“Pay yourself first.” Many have heard that term but fail to implement it into their personal finance strategy. Those who either have a savings goal OR have trouble prioritizing their savings may want to set up a routine, automatic “periodic investment program” into a solid growth and income mutual fund. It’s less complicated than its name. Just specify the amount per month (say $100) that you think you can afford. The amount can be withdrawn automatically from your checking account. And, try to save at least 25% of annual bonuses or windfalls to this periodic investment program. This investment style, sometimes referred to as “dollar cost averaging” is a good approach to investing because you end up purchasing more shares when the price of the fund is low. It’s a proven technique, but remember, dollar cost averaging does not assure a profit or protect again loss in declining markets.
Daily Archives: September 6, 2016
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- (very favorable). Favorable activity in the housing market continues to support growth in the level of spending.
THE FED AND ITS POLICIES: This factor is rated A (very favorable). Economic reports indicate the U.S. economy is improving.
BUSINESS PROFITABILITY: This factor’s grade is a C- (below average). So far this quarterly reporting period, quarterly profits are slightly ahead of expectations but down from the prior period. Looking ahead, comparable profits will be easier to beat, on average, because lower energy sector profits are in the base period. This factor’s grade may be increased after more data becomes available.
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 4. These risks deserve our ongoing attention.
The Numbers
Last week, US Stocks, Foreign Stocks and Bonds all increased. During the last 12 months, STOCKS outperformed BONDS.
|
Returns through 9-2-2016 |
1-week |
Y-T-D |
1-Year |
3-Years |
5-Years |
10-Years |
|
Bonds- BarCap Aggregate Index |
.2 |
5.7 |
5.8 |
4.3 |
3.1 |
4.9 |
|
US Stocks-Standard & Poor’s 500 |
.6 |
8.3 |
14.3 |
12.5 |
15.6 |
7.5 |
|
Foreign Stocks- MS EAFE Developed Countries |
.5 |
2.0 |
4.1 |
2.5 |
5.8 |
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 will discuss:
“Required Minimum Distributions – understanding the concept and requirements”
Laurie will take your calls on these topics 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.
Motivational Quote of the Week
“Diligence is the mother of good luck.” – Benjamin Franklin
The Markets This Week
All signs last week pointed to a hobbled U.S. economic recovery and lower interest rates for longer. Stocks basked in the mediocrity.
The Dow Jones Industrial Average rose 97 points, or 0.5%, to 18,491.96—just 0.8% below its record close. The Standard & Poor’s 500 index rose to 2179.98. The Nasdaq Composite rose 0.6%, to 5249.90. Trading was as light as a pair of flip-flops padding around a beach in the Hamptons. Volume on the New York Stock Exchange hit 2.6 billion shares on Monday, the lowest for a full day for the year.
Data released last week showed that job growth limped forward in August, manufacturing unexpectedly contracted, and inflation stayed muted. Strategists and economists agreed that the new data undercuts the case for a September rate hike by the Federal Reserve.
The U.S. added 151,000 jobs in August, less than the 180,000 that economists had expected and below July’s 275,000. Wages limped ahead by 0.1%, and the average workweek contracted slightly. Investors tend to look skeptically at August reports, which include more seasonal adjustments than other months. “We’re in the sweet spot,” says Brad McMillan, chief investment officer at Commonwealth Financial Network. “It wasn’t bad, but it should keep the Fed from raising rates. So we have growth and a few more months of monetary stimulus. You can’t ask for more than that.”
Manufacturing also slumped. The Institute for Supply Management said Thursday that its manufacturing index fell to 49.4 in August, well below the expected 52. Anything below 50 indicates the manufacturing sector is declining. Weakness in manufacturing sometimes heralds a recession, but Michael Shaoul, CEO of Marketfield Asset Management, wrote that manufacturing is “stagnating” because the economy is shifting more quickly toward service jobs. The weakness shows “a narrowing of the economic base into service and a portion of the industrial economy.”
Inflation data gave investors more confidence that the Fed will hold off. A report on personal consumption expenditures indicated that inflation has stayed steady at a core annual rate of 1.6%, still below the Fed’s target.
That said, investors do appear ready for a rate hike, according to Jim Paulsen, chief investment officer at Wells Capital Management.
“I think this suggests that the bond market is continuing to price in a near-term rate hike by the Fed,” he wrote. “If the bond market felt the job numbers pushed back the Fed until December, I doubt yields would have risen today. And that is also the message coming today from stocks, commodities, and the U.S. dollar.”
Oil prices slumped last week more than they have in any week since early July, with futures falling 6.7% to $44.44 a barrel. Investors continue to fret about oversupply in the industry as crude stockpiles grew unexpectedly. And there are more indications that drillers are ramping up again, as unemployment in the energy and mining sector fell to 5.4% in August from 9.3% in July. “The negative effects of lower oil prices on the energy sector are behind us,” wrote Deutsche Bank economist Torsten Slok.
(Source: Barrons Online)