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Weekly Market Commentary (November 13, 2017)

Weekly Market Commentary (November 13, 2017)

 

The Markets

 

Selling it overseas.

 

Most of the companies in the Standard & Poor's 500 (S&P 500) Index have reported third quarter earnings per share (EPS), which is the profit earned per share of stock outstanding during the period. Many have done quite well.

 

With more than 90 percent of companies reporting, the total EPS growth rate for the S&P 500 has exceeded expectations, reported FactSet. In aggregate, the growth rate accelerated from 3.1 percent on September 30 to 6.1 percent last week.

 

It's interesting to note companies that sell more products and services outside the United States experienced significant increases in EPS when compared to companies that sell more at home. S&P 500 companies with:

 

·         More than one-half of sales in the United States had an aggregate growth rate of 2.3 percent.

·         Less than one-half of sales in the United States had an aggregate growth rate of 13.4 percent.

 

The disparity owed much to the weaker U.S. dollar and faster economic growth in other countries, including emerging markets.

 

Investors weren't all that appreciative of strong corporate performance. They rewarded positive EPS surprises less than average and penalized negative EPS surprises more than average. On November 10, FactSet explained:

 

"...it may be due to the high valuation of the index relative to recent averages. As of today, the forward 12-month P/E [price-to-earnings] ratio for the S&P 500 is 18.0... Prior to the month of October, the forward 12-month P/E had not been equal to (or above) 18.0 since 2002. Thus, despite the number and magnitude of positive earnings surprises in recent quarters, the market may be reluctant to push valuations even higher in aggregate."

 

Last week, major U.S. stock indices ended their multi-week winning streaks and finished lower.

 



Data as of 11/10/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

-0.2%

15.3%

19.1%

8.2%

13.4%

6.0%

Dow Jones Global ex-U.S.

-0.3

21.3

23.0

4.0

5.7

-0.5

10-year Treasury Note (Yield Only)

2.4

NA

2.1

2.4

1.6

4.2

Gold (per ounce)

1.4

10.8

1.3

3.4

-5.8

4.8

Bloomberg Commodity Index

0.5

-0.3

4.1

-9.2

-9.1

-7.1

DJ Equity All REIT Total Return Index

2.7

9.9

17.9

8.2

11.1

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.

 

The Winter holidays are almost here. It's that time of year when people search and search for just-the-right gifts at just-the-right-prices for friends and loved ones. The National Retail Federation expectsholiday sales to rise by 3.6 percent to 4.0 percent this year and total about $680 billion. The average consumer expects to spend about $970 on the holidays. Here are a few gift ideas for the hard-to-buy-for individuals on your list:

 

·         For coffee lovers. It's an experience shared by coffee drinkers everywhere. You pour a cup, doctor it up, and before you can take a sip, you are called away. By the time you return, the coffee is cold. A ceramic mug with a microprocessor-controlled heating system can solve the problem.

·         For the outdoorsy. Anyone who spends time in the sun knows the importance of sunscreen. The mystery is when to reapply it. The outdoorsy folks in your family may appreciate a UV patch. It's a wearable decal that changes color when it's time to reapply sunscreen.

·         For the indoorsy. Series bingers and show streamers will love 'wallpaper' television. It's a new kind of TV that viewers 'peel and stick' to their walls using magnetic mats.

·         For the fashion-conscious environmentalist. Soon, clothing may be made of synthetic spider silk and bio-manufactured leather. It's unlikely they'll be available this winter, but you could give tickets to the Museum of Modern Art in New York City. Clothing made of these fabrics is on display through January 2018.

·         For the insomniac. Know someone who has trouble sleeping? A white noise machine or an air purifier with a fan can provide constant, soothing sound that may help lull them to sleep.

·         For the vision impaired. There are all kinds of gadgets that can make life a little easier for people with low or no vision. Try a wristband that shakes to give directions or a new 'feeling fireworks' display that simulates the visual experience through touch.

 

If you're stressing because you cannot find the right gift, remember the best gift is time. Instead of buying things, invite the people on your gift list to join you for an event or an activity.

 

Weekly Focus - Think About It

 

"I slept and I dreamed that life is all joy. I woke and I saw that life is all service. I served and I saw that service is joy."

--Kahlil Gibran, Lebanese writer and poet

 

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 (November 6, 2017)

Weekly Market Commentary (November 6, 2017)

 

The Markets

 

 

"Taxes are what we pay for a civilized society."

 

U.S. Supreme Court Justice Oliver Wendell Holmes's statement is engraved on the front of the Internal Revenue Service building in Washington, D.C. Some people agree with the sentiment. Others believe it to be a logical fallacy.

 

It's likely the tax plan proposed by House Republicans last week had all of them talking, regardless of position on the opinion spectrum. Some of the changes suggested in the proposal include:

 

  • Reducing current marginal income tax brackets from seven to four (12, 25, 35, and 39.6 percent). The New York Times reported, "While the lowest income rate would increase, typical families in the existing 10 percent bracket would most likely be better off because of a larger child tax credit and an increase in the standard deduction."
  • Repealing the Alternative Minimum Tax.
  • Increasing the standard deduction to $12,000 for individuals and $24,000 for married couples, while eliminating personal exemptions (the $4,050 exemptions you claim for yourself, your spouse, and your dependents).
  • Repealing state and local tax deductions.
  • Reducing (and eventually eliminating) estate taxes.
  • Setting the corporate tax rate at 20 percent. Financial Times wrote, "This will not increase wages or growth by much, and nowhere near the wild claims made by its proponents. But a lower rate combined with a broader tax base is not a terrible idea...To pay for the cuts, the tax law writers have gone after corporate deductions..."
  • Eliminating medical expense deductions. The Hill explained, "Under current law, the IRS allows individuals to deduct qualified medical expenses that exceed 10 percent of a person's adjusted gross income for the year. The bill would repeal that itemized deduction, effective in 2018."

 

In addition to headline news about tax reform, investors contemplated the appointment of Jerome Powell as the next Chair of the Federal Reserve and embraced strong earnings. The Standard & Poor's 500 Index, Dow Jones Industrial Average, and NASDAQ closed at record highs last week.

 

 

Data as of 11/3/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.3%

15.6%

23.9%

8.7%

12.8%

5.6%

Dow Jones Global ex-U.S.

0.9

21.6

22.9

4.0

5.4

-0.9

10-year Treasury Note (Yield Only)

2.3

NA

1.8

2.4

1.7

4.3

Gold (per ounce)

0.1

9.3

-2.6

2.8

-5.5

4.6

Bloomberg Commodity Index

1.2

-0.7

3.9

-9.6

-9.1

-7.1

DJ Equity All REIT Total Return Index

1.2

7.0

14.0

7.2

10.2

6.8

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.

 

are you bullish about Pet Tech? Early in the last century, authors like Anna Sewell (Black Beauty) and Jack London (White Fang) wrote stories that encouraged readers to understand and empathize with animals. Today, entrepreneurs are developing devices to help people better understand pets. Here are a few innovations in the pet-tech space that may (or may not) become household necessities or in-demand holiday gifts:

 

  • Remote control pet interaction. You may be sitting in your office, miles from home, but that doesn't mean you can't pull out your smartphone and fling a treat to Fido or shine a laser for Boots to chase. That's right, interactive pet cameras let you see, feed, talk to, and play with your pet when you're far away.

 

  • Pet insight software. A tech writer at Slate wrote, "For the most part, [my cat's] feelings, daily activities, and health are a black box to me." Apparently, it's a common issue. Entrepreneurs have invested $10 million to develop "deep learning software that can analyze the huge quantities of pet video...to learn more about animal behavior and how it's linked to animal health issues and moods."

 

  • Fitness trackers for pets. Pet owners who suspect their animals are too sedentary may want to invest in smart collars for their pets. Some collars track temperature, heart rate, heart rate variability, activity, calories burned, and more. Once a normal baseline has been established, pet owners may be able to spot anomalies that signal health issues.

 

  • Robotic pets with artificial intelligence. Perhaps, you just don't have the time to feed, walk, and play with a pet. Maybe, you travel too much or dislike the household wear and tear associated with pets. If you want a pet that behaves perfectly and requires less care, you may want to consider a robotic alternative that's "packed with an array of sensors, cameras, microphones, and internet connectivity, as well as far more advanced AI backed by cloud computing to develop the dog's personality," according to The Guardian.

 

It's a high-tech world, after all.

 

Weekly Focus - Think About It

 

"Lots of people talk to animals.... Not very many listen, though.... That's the problem."

 

--Benjamin Hoff, Author of The Tao of Pooh

 

 

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 (October 30, 2017)

Weekly Market Commentary (October 30, 2017)

 

The Markets

 

The last full week of October was a box full of surprises.

 

First, U.S. economic growth exceeded expectations. The devastation wrought by Hurricanes Harvey, Irma, and Maria was widely expected to stifle U.S. quarterly growth, according to NPR. The Atlanta Federal Reserve predicted 2.5 percent gross domestic product (GDP)* growth for third quarter, down from 3.1 percent the previous quarter. Instead, U.S. GDP grew by 3.0 percent.

 

In fact, productivity has been flourishing around the globe. The Financial Times reported:

 

"...activity has again broken upwards in recent weeks, with growth in the advanced economies close to the highest rates seen since before the Great Financial Crash (GFC), apart from in the immediate recovery phase in 2010. Furthermore, world trade volume has now joined the recovery, and corporate expenditure on jobs and machinery is picking up. Overall, it seems that some of the symptoms of "secular stagnation" are beginning to fade..."

 

Tech companies were a sensation last week, too. Several of the biggest firms beat earnings estimates by wide margins, pushing share values higher, reported CNBC. Despite tech's strong performance, the Standard & Poor's 500 Index (S&P 500) has delivered third quarter earnings growth of 4.7 percent with more than half of companies reporting.

 

Earnings are lower than they would have been without the hurricanes, according to FactSet. With insurance industry earnings excluded, the S&P 500's earnings growth pops from 4.7 percent to 7.4 percent.

 

The final surprise for the week was the doldrums. October is supposed to be the most volatile month of the year, according to Barron's. Instead, we've experienced the calmest October since 1928.

 

The S&P 500 and the NASDAQ both finished last week at new all-time highs.

 

*GDP is the value of all goods and services produced in a region.

 

 

Data as of 10/27/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.2%

15.3%

21.0%

9.6%

12.8%

5.3%

Dow Jones Global ex-U.S.

-0.2

20.5

20.2

4.4

5.2

-1.2

10-year Treasury Note (Yield Only)

2.4

NA

1.8

2.3

1.7

4.4

Gold (per ounce)

-1.2

9.3

0.0

1.0

-5.8

4.9

Bloomberg Commodity Index

0.7

-1.9

-0.4

-9.8

-9.6

-7.2

DJ Equity All REIT Total Return Index

-1.4

5.8

9.8

7.5

10.0

6.2

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.

 

And the leader in biometric identification is India! Remembering passwords, especially if you follow best practices and have unique 12- to15-character passwords for each account, can be challenging.

 

Even when you follow best practices, which many people do not, passwords are vulnerable to data breaches. The Harvard Business Review recently reported password insecurity is one reason businesses have been opting for biometric technology such as:

 

  • Fingerprint readers
  • Eye scanners
  • Voice recognition systems
  • Hand geometry

 

For instance, in Hangzhou, China, a "health-food concept restaurant" belonging to an American fast food chain, relies on facial recognition software to allow diners to pay with a smile, according to c|net.com. It's a lot to digest.

 

India is a leader in the new technology. Ninety-nine percent of adults in the country have been enrolled in Aadhaar, a biometric identification program that has collected the fingerprints and iris scans of more than a billion people since 2010, according to The Economist.

 

When given permission, Indian government bodies and private businesses can match the fingerprints or irises of individuals to their unique 12-digit numbers, facilitating purchases, payments, and other processes. The system has some glitches, though:

 

"Unlike reading an ID card, checking someone's identity through Aadhaar requires an internet connection and, often, electricity. Ration-shop owners in out-of-the-way places are known to march their customers to the top of a hill, roof, or tree - wherever a phone signal can be found - to check their identity. Even then, samples seem to show that roughly a third of authentications come back negative, an extraordinarily high failure rate for a technology that people rely on for necessities."

 

Regardless, Morgan Stanley believes "digitizing its predominantly cash-based economy and reforming its archaic tax system" will help put India on the economic fast track. "The country was already on a strong trajectory, but digitization puts India's nominal GDP growth on track to compound annually by more than 10 percent in U.S. dollar terms over the coming decade."

 

Weekly Focus - Think About It

 

"There is probably no pleasure equal to the pleasure of climbing a dangerous Alp; but it is a pleasure which is confined strictly to people who can find pleasure in it."

 

--Mark Twain, American novelist

 

Best regards,

 

Lee Barczak

 

President

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Weekly Market Commentary (October 23, 2017)

Weekly Market Commentary (October 23, 2017)

 

The Markets

 

And the hits just keep on coming.

 

Last week was the anniversary of Black Monday. On October 19, 1987, the Dow Jones Industrial Average (Dow) lost 508 points, or more than 20 percent of its value, as it fell from the previous trading day's closing value of 2,247 to 1,739. The culprits behind the historic drop are widely thought to be program trading, high valuations, and market psychology.

 

The anniversary didn't put a hitch in the markets' giddy up last week, though. The Dow closed above 23,000 for the first time ever on Wednesday. That's the fourth thousand-point milestone the Dow has passed this year, according to Reuters.

 

The Standard & Poor's 500 Index also finished the week at a new high. Strong earnings, along with optimism about fiscal and monetary policy, contributed to investors' optimism. Financial Times wrote:

 

"U.S. stocks hit record highs yet again and the dollar touched its strongest level against the yen for more than three months as growth bulls applauded news that the Senate had adopted a fiscal 2018 budget resolution, opening the way for tax reform. U.S. Treasuries fell - most sharply at the longer end of the curve - as participants fretted about the prospect of increased federal borrowing and potentially higher inflation."

 

It's interesting to note, despite major U.S. stock markets hitting new highs, bullish sentiment has been below the historical average 36 times this year, including last week. The AAII Investor Sentiment Survey showed bullish sentiment down 1.8 percent, while bearish sentiment gained 1 percent and neutral sentiment was up 0.8 percent. Of course, some consider this survey to be a contrarian indicator.

 

 

Data as of 10/20/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.9%

15.0%

20.3%

10.6%

12.4%

5.5%

Dow Jones Global ex-U.S.

-0.4

20.8

19.4

4.6

5.0

-0.6

10-year Treasury Note (Yield Only)

2.4

NA

1.8

2.2

1.8

4.4

Gold (per ounce)

-1.4

10.5

0.8

1.0

-5.8

5.5

Bloomberg Commodity Index

-0.7

-2.6

-0.9

-9.9

-10.1

-7.1

DJ Equity All REIT Total Return Index

-1.0

7.3

7.2

8.9

10.1

6.4

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.

 

know what can be really scary? warehouse clubs. Like horror flick fodder (extras and co-stars who ignore their gut instincts and venture into places they shouldn't), people go into warehouse clubs thinking they'll be able to buy just the items they need and escape without serious injury to their budgets. In reality, only shoppers with the preternatural ability to avoid impulse purchases manage it, reports AARP Magazine.

 

That doesn't mean you won't find good deals at warehouse clubs. You will, but you have to exercise tremendous self-discipline. AARP Magazine and Kiplinger's offered insight to some of the better values at warehouse clubs. They include:

 

  • Wine. Here's a shocker: One warehouse club is the biggest wine retailer in the country, according to MarketWatchMag.com. Reasonably priced, signature brands of quality wines and alcohol have been helping warehouse clubs attract members and improve sales.

 

  • Movie tickets. There are some films that should be watched in the theater. If you pick up a packet of discount movie tickets at a warehouse club instead of the theater, the show will cost approximately $8.50 per ticket instead of $13 per ticket.

 

  • Batteries. With the holidays approaching, you're going to need batteries for everything from drones to remote controls to digital games. Warehouse clubs often have competitively priced options.

 

If you're determined to save money by shopping at warehouse clubs, Fox News suggested a mindset adjustment could help:

 

"Buying an item you don't need because it was marked down from $125 to $50 is not saving $75. It's spending $50. That's a lesson that, if taken to heart, should save all [warehouse club] members money. That doesn't seem to be the case for most people, however, so these money-saving memberships probably end up being a drain on people's finances."

 

Here's another way to avoid impulse purchases: Make your choices online and then choose in-store pick-up or delivery.

 

Weekly Focus - Think About It

 

"Today [Amy] starts shopping from her couch by launching a videoconference with her personal concierge at...the retailer where she bought two outfits the previous month. The concierge recommends several items, superimposing photos of them onto Amy's avatar. Amy rejects a couple of items immediately, toggles to another browser tab to research customer reviews and prices, finds better deals on several items at another retailer, and orders them. She buys one item from [the retailer] online and then drives to the...store near her for the in-stock items she wants to try on. As Amy enters [the retailer], a sales associate greets her by name and walks her to a dressing room stocked with her online selections - plus some matching shoes and a cocktail dress. She likes the shoes, so she scans the bar code into her smartphone and finds the same pair for $30 less at another store. The sales associate quickly offers to match the price..."

--Darrell K. Rigby, The Future of Shopping

 

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.* All indexes referenced are unmanaged. 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.* Stock investing involves risk including loss of principal.* Consult your financial professional before making any investment decision.Weekly Market Commentary (October 23, 2017)

 

 

The Markets

 

And the hits just keep on coming.

 

Last week was the anniversary of Black Monday. On October 19, 1987, the Dow Jones Industrial Average (Dow) lost 508 points, or more than 20 percent of its value, as it fell from the previous trading day's closing value of 2,247 to 1,739. The culprits behind the historic drop are widely thought to be program trading, high valuations, and market psychology.

 

The anniversary didn't put a hitch in the markets' giddy up last week, though. The Dow closed above 23,000 for the first time ever on Wednesday. That's the fourth thousand-point milestone the Dow has passed this year, according to Reuters.

 

The Standard & Poor's 500 Index also finished the week at a new high. Strong earnings, along with optimism about fiscal and monetary policy, contributed to investors' optimism. Financial Times wrote:

 

"U.S. stocks hit record highs yet again and the dollar touched its strongest level against the yen for more than three months as growth bulls applauded news that the Senate had adopted a fiscal 2018 budget resolution, opening the way for tax reform. U.S. Treasuries fell - most sharply at the longer end of the curve - as participants fretted about the prospect of increased federal borrowing and potentially higher inflation."

 

It's interesting to note, despite major U.S. stock markets hitting new highs, bullish sentiment has been below the historical average 36 times this year, including last week. The AAII Investor Sentiment Survey showed bullish sentiment down 1.8 percent, while bearish sentiment gained 1 percent and neutral sentiment was up 0.8 percent. Of course, some consider this survey to be a contrarian indicator.

 

 

Data as of 10/20/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.9%

15.0%

20.3%

10.6%

12.4%

5.5%

Dow Jones Global ex-U.S.

-0.4

20.8

19.4

4.6

5.0

-0.6

10-year Treasury Note (Yield Only)

2.4

NA

1.8

2.2

1.8

4.4

Gold (per ounce)

-1.4

10.5

0.8

1.0

-5.8

5.5

Bloomberg Commodity Index

-0.7

-2.6

-0.9

-9.9

-10.1

-7.1

DJ Equity All REIT Total Return Index

-1.0

7.3

7.2

8.9

10.1

6.4

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.

 

know what can be really scary? warehouse clubs. Like horror flick fodder (extras and co-stars who ignore their gut instincts and venture into places they shouldn't), people go into warehouse clubs thinking they'll be able to buy just the items they need and escape without serious injury to their budgets. In reality, only shoppers with the preternatural ability to avoid impulse purchases manage it, reports AARP Magazine.

 

That doesn't mean you won't find good deals at warehouse clubs. You will, but you have to exercise tremendous self-discipline. AARP Magazine and Kiplinger's offered insight to some of the better values at warehouse clubs. They include:

 

  • Wine. Here's a shocker: One warehouse club is the biggest wine retailer in the country, according to MarketWatchMag.com. Reasonably priced, signature brands of quality wines and alcohol have been helping warehouse clubs attract members and improve sales.

 

  • Movie tickets. There are some films that should be watched in the theater. If you pick up a packet of discount movie tickets at a warehouse club instead of the theater, the show will cost approximately $8.50 per ticket instead of $13 per ticket.

 

  • Batteries. With the holidays approaching, you're going to need batteries for everything from drones to remote controls to digital games. Warehouse clubs often have competitively priced options.

 

If you're determined to save money by shopping at warehouse clubs, Fox News suggested a mindset adjustment could help:

 

"Buying an item you don't need because it was marked down from $125 to $50 is not saving $75. It's spending $50. That's a lesson that, if taken to heart, should save all [warehouse club] members money. That doesn't seem to be the case for most people, however, so these money-saving memberships probably end up being a drain on people's finances."

 

Here's another way to avoid impulse purchases: Make your choices online and then choose in-store pick-up or delivery.

 

Weekly Focus - Think About It

 

"Today [Amy] starts shopping from her couch by launching a videoconference with her personal concierge at...the retailer where she bought two outfits the previous month. The concierge recommends several items, superimposing photos of them onto Amy's avatar. Amy rejects a couple of items immediately, toggles to another browser tab to research customer reviews and prices, finds better deals on several items at another retailer, and orders them. She buys one item from [the retailer] online and then drives to the...store near her for the in-stock items she wants to try on. As Amy enters [the retailer], a sales associate greets her by name and walks her to a dressing room stocked with her online selections - plus some matching shoes and a cocktail dress. She likes the shoes, so she scans the bar code into her smartphone and finds the same pair for $30 less at another store. The sales associate quickly offers to match the price..."

--Darrell K. Rigby, The Future of Shopping

 

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.* All indexes referenced are unmanaged. 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.* Stock investing involves risk including loss of principal.* Consult your financial professional before making any investment decision.

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Weekly Market Commentary (October 16, 2017)

The Markets

 

There's a new kid in town: narrative economics.

 

Last week, Richard Thaler was awarded the Nobel Prize in economics. His work in behavioral economics and finance recognizes not all economic and financial decisions are made after rational reflection. In Nudge, he wrote:

 

"The workings of the human brain are more than a bit befuddling. How can we be so ingenious at some tasks and so clueless at others?...Many psychologists and neuroscientists have been converging on a description of the brain's functioning that helps us make sense of these seeming contradictions. The approach involves a distinction between two kinds of thinking, one that is intuitive and automatic, and another that is reflective and rational."

 

Yale professor Robert Shiller, another Nobel laureate in economics, is exploring a field of study related to Thaler's. It's called narrative economics. Narratives are the stories we share with each other. They are fuel for conversation and popular narratives often become viral. During a presentation at the University of Chicago, Schiller explained narrative economics is "the study of the spread and dynamics of popular narratives, the stories, particularly those of human interest and emotion, and how these change through time, to understand economic fluctuations."

 

Today, a popular narrative in financial circles focuses on Professor Shiller's cyclically-adjusted price-earnings (CAPE) ratio, which suggests the market may be overvalued. Barron's reported, "The CAPE, which is based on average inflation-adjusted earnings over the trailing 10 years, stands at 31, versus 32.5 in 1929 and 44 in late 1999."

 

If stocks are overvalued, why do investors keep buying shares? It's a question narrative economics hopes to help answer in the future.

 

 

Data as of 10/13/17

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

0.2%

14.0%

19.7%

10.8%

12.1%

5.1%

Dow Jones Global ex-U.S.

1.7

21.3

21.8

5.0

5.4

-0.9

10-year Treasury Note (Yield Only)

2.3

NA

1.7

2.3

1.7

4.7

Gold (per ounce)

3.0

12.1

3.1

1.9

-5.6

5.5

Bloomberg Commodity Index

2.4

-1.8

-0.4

-10.3

-10.0

-7.1

DJ Equity All REIT Total Return Index

1.6

8.4

8.8

10.4

10.3

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.

 

self-driving cars, life-like robots, artificial intelligence, and video phones. Millennials and members of Gen Z may find the original Blade Runner movie a bit dated. After all, many of the tech innovations imagined have become a part of our daily lives and others, like mood organs, are in the works.

 

Mood organs were among the human enhancements imagined by Philip Dick in Do Androids Dream of Electric Sheep? (The book upon which Blade Runner was based.) A recent c|net.com article explained:

 

"Dick doesn't describe the design of the mood organ or how it works, only specifying that it can stimulate or sedate the user's cerebral cortex. Users simply dial up the emotion they want, such as 481 (awareness of the manifold possibilities open in the future) or 594 (pleased acknowledgement of a spouse's superior wisdom)."

 

Neural implants are a reality already, although they're not used to control human emotion. Thousands of people with Parkinson's have implants to manage tremors and applications to help with epilepsy and depression are being explored, according to IEEE Spectrum.

 

Medical treatments are not the only applications for neural implants. Elon Musk is developing 'neural lace,' a brain-computer interface (BCI) that may be injected into the human body, travel through the bloodstream, and settle over the cerebral cortex. While neural lace someday may be used to treat or diagnose neurological issues, The Economist reports Mr. Musk has argued, "human beings need to embrace brain implants to stay relevant in a world which, he believes, will soon be dominated by artificial intelligence."

 

Musk is not the only entrepreneur pursuing brain interfaces. IEEE Spectrum reported Mary Lou Jepsen, an MIT alumnus and tech executive, has founded a company which is working on non-invasive BCIs "for imaging and telepathy (the latter could conceivably be done by reading out thought patterns in the brain)."

 

It's possible the idea of humans with superpowers may seem quaint to future generations.

 

Weekly Focus - Think About It

 

"The real question is, when will we draft an artificial intelligence bill of rights? What will that consist of? And who will get to decide that?"

--Gray Scott, Futurist philosopher

 

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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