020)
 
The Markets
  
Last week, major U.S. indices posted strong gains. That's welcome news, but the drivers behind share price appreciation appear to have little to do with company fundamentals.
 
Fourth quarter earnings season is underway. During earnings season, companies let investors know how profitable they were during the previous quarter. With 45 percent of companies in the Standard & Poor's 500 (S&P 500) Index reporting, earnings are slightly down. If the trend continues, this will be the fourth consecutive quarter of year-over-year earnings declines, according to FactSet.
 
Falling company profits, in tandem with rising share prices, have made U.S. stocks very expensive. The price-to-earnings ratio of the S&P 500 Index was 25.04 on Friday. That's significantly higher than its long-term average of 15.78.
 
Expectations for economic growth may have been behind last week's gains. Axios reported, "U.S. economic data had been strengthening ahead of the [coronavirus] outbreak - last month the all-important services sector notched its best reading since September, a private payrolls survey showed the highest job growth in five years, and consumer confidence held at historically high levels."
 
The Economist Intelligence Unit (EIU) estimates U.S. economic growth will be 1.7 percent in 2020, although the coronavirus could create issues that slow growth.
 
Economic growth also could be inhibited by the national debt. The Federal Reserve Bank of St. Louis showed U.S. debt at about 105 percent of gross domestic product (GDP) at the end of the third quarter of 2019 (GDP is the value of all goods and services produced by the United States). According to the Council on Foreign Relations, high levels of debt can slow economic growth and divert investment from infrastructure, education, and research.
 
Ben Levisohn of Barron's suggested last week's gains might have been the result of limited supply and high demand for U.S. stocks, "...because the world's problems might actually make U.S. markets more attractive." Stock market gains may also owe something to supportive central bank policies.
 
During the next few weeks, stay calm and expect some volatility.
 

Data as of 2/7/20
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) 3.2% 3.0% 23.0% 13.2% 10.2% 12.2%
Dow Jones Global ex-U.S. 1.9 -0.9 9.8 5.6 2.8 3.5
10-year Treasury Note (Yield Only) 1.6 NA 2.7 2.4 2.0 3.6
Gold (per ounce) -0.7 3.3 20.1 8.5 4.9 4.0
Bloomberg Commodity Index -0.1 -7.6 -6.6 -5.2 -6.3 -5.2
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; 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, MarketWatch, 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.
 
DO YOU KNOW A FINANCIAL TWO-TIMER? In an online poll conducted by YouGov, CreditCards.com asked people how open and honest they are with their spouses and partners about money. The survey discovered financial infidelity is not uncommon. Respondents cheat financially in a variety of ways, including:
 
34 percent have spent more than their spouse/partner would approve
12 percent have secret debt
10 percent have secret credit card accounts
  9 percent have secret savings accounts
  8 percent have secret checking accounts
           
Respondents had a variety of reasons for secretive financial dealings:
 
36 percent said privacy and control were important
27 percent said they never felt the need to share
26 percent were embarrassed by the way they handle money (frequently cited by wealthiest respondents.)
 
Janice Wood of PsychCentral wrote, "Financial infidelity can take as big a toll on relationships as sexual infidelity and emotional dishonesty...A few things that couples can do to prevent financial infidelity is to talk more, get on the same page regarding both joint and individual goals they might have, and also budget for some occasional indulgences along the way of achieving their long-term financial goals..."
 
If you're looking for a great Valentine's Day gift, talking with your spouse or partner about money is a choice that could deliver long-term rewards.
 
Weekly Focus - Think About It
 
"It is better to be hated for what you are than to be loved for what you are not."
--Andre Gide, Author and Nobel Prize winner
 
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 (February 4, 2020)

The Markets
Prepare yourself. There is a good chance markets will be volatile in the coming weeks.
 
Precautions designed to slow the spread of the coronavirus may also slow Chinese economic growth and, by extension, global economic growth.
 
On Thursday, the World Health Organization declared the coronavirus to be an international health emergency. The U.S. State Department issued a travel advisory for China, and major U.S. airlines suspended flights to the nation, reported Forbes.
 
In six Chinese provinces, factories and businesses are shuttered until at least February 10. The closures have created issues for global supply chains, and Financial Times reported, "Companies from luxury retailers to airlines and banks are reeling as the disease accelerates."
 
Events sparked a bond rally as investors shifted assets into safe haven investments. The Economist wrote that previous viruses have not had lasting effects on economic growth. "Other recent epidemics have reinforced the impression that economists should not be overly worried, so long as good doctors are on the job. Neither avian flu in 2006 nor swine flu in 2009 dimmed the global outlook. Yet even flint-hearted investors are wondering whether the new epidemic might be worse. Stocks in Hong Kong have fallen by nearly 10 percent as reported infections have steadily increased. Tremors have also rippled through global markets."
 
China's government is prepared to step into the breach. On Saturday, Reuters reported, "Chinese authorities have pledged to use various monetary policy tools to ensure liquidity remains reasonably ample and to support firms affected by the virus epidemic..." The Chinese central bank is expected to begin offering support on February 3 before the Chinese stock market reopens for the first time since January 23.
 
The European Union may also be in need of economic stimulus. Financial Times reported the Eurozone economy came to a virtual standstill (up 0.1 percent) in the fourth quarter and grew just 1.2 percent during 2019. Economies in France and Italy, the second and third largest in the region, both contracted during the fourth quarter.
 
Major U.S. stock indices moved lower last week.
 

Data as of 1/31/20
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) -2.1% -0.2% 19.3% 12.3% 9.8% 11.5%
Dow Jones Global ex-U.S. -3.1 -2.7 7.2 5.0 2.6 2.9
10-year Treasury Note (Yield Only) 1.5 NA 2.6 2.5 1.7 3.7
Gold (per ounce) 1.3 4.0 19.7 9.3 4.5 3.8
Bloomberg Commodity Index -3.2 -7.5 -7.3 -5.1 -5.9 -5.4
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; 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, MarketWatch, 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.
 
The Things We Do For Pets. While there is some debate about how many American households include pets - The Washington Post reports estimates from the American Pet Products Association are about 11 percent higher than those of the American Veterinary Medical Association - there is little debate about how much people love their pets.
 
With Valentine's Day coming up soon, you may be wondering how to show your pet you care. Here are a few ideas:
 
  • Doggie playlists and podcasts. Want to make certain your pup doesn't get lonely (or into too much trouble) when left at home alone? One major media company is making canine playlists and podcasts. Reuters reported the podcasts feature, "...soothing music, 'dog-directed praise,' stories, and messages of affirmation and reassurance narrated by actors to alleviate stress..."
 
  • Video chat or...bark? Wouldn't it be great to take a break and chat with your pet during lunch hour? One social media user, cited by The Insider, thought so. "I taught my dog to accept [video] calls through my laptop at home while I'm at work. Then, we just talk."
 
  • Travel somewhere fun. Millions of people travel with their pets, according to Forbes. One travel magazine publishes a pet-friendly article each month. The LA Travel Magazine archive includes titles like, 'TopDawg' Resorts in the U.S. and The Pawfect Guide to Dog Beaches in SoCal.
 
  • Just don't supersize it. A pet owner, cited by the Odyssey, occasionally indulges her pets with people food. "When we go out for [fast food] or something, my mom and I buy them each their own burger and sometimes include fries so they can have a meal."
 
On Valentine's Day, remember to do something nice for the people you love, too.
 
Weekly Focus - Think About It
 
"The more cats you have, the longer you live. If you have a hundred cats, you'll live ten times longer than if you have ten. Someday this will be discovered, and people will have a thousand cats and live forever."
                                                                                                                                                                                                                                --Charles Bukowski, Poet and novelist
 
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 (January 30, 2020)

Weekly Market Commentary (January 30, 2020)
 
The Markets
  
Markets hunkered down last week.
 
News of the coronavirus outbreak in Wuhan, China unsettled investors around the world. The respiratory infection is related to severe acute respiratory syndrome (SARS) and Middle East respiratory syndrome (MERS), reported WebMD.
 
Previous virus outbreaks have affected global economic growth. Research into pandemic preparedness suggests extreme events can reduce global annual income by 0.6 percent per year (including mortality and income loss). Lower income often is equated with slower economic growth.
 
Viruses can also affect companies and share values. However, not every investment will move in the same direction at the same time, and not every country or industry will be affected in the same way. Barron's reported:
 
"SARS infected more than 8,000 people in 2003, killing more than 770. The outbreak occurred between November 2002 and July 2003. Stocks of U.S. airlines - a proxy for travel-related shares - dropped more than 30 percent from pre-SARS highs during that outbreak, about twice the decline of the broader S&P 500 index. All stocks, it appears, were impacted by the outbreak. It took about three months for shares to bottom and another three months to achieve previous highs."
 
China responded to the outbreak by imposing a transportation lockdown, and that could affect China's economic growth. S&P Global explained:
 
"The coronavirus is hitting China during Lunar New Year, a period when households tend to spend more on travel, entertainment, and gifts. Even if the virus is contained fairly quickly, the initial stages of high uncertainty are likely to affect spending."
 
In addition, the city of Wuhan, where the outbreak began, is a major transportation hub and a center for auto production. It is China's sixth largest city, home to 11 million people, and responsible for 1.6 percent of the country's economic growth.
 
Major stock indices in the United States moved lower last week.
 

Data as of 1/24/20
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) -1.0% 2.0% 24.7% 13.1% 9.8% 11.6%
Dow Jones Global ex-U.S. -1.1 0.4 13.2 6.2 3.1 3.0
10-year Treasury Note (Yield Only) 1.7 NA 2.7 2.5 1.8 3.6
Gold (per ounce) 0.4 2.7 21.9 8.7 4.1 3.6
Bloomberg Commodity Index -3.1 -4.4 -3.6 -4.5 -5.2 -5.4
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; 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, MarketWatch, 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.
 
a decade of words. Time Magazine puts a 'Person of the Year' on its cover. ESPN awards ESPYs to athletes annually. Nobel and Ig Nobel committees recognize the worthy and the unsuspecting. Merriam Webster selects a 'Word of the Year.' It is the word dictionary users searched for more than they had in previous years. Here are the words of the year from the last decade:
 
2010: Austerity, noun, "The quality or state of being austere, a stern and serious quality, a plain and simple quality."
           
2011: Pragmatic, adjective, "Relating to matters of fact or practical affairs often to the exclusion of intellectual or artistic matters: practical as opposed to idealistic."
 
2012: Socialism, noun, "Any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods," tied with Capitalism.
 
Capitalism, noun, "An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market."
 
2013: Science, noun, "The state of knowing: knowledge as distinguished from ignorance or misunderstanding."
 
2014: Culture, noun, "The customary beliefs, social forms, and material traits of a racial, religious, or social group, also the characteristic features of everyday existence (such as diversions or a way of life) shared by people in a place or time."
 
2015: -ism, noun suffix, "Manner of action or behavior characteristic of a (specified) person or thing, or prejudice or discrimination on the basis of a (specified) attribute." (The most looked up words were socialism, fascism, racism, feminism, communism, capitalism, and terrorism.)
 
2016: Surreal, adjective, "Marked by the intense irrational reality of a dream."
 
2017: Feminism, noun, "The theory of the political, economic, and social equality of the sexes; organized activity on behalf of women's rights and interests."
 
2018: Justice, noun, "The maintenance or administration of what is just especially by the impartial adjustment of conflicting claims or the assignment of merited rewards or punishments."
 
2019: They, pronoun, "Those ones: those people, animals, or things." The definition was expanded to, "Used to refer to a single person whose gender identity is nonbinary."
 
The short-list of words for 2019 included: quid pro quo, impeach, crawdad, egregious, clemency, the, snitty, tergiversation ("evasion of straightforward action or clear-cut statement"), camp, and exculpate.
 
Weekly Focus - Think About It
 
"We think of English as a fortress to be defended, but a better analogy is to think of English as a child. We love and nurture it into being, and once it gains gross motor skills, it starts going exactly where we don't want it to go: it heads right for the...electrical sockets. We dress it in fancy clothes and tell it to behave, and it comes home with its underwear on its head and wearing someone else's socks. As English grows, it lives its own life, and this is right and healthy. Sometimes English does exactly what we think it should; sometimes it goes places we don't like and thrives there in spite of all our worrying. We can tell it to clean itself up and act more like Latin; we can throw tantrums and start learning French instead. But we will never really be the boss of it. And that's why it flourishes."
--Kory Stamper, Lexicographer and author
 
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 (January 22, 2020)

The Markets
 
The new trade deals are here!
 
The United States and China signed a preliminary trade deal last week. The next day, the United States-Mexico-Canada Agreement was approved by the Senate.
 
The phase-one deal between the United States and China has been analyzed, applauded, disparaged, and questioned. Here is a sampling of what's being said:
 
"The eight-part deal includes protections for trade secrets and intellectual property, mechanisms for enforceability, and commitments by Beijing to increase purchases of U.S. goods and services by $200 billion over the next two years. It also broadens U.S. companies' access to China's markets..."
-- Barron's
 
"While the deal isn't insignificant - China has promised $200 billion in purchases...The sweeping U.S. goals to change the way China's economy functions, from shrinking state-funded industries to strengthening intellectual property laws, are either absent from the deal or described in vague terms."
-- Foreign Policy
 
"A truly grand pact between the two countries is some way off - and indeed, may never arrive. But this modest trade agreement shows how much the status quo has changed. Tariffs on hundreds of billions of dollars...of imports into both countries remain in place, with an ever-present threat of more. This is not trade peace, but rather a trade truce - and a tense one at that."
-- The Economist
 
"Moreover, some countries are worried that $200bn of Chinese purchases of US goods that are part of the agreement will enshrine 'managed trade' between the world's two largest economies, possibly flouting market forces, discriminating against their companies and violating WTO commitments."
-- Financial Times
 
"One aspect that most have not addressed is that this is only a two-year agreement. What happens at the end of the two years is not defined...China has pledged to purchase $36.5 billion in ag products in 2020 and $43.5 billion in 2021. But the issues are no one believes either side will keep up their end of the bargain."
-- AgWeek
 
Despite a diversity of opinion about the deal, investors were happy. The Dow Jones Industrial Average surpassed 29,000 for the first time and was up 2.8 percent for the year through last Friday, reported Barron's.
 

Data as of 1/17/20
1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor's 500 (Domestic Stocks) 2.0% 3.1% 26.3% 13.7% 10.5% 11.2%
Dow Jones Global ex-U.S. 1.0 1.5 15.3 6.8 3.7 2.6
10-year Treasury Note (Yield Only) 1.8 NA 2.8 2.3 1.8 3.7
Gold (per ounce) 0.3 2.3 20.7 8.6 4.1 3.2
Bloomberg Commodity Index -1.1 -1.3 -0.8 -3.6 -4.7 -5.4
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; 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, MarketWatch, 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.
 
Culinary trends of the 2010s...The way we eat changed during the past 10 years. The Auguste Escoffier School of the Culinary Arts pointed out sales of American cheese have fallen because younger generations prefer artisanal cheeses. Unprocessed cheese isn't the only food trending last decade.
 
  • Shoot it while it's hot! Social media has delayed a few meals. More than one-in-four people told Influence.com they had been asked to delay a meal so someone could take a perfect shot to whet followers' appetites.
 
  • Look at all the rainbows and unicorns. People indulged in rainbow bagels smeared with birthday cake frosting and rainbow grilled cheese sandwiches. If cupcakes, toast, or coffee was sparkly, bright, or shaped - it may have had 'unicorn' before its name. Why, you ask? Scientific studies suggest people perceive bright and/or sparkly food to be tastier and less boring than naturally colored food.
 
  • Avocado toast persisted. From simple avocado mashed on crunchy bread to 20-plus ingredient gourmet extravaganzas, avocado toast became a social media sensation. There are even competing origin stories. Was the first avocado (a.k.a. alligator pear) toast created and consumed in Australia? California? Mexico?
 
  • Meatless meat. Vegetables are delicious. They're versatile, and now they're masquerading as meat. America has become passionate about plant-based meat products. There is a catch. Vox reported, "...nutritionists who have conducted analyses have largely found that the meatless meat burgers are, well, fine - not any better for you than a beef burger but not worse, with the specific details depending on which health priorities you have."
 
What is your favorite food trend from the last decade? Putting an egg on top? Meal kits? Kale? Macarons? Fermentation?
 
Weekly Focus - Think About It
"There's a rebel lying deep in my soul. Anytime anybody tells me the trend is such and such, I go the opposite direction. I hate the idea of trends. I hate imitation; I have a reverence for individuality."
                                                                                                                                                                                                                                                                 Clint Eastwood, Actor
 
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

The Markets
 
About face!
 
2019 was a remarkable year for investors with many asset classes delivering positive performance. Both the Standard & Poor's 500 Index, a gauge of U.S. stock market performance, and the Dow Jones Global (ex U.S.) Index delivered double-digit increases (see the below table). Bonds and gold rallied, too, delivering positive returns for the year.
 
Possibly the most important factor contributing to asset performance in 2019 was an 'about face' by the United States Federal Reserve. Axios reported:
 
"The Fed's 180-degree turn was the story of 2019, asset managers and market analysts say...Chairman Jerome Powell and the U.S. central bank went from raising interest rates for a fourth time at the close of 2018 and giving market watchers the explicit expectation this would continue in 2019, to doing the opposite. The Fed cut rates thrice and even began re-padding its balance sheet in the last quarter of the year, bringing it back above $4 trillion."
 
The Fed's policy decision gave investment markets a boost, however, it did little to quell investors' worries about potential recession and the impact of the U.S.-China trade war, reported The Wall Street Journal. As a result, investors moved money from U.S. stock markets into bonds and other investments they perceived to be safer throughout the year.
 
During the fourth quarter of 2019, U.S. markets delivered positive returns despite uncertainty about the strength of the U.S. economy created by inconsistent economic data. For example, the last jobs report of the year indicated unemployment remained near a 50-year low. Yet, in 2019, workers experienced the highest number of layoffs in a decade.
 
Many layoffs during the year were the result of corporate bankruptcies, especially in the retail sector. Investors who took time to evaluate the juxtaposition of unemployment levels and layoffs may have recognized disruptions in the retail sector has potential to create opportunities for investors.
 
A closely watched indicator during 2019 was manufacturing. In December, Fox News reported, "The ISM Manufacturing Index fell for the fifth month in a row to 47.2 in December, down from November's reading of 48.1. That's the weakest reading since June 2009, when it hit 46.3, and well below the 49 reading that economists surveyed by Reuters expected."
 
One of the reasons for weakness in manufacturing is the U.S.-China trade war. Late in the fourth quarter, concerns about trade subsided after the announcement of a phase one trade deal. The agreement is scheduled to be signed on January 15, 2020.
 
Continued progress in resolving the trade war could help boost economic growth in the United States. At the end of 2019, United States gross domestic product, the value of all goods and services produced in the country, was expected to remain slow and steady during 2020. However, forecasters at the Federal Reserve Bank of Philadelphia expected the economies of nine states to contract during the first six months of the new year.
 
From a geopolitical perspective, the 2020s are beginning just like the last decade did, with all eyes on Iran.
 
In 2009 and 2010, the Iranian Green Revolution captured the world's attention as social media provided insight to post-election turbulence and unrest in Iran. Last week, the first of the new decade, all eyes were again on the Middle East as tensions between the United States and Iran flared after the death of a top Iranian military leader targeted by the United States.
 
After rallying on the first day of the new decade, some major U.S. stock markets declined on news of heightened tensions in the Middle East and concerns about the potential consequences, such as the disruption of oil supplies.
 

Data as of 1/3/20
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
-0.2%
0.1%
32.2%
12.7%
9.9%
11.1%
Dow Jones Global ex-U.S.
0.2
0.4
19.7
7.4
3.8
2.6
10-year Treasury Note (Yield Only)
1.8
NA
2.6
2.5
2.0
3.3
Gold (per ounce)
2.5
1.7
20.0
10.4
5.2
3.3
Bloomberg Commodity Index
0.0
0.6
5.1
-1.9
-4.8
-5.4
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; 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, MarketWatch, 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 A DECADE! While some have called the 2010s a 'lost decade' because there was little economic growth, we disagree with the assessment. The decade was filled with remarkable events in politics, sports, science, pop culture, and other areas of interest. Here are a few memorable events from the past decade:
 
  • NASA's Voyager 1 probe left the solar system. Launched in 1977 to explore planets including Jupiter, Saturn, Uranus, and Neptune, the probe left our solar system in 2013. It will continue to send data until 2025.
 
  • The Patient Protection and Affordable Care Act was signed into law. The controversial law, which Encyclopedia Britannica reported, "required most individuals to secure health insurance or pay fines, made coverage easier and less costly to obtain, cracked down on abusive insurance practices, and attempted to rein in the rising costs of health care," remains under challenge in American courts.
 
  • eSports became an industry. To the delight of people who would prefer to spend their time gaming, online games became a recognized form of sports competition, complete with news coverage and multimillion-dollar prize money.
 
  • Civil and social movements changed thinking. There were pro-democracy protests in the Middle East (Arab Spring), and social movements in the United States (Occupy, Black Lives Matter, Blue Lives Matter, and MeToo, among others). MIT explained, "...a successful movement can change how we think and talk about key social issues."
 
  • The Higgs Boson particle was found. Any fan of the television show, The Big Bang Theory, will know exactly how much this meant to Sheldon Cooper. The television show's popularity was also a phenomenon of the last decade.
 
  • Carli Lloyd scored the fastest hat trick in World Cup soccer.Carli Lloyd scored a hat trick - three goals - in 13 minutes for the U.S. women's national team during the World Cup final against Japan in 2015. She also played on the team that won the 2019 Women's World Cup.
 
  • Hurricanes, earthquakes, and storms wrought destruction. Countries around the world were pummeled by storms during the decade. Hurricanes and tropical storms like Irene, Sandy, Harvey, Irma, Michael, Dorian, and Maria did significant damage in the United States and its territories. One of the most memorable was the Great Japanese earthquake and tsunami that preceded the Fukushima Daiichi nuclear accident.
 
  • The Chicago Cubs broke the curse. Advised by their manager to go out there and, "Try not to be bad," the Cubs won the World Series for the first time since 1908.
 
  • Entertainment took a turn toward streamingDeadline Hollywood reported, "It is impossible to find a corner of the industry that has not been reshaped by streaming, from the pay TV ecosystem and movie exhibition to labor negotiations and talent deals."
 
The 2010s provided disruptions and delights. Let's hope the events of the coming decade will make the world a better place.
 
Weekly Focus - Think About It
 
"It's the action, not the fruit of the action, that's important. You have to do the right thing. It may not be in your power, may not be in your time, that there'll be any fruit. But, that doesn't mean you stop doing the right thing. You may never know what results come from your action. But, if you do nothing, there will be no result."
--Mahatma Gandhi, Lawyer, politician, social activist
 
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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