Daily Archives: October 15, 2014

Heads Up!

Posted on by

RECOMMENDATION: We recommend you review your planned withdrawals from your portfolio for the next 18 months and invest this amount in short term bond funds and other stable investments – and, not invest any of this in the stock market or stock market mutual funds.

REASON: We are receiving signals on the stock market pointing in two different directions. The details follow:

  1. The fundamental analysis signal for the economy, which I report weekly to you as the “Heat Map” continues to be strong. The trend for the 3 pillars comprising the Heat Map is improving. Thus, the fundamental analysis would say BUY. Note: fundamental analysis attempts to be impartial as to investor emotions and behavioral attitudes toward the markets for intermediate and long term time periods.
  2. The technical analysis signal for the market has weakened materially and indicates SELL. Technicians seek to identify momentum, price patterns, reversals, channels, lines of support, resistance and other market trends based upon charts or computer based computations. Note: technical analysis is typically short-term and used by many day traders to take advantage of investor emotional reactions and behavioral attitudes.

We continue to believe it is exceptionally difficult to time the market for quick developing corrections. For most investors, the best course of action is “stay the course”, but keep out of the stock market the money you intend to withdraw (i.e., to use)during the next 18 months.

The “Heat Map”

Posted on by

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

CONSUMER SPENDING: We grade this factor to A- (very favorable)

THE FED AND ITS POLICIES: We continue to grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices.

BUSINESS PROFITABILITY: We CONTINUE to rate this factor B- (slightly above average).

OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in good shape ASSUMING no international crisis. We will add the risk of an EBOLA pandemic to the “powder keg” in the Middle East to the situations to be watched. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these collectively as a 3 at this time. Risks continue to lurk, and they deserve our ongoing attention.

The Economy

Posted on by

Last week was a light week for economic data.  United States Jobless Claims decreased to 287,000 in the week ending October 4th, a decrease of 1,000 from the previous week.  US Wholesale Inventories increased .70 percent as wholesalers ramped up for what is presumed to be increased demand.  Lower interest rates continue to drive down the Mortgage Bankers Association fixed 30-year mortgage rate as it average 4.30 percent in the week ended October 4th, down from 4.33 percent.  Lower rates helped support mortgage applications as refinancing and home purchase demand increased 3.80 percent for the week ending October 4th.  Slowing growth in property values and lower borrowing costs mixed with more people at work should provide support to the struggling real estate market.

The Numbers

Posted on by

Last week, U.S. Stocks and Foreign Stocks decreased and Bonds increased (AGAIN). During the last 12 months, STOCKS outperformed BONDS.

Returns through 10-10-2014

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

  .6

 5.1

  5.1

  3.0

  4.3

4.7

US Stocks-Standard & Poor’s 500

 -3.1

 4.8

14.9

19.1

14.6

7.8

Foreign Stocks- MS EAFE Developed Countries

-2.4

-6.6

  -.8

10.1

  5.3

5.5

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”

Posted on by

“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 guest host Donato Ciampittiello of Knopf Automotive, will discuss: “Decisions you face in car buying.”

Laurie and Donato will take your calls on this topic and other inquiries this week. 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; and, it is broadcast on FM 93.7 in the Fogelsville and Macungie 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.

Personal Notes

Posted on by

Thanks to all of you who responded with your favorite restaurants in the Lehigh Valley for breakfast, lunch and dinner. Jo Anne and I intend to use your ideas to our culinary delight.

Thomas M. Riddle
President, VNFA

The Markets This Week

Posted on by

Stock prices were whipsawed in a wild week of trading, ultimately falling over 3% on worsening worries about slowing global economic growth. By Friday’s close, the market was down 5% from highs, halfway to a correction.

As bad as that was, many industries particularly exposed to such fears received an even bigger beat-down. As crude-oil prices fell into bear-market territory on Wednesday, down over 20% from highs, oil and gas shares shed 8% last week. Semiconductors lost 9%, most of that after bellwether Microchip Technology (ticker: MCHP) lowered quarterly sales guidance, led by a revenue miss in China. Auto makers fell 8%, as Ford Motor (F) said that September sales in China declined 4%. Airline stocks were whacked 10% on growing Ebola fears, and agricultural-products firms lost 9% on continuing drops in commodity prices.

That news fed the global growth anxiety, says Stephen Massocca, a portfolio manager at Wedbush Equity Management. “I felt like I went 13 rounds with Mike Tyson every day last week.”

Perhaps that’s an exaggeration, but in recent weeks plenty of money managers have complained of the pain to this columnist. Just one in five active fund managers is outperforming year to date, according to an Oct. 9 report from Bank of America Merrill Lynch.

The simplest measure of volatility was that Wednesday was the best day of the year for the Dow Jones Industrial Average, up 275 points, and was promptly followed by the worst day, down 335 on Thursday. The last time the index had a back-to-back largest point gain and drop of the year was in 1997—in October, of course.

Last week, the Dow surrendered 466 points or 2.7%, to 16,554.10, and the Standard & Poor’s 500 index lost 62 or 3.1%, to 1906.13. The Nasdaq Composite index lost nearly 200 or 4.5%, to 4276.24. The Russell 2000 fell 4.7%, to 1053.32.

How bad the volatility seems depends on your time frame, says Thomas Villalta, director of investment research at Covenant Multifamily Offices. “It’s more than people have been used to lately” but still low compared to gyrations in 2011. “There’s no sense of panic,” he says.

Friday’s decline didn’t show the “buy on dips” mentality that has supported the market previously, adds Tim Ghriskey, chief investment officer of Solaris Asset Management. As third-quarter earnings begin to come out, investor focus should move to profits from global issues, he says.

Friday’s late-day weakness doesn’t bode well for the market this week.

(Source: Barrons Online)