The Numbers & “Heat Map”

THE NUMBERS
Sources: Index Returns: 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. Interest Rates: Federal Reserve, Freddie Mac

US ECONOMIC HEAT MAP
The health of the US economy is a key driver of long-term returns in the stock market. Below, we grade 5 key economic conditions that we believe are of particular importance to investors.

CONSUMER SPENDING

A

Our consumer spending grade remains an A. Surveys of US consumers continue to indicate that the consumer is in a strong position, and a recent bounceback in existing home sales suggests that households are still willing to make large purchases, which bodes well for the economy and for markets.

FED POLICIES

C+

(Upgraded from C-) Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause.

BUSINESS PROFITABILITY

B-

(Downgraded from B+) Corporate earnings remain strong, but we anticipate earnings growth will taper off in 2019. According toFacset, the expected earnings growth rate for S&P 500 companies during 2019 is around 4%. This is below the long-term average for the current cycle.

EMPLOYMENT

A

The US economy added 196,000 new jobs in March, helping to alleviate concerns from an unexpectedly weak February report. Encouragingly, we have also observed some healthy wage growth, which is currently above the rate of inflation.

INFLATION

B

Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. The inflation rate remains benign at this time, but we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

5

The above ratings assume 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 5. These risks deserve our ongoing attention.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Markets This Week

by Connor Darrell CFA, Assistant Vice President – Head of Investments
Most major stock indexes posted small gains for the week, with U.S. stocks (as measured by the S&P 500) slightly outperforming their international counterparts. Q1 earnings season officially kicked off with some high-profile earnings beats, including encouraging results from Walt Disney and JP Morgan. The current earnings season is being tabbed as one of the more important in recent years, as analyst surveys have pointed to a general expectation that corporate profits may actually post negative growth when compared to the data from Q1 2018. The expectations for limited earnings growth stem from two primary factors. First, the benefits of tax reform are no longer boosting the year-over-year comparison since companies now are likely to have the same effective tax rates as last year. Secondly, rising wages and raw materials costs are putting downward pressure on profit margins. Across the market, analysts are calling for 5% growth in revenues, but for that growth to be offset by increases in the cost of doing business.

Labor Market Remains the Strongest Aspect of a Still Healthy Economy
On Thursday, the Labor Department reported that weekly jobless claims had fallen to their lowest level since 1969. Jobless claims are reported as an absolute measure, meaning that they are just a running tally of total new claims for unemployment insurance. What makes the most recent measure particularly impressive is that the last time jobless claims were this low, the labor market (total eligible workers within the economy that are either working or looking for work) was only 60% of its current size. The labor market continues to be an area of strength for the U.S. economy, and the Fed has made note of this in recent meeting notes. In fact, the minutes from the Fed’s most recent policy meeting were released on Wednesday and made specific reference to the tightness in the labor market, pointing out that it was “noteworthy” that the health of the labor market has not led to higher inflation.

“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®.

Laurie will not be live on the air, April 17 or April 24. Tune into WDIY for a pre-recorded Your Financial Choices episode. Questions submitted via the website will be addressed during the next live show on May 1.

Recordings of past shows are available to listen or download  at both yourfinancialchoices.com and wdiy.org.

The Numbers & “Heat Map”

THE NUMBERS
Sources: Index Returns: 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. Interest Rates: Federal Reserve, Freddie Mac

US ECONOMIC HEAT MAP
The health of the US economy is a key driver of long-term returns in the stock market. Below, we grade 5 key economic conditions that we believe are of particular importance to investors.

CONSUMER SPENDING

A

Our consumer spending grade remains an A. Surveys of US consumers continue to indicate that the consumer is in a strong position, and a recent bounceback in existing home sales suggests that households are still willing to make large purchases, which bodes well for the economy and for markets.

FED POLICIES

C+

(Upgraded from C-) Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause.

BUSINESS PROFITABILITY

B-

(Downgraded from B+) Corporate earnings remain strong, but we anticipate earnings growth will taper off in 2019. According toFacset, the expected earnings growth rate for S&P 500 companies during 2019 is around 4%. This is below the long-term average for the current cycle.

EMPLOYMENT

A

The US economy added 196,000 new jobs in March, helping to alleviate concerns from an unexpectedly weak February report. Encouragingly, we have also observed some healthy wage growth, which is currently above the rate of inflation.

INFLATION

B

Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. The inflation rate remains benign at this time, but we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

5

The above ratings assume 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 5. These risks deserve our ongoing attention.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

Did You Know…?

Final Tax Return Reminders!
Monday is the filing deadline, and our team is busy making sure that our clients’ tax returns are completed.

If you have requested a paper copy of your return, our office will notify you when it is ready for pickup. If you requested a digital copy, you will receive a notification e-mail from tax@valleynationalgroup.com to let you know that your returns are ready for review and your signatures.

Please be sure to return your signed 8879 and state filing forms to us as quickly as possible. You can deliver them in person, post a scan or image of the signed paper document to your eVault Client Portal, or e-mail them to our team at tax@valleynationalgroup.com.

Remember, local tax returns and any related payments are your responsibility to submit directly. We include instructions in your personal tax packet to help you get these submitted.