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Weekly Market Commentary (April 2, 2018)

Weekly Market Commentary (April 2, 2018)
 
The Markets
 
In like a lion...
 
Investors roared into 2018.
 
During the first week of the first quarter of the New Year, the Dow Jones Industrial Average rose above 25,000 for the first time ever. Less than two weeks later, it closed above 26,000. The Standard & Poor's (S&P) 500 Index and NASDAQ Composite also reached new all-time highs.
 
Strong performance was supported by strong fundamentals. In December 2017, Mohamed A. El-Erian wrote in BloombergView economic and policy fundamentals, including synchronized global recovery, progress on U.S. tax reform, improved certainty around Brexit, and orderly acceptance of changing U.S. monetary policy, "...reinforce the prospects for better actual and future growth, thereby increasing the possibility of improved fundamentals validating notably elevated asset prices."
 
During the first quarter, the global economy remained robust, reported Forbes. American companies were profitable (profitability is measured by earnings) and earnings per share for the S&P 500 Index are expected to increase during 2018. FactSet reported analysts currently estimate the S&P 500 Index will deliver double-digit earnings growth (18.5 percent overall) during 2018. Here's what the analysts anticipate each quarter:
 
  • Q1: Earnings growth of 17.3 percent
  • Q2: Earnings growth of 19.1 percent
  • Q3: Earnings growth of 20.9 percent
  • Q4: Earnings growth of 17.1 percent
 
Improving expectations for American companies can be credited, in large part, to tax reform, which lowered corporate tax rates significantly. In addition, rising oil prices may help companies in the Energy sector, and rising interest rates may give a boost to companies in the Financials sector.
 
Despite a robust global economy, strong earnings, and improving earnings per share (EPS) expectations, the major U.S. stock indices delivered negative quarterly returns for the first time since 2015. On March 29, the last trading day of the quarter, the Dow closed at about 24,100.
 
If fundamentals are strong, why did major indices in the United States (and many indices around the world) finish the quarter lower? Financial Times suggested uncertainty might have something to do with the retreat:
 
"The tax cut has been achieved. We are no longer so sure that [President Trump's] remaining ideas are so good, and most investors think his ideas about trade are downright terrible. And so the market has started reacting to presidential tweets... Most importantly, though, key assumptions have been stripped away. We can no longer rely on low volatility. And critically, the positive view of a low-inflation strong-growth future has been called into question - but only after the stock market had priced in that assumption as a done deal."
 
Market declines may also reflect concern about valuations. One financial professional told Financial Times many asset classes have gone from being very expensive to being expensive. They haven't yet gotten inexpensive.
 
Out like a lamb...
 
The last week of the quarter was a good one for U.S. stock markets, which pushed higher. However, the major indices were unable to overcome deficits accumulated earlier in the quarter. The Dow Jones Industrial Average gained 2.4 percent last week, finishing the quarter down 2.5 percent. The S&P 500 Index was up 2.0 percent last week, down 1.2 percent for the quarter. Likewise, the NASDAQ bounced 1.0 percent last week, but ended the quarter down 2.3 percent, reported Barron's.
 

Data as of 3/29/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
2.0%
-1.2%
11.9%
8.2%
10.1%
7.2%
Dow Jones Global ex-U.S.
0.6
-1.5
13.6
3.9
3.9
0.6
10-year Treasury Note (Yield Only)
2.7
NA
2.4
2.0
1.8
3.4
Gold (per ounce)
-1.7
2.1
5.8
3.8
-3.5
3.6
Bloomberg Commodity Index
0.0
-0.8
2.4
-4.1
-8.5
-8.0
DJ Equity All REIT Total Return Index
3.7
-6.7
-0.3
2.7
6.7
6.9
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.
 
IF YOU ASKED ARTIFICIAL INTELLIGENCE (AI) TO BAKE, WHAT WOULD IT MAKE? Janelle Shane at PopSci.com wrote, "When computers try to imitate humans, they often get confused. But simulated brain cells in so-called neural networks can mimic our problem-solving skills. An AI will look at a dataset, figure out its governing rules, and use those instructions to make something new. We already employ these bots to recognize faces, drive cars, and caption images for the blind. But can a computer cook?"
 
Shane addressed the question by training a computer's neural network to write a recipe. The computer reviewed a dataset of more than 24,000 online recipes (647 of them began with the word chocolate and 8 included blood as an ingredient). After two days of processing, the network delivered a remarkable recipe that includes a title, category, ingredients, and directions, although the nonsensical word choices are likely to leave bakers uncertain about how to proceed:
 
CHOCOLATE BUTTERBROTH BLACK PUDDING
cheese/eggs
4 oz cocoa; finely ground
1teaspoon butter
½ cup milk
¼ teaspoon pepper
¼ cup rice cream, chopped
1 lb cream
1 sesame peel
 
- DATE HOLY -
 
1 large egg
1 powdered sugar serving barme
¼ cup butter or margarine, melted
 
Brown sugar, chocolate; baking powder, beer, lemon juice and salt in chunk in greased 9x2 inch cake. Chill until golden brown and bubbly. Place serve garlic half by pieoun on top to make more use bay. Place in frying pan in preheated oven. Sprinkle with fresh parsley for cooking. Eating dish to hect in pot of the oil, pullover half-and half...Yield: 1 cake"
 
AI seems to have missed an important governing rule for recipes: Instructions should not include unlisted ingredients and all ingredients should be included in the instructions. DATE HOLY is particularly baffling. The author suggested the neural network might have been trying for frosting. It is a cake, after all.
 
Weekly Focus - Think About It
 
"We are surrounded by hysteria about the future of artificial intelligence and robotics - hysteria about how powerful they will become, how quickly, and what they will do to jobs...Mistaken predictions lead to fears of things that are not going to happen, whether it's the wide-scale destruction of jobs, the Singularity, or the advent of AI that has values different from ours and might try to destroy us. We need to push back on these mistakes."
--Rodney Brooks, Australian robotics entrepreneur
 
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.
Morgan Kenwood Advisors
5130 West Loomis Road, Greendale, Wisconsin 53129
Phone: (414) 423-4020
 
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Weekly Market Commentary (March 27, 2018)

Weekly Market Commentary (March 26, 2018)
 
The Markets
 
Why am I saving and investing?
 
After a week like last week, it's an important question. There are many reasons people save and invest, including to:
 
  • Live the life they want today and in the future
  • Accumulate resources so they're prepared for any bumps in the road
  • Provide an education for their children
  • Offer assistance to parents
  • Support a young person with a disability
  • Do good in the world
  • Live comfortably in retirement without anxiety
 
However, none of these reasons have anything to do with short-term market fluctuations.
 
Last week, major U.S. stock indices experienced a selloff, and we saw a dramatic downturn in stock markets. The Dow Jones Industrial Average was down 5.7 percent, the Standard & Poor's 500 index lost 6 percent, and the NASDAQ fell 6.5 percent, reported Barron's.
 
Those are big moves for a single week. The kind of moves that light up the emotion centers of investors' brains and make them want to sell.
 
It's not a new phenomenon. In 2002, in an article for CNN Money, Jason Zweig explained the brain's potentially negative influence on investment decisions, "But in the world of investing, a panicky response to a false alarm - dumping all your stocks just because the Dow is dropping - can be as costly as ignoring real danger. For one thing, it can cause you to flee the market at a low point and miss out when the market bounces back. A moment of panic can also disrupt your long-term investing strategy."
 
So, what happened last week? In short:
 
  • The Fed raised rates, as expected. The Federal Reserve raised the Fed funds rate by a quarter of a percent, which may benefit savers and investors, but will make borrowing more expensive.
  • Tariffs triggered trade war worries. The Trump administration levied tariffs on China, raising concerns of a global trade war.
  • You're fired! There was additional turnover among senior advisers to President Trump.
  • Can they do that? British news reported a data analytics firm has been influencing elections around the world in some unsavory ways.
  • Don't share my data! There was news a social media firm had shared the personal data of thousands with a researcher who shared it with a third-party firm without permission.
  • Sigh. Another data breach. An online travel company experienced a data breach that may have exposed the personal information of 880,000 users.
  • The economy is chugging along. Last week's U.S. economic releases were overshadowed by everything else, but many indicated a strengthening economy, reported Barron's.
 
That's a lot to take in over the span of five days. The critical thing is to recognize these short-term events are unlikely to change your long-term financial goals. Financial decisions, including buying and selling investments, are important and can be life shaping. They should be grounded by long-term financial goals and foundational principles of investing. They should not be based on the brain's instinctive fear and flight response.
 

Data as of 3/23/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
-6.0%
-3.2%
10.3%
7.1%
10.8%
6.7%
Dow Jones Global ex-U.S.
-2.7
-2.1
13.4
3.3
3.8
0.9
10-year Treasury Note (Yield Only)
2.8
NA
2.4
1.9
1.9
3.5
Gold (per ounce)
2.8
3.9
7.9
4.3
-3.4
3.8
Bloomberg Commodity Index
0.1
-0.8
3.4
-4.4
-8.7
-7.9
DJ Equity All REIT Total Return Index
-4.0
-10.0
-3.7
0.9
6.3
6.1
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.
 
LET'S TAKE A GOOD NEWS BREAK. After last week, we could all use some good news. Here are 10 intriguing headlines from the Good News Network:
 
  1. Scientists Believe They Found a Way to Stop Future Hurricanes in Their Tracks
  2. Strangers Rally Around 13-Year-old Whose Rock Museum was Robbed
  3. Dog that Shoplifted a Book on 'Abandonment' is Given the Love It was Asking For
  4. Stranger Becomes Honorary Grandma After She Opens Home to Stranded Father in Distress
  5. We're Not Spinning a Yarn Here: Knitting May Boost Health and Happiness
  6. Robot Becomes Part of the Community After Easing Daily Burden of Water Collection in Remote Village
  7. Instead of Using Trees, Scientists are Making Sustainable Paper Out of Manure
  8. World's First Mass-Produced, 3D-Printed Car is Electric and Costs Under $10K
  9. This Pollution-Gobbling City Bench Can Absorb as Many Toxins as 275 Trees
  10. Free Clothing Hung on Streets to Help the Homeless Stay Warm
 
There is a lot of good news in the world. Unfortunately, it doesn't pack a wallop like bad news does, so we hear less about it.
 
Weekly Focus - Think About It
 
"When the weather changes, nobody believes the laws of physics have changed. Similarly, I don't believe that when the stock market goes into terrible gyrations its rules have changed."
--Benoit Mandelbrot, Mathematician and polymath
 
 
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.
Morgan Kenwood Advisors
5130 West Loomis Road, Greendale, Wisconsin 53129
Phone: (414) 423-4020
 
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Weekly Market Commentary

Weekly Market Commentary (March 12, 2018)
 
The Markets
 
It's a bird...It's a plane...It's a labor shortage!
 
There is little doubt the Millennial generation has been reshaping our world. One of the most remarkable aspects of this demographic group is a preference for experiences over consumer goods. "Three out of four millennials would rather spend their money on an experience than buy something desirable. This "experience generation" is now a third of the U.S. population," reported Eventbrite.
 
Well, a new experience has arrived - a labor shortage in the United States.
 
Last week, Barron's reported, "Across the nation, in industries as varied as trucking, construction, retailing, fast food, oil drilling, technology, and manufacturing, it's becoming increasingly difficult to find good help. And, with the economy in its ninth year of growth and another baby boomer retiring every nine seconds, the labor crunch is about to get much worse...This, of course, is how a labor market works: Production rises, workers get scarce, and employers raise wages to attract employees."
 
Currently, the population of the United States is growing faster than the U.S. workforce, reported Barron's. It's a state of affairs that occurred twice during the last century (1948 through 1967 and 1991 through 1999) and was accompanied by labor shortages both times. This time, Baby Boomers' retirements may exacerbate the situation. Some estimates suggest the current labor shortage could last through 2050.
 
Despite low unemployment and high demand for workers, wage growth slowed in February.
 
There is a wild card in play, however. Many Americans prefer to participate in the workforce through the Gig economy. Gig workers have temporary jobs or freelance rather than working for an employer. MBO Partners reported, "Independents are the nearly 41 million adult Americans of all ages, skill, and income levels - consultants, freelancers, contractors, temporary, or on-call workers - who work independently to build businesses, develop their careers, pursue passions, and/or to supplement their incomes."
 
The government has yet to figure out how to measure the Gig economy. When it does, a clearer employment and wage picture may emerge.
 

Data as of 3/9/18
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor's 500 (Domestic Stocks)
3.5%
4.2%
17.8%
10.3%
12.4%
8.2%
Dow Jones Global ex-U.S.
1.8
0.5
19.6
5.2
4.1
1.1
10-year Treasury Note (Yield Only)
2.9
NA
2.6
2.2
2.1
3.4
Gold (per ounce)
-0.1
1.9
9.5
4.2
-3.5
3.1
Bloomberg Commodity Index
-0.2
-0.2
4.0
-4.3
-8.5
-8.6
DJ Equity All REIT Total Return Index
3.3
-7.5
1.5
4.0
6.9
7.8
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 NOT JUST FOR MILLENNIALS! While the emergence of the Gig economy often is attributed to Millennials, MBO Partners' 2017 survey found the full-time Gig workforce is a generational mash-up. It includes:
 
  • 38 percent Millennials (ages 21 to 37)
  • 27 percent Gen Xers (ages 38 to 52)
  • 35 percent Baby Boomers (ages 53 to 72) and Matures (ages 72 and older)
 
Full-time independents work at least 15 hours per week and average 35 hours per week.
 
While the term 'Gig economy' may conjure images of ride-sharing drivers and homeowners who rent to vacationers, it includes a much broader swath of careers and many people who earn six figures. So, what do Gig economy jobs look like? According to Entrepreneur.com and Forbes, some of the top gigs include:
 
  • Deep learning professionals. Facilitating machines learning by developing neural networks similar to those of the human brain.
  • Robotics designers and programmers. Responsible for building and designing mechanical elements and machinery to streamline operations.
  • Ethical hackers. 'White hats' help companies evaluate systems for security vulnerabilities.
  • Virtual reality freelancers. They develop algorithms and have 3D modeling and scanning skills.
  • Social media marketers. Understand platform algorithms and create engaging content to help companies develop their brands and market their products on a platform.
  • Multimedia artists. Employ technology to create designs and special effects for digital media.
  • Broadcast and sound engineering technicians. Sound is a vital part of radio programs, television broadcasts, concerts, and movies.
  • Carpenters. Demand for carpenters is expected to grow by 6 percent through 2024.
  • Delivery truck drivers. This may change with the debut of self-driving delivery trucks.
 
If you're a risk taker looking for a flexible career or a retiree looking to supplement your income, a job in the Gig economy may be just the ticket.
 
Weekly Focus - Think About It
 
"You don't concentrate on risks. You concentrate on results. No risk is too great to prevent the necessary job from getting done."
--Chuck Yeager, retired United States Air Force officer, flying ace, and test pilot
 
Best regards,
 
Lee Barczak
President
 
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor's 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.
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Weekly Market Commentary

Weekly Market Commentary (February 26, 2018)

 

The Markets

 

U.S. Treasuries are offering a lesson in supply and demand.

 

Last week, the U.S. Treasury auctioned $258 billion in bonds. Treasury auctions are the way the United States government finances its debt. The Treasury sells short-, intermediate-, and long-term IOUs, known as bills, notes, and bonds. When investors and governments purchase bonds, they agree to lend money to the United States. In return, the United States agrees to pay an amount of interest over a certain period of time. At the end of that time, the government is expected to repay the money borrowed.

 

The price and interest paid on U.S. government debt is determined by supply and demand. When there are few bonds and a lot of demand, prices rise and interest rates fall. When there are a lot of bonds and little demand, prices fall and interest rates rise.

 

Last week, Barron's reported, "The law of supply and demand meant that the glut of new Treasuries temporarily drove down prices and pushed up yields. The 10-year Treasury climbed during the week - brushing 2.95 percent - but ultimately lost half a basis point, ending at 2.87 percent. (A basis point is a hundredth of a percentage point.)"

 

The Treasury increased its debt issuance to fund tax reform and the two-year federal budget. Reuters reported, "...tax reform is expected to add as much as $1.5 trillion to the federal debt load, while the budget agreement would increase government spending by almost $300 billion over the next two years."

 

A surplus of Treasury bonds, in tandem with decreased demand as the Federal Reserve reduces the holdings it accumulated during quantitative easing (an unconventional monetary policy in which a central bank purchases government securities in order to lower interest rates, increase the money supply, and stimulate the economy), could push Treasury rates higher. In addition, MarketWatch reported the Federal Reserve appears to be committed to gradually increasing the Fed funds rate to avoid an overheating economy and keep inflation down.

 

Higher interest rates may be coming.

 

 

Data as of 2/23/18

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.6%

2.8%

16.3%

9.2%

13.1%

6.3%

Dow Jones Global ex-U.S.

0.1

1.6

19.3

4.9

4.6

0.7

10-year Treasury Note (Yield Only)

2.9

NA

2.4

2.1

1.9

3.9

Gold (per ounce)

-1.8

2.4

6.4

3.3

-3.5

3.5

Bloomberg Commodity Index

0.6

0.6

1.5

-4.5

-8.4

-8.2

DJ Equity All REIT Total Return Index

-0.3

-8.0

-3.6

2.2

7.4

6.9

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.

 

olympic athletes have to pay the bills, too. Not every American Olympian and Paralympian is a household name. Money.com reported, "These athletes don't have the same kind of lucrative sponsorship deals as Olympic standouts like snowboarder Shaun White or alpine skiing star Lindsey Vonn - so they have to make ends meet, which can often mean squeezing in extra shifts during the off season, heading to the gym early in the morning before work and moving from a full-time position to a part-time one with no replacement for those lost wages."

 

So, how do lesser-known athletes pay the bills while training?

 

  • Sled hockey player Josh Pauls is a sales account executive. His teammate Steve Cash is a personal banker.
  • Pairs figure skater Chris Knierim works as an auto mechanic and wants to have his own auto shop someday.
  • Biathlon competitor Lowell Bailey is a singer and songwriter who plays in bluegrass bands.
  • Curling team member Nina Roth is a registered nurse. Her teammate Tabitha Peterson is a pharmacist.
  • Snowboarder Jonathan Cheever is a licensed plumber.
  • Luger Emily Sweeney is a member of the National Guard, and so is bobsledder Nick Cunningham.
  • Short track speed skater Jessica Kooreman has a real estate license.
  • Luger Justin Krewson is a firefighter.
  • Snowboarder Mike Schultz designs and engineers prosthetics.
  • Nordic skier Kendall Gretsch works in tech support.

 

There is a lot to admire about Olympic and Paralympic athletes.

 

Weekly Focus - Think About It

 

"There are only three ways to meet the unpaid bills of a nation. The first is taxation. The second is repudiation. The third is inflation."

--Herbert Hoover, 31st President of the United States

 

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 12, 2018)

Weekly Market Commentary (February 12, 2018)

 

The Markets

 

Back to reality...

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

Data as of 2/9/18

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

-5.2%

-2.0%

13.5%

8.6%

11.5%

6.9%

Dow Jones Global ex-U.S.

-6.3

-2.7

16.0

4.4

3.7

0.9

10-year Treasury Note (Yield Only)

2.8

NA

2.4

2.0

2.0

3.6

Gold (per ounce)

-1.3

1.4

6.3

2.0

-4.5

3.7

Bloomberg Commodity Index

-3.9

-2.9

-3.3

-6.1

-9.4

-8.0

DJ Equity All REIT Total Return Index

-4.2

-9.6

-2.9

1.9

6.7

7.3

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

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

 

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

 

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

--BlackRock Investment Institute, February 7, 2018

 

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

--The Economist, February 8, 2018

 

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

--IMF Blog, January 22, 2018

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

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

 

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

--Schwab market commentary, February 9, 2018

 

Forecasting is a difficult task. Time will tell.

 

Weekly Focus - Think About It

 

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

--John Paulson, Investment manager

 

Best regards,

Lee Barczak

President

 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor's 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.

Continue reading
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