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Weekly Market Commentary (October 1, 2018)

Weekly Market Commentary (October 1, 2018)
 
 The Markets
 
It wasn't headline news...
 
But, if newsprint was still popular, last week's key economic news would have appeared below the fold.
 
The Federal Reserve raised rates for the third time in 2018, as expected. In addition, the Federal Open Market Committee projects economic growth will continue for three more years, although its median numbers show growth slowing from 3.1 percent in 2018 to 1.8 percent in 2021. (Remember, forecasts, no matter how venerable the source, are best guesses and not bedrock.)
 
Investors weren't enthusiastic about the Fed's actions or its expectations, and the onset of United States-China tariffs didn't lift their spirits. Ben Levisohn of Barron's explained:
 
"The Dow Jones Industrial Average dropped 285.19 points, or 1.1 percent, to 26,458.31 on the week, while the S&P 500 fell 0.5 percent to 2913.98. Neither could be considered life threatening, and the S&P 500 still rose for a sixth consecutive month. So, while we need something to blame, we needn't get too worried. Last Monday kicked off with the implementation of tariffs by the United States and China and continued with a Federal Reserve rate hike. Neither was a surprise, though the Fed might have caught a few napping when it removed the word 'accommodative' from its statement."
 
What does it mean when the Federal Reserve removes the word 'accommodative?'
 
The Fed pursues 'accommodative' or 'easy' monetary policy when it is encouraging economic growth. Accommodative policy may include lowering interest rates or, in unusual circumstances, quantitative easing.
 
By removing the word, the Fed may be signaling that policy will be 'tightening' in an effort to prevent the economy from overheating, reported Sam Fleming of Financial Times. There is debate about whether rates are at a neutral level; one that won't cause the economy to run too hot or too cold.
 
Let's hope for a Goldilocks economy.
 

Data as of 9/28/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
-0.5%
9.0%
16.1%
15.7%
11.6%
10.2%
Dow Jones Global ex-U.S.
-0.9
-5.2
0.1
8.0
2.1
2.9
10-year Treasury Note (Yield Only)
3.1
NA
2.3
2.1
2.6
3.6
Gold (per ounce)
-1.0
-8.4
-7.5
1.6
-2.2
2.8
Bloomberg Commodity Index
1.0
-3.4
0.7
-0.8
-7.7
-6.5
DJ Equity All REIT Total Return Index
-1.1
2.1
4.7
9.8
9.7
8.4
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.
 
WHEN DO YOU BEHAVE THE MOST LIKE YOURSELF? Don't worry. This isn't about soul-searching and trying to find answers to existential questions like, 'Who am I?' or 'What is my purpose?' or 'How should I live my life?'
 
Nope. This is about a science experiment!
 
Ian Krajbich of Ohio State University and Fadong Chen of Zhejiang University in China wanted to better understand how people made social decisions, according to a paper they published in Nature Communications. They began with the premise that "Social decisions typically involve conflicts between selfishness and pro-sociality."
 
Then, they asked 200 students in the United States and Germany to play "mini-dictator games in which subjects make binary decisions about how to allocate money between themselves and another participant."
 
Science Daily explained, "In some cases, participants had to decide within two seconds how they would share their money as opposed to other cases, when they were forced to wait at least 10 seconds before deciding. And, in additional scenarios, they were free to choose at their own pace, which was usually more than two seconds but less than 10."
 
The upshot was people who were pro-social became more pro-social, and people with more selfish instincts became more selfish, under severe time constraints. Given more time, "pro-social subjects became marginally less pro-social under time delay...while selfish subjects became less selfish under time delay...though these effects are less pronounced."
 
Maybe you behave most like you when you're pressed for time.
 
Weekly Focus - Think About It
 
"Selfishness is not living as one wishes to live, it is asking others to live as one wishes to live."
--Oscar Wilde, Irish poet and playwright
 
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 (September 24, 2018)

Weekly Market Commentary (September 24, 2018)
 
The Markets
  
Did you hear the news?
 
A tech company introduced a microwave you can turn on using Wi-Fi - as long as you have one of the company's voice assistants at home, reported Kaitlyn Tiffany of Vox. Soon, the voice assistants will be built with neural networks that will formulate hunches about whether their owners might like to be reminded to lock the door or turn off a device.
 
Some people love the idea. Others don't.
 
Internet-enabled appliances weren't the only show in town last week. The strong performance of the U.S. economy earned a standing ovation from investors who pushed the Dow Jones Industrial Index and the Standard & Poor's 500 Index to new highs. Many global stock markets moved higher, too. Ben Levisohn of Barron's reported:
 
"One need only look overseas for a sign that investors are feeling better about the state of the world - or at least better enough to do some bargain-hunting. China's Shanghai Composite rose 4.3 percent this past week, though it is still down 21 percent from its January high..."
 
The news in a FactSet Insight written by John Butters may dampen some investors' enthusiasm.
 
With the third quarter earnings season ahead, Butters reported 98 of the companies in the Standard & Poor's 500 Index have issued guidance. The majority (76 percent) issued negative guidance, meaning they anticipate earnings will be lower than analysts' mean earnings per share estimates.
 
It's important to remember that, historically, the U.S. economy has moved in cycles. We may be in the latter stages of this expansion. The next stage is contraction and no one can predict exactly when it may occur.
 

Data as of 9/21/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
0.9%
9.6%
17.2%
14.2%
11.5%
9.3%
Dow Jones Global ex-U.S.
2.7
-4.3
0.0
6.8
2.1
2.0
10-year Treasury Note (Yield Only)
3.1
NA
2.3
2.2
2.7
3.8
Gold (per ounce)
-0.3
-7.5
-7.2
1.9
-2.0
3.0
Bloomberg Commodity Index
2.4
-4.3
-0.5
-1.6
-7.9
-7.4
DJ Equity All REIT Total Return Index
-0.4
3.2
5.8
9.2
9.7
8.2
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; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
 
MILLENNIALS DON'T EXIST! Gen Xers and the Silent Generation get a lot less press than Millennials, but all three generations have one thing in common. According to comedian Adam Conover, "Generations in general don't exist. They're not real things that exist in nature. We made them up...Here's what really exists: People who are alive at the same time."
 
He may have a point.
 
The only generation that has been recognized officially by the U.S. government is the Baby Boom generation. At least, that's what a U.S. Census Bureau spokesperson told Philip Bump of The Atlantic. The Baby Boom generation was recognized because its members were part of a demographic event. Encyclopedia Britannica explainedthe baby boom as:
 
"...the U.S. increase in the birth rate between 1946 and 1964; also, the generation born in the U.S. during that period. The hardships and uncertainties of the Great Depression and World War II led many unmarried couples to delay marriage and many married couples to delay having children. The war's end, followed by a sustained period of economic prosperity (the 1950s and early 1960s), was accompanied by a surge in population. The sheer size of the baby-boom generation (some 75 million) magnified its impact on society..."
 
So, where did other generations originate?
 
Sarah Laskow of The Atlantic reported, until the 19th century, generations were thought of as biological relationships within families. For example, grandparents would be one generation, their children the next, and their grandchildren the next, and so on.
 
The idea of societal generations - people who live at the same time and experience the same things - came from European intellectuals in the 1800s and early 1900s who advised, "people do not react to their particular historical conundrums as a monolithic group."
 
Every person is unique and individual.
 
Weekly Focus - Think About It
 
"The power of youth is the common wealth for the entire world. The faces of young people are the faces of our past, our present, and our future. No segment in the society can match with the power, idealism, enthusiasm, and courage of the young people."
--Kailash Satyarthi, Nobel Prize winner and 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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Weekly Market Commentary (September 17, 2018)

Weekly Market Commentary (September 17, 2018)
 
The Markets
 
All investors are consumers, but not all consumers are investors.
 
The September installment of University of Michigan's Consumer Sentiment Survey reported Americans are feeling pretty optimistic. Consumer sentiment rose to the second highest level since 2004, and consumer expectations reached the highest level since 2004. Surveys of Consumers chief economist, Richard Curtin, wrote:
 
"Consumers anticipated continued growth in the economy that would produce more jobs and an even lower unemployment rate during the year ahead...The largest problem cited on the economic horizon involved the anticipated negative impact from tariffs. Concerns about the negative impact of tariffs on the domestic economy were spontaneously mentioned by nearly one-third of all consumers in the past three months, up from one-in-five in the prior four months."
 
Investors weren't as optimistic, according to the American Association of Individual Investors(AAII). Last week, the AAII Investor Sentiment Survey reported bullish sentiment dropped more than 10 percentage points. The results were:
 
  • Bullish            32.1 percent of respondents (historic average: 38.5 percent)
  • Neutral                        35.1 percent of respondents (historic average: 31.0 percent)
  • Bearish            32.8 percent of respondents (historic average: 30.5 percent)
 
Despite the apparent shift in investor attitudes, stock markets moved higher last week. Vito J. Racanelli of Barron's wrote:
 
"The stock market radiated confidence this past week, finishing about 1 percent higher despite choppy action. There was a plethora of good economic news - from lower-than-expected inflation to sky-high business and consumer confidence numbers - that drove shares up. Not even a ratcheting up of tough tariff talk Friday on the part of the U.S. could dampen investor enthusiasm for long."
 
Some believe the AAII Sentiment Survey is a contrarian indicator. Last week, that may have been the case.
 

Data as of 9/14/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
1.2%
8.7%
16.4%
14.2%
11.3%
9.3%
Dow Jones Global ex-U.S.
1.4
-6.8
-2.3
5.9
1.8
2.1
10-year Treasury Note (Yield Only)
3.0
NA
2.2
2.2
2.9
3.5
Gold (per ounce)
0.3
-7.3
-9.3
2.9
-1.9
4.5
Bloomberg Commodity Index
-3.3
-6.5
-3.1
-2.4
-8.6
-7.1
DJ Equity All REIT Total Return Index
0.2
3.6
4.5
10.7
9.9
8.6
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.
 
WORDIES UNITE! The Merriam Webster Dictionary added some new words during 2018. A favorite among fans of dictionaries is 'wordie,' which means 'word lover' and should not be confused with 'wordy,' which describes something with too many words. Dictionary newcomer 'TL;DR' (the new word that means 'too long; didn't read') could be used to describe a reader's response to something that's wordy.
 
A few of the new additions are descriptions of dog breeds, including:
 
  • Chiweenie: a cross between a Chihuahua and a dachshund
  • Schnoodle: a cross between a schnauzer and a poodle
  • Yorkie-poo: a cross between a Yorkshire terrier and a poodle
 
A number of 'wanderworts' - words that have wandered from one language into another - also made the list. These include:
 
  • Harissa: spicy North African chili paste
  • Kabocha: a type of Japanese pumpkin
  • Kombucha: a fermented, bubbly tea drink
 
Many of the new entries are abbreviated versions of longer words that have been part of our vocabulary for a long time. This may be the inevitable outcome in a society that adapts to the communication shorthand demanded by text, photo, and social media apps. See if you can guess the longer version of these new words:
 
  • Adorbs
  • Avo
  • Bougie
  • Fave
  • Guac
  • Marg
  • Ribbie
  • Zuke
 
If you get stumped, give us a call.
 
Weekly Focus - Think About It
 
"Language is the road map of a culture. It tells you where its people come from and where they are going."
--Rita Mae Brown, American 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 (September 10, 2018)

 

 

 

 The Markets

 

Remember: Volatility is normal.

 

Major U.S. stock market indices climbed into record territory during August. They gave back some gains last week. Peter Wells of Financial Times explained:

 

"Speculation about a fresh round of tariffs on Chinese imports from the Trump administration weighed on U.S. stocks, handing the S&P 500 its first four-day losing streak in a month. A strong jobs report only hardened expectations that the Federal Reserve views the U.S. economy as healthy enough to withstand a probable interest rate rise later this month."

 

Strong economic growth and rising wages have the potential to push inflation - increases in prices of everyday goods - higher than the Fed's 2 percent target. The Fed battles inflation and promotes financial stability by raising the Fed funds rate. Usually, higher rates make borrowing more expensive and slow economic growth, reported Katherine Reynolds Lewis at Bankrate.com.

 

Rising rates in the United States have an effect on emerging markets, too. Colin Dwyer of National Public Radio reported higher interest rates in the United States have enticed investors and they have moved money out of riskier emerging markets investments.

 

Last week The Wall Street Journal reported, "Emerging markets tipped into bear territory...The MSCI Emerging Markets Index's 0.3 percent decline Thursday, led by selloffs in Russia and the Philippines, pushed that gauge of stocks in poorer countries 20 percent below its recent peak, the common definition of a bear market."

 

 

Data as of 9/7/18

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

-1.0%

7.4%

16.5%

13.4%

11.4%

8.5%

Dow Jones Global ex-U.S.

-3.0

-8.0

-3.0

6.1

2.0

1.6

10-year Treasury Note (Yield Only)

2.9

NA

2.1

2.2

2.9

3.7

Gold (per ounce)

-0.3

-7.5

-10.8

2.3

-2.9

4.0

Bloomberg Commodity Index

1.9

-3.3

-0.4

-1.1

-8.1

-7.1

DJ Equity All REIT Total Return Index

-1.2

3.4

4.4

10.9

10.6

7.5

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.

 

why are nordic countries at the top of the world happiness report?It's a question Freakonomics Radio explored in August. They asked Jeff Sachs, a professor at Columbia University, who is also a special adviser to the United Nations Secretary General on the Sustainable Development Goals.

 

The World Happiness Report ranks 156 countries by the happiness of their citizens. The countries that top the list tend to have high scores in all six of the variables considered to measure well-being. These include income, healthy life expectancy, social support, freedom, trust, and generosity.

 

Currently, the happiest countries in the world are:

 

  1. Finland
  2. Norway
  3. Denmark
  4. Iceland
  5. Switzerland
  6. Netherlands
  7. Canada
  8. New Zealand
  9. Sweden
  10. Australia

 

The United States is ranked number 18. That has something to do with our priorities, according to the interview with Sachs. "We have the paradox that income per person rises in the United States, but happiness does not...the United States is falling behind other countries, because we are not pursuing dimensions of happiness that are extremely important: our physical health, the mental health in our community, the social support, the honesty in government."

 

Helen Russell, author of The Year of Living Danishly, also participated in the interview. She offered this example to illustrate a key difference between the United States and Denmark:

 

"...there was a story, in New York a few years ago, of a Danish woman who was there, who left her child sleeping outside in a pram, which is what you do in Denmark, and was arrested for child neglect. And lots of people in Denmark didn't understand why it was such a fuss, because in Denmark people trust most people. And this plays into everything. You are not anxious if you trust the people around you, you're not scared they're going to rob you to put food on their table."

 

What makes you happy?

 

Weekly Focus - Think About It

 

"If I were to ask all of you to try and come up with a brand of coffee - a type of coffee, a brew - that made all of you happy, and then I asked you to rate that coffee, the average score in this room for coffee would be about 60 on a scale of 0 to 100. If, however, you allowed me to break you into coffee clusters, maybe three or four coffee clusters, and I could make coffee just for each of those individual clusters, your scores would go from 60 to 75 or 78. The difference between coffee at 60 and coffee at 78 is a difference between coffee that makes you wince and coffee that makes you deliriously happy. That is the final, and I think most beautiful lesson...that in embracing the diversity of human beings, we will find a surer way to true happiness."

--Malcolm Gladwell, Journalist 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 (September 4, 2018)

The Markets
 
Where is our country's biggest export market?
 
Markets were fired up last week after the United States and Mexico agreed on new trade rules. The Standard & Poor's 500 (S&P 500) Index reached an all-time high and finished the month of August up about 3 percent, reported Michael Sheetz, Thomas Franck, and Alexandra Gibbs of CNBC.
 
During the latter half of last week, though, the S&P 500 gave back some gains. A hitch in the giddy-up of trade talks between the United States and Canada caused the index to stumble. Damian Paletta, Jeff Stein, and Heather Long of The Washington Post explained:
 
"High-stakes trade negotiations between the White House and Canadian leaders unraveled Friday, a major setback in President Trump's effort to redraw the North American Free Trade Agreement...the United States and Canada have interwoven economies, with integrated supply chains and vast amounts of trade. The value of goods and services sold between the two countries last year reached $673.1 billion, making Canada the United States' largest export market for goods."
 
The United States exported about $341 billion of goods and services to Canada in 2017, according to The Office of the U.S. Trade Representative website. Our top exports to Canada during 2017 included:
 
  • Services ($58 billion)
  • Vehicles ($52 billion)
  • Machinery ($43 billion)
  • Electrical machinery ($25 billion)
  • Agricultural products ($24 billion)
  • Mineral fuels ($20 billion)
  • Plastics ($13 billion)
 
Trade talks are expected to resume next week.
 

Data as of 8/31/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
0.9%
8.5%
17.4%
13.7%
12.1%
8.6%
Dow Jones Global ex-U.S.
0.4
-5.1
0.9
5.9
3.1
1.5
10-year Treasury Note (Yield Only)
2.9
NA
2.1
2.2
2.9
3.8
Gold (per ounce)
0.4
-7.3
-8.3
1.7
-2.9
3.9
Bloomberg Commodity Index
0.1
-5.0
-1.1
-2.7
-8.5
-7.6
DJ Equity All REIT Total Return Index
0.8
4.7
6.8
10.9
11.2
7.9
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.
 
PREPARE FOR A SHAKE UP! From Reuters to Marketplace, economic and financial news shows like to 'do the numbers.' They often review economic indicators, Federal Reserve rate changes, or benchmark index performance.
 
In general, these statistics are intended to help people gauge how economies and markets are performing. For instance, when Gross Domestic Product (GDP) - the value of all goods and services produced by a nation during a certain period of time - moves higher, it means the economy grew during the period. When GDP moves lower, the economy contracted during the period.
 
Asset managers and investors rely on benchmark indices, like the S&P 500 Index, to measure the relative performance of investment portfolios. The S&P 500 is a benchmark for large U.S. company stocks. It includes companies from diverse sectors including:
 
  • Information technology
  • Healthcare
  • Financials
  • Consumer discretionary
  • Industrials
  • Consumer staples
  • Energy
  • Utilities
  • Real estate
  • Materials
  • Telecommunications services
 
But, wait, change is coming!
 
Soon, benchmark indices will have a new sector. At the end of September 2018, Telecommunications Services will become Communication Services. The name is changing and so are the companies that will be included in the sector. Ben Levisohn at Barron's reported:
 
"The biggest changes will be around some prominent companies that will migrate out of the information-technology and consumer-discretionary sectors and into a new communication-services sector...[The changes] certainly don't herald any fundamental changes for the companies involved. But they do have the potential to create short-term noise..."
 
If you'd like to learn about the ways sector changes may affect benchmark indices, give us a call.
 
Weekly Focus - Think About It
 
"Progress is impossible without change, and those who cannot change their minds cannot change anything."
--George Bernard Shaw, Irish playwright
 
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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