Daily Archives: January 16, 2017

Heads Up!

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Artificial Intelligence (AI), Robotics, and Virtual Reality (VR) are 3 of the next big thing(s) during the upcoming 5 to 25 years. The winner in AI is hard to predict at this time. Robotics applications are popping up in many applications. On the other hand VR’s time is just around the corner. Here is an article from ScienceInfo.net which spells this out.

The market for virtual reality (VR) technology could be a trillion-dollar industry by the year 2035, according to new research from a forward-looking analysis unit of the investment bank Citi.

Citi’s report arrived the same week that Sony released the PlayStation VR, a virtual reality headset aimed at owners of its video game console. 2016 has seen other high-profile headsets released by competitors, including the Oculus Rift and the HTC Vive. “VR is now firmly on the radar as an investment theme and is expanding as an industry and we believe it will be used in a wide range of applications and in a number of different industries going forward,” Kathleen Boyle, managing editor of Citi GPS (Global Perspectives & Solutions), said in the report on Thursday.

In fact, VR technology is already making its impact felt in several ways, with many companies exploring its applications. Beyond gaming and entertainment, VR is being used in the tourism sector, for education and in health care. In addition, DeLoitte published a survey in August which found 88 percent of mid-market companies (firms with annual revenue of between $100 million and $1 billion) were using some form of virtual or augmented reality as part of their business.

Citi predicts hardware sales, specifically of headsets, will be the primary driver of the industry’s growth and the VR market will be worth $692 billion by 2025, rising to more than a trillion by the following decade…. and is expected to rise to $4 trillion by 2030.

All major content providers are piling into this area, and user-generated content is poised to explode as more affordable 360-degree cameras come to market,” he said in a press release in August. We envision a world where ‘surroundie’ photos and videos become the next big thing, especially as 360-degree content can be so easily shared with more than 1.7 billion Facebook and YouTube users,” he added.

Update – Washington

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The U.S. stock market has jumped since the November 8th election. Let’s identify and track the 4 initiatives upon which the U.S. stock market is speculating will be successfully accomplished early in the Trump administration.

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. BOTH THE HOUSE AND THE SENATE TOOK THE FIRST STEPS TO REPEAL THE ACT. NO REPLACEMENT HAS BEEN FINALIZED. CUMULATIVE PROGRESS TOWARD GOAL: 5%

  4. Roll back of government regulations and Executive Orders considered to be difficult for businesses. NO PROGRESS RECENTLY.  HEARINGS AND CONGRESSIONAL APPROVAL (OR NOT) ON TRUMP APPOINTEES FORMS A LITMUS TEST FOR FUTURE EFFECTIVENESS OF THE TRUMP ADMINISTRATION.  CUMULATIVE PROGRESS TOWARD GOAL: 0%

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”

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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. This category’s grade will improve if and when the Trump legislation is passed.

THE FED AND ITS POLICIES: This factor is rated C-. The FED stated it would take a wait and see attitude toward the economic impact of legislation the Trump Administrations has proposed.  Some experts believe the FED could raise rates at a faster pace if and when the Trump proposed legislation is passed into law. The FED is in the process of turning from a friend to the stock market to an anchor weighing down profitability, reducing valuations, and constraining growth.

BUSINESS PROFITABILITY: This factor’s grade is rated a B- (above average). Trump’s goal is a 4% growth rate for the U.S. economy. This will increase business profits significantly. During the next 3 weeks, U.S. corporations will be releasing their 4th Quarter earnings and will be forecasting the year ahead.

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 3. These risks deserve our ongoing attention.

The Numbers

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

Returns through 1-13-2017

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

 .2

.4

2.1

2.8

2.2

4.4

US Stocks-Standard & Poor’s 500

 -.1

1.7

23.0

10.0

14.5

7.0

Foreign Stocks- MS EAFE Developed Countries

  .8

2.6

10.3

-.7

7.0

1.0

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”

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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, my daughter, Erika Riddle Petrozelli CPA, Director of Donor Services at Lehigh Valley Community Foundation will discuss:

“Lehigh Valley Community Foundation 50th anniversary grants and legacy planning”

Laurie and Erika 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.

Personal Notes

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We have some very sad news. Betty Adam, a longtime, trusted employee, and a friend to many, has passed away after a long battle. For 22 years at Valley National, Betty contributed in a big way to the legacy of trust on which VN has been built. She stopped in to the office just last Wednesday to give us her warmest regards, and she was in full possession of dignity and pleasantness for which we will always remember her.

The Markets This Week

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No one likes making a call and being placed on hold. Unfortunately, that’s exactly where the market is just about now.

This is not what was supposed to happen. The new year began with high hopes, with the bulls expecting the rally that began with Donald J. Trump’s election victory to continue into 2017, while the bears salivated at the opportunity presented by a market that had gotten way ahead of itself. Instead, the market has failed to break up or down. Last week, the Standard & Poor’s 500 index was virtually flat at 2,274.64, while the Dow Jones Industrial Average declined 78.07 points, or 0.4%, to 19,885.73. The Nasdaq Composite bucked the trend by gaining 1% to 5,574.12, a record high.

“It has taken longer than people had hoped” for the market to find direction, says Frank Cappelleri, executive director at Instinet. “It’s frustrating for both sides.”

What made it particularly frustrating was that President-elect Trump had the opportunity to get the market going again, but elected not to. At his press conference last week, Trump covered a lot of ground—everything from the media to manufacturing to the sky-high price of pharmaceuticals. But he didn’t cover the three subjects investors especially wanted to hear about—namely taxes, fiscal policy, and infrastructure. As a result, some of the primary beneficiaries of the Trump trade stalled.

The bright side: While investors might be reluctant to place further bets on the Trump trade, they’ve been more than willing to dive into areas that had lagged. Consumer discretionary and tech stocks, in particular, got a boost, with Facebook (ticker: FB) and Amazon.com (AMZN) gaining 4% and 2.7%, respectively. That suggests investors haven’t given up hope for more market upside, they’re just seeking less elevated opportunities. “Everyone’s looking for value where it resides,” says Todd Lowenstein, director of research at HighMark Capital Management. “That’s a healthy sign.”

(Source: Barrons Online)