Heads Up!

You may have heard you may be one of at least 143,000,000 victims whose personal information may be at risk because of a data breach at Equifax.  This is a big deal which will result in FBI scrutiny, law enforcement investigations, Congressional inquiry, and numerous efforts on Equifax’s part to appease those who have become a victim.  We intend to follow this mess.  At this time, we recommend you click here and read this consumer information from the Federal Trade Commission.

Update – Washington

The U.S. stock market has jumped since the November 8th election.  We identified 4 initiatives on which the U.S. stock market is speculating to be successfully accomplished early in the Trump administration.  What will happen next?  It’s still to be determined!

The 4 initiatives will have a tremendous influence on the “Heat Map” which forms the basis of our forward looking view of the U.S. economy.  We consider the success or failure of the 4 initiatives to be “leading” indicators for the Heat Map.

Below are the 4 Trump administration initiatives upon which the stock market is speculating and what progress, if any, has been made:

  1. Tax cuts and tax reforms benefiting most individuals and businesses. NO PROGRESS RECENTLY.  CUMULATIVE PROGRESS TOWARD GOAL: 0%
  2. Infrastructure spending of up to $1 Trillion over the upcoming 7 to 10 years. NO PROGRESS RECENTLY.  CUMULATIVE PROGRESS TOWARD GOAL: 0%
  3. Affordable Care Act amendment, reform or reorganization. ON ITS SECOND ATTEMPT, THE HOUSE OF REPRESENTATIVES PASSED LEGISLATION TO REVISE IT. THE SENATE HAS FAILED TO BRING THE BILL AND HAS FAILED TO PASS THE HOUSE’S VERSION OR ANY OTHER. CUMULATIVE PROGRESS TOWARD THIS GOAL IS 0%.
  4. Roll back of government regulations and Executive Orders considered to be difficult for businesses. ROLL BACKS HAVE CONTINUED. CUMULATIVE PROGRESS TOWARD GOAL: 40%

As the action happens in Washington on these 4 initiatives, don’t be surprised if the political “tug and pull” contest results in a wilder than normal stock and bond market.

We will continue to report in future issues on the progress on each initiative. 

The “Heat Map”

Most of the time, the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.

CONSUMER SPENDING: This grade is a B+ (favorable).

THE FED AND ITS POLICIES: This factor is rated C- (Below average).

BUSINESS PROFITABILITY: This factor’s grade is A- (very favorable).

OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 6. These risks deserve our ongoing attention.

The Numbers

Last week, Foreign stocks and Bonds increased.  U.S. Stocks declined. During the last 12 months, STOCKS outperformed BONDS.

Returns through 9-8-2017

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

.5

3.9

1.0

2.9

2.3

4.3

US Stocks-Standard & Poor’s 500

-.6

11.5

15.2

9.5

13.7

7.7

Foreign Stocks- MS EAFE Developed Countries

.8

18.5

15.8

3.4

8.1

1.8

Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.

“Your Financial Choices”

The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®.  This week Laurie and co-host Attorney Charles Stopp of the law firm, Steckel & Stopp, will discuss:

“Using Trusts in estate planning.”

Laurie and Charles will take your calls on this topic and other inquiries this week.  Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie.  This show will be broadcast at the regular time. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton and Phillipsburg area– or listen to it online from anywhere on the internet.  For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.

The Markets This Week

The market should be facing a disaster of biblical proportions.

We have hurricanes and earthquakes, a nuclear-armed dictator in North Korea threatening to unleash fire and brimstone, and yes, even a Republican president working with Democrats in Congress. Or as Bill Murray put it in Ghostbusters, “Mass hysteria!”

Not quite. Despite the suffering brought by a trifecta of natural disasters, and the shock of seeing President Donald Trump teaming up with Nancy Pelosi to extend the debt-ceiling deadline, only nuclear tests by North Korea really shook the markets. And even then, it wasn’t much of a shock. The Standard & Poor’s 500 index declined just 0.6%, to 2461.43, last week, while the Dow Jones Industrial Average fell 189.77 points, or 0.9%, to 21,797.79. The Nasdaq Composite dropped 1.2%, to 6360.19. Despite the declines, the S&P 500 sits just 0.8% below its all-time high.

Why have stocks held up as well as they have? Dubravko Lakos-Bujas, head of U.S. equity strategy and global quantitative research at JPMorgan, observes that the S&P 500 has dropped about 2% when hurricanes make landfall, as sectors that get slammed—think insurance companies, hotels, and cruise lines—are offset by ones that benefit, like autos, energy and equipment services, and basic materials for construction. A failure to raise the debt ceiling or pass a budget, though, has typically caused the market to drop 3% to 5%. “In essence, the market risk associated with the failure of passing the budget and addressing the debt ceiling has been pushed out for now,” Lakos-Bujas says.

There’s another reason for optimism: earnings. Yes, we know that second-quarter earnings season just ended, but investors are already looking ahead to the third quarter. And despite some recent negative guidance associated with Hurricane Harvey, earnings revisions appear to be holding up well. Bank of America Merrill Lynch strategist Jill Hall notes that the three-month earnings estimate revision ratio—a measure of companies guiding higher versus those guiding lower—sat unchanged at 1.23 at the end of August, its highest level in six years. “It suggests strong near-term S&P 500 returns,” she says.

More importantly, that means earnings expectations aren’t coming down. Andrew Slimmon, a portfolio manager at Morgan Stanley Investment Management, notes that earnings forecasts generally drop by about 7% from the start of the year. But with earnings coming in close to expectations, the market might start viewing next year’s S&P 500 earnings estimate for $145 as achievable. At Friday’s close, that puts the index’s valuation at a more reasonable 17 times earnings. “I don’t think that’s all that expensive,” Slimmon says. “We have a setup for a decent rally in the fourth quarter.”

Of course, not everyone is ready to buy into such arguments. For them, the market’s strength is simpler. “It’s a bull market,” says Vincent Deluard, global macro strategist at INTL FCStone Financial. “Good news is celebrated; bad news ignored.” Until it isn’t.

(Source: Barrons Online)

Heads Up!

Imagine you were and I were employed as part of an executive team at a major corporation – and we reported the current state of affairs of our corporation to the Board of Directors the day before the entire executive team left for vacation for a month. Can you imagine the consequence if we said: Sorry, but we were not able to complete the budget for your review. Sorry, we did not have time to reach out to our bankers to renew our line of credit, and we will run out of money next month. Sorry, we were not able to fix the company’s healthcare plan, which will soon spiral out of control. And, sorry, we did not get to figure out or tax situation either. But, we are all going on vacation for the entire month of August. Yes!  We would all be fired.

Update – Washington

The U.S. stock market has jumped since the November 8th election. We identified 4 initiatives on which the U.S. stock market is speculating to be successfully accomplished early in the Trump administration. What will happen next? It’s still to be determined!

The 4 initiatives will have a tremendous influence on the “Heat Map” which forms the basis of our forward looking view of the U.S. economy. We consider the success or failure of the 4 initiatives to be “leading” indicators for the Heat Map.

Below are the 4 Trump administration initiatives upon which the stock market is speculating and what progress, if any, has been made:

  1. Tax cuts and tax reforms benefiting most individuals and businesses. NO PROGRESS RECENTLY. CUMULATIVE PROGRESS TOWARD GOAL: 0%

  2. Infrastructure spending of up to $1 Trillion over the upcoming 7 to 10 years. NO PROGRESS RECENTLY. CUMULATIVE PROGRESS TOWARD GOAL: 0%

  3. Affordable Care Act amendment, reform or reorganization. ON ITS SECOND ATTEMPT, THE HOUSE OF REPRESENTATIVES PASSED LEGISLATION TO REVISE IT. THE SENATE HAS FAILED TO BRING THE BILL AND HAS FAILED TO PASS THE HOUSE’S VERSION OR ANY OTHER. CUMULATIVE PROGRESS TOWARD THIS GOAL IS 0%.

  4. Roll back of government regulations and Executive Orders considered to be difficult for businesses. ROLL BACKS HAVE CONTINUED. CUMULATIVE PROGRESS TOWARD GOAL: 40%

As the action happens in Washington on these 4 initiatives, don’t be surprised if the political “tug and pull” contest results in a wilder than normal stock and bond market.

We will continue to report in future issues on the progress on each initiative. 

The “Heat Map”

Most of the time, the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.

CONSUMER SPENDING: This grade is a B+ (favorable).

THE FED AND ITS POLICIES: This factor is rated C- (Below average).

BUSINESS PROFITABILITY: This factor’s grade is A- (very favorable).

OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 6. These risks deserve our ongoing attention.