Markets Cautious but Resilient – Weekly Update for August 21, 2017

From domestic unrest to international terrorism, last week provided many headlines that could easily rattle the markets. While we did see days with volatility and declines, the major indexes remained relatively flat. For the week, the Dow was down 0.84%, the S&P 500 dropped 0.65%, and the NASDAQ fell 0.64%. On the international front, the MSCI EAFE remained virtually the same last week as the week before, recording a microscopic 0.0014% increase.

Why didn’t the markets react to the geopolitical turmoil by turning sharply negative? As we’ve shared before: Headlines shouldn’t drive long-term market behavior—economic fundamentals should. Last week, we received reports indicating the economy continues to be strong in a number of areas.

Here is a closer look at last week’s important economic news:

  • Robust Retail Sales: July retail sales rose 0.6%, beating expectations and showing strength in a variety of retail categories.
  • Strong Business Inventories: Factory, warehouse, and retail business inventories all jumped for a combined 0.5% increase in June. The data looks promising—inventory levels tend to rise in positive economic environments.
  • Uneven Industrial Activity: Industrial production rose 0.2% in July. This growth was lower than expected due to declining motor vehicle production dragging on the index.
  • Mixed Housing Data: The housing market index surged by 4 points as home-builders experience an increasing demand from buyers. But despite the growing appetite for new construction, July’s housing starts slipped, in part because builders are struggling to find experienced labor and new sites to build on.

Looking Ahead

This week, we will receive more data that helps deepen our perspectives on housing market health, Q3 expectations, and the Fed’s upcoming plans.

In this time of dramatic headlines and geopolitical uncertainty, we want to remind you that you are in control of your wealth and financial future. No matter what the talking heads want you to believe, stay focused on market fundamentals. Please call or email if you have any questions concerning specific market data or larger, developing issues.

ECONOMIC CALENDAR  

Wednesday: New Home Sales
Thursday: Jobless Claims, Existing Home Sales
Friday: Durable Goods Orders, Janet Yellen Speaks

Markets Turn Jittery – Weekly Update for August 14, 2017

Last week, rising tension between North Korea and the U.S. rattled the world’s markets. As the two countries traded tough words, concerns escalated and markets reacted emotionally to the news. Though stress is building internationally, we remain committed to focusing on the market fundamentals that drive long-term value.

We recently published a special update outlining the details of how markets have reacted to other significant geopolitical events. History shows that markets can fall in the wake of alarming news but do recover, given time. We encourage you read through the post and talk to us if you have questions or concerns. You can find the special update HERE.

Amidst the pressure last week, volatility returned to markets—and all three major U.S. market indexes turned south. The Dow dropped 1.06%, the S&P 500 fell 1.43%, and the NASDAQ declined 1.50%. Global markets also reacted as the MSCI EAFE lost 1.59% for the week.

Though international developments dominated headlines, economic news important to markets and investors continued to roll out. The data reflects a solid economy, but some possible headwinds are on the horizon. Here are the highlights:

  • Impressive Corporate Earnings: Q2 corporate earnings reports both domestically and internationally were impressive. Reported corporate earnings in the U.S. increased an average of over 10% for the second quarter in a row—their first time doing so since 2011.
  • Low Inflation: The consumer price index, which measures changes to the average price of specific goods and services, rose only 0.1% in July. Expectations for a 0.2% increase failed to materialize as housing and travel costs, wireless services, and auto sales all slumped in July. At 1.7%, year-over-year inflation remains below the Federal Reserve’s targeted 2% growth rate. Continued low inflation may cause the Fed to rethink its plans to raise interest rates.
  • Rising Demand for Labor: Labor markets continue to be a key economic driver as evidenced by sharply rising job openings. June’s job openings jumped to 6.2 million from 5.7 million in May. Year-over-year, job openings climbed an impressive 11.3%. Moreover, jobless claims remain at historic lows.
  • High U.S. Household Debt: The current outstanding consumer debt of $12.7 trillion is now higher than the previous record reached in 2008. This debt load could wind up being a drag on consumer spending and the economy as a whole.

What Is Ahead

Tense geopolitical headlines may continue, but there will be plenty of market news, too. Retail, manufacturing, and housing data will come out this week, and Friday’s August consumer sentiment numbers will be of interest. Though the markets may move with emotions, economic fundamentals should continue to be the base for long-term value.

No matter what questions you may have, we always welcome you to reach out and contact us. We are here to help.

ECONOMIC CALENDAR

Tuesday: Retail Sales, Import and Export Prices, Housing Market Index, Business Inventories
Wednesday: Housing Starts
Thursday: Jobless Claims, Industrial Production
Friday: Consumer Sentiment

August 2017 Market Update Video


A slow first quarter followed by stronger growth in the spring has been a familiar pattern over the past several years. Because of it, the government began combined efforts to manage shortcomings in the government’s seasonal adjustment process. Even with this spring rally, though, economic analysts do not think it will meet the ambitious targets set by President Trump. For 2017, economic experts believe growth will come in around 2.2%, which is where growth has been since the Great Recession recovery began in mid-2009.

In this video, Josh will battle the mosquito apocalypse, and discuss some of the economic headlines that influenced markets in July, and give you some insight into what they could mean for you as an investor.

If you have any questions or concerns about your portfolio after watching this video, please don’t hesitate to reach out to us by email, or by giving us a call at (419) 425-2400. We would be happy to talk.

Markets March Ahead – Weekly Update for July 31, 2017

Last week, markets marched ahead within a busy reporting week. The Dow rose 1.16% to close Friday on another new high. The S&P 500 notched a record high during the week, despite closing the week slightly down 0.02%. Meanwhile, the NASDAQ slipped 0.20%, and the MSCI EAFE rose 0.21%.

Generally strong corporate earnings reports helped markets continue to hit highs. The majority of companies that have posted Q2 earnings so far have beaten their estimates. Those earnings performances helped push financials, materials, and energy stocks up by over 1% early in the week. Health care companies also posted substantial earnings as S&P 500 health care stocks have risen 16% this year. Health insurer stocks have also increased by 22%.

Additionally, Q2 Gross Domestic Product (GDP), consumer confidence, exports, housing, and oil all reported noteworthy developments.

A Rundown of Last Week’s Developments

  • Solid GDP Performance: For the second quarter, GDP came in at a 6% annualized rate—one of the strongest quarters in the last 2 years. GDP growth was based on robust consumer spending for durable and nondurable goods. In addition, business investment hit a solid 5.2% annualized increase for the quarter.
  • Healthy Consumer Confidence: Consumer confidence remains quite high with the index rising in July almost 4 points to 121.1. The index beat the optimistic estimate of 118 and has jumped approximately 20 points since last November’s election, staying near March’s 17-year high of 124.9. In addition, the consumer sentiment index moved up modestly the last two weeks of July to end at 93.4.
  • Decent Export and Import Numbers: Food products and capital goods helped exports rise by 1.4% in June. Further, wholesale and retail inventories both jumped 0.6%. Imports, however, fell 0.4% on lower industrial supplies and consumer goods.
  • Mixed Home Sales: A tight labor market and low mortgages continue to spur demand for housing. In June, new home sales recorded a strong 610,000 annualized rate. Meanwhile, existing home sales dropped 1.8% in June to an annualized rate of 5.5 million, which was lower than anticipated. Existing home prices, however, were up 6.5% year-over-year, with a median price of $263,800.
  • Better Oil Prices: Oil prices rose this week, hitting the highest weekly percentage gains this year. Prices strengthened with news of shrinking U.S. crude and gas inventories, along with foreign efforts to reduce output.

What Lies Ahead

The Fed observed in its meeting last week that risks to the economic outlook seem stable. In its analysis of the economy, the Fed pointed to moderate economic growth, a sturdy employment environment, and positive business investments. As expected, the Fed did not increase interest rates but suggested that unwinding its $4.5 trillion balance sheet could begin as early as September.

This week will again offer key economic data to help provide a better understanding of market performance in June and early indicators for July. As always, we are here to answer any questions you may have about our economy and your financial life.

ECONOMIC CALENDAR

Monday: Pending Home Sales Index
Tuesday: Motor Vehicle Sales, Personal Income and Outlays, PMI Manufacturing Index, Construction Spending
Wednesday: ADP Employment Report
Thursday: Factory Orders
Friday: Employment Situation, International Trade

 

[xvii] http://wsj-us.econoday.com/byshoweventarticle.asp?fid=482414&cust=wsj-us&year=2017&lid=0&prev=/byweek.asp#top

Schooling College Students about Financial Responsibility

Classrooms at universities and colleges across the nation will open for fall semester in the next couple of months. You might have a child, grandchild, niece or nephew who is all set to spend their semester studying, socializing, and living on their own. You have prepared them for college life by teaching them how to grocery shop, prepare simple meals, and do laundry. Often, however, college students head to school with little knowledge about making a budget and managing money.

A National Student Financial Wellness Study, the first of its kind released in 2015 by Ohio State University, showed college students’ biggest worries were not exams or terrible roommates. Their biggest worries revolved around money. A little more than 72% of the students surveyed said they felt stressed about personal finances, monthly expenses, or whether they would be able to pay for college at all.

A 2016 survey found that among college students surveyed, 71% said they learned about money management from their parents. So take a few minutes and sit down with your college student today and share these tips. Your advice could help them not only during their college days but throughout their lives.

Financial Advice for Your College-Bound Students

  1. Help your college student set up necessary accounts. College students likely will need at least checking and savings accounts. Start teaching them good habits now and ask them to research banking institutions that would be convenient for them to get to from campus or their residence.
  2. Establish clear financial responsibilities. Determine who will be responsible for which expenses. If you are planning to take care of bills such as auto and health insurance, or cell service, be clear with your student that he or she is responsible for living expenses including rent, utilities, groceries, and other household costs.
  3. Wean them off your bank accounts. It might be tempting to continue paying your child’s, grandchild’s or niece’s or nephew’s expenses to help them get a strong start, but that does not teach them to be self-sufficient; it is likely to make them more dependent on you.
  4. Decide whether a credit card is appropriate. Credit cards often give college students the most trouble. Credit cards are an effective way to establish early credit history, but it is common for students to run up balances without fully understanding how credit cards work. If your student gets a credit card, be sure they understand how credit cards work and how important it is to pay off the balance every month.
  5. Will your college-bound student work during college? Holding down a part-time job while going to school has plenty of advantages. It helps cover living expenses or it gives them a chunk of money to save each month. It also makes it easier for them to manage money and gain valuable work experience. And finally, it looks great on their resume after they graduate and go looking for a job in their field.

It is never too late to sit down with your college-bound child, grandchild, niece or nephew and talk frankly with them about the importance of being financially responsible.

We are here to help you each step of the way, so please let us know if you have any questions about these tips or the bigger strategies that are helping guide you to your financial future.

 

Strong Stocks and a Falling Dollar – Weekly Update for July 24, 2017

Last week, the Dow, S&P 500, and NASDAQ again hit record highs. The midweek peaks fell by Friday, though market performance remained strong. By week’s end, the Dow dropped 0.27%, and the S&P 500 and NASDAQ dipped on Friday but closed up 0.54% and 1.19%, respectively. The MSCI EAFE finished with a 0.46% increase.

Corporate Earnings Drive Growth

Analysts noted that stocks were particularly “strong” last week due to generally robust Q2 corporate earnings reports. With roughly 20% of S&P 500 companies reporting, corporate earnings should remain solid through the quarter. So far, 73% of reporting companies beat their estimated earnings per share, and 77% have higher-than-expected sales against a 5-year average.

Weakened Dollar Continues

The dollar continued its downward trend, dropping 1.3% during the week. So far, our currency has fallen 8.1% since the start of 2017. A weakening dollar will boost companies with exports or overseas business. As such, the U.S. consumer will take a hit, since a falling dollar causes price increases on imported goods. The latest fall started last week after the Fed expressed concerns over low inflation.

By and large, European markets reacted negatively to the falling U.S. dollar, and uneven EU corporate earnings reports did not help either. With the euro’s value against the dollar rising to its highest point since January 2015, the value of EU company exports and overseas earnings measured in dollars will fall.

Other Key Market Developments

Here are some other key developments in fundamentals from last week:

  • Housing Tensions Relax: Housing starts jumped to a 1.215 million annual rate, the first gain in three months. Similarly, housing permits increased to a 1.254 million rate, the strongest numbers since March. Homebuilders are cautious, however, with the Housing Market Index and Components falling 3 points in July. The rising cost in lumber—due to tariffs on Canadian softwood—has builders concerned, as homebuyers will ultimately pay higher prices.
  • Jobless Claims Fall: July’s employment numbers look hopeful as the initial jobless claims for the week of July 15 dropped to 233,000, far below the consensus estimate of 246,000. The numbers should help lower July’s overall unemployment rate and suggest that—despite low wages and productivity—labor demand remains high.
  • Oil Prices Drop: Oil prices fell over 2% on July 21, after reaching a 6-week high earlier in the week. The drop followed news that OPEC increased July production by 145,000 barrels daily while U.S. stockpiles largely decreased, contributing to the temporary price hikes.

A Busy Week Ahead

This week will be busy. More housing news starts the week, and expect Wednesday’s Fed meeting to get some attention, though interest rates should not increase. Further, Friday’s Gross Domestic Product (GDP) Price Index and Consumer Sentiment Index will be of interest to markets.

Though the news from Washington can dominate the headlines, remaining focused on key drivers of market performance is key. Contact us if you have questions as to how the past week’s markets may influence your portfolio. We are always happy to help.

ECONOMIC CALENDAR

Monday: Existing Home Sales
Tuesday: FHFA House Price Index, Consumer Confidence Index
Wednesday: New Home Sales
Thursday: Durable Goods Orders, International Trade In Goods, Jobless Claims, Chicago Fed National Activity Index
Friday: GDP, Employment Cost Index, Consumer Sentiment

 

Q2 Coming into Focus – Weekly Update for July 17, 2017

Last Friday, stocks closed on more record highs. The S&P 500 rose 1.41% and the Dow climbed 1.04%—both closing at new peaks. The NASDAQ reported a 2.58% gain and the MSCI EAFE posted a 2.38% increase. Despite continuing headlines from Washington, the markets remain productive and strong. New Q2 numbers also rolled in last week, giving us a clearer picture of what happened from April through June.

Q2 Coming Into Focus

Over the second quarter, the S&P 500 rose 2.57%, the Dow gained 3.32%, and the NASDAQ jumped 3.87%. Meanwhile, the MSCI EAFE improved by 5.0%. Analysts are now predicting that Q2 Gross Domestic Product (GDP) will grow to 2.4%—stronger than Q1’s soft 1.4% increase.

While we wait for more numbers and reports, here are some highlights so far:

  • Corporate Earnings: Corporate Earnings should remain strong for Q2, with an expected S&P 500 earnings growth of 6.5%. As of July 14, only 6% of S&P 500 companies have reported earnings.
  • Core Consumer Pricing: Core Consumer Pricing, which measures the price of consumer goods excluding food and energy, remained at 60-year historically low June’s numbers increased by only 0.1%—the third month in a row for low rates.
  • Retail Sales: Retail sales were soft, declining unexpectedly by 0.2% following May’s 0.1% drop and April’s 0.3% rise.
  • Labor Market: Employers hired at a record increase of 8.3% in May, filling 5.5 million jobs. Consequently, job openings fell in May to 5.7 million from April’s strong 6.0 million. The strong labor market further reflected in June’s low unemployment rate of 4.4%.

On the international front, global economic growth is set to post a predicted 3.0% increase for Q2. Emerging and advanced economies both should record positive results based on strong global trade growth and favorable economic indicators. Both China and Japan are expected to post strong economic growth.

News From Last Week and Looking Ahead

For Q3 and Q4, the economy should continue to produce strong job data and decent housing markets—along with growing investments in businesses. For the year, the economy is expected to expand at an estimated 2.2% in 2017. With that said, consumer sentiment fell to 93.1 in July—much lower than expected. Because consumer spending makes up more than two-thirds of the economy, the markets will continue to follow consumer attitudes and spending. Given current global economic trends, some analysts expect the global economy to grow by 3.0% for 2017.

Finally, Fed Chair Janet Yellen testified before Congress last week. She confirmed that the Fed’s reduction in its $4.5 trillion balance sheet—known as “tapering”—will start later this year. She also suggested that interest rate hikes might continue for a couple of more years. With inflation hovering at 1.4%, however, the Fed may be losing confidence in reaching its targeted goal of an annual 2% increase. Meanwhile, The Bank of Canada has followed the Fed’s lead by raising its interest rates 25 basis points to 0.75%—its first raise since 2010.

As always, we are here to help you navigate the often-complex economic environment. Contact us if you have any questions about how this information may impact your financial life. 

ECONOMIC CALENDAR

Monday: Empire State Manufacturing Survey
Tuesday: Import and Export Prices, Housing Market Index
Wednesday: Housing Starts
Thursday: Jobless Claims, Philadelphia Fed Business Survey Outlook, Fed Balance Sheet

 

July 2017 Market Update Video

June 30 marked the final trading session not only of the month, but also the first half of 2017. It’s a period marked by strong stock market returns and exceptionally low volatility, although volatility returned the last week of June. We also saw markets alternating between gains and losses.

In this video, Adam will talk about some of the economic headlines that influenced markets in June, and give you some insight into what they could mean for you as an investor.

As always, if you have any questions or concerns about your portfolio, or if you would like a second opinion, give us a call at (419) 425-2400, or send us an email. Thank you for watching!!

Slow Start to Second Half for Markets – Weekly Update for July 10, 2017

As the country celebrated the Fourth of July last week, the markets experienced some volatility, though they finished a bit flat overall. The Dow fell then rose to close the week up 0.30%. The S&P 500 climbed a modest 0.07% for the week, and the NASDAQ finished the week up 0.21%. The MSCI EAFE fell 0.48%.

Internationally, European markets posted soft gains on Friday, though emerging markets fell for a second-straight week. Further, gold dropped to a 5-month low, while bond yields rose globally on weakening bond markets. In addition, world leaders met last week at the G20 Global Summit and issued a statement supporting open markets. They agreed to fight unfair trade practices, such as countries blocking or heavily taxing imports to protect domestic industries.

 A Closer Look at U.S. Market News

  • Auto Sales Continue to Drop: Auto sales dropped in June by 3% from a year ago. Though vehicle sales are still generally high, numbers in the second half of 2017 are expected to remain soft.
  • Employment Numbers Give Mixed Signals: Payroll growth rose a strong 222,000, exceeding expectations of 170,000. The employment growth numbers, along with continuing low unemployment figures, reflect a high demand for workers. However, wage growth remains low at an annual rate of 2.5%.
  • Inflation Stays Weak: Inflation came in at a weak 1.4% in May, staying well below the Fed’s target of 2.0%. Despite weak inflation numbers, the Fed appears committed to raise interest rates one more time this year.
  • Manufacturing Rises and Falls: The PMI manufacturing index closed at a low 0, down from May’s 52.7 on weak cost pressures and selling prices. Meanwhile, some good news emerged: The ISM manufacturing index surprised expectations of 55.1 and rose to 57.8—the strongest number since August 2014.
  • Oil Prices Continue to Slump: Oil dropped to $44.33 per barrel on continuing oversupply concerns. The week’s price erosion comes after a 14% drop in the first half of 2017.

A Look Ahead

 On Friday, July 14, key economic data will emerge such as consumer price index, retail sales, and consumer sentiment. As we look to the second half of 2017, a variety of developments could boost markets: strong corporate earnings, strengthening wage rates, and growing global trade and Gross Domestic Products (GDPs).

We want to remind you to avoid letting geopolitical ups and downs sway your investment focus. Instead, stay tuned to the fundamentals as you work toward your long-term goals. Feel free to contact us for any perspectives that can help you make sense of your financial life.

ECONOMIC CALENDAR

Tuesday: Job Openings and Labor Turnover Survey (JOLTS)
Wednesday: Beige Book
Thursday: Jobless Claims
Friday: Consumer Price Index, Retail Sales, Industrial Production, Business Inventories, Consumer Sentiment

 

 

Mixed Markets Continue – Weekly Update for June 19, 2017

Markets remained mixed last week as the Dow closed at another record high, while the NASDAQ fell and the S&P 500 held steady. By Friday, the Dow gained 0.52%, the NASDAQ fell -0.92%, and the S&P 500 gained a slight 0.05%. Meanwhile, the MSCI EAFE remained virtually unchanged from last week, down only -0.002%.

In other markets, oil closed at $44.74 a barrel, down 2.4% on the week—its fourth week of declines. Overall, European equity markets remained steady while most Asian markets recorded modest gains at week’s end.

The Fed Increases Interest Rates

As expected, the Fed announced last week that it raised the short-term interest rate target by 25 basis points to a range between 1.00 and 1.25%. This was the third interest rate hike by the Fed in the last six months. The Fed also announced its intention to reduce the $4.5 trillion balance sheet by selling off assets acquired in the wake of the 2008 financial crisis. The Fed currently plans to sell approximately $10 billion monthly starting later this year.

Further, last Wednesday, Federal Reserve Chair Janet Yellen reported on the Fed’s belief that the current weak inflation numbers are temporary. However, the Fed’s plan to continue raising interest rates going forward and sell off its assets may change if the economy does not gain momentum in Q3 and Q4. To date, the economic data continues to point to a Q2 Gross Domestic Product (GDP) that may be weaker than previously anticipated.

Soft Economic Data Continues

Consumer Sentiment Dampens: The preliminary consumer sentiment index for June dropped to 94.5, the lowest since last November. The index fell from May’s reported 97.1.

Retail Sales Soften: Retail sales had their largest monthly drop since January 2016.  Sales declined 0.3% in May against predictions of a 0.1% gain over April. The report includes a variety of disappointing numbers:

  • 1% decrease for restaurants
  • 2% dip for automotive vehicles
  • 0% fall for department stores

Business Inventories Drop: In April, business inventories dropped 0.2% from the prior month, which was 0.1% under the consensus. Further, retail inventories also dropped 0.2%, and wholesale inventories abruptly fell 0.5% for the month.

CPI Falls: The Consumer Price Index fell 0.13% in May. The disappointing numbers mark another decline—the 2nd in 3 months—as economists had expected a 0.2% increase from April’s number.

Housing Weakens: In May, housing starts dropped 5.5% from April and permits fell 4.9%. The trend continues the decline from Q1 and could signal another negative quarter.

Market Details on the Horizon

More housing news will influence the week ahead as the existing home sales report comes out on Wednesday and the new home sales report comes out on Friday. Markets will continue to watch the fundamentals, including consumer spending, which makes up 69% of GDP. So far this year, consumer spending has been soft with vehicle sales and restaurant sales sliding downward most months.

As always, we are here to talk should you have any questions about the markets or your own financial objectives. Our goal is to help you understand your financial life with clarity and confidence.

ECONOMIC CALENDAR

Wednesday: Existing Home Sales
Thursday: Jobless Claims
Friday: PMI Composite Flash, New Home Sales