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Weekly Market Commentary August 27, 2018

The Markets

 

Tick, Tock.

 

Not everybody loves meetings and even fewer enjoy reading the minutes, but investors make an exception with the Federal Reserve. This week the Fed published the minutes from its August 1meeting. While no changes were made to interest rates, the minutes did provide insight to how the Fed sees the U.S. economy.

 

Key Insights:

 

·         The economy is strong. The economy is poised for its best annual growth in a decade due to stimulation from tax cuts and federal spending. The current nine-year bull market is about to be the longest bull market in history and the stock market hit a new high last week. Inflation is back to the 2 percent range, after missing for several years, and the already tight labor market continues to tighten, reported The Wall Street Journal.

 

While the Fed remains concerned about the risks of inflation, it also is concerned about slowness in the housing market. Home building has declined due to a labor shortage and to higher cost in materials from tariffs, according to The New York Times.

 

·         When will the Fed stop raising rates? The Fed is all but guaranteed to raise rates in September, with market odds at a 96 percent probability and a 60 percent probability for another hike in December. The Fed will continue its gradual interest rate increases for now as long as economic activity is consistently expanding at a sustainable rate. The minutes revealed the Fed governors will soon revise its policy stance from “accommodative to neutral,” reported MarketWatch.

 

·         What does the Fed think about tariffs? The Fed is aware tariffs could derail their initial plan of steady rate hikes. Although concerned about President Trump’s tariffs, they are waiting for economic data to assess the damage. They did, however, say tariffs would have “adverse effects on business sentiment, investment spending, and employment. Moreover, wide-ranging tariff increases would also reduce the purchasing power of U.S. households,” reported The New York Times.

 

The Fed is content, for now, with their current policy stance of steady rate hikes, but are on edge as they wait to see how fiscal policy plays out in the data. The Fed is more likely to raise rates two more times this year given the strength of the economy.

 

 

 

 

 


Data as of 8/24/18

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.9%

7.5%

17.9%

14.9%

11.6%

8.3%

Dow Jones Global ex-U.S.

1.5

-5.5

1.4

7.2

2.8

1.4

10-year Treasury Note (Yield Only)

2.8

NA

2.2

2.0

2.8

3.9

Gold (per ounce)

1.6

-7.6

-7.1

0.9

-2.8

3.8

Bloomberg Commodity Index

0.4

-5.1

0.2

-0.9

-8.5

-8.0

DJ Equity All REIT Total Return Index

-0.9

3.9

6.7

10.4

10.4

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 would you ask for a raise? When CNBC asked business author Suzy Welch how someone should ask for a raise she explained, “The key…is an approach that includes research and emphasizes your achievements.” She recommended three basic steps:

 

1.      Time your request right. Ask after a big win, a positive performance review, or when being asked to accept more responsibility.

2.      Prove your case. Be prepared to explain why you deserve a raise, including your achievements and results.

3.      Establish a time frame for action. If your boss isn’t prepared to provide an answer immediately, end your meeting by asking when you can expect a response.

 

This is sound advice.

 

When Willy Appelman of Fast Company asked children at the Underhill Playground how they would ask a boss for a raise, the kids believed the keys to success were good manners, hard work, baked goods, and physical appearance. Here are some of their recommendations:

 

·         “Ask them politely and say: Can I please have a raise because I’ve been really working hard this week.”

·         “Go up to your boss and say: Is it okay if I have some more money?”

·         “Be confident and try your best.”

·         “I would give them desserts, like pastry and cookies.”

·         “Make sure you look weaker than your employer so they have power and they might feel merciful...”

 

If you recently received a raise or a bonus (or expect to), you may want to give some serious thought to how you will to use the additional income – spend it, save it, or do some of both – and how your choices will affect your taxes. If you’d like to discuss your options, give us a call.

 

Weekly Focus – Think About It

 

“The tax advisor had just read the story of Cinderella to his four-year-old daughter for the first time. The little girl was fascinated by the story, especially the part where the pumpkin turns into a golden coach. Suddenly she piped up, ‘Daddy, when the pumpkin turned into a golden coach, would that be classed as income or a long-term capital gain?’”

--Unknown

 

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Weekly Market Commentary August 20, 2018

Weekly Market Commentary

 

 The Markets

As Maxwell Smart used to say…

 

Missed it by THAT much! After a rocky start, the Standard & Poor’s 500 Index came within 1 percent of an all-time high last week, reported Ben Levisohn for Barron’s. It’s significant because the Standard & Poor’s 500 Index has been trading below its January record all year. The article suggested the lack of progress begs the question: Are we still in a bull market?

 

It’s the old ‘Shrink Global Markets with Corporate Buybacks’ trick. Last week, Robin Wigglesworth of Financial Times reported, “The global equity market is shrinking at the fastest pace in at least two decades, as a wave of corporate share buybacks swamps the overall volume of companies going public, issuing new stock or selling convertible debt.”

 

The value of the global equity market is increasing despite the reduction in volume. In part, this is because stock buybacks help push share prices higher.

 

There is a potential downside to buybacks, though. Nasdaq.com explained, “…rewarding current shareholders so liberally can lead to a systemic extraction of value from companies on a macroeconomic scale. Throw in dividends and little is left for growth and expansion.”

 

Would you believe…the President asked for it? “President Trump on Friday asked regulators to review a decades-old requirement that public companies release earnings quarterly, a change some executives support to promote longer-term planning but that some investors worry could reduce market transparency,” reported Dave Michaels, Michael Rapoport, and Jennifer Maloney of The Wall Street Journal.

 

While transparency is essential to investors, critics suggest quarterly reporting “distracts companies from focusing on longer-term financial and strategic goals and may deter companies from going public,” wrote Andrew Edgecliffe-Johnson and Mamta Badkar for Financial Times.

 

Stay tuned.

 


Data as of 8/17/18

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.6%

6.6%

17.3%

11.1%

11.6%

8.4%

Dow Jones Global ex-U.S.

-1.4

-6.9

0.5

3.4

2.5

1.2

10-year Treasury Note (Yield Only)

2.9

NA

2.2

2.2

2.9

3.8

Gold (per ounce)

-3.0

-9.1

-8.3

1.8

-2.9

4.0

Bloomberg Commodity Index

-1.0

-5.5

0.8

-2.5

-8.5

-7.8

DJ Equity All REIT Total Return Index

3.1

4.8

8.5

7.9

11.4

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.

 

remember that saying about the forest and the trees? Some pretty good numbers have been posted for 2018. They’re the type of numbers that inspire confidence. For example:

 

4.1 percent. The United States experienced strong economic growth during the second quarter. The advance estimate for U.S. gross domestic product (the value of all goods and services produced by a nation) during the second quarter of 2018 was 4.1 percent. That was the highest rate of growth since the first quarter of 2014.

 

24.6 percent. 2017’s tax reform, which lowered corporate tax rates from an average of 35 percent to an average 21 percent, boosted corporate earnings, reported Nasdaq.com. With 91 percent of companies reporting in, the blended earnings growth rate for the S&P 500 was 24.6 percent during the second quarter of 2018.

 

$1 trillion. What are companies doing with their tax windfall? U.S. companies are rewarding shareholders by buying back stock, reported Nasdaq.com, which suggested buybacks could total $1 trillion in 2018.

 

3,453 days. Depending on how precisely you define the last bull market, August 22 may be the day that marks this one as the longest bull market in history.

 

While positive economic and market numbers are nice to see, they are trees in a forest and don’t necessarily provide a full or an accurate picture. For instance, the length of a bull market is interesting, but it has no predictive value, reported Barron’s. The length of the current economic expansion is far more important.

 

Barron’s cited Dr. Ed Yardeni, chief investment strategist at Yardeni Research, who said, “All I’m interested in is how long the expansion lasts…Because the longer it lasts, the longer the bull market lasts.”

 

It’s important to understand which numbers are important and how they relate to one another. If you would like to learn more, give us a call.

 

Weekly Focus – Think About It

 

“There is no truth. There is only perception.”

--Gustave Flaubert, French 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 (August 6, 2018)

Weekly Market Commentary (August 6, 2018)
 
The Markets
 
 Capital gains tax reform comes with a big price tag: $100 billion over 10 years.
 
A capital gain is any increase in the value of an asset, such as an investment, a home, land, etc., between its purchase and its sale. The amount of a gain is determined by subtracting the purchase price from the sale price.
 
Last week, the White House proposed capital gains be adjusted or ‘indexed’ for inflation before they are taxed. Princeton Professor Alan Blinder explained the idea in The Wall Street Journal:
 
“Why index gains? Suppose you own a stock for many years, during which time overall prices have doubled because of inflation. Over the holding period, the value of your stock also has doubled. When you sell, the proceeds have precisely the same purchasing power as the original purchase. There’s no gain, no loss. But under current tax law, you owe taxes on the phantom ‘gain.’ Worse, if your stock went up by less than the cumulative inflation, you’ll still get taxed despite your loss. This is unfair and dysfunctional.”
 
While the suggestion is appealing to many investors, it’s not without controversy. For example, the White House suggested the Treasury Department change the tax code without Congressional approval by modifying enforcement regulations. However, the legislative branch - Congress - is constitutionally responsible for tax law.
 
In addition, adjusting capital gains for inflation without doing the same for interest expense and depreciation may allow some taxpayers to be able to generate significant losses on paper. Current tax law includes provisions that limit this kind of tax strategy, but indexing capital gains would reopen the door, reported the Tax Policy Center.
 
Another consideration is the impact of the change on the deficit and the national debt. The Congressional Budget Office estimates suggest 2017 tax reform will increase “...the total projected deficit over the 2018-2028 period by about $1.9 trillion.” Adjusting capital gains for inflation could increase the shortfall by about $100 billion over a decade, reported Naomi Jagoda for The Hill.
 

Data as of 8/3/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
0.8%
6.2%
14.9%
10.6%
10.7%
8.6%
Dow Jones Global ex-U.S.
-1.4
-4.1
2.0
3.7
3.0
1.2
10-year Treasury Note (Yield Only)
3.0
NA
2.2
2.2
2.6
4.0
Gold (per ounce)
-0.6
-6.2
-4.1
3.7
-1.4
3.0
Bloomberg Commodity Index
0.1
-3.7
1.9
-2.1
-7.5
-8.1
DJ Equity All REIT Total Return Index
3.2
3.2
6.2
8.0
9.4
8.3
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.
 
THE MILLENNIAL WAY. From social media to housing options to banking, every generation has had its own preferences. Today, millennials (individuals between the ages of 18 and 34) are having a profound influence on lifestyle and culture. Here are three trends to watch:
 
  1. Millennials are moving to smaller cities. “Mid- or second-tier cities, loosely defined as those under a million people that aren’t regional powerhouses like Austin or Seattle, are increasingly seen as not just places to find a lower cost of living, easier commute, and closer connections with family, but also a more approachable, neighborhood-oriented version of the urban lifestyle that sent many to the larger cities in the first place,” reported Patrick Sisson for Curbed.com.
 
  1. Millennials like point-of-sale loans. Point-of-sale loans are catching on. The Economistreported, “Consumers who might previously have financed big-ticket purchases such as furniture, electronics, or home-improvement projects with a credit card are now opting to borrow at the checkout, often with an initial 0 percent interest rate. These short-term credit products were once the domain of big banks...[and] store-branded credit cards. Now tech startups are entering the market with innovative techniques for underwriting and approving potential borrowers, often in seconds.”
 
  1. Millennials tend to prefer healthier lifestyles. “For millennials, wellness is a daily, active pursuit. They’re exercising more, eating smarter, and smoking less than previous generations. They’re using apps to track training data and online information to find the healthiest foods. And, this is one space where they’re willing to spend money on compelling brands,” reported Goldman Sachs.
 
Weekly Focus - Think About It
 
“The changes in our life must come from the impossibility to live otherwise than according to the demands of our conscience, not from our mental resolution to try a new form of life.”
--Leo Tolstoy, Russian writer
 
Best regards,
Lee Barczak
President
 
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor's 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.
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Weekly Market Commentary July 30, 2018

 

Is it a sugar rush or something more sustainable?

 

Economic growth in the United States was strong during the second quarter. Gross domestic product (GDP), which is the value of all goods and services produced in the United States, grew by 4.1 percent. That’s the fastest growth in four years, reported the BBC.

 

The news was received with varying levels of enthusiasm. President Trump said the gain is “an economic turnaround of historic importance” and thinks the economy should continue to grow rapidly, reported Shawn Donnan in Financial Times.

 

Economists were less certain. They think second quarter’s GDP gains were underpinned by one-time factors. These included high levels of profitability attributable to last year’s corporate tax cuts and an increase in exports as U.S. producers and their buyers abroad tried to avoid upcoming tariffs, reported Financial Times.

 

Another consideration is the business cycle. The business cycle tracks the rise and fall of a country’s productivity over time. The U.S. appears to be in the latter stages of the current cycle. John Authers of Financial Times explained:

 

“…President Donald Trump’s self-congratulation yesterday was fully merited. Things are going according to plan. This business cycle looks ever more like a normal one, which is a fantastic and welcome development after an epochal crisis and then a decade of doldrums…The advent of a normal cycle is itself a problem because a normal cycle terminates with high interest rates and declining growth. The president has voiced his disapproval of these things, but they are the logical and sensible consequence of the economic developments that are now unfolding.”

 

In the United States, the Dow Jones Industrial Average and the Standard & Poor’s 500 Index moved higher while the NASDAQ Composite gave up some ground.

 


Data as of 7/27/18

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.6%

5.4%

13.9%

10.9%

10.8%

8.6%

Dow Jones Global ex-U.S.

1.5

-2.7

4.1

4.7

3.6

1.2

10-year Treasury Note (Yield Only)

3.0

NA

2.3

2.2

2.6

4.0

Gold (per ounce)

-0.4

-5.6

-3.0

3.6

-1.6

2.9

Bloomberg Commodity Index

1.4

-3.8

0.7

-2.7

-7.6

-8.4

DJ Equity All REIT Total Return Index

-0.6

0.0

2.1

7.4

8.1

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.

 

it’s camping season! In 1869, the first recreational camping guide, Adventures in Wilderness, was authored by minister William H.H. Murray and became a bestseller. The book’s success may have owed something to a new train route that made the Adirondacks more accessible. Time.com reported his practical guide offered advice on important topics:

 

“For sleeping, he describes how to make ‘a bed of balsam-boughs.’ On what to wear, he suggests bringing a ‘felt hat,’ ‘stout pantaloons,’ and a ‘rubber blanket or coat.’ For warding off woodchucks, ‘a stick, a piece of bark, or tin plate shied in the direction of the noise will scatter them like cats.’ As for wolves, his technique would likely not pass muster with fire wardens: ‘touch a match to an old stump and in two hours there will not be a wolf within ten miles of you.’”

 

His book inspired Kate Field to try camping, and she became an early advocate of land preservation. She wrote for the Adirondack Almanac in 1870. A more recent article in the publication reported:

 

“Field advised her readers to bring a tent rather than kill trees. ‘It is cruel to stab a tree to the heart merely to secure a small strip of bark,’ she said. ‘It is ungrateful to destroy the pine and balsam that have given us our beds of boughs, and fanned us with their vital breath. Let there be tents.’”

 

Additional advice can be found in Civil War veteran John M. Gould’s 1877 guide to backpacking, titled How To Camp Out. He warned against the allure of new gear:

 

“Do not be in a hurry to spend money on new inventions. Every year there is put upon the market some patent knapsack, folding stove, cooking-utensil, or camp trunk and cot combined; and there are always for sale patent knives, forks, and spoons all in one…Let them all alone: carry your pocket-knife…”

 

He might have been willing to make an exception for some of the gear available today!

 

Weekly Focus – Think About It

 

“Camping is nature's way of promoting the motel business.”

--Dave Barry, Humorist

 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, July 23, 2018

Weekly Market Commentar(July 23, 2018)
 
The Markets
 
Last week, there was some good news and some notable news.
 
Here's the good news: Corporate earnings have been strong. As of July 20, 17 percent of the companies in the Standard & Poor's 500 Index had reported second quarter results. More than 85 percent of those companies reported positive earnings surprises, according to FactSet, which means they earned more than expected.
 
"It appears the lower tax rate is more than offsetting the impact of rising costs, resulting in a record-level net profit margin for the index for the second quarter," explained FactSet.
 
Here's the notable news: U.S. stock markets largely ignored a slew of domestic and global issues to finish up a basis point or two last week. (Performance was flat when you round to one place, as we do in the table.) Barron's reported:
 
"President Donald Trump took on the Federal Reserve, telling an interviewer that he's 'not happy' about rising interest rates, the kind of meddling we haven't seen in a while. We also had the usual trade war concerns, as the president and his advisors talked about the need to take on what they consider China's unfair trade practices. China's yuan, meanwhile, tumbled in a way that was a little too reminiscent of August 2015, when its slide caused global markets to shudder. Those concerns, however, were offset by strong corporate earnings."
 
The U.S. bond market has been less sanguine than the U.S. stock market. Debate has focused on the flattening yield curve. The yield curve reflects the difference in yield on U.S. Treasuries from short- to long-term. Normally, investors expect to earn higher yields when they lend their money for longer periods of time (e.g. invest in longer-term bonds).
 
At the end of last week, two-year U.S. Treasuries yielded 2.6 percent and 30-year Treasuries yielded 3.0 percent. Some say when short-term rates rise above long-term rates, inverting the yield curve, recession is ahead.

Data as of 7/20/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
0.0%
4.8%
13.3%
9.6%
10.6%
8.3%
Dow Jones Global ex-U.S.
0.2
-4.2
2.8
3.0
3.0
0.9
10-year Treasury Note (Yield Only)
2.9
NA
2.3
2.4
2.5
4.1
Gold (per ounce)
-1.0
-5.2
-0.8
3.6
-1.5
2.5
Bloomberg Commodity Index
-0.2
-5.1
0.0
-4.5
-8.4
-8.9
DJ Equity All REIT Total Return Index
-1.6
0.6
3.4
7.4
7.7
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.
 
FORWARD LOOKING CAREER: AIR BROKER. By 2050, about 70 percent of the world's population is expected to live in cities, reports UNICEF.
 
The United States is ahead of the curve. Since the 1990s, 75 percent or more of Americans have lived in metropolitan areas. The same was true in Spain, the United Kingdom, Australia, and Canada. In 2000, citizens of Mexico, Korea, and Brazil were largely urban dwelling. By 2050, China and India are expected to have almost two billion people living in cities - and neither will have crossed the 75 percent level.
 
If the thought of densely packed cities inspires a bit of claustrophobia, you're not alone. Anyone who has ever watched 'Green Acres' knows city living isn't for everyone. However, cities are innovation engines, reports Fast Company. "The more people there are in an area, and the more densely they're networked, the more startups get created and the more patents get filed."
 
Consider the entrepreneurial example set by a New York City (NYC) deli owner who was trying to figure out how to stay in business on the Lower East Side of Manhattan. The answer was selling air, reports The Indicator From Planet Money:
 
"So when you buy a plot of land in New York, it comes with what are called 'air rights.' That essentially says how much you are allowed to build on that plot of land. Let's say you buy a plot of land and it comes with 10 stories worth of air rights, you could build a 10-story building on it."
 
The deli owned five stories worth of air rights, or 27,960.66 square feet of air. How much was all that air worth? Reportedly, a developer in New York paid about $17 million for it.
 
Guess who negotiates air deals in NYC.
 
That's right: Air brokers.
 
Weekly Focus - Think About It
"Growth is inevitable and desirable, but destruction of community character is not. The question is not whether your part of the world is going to change. The question is how."
--Edward T. McMahon, 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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