Monthly Archives: March 2017

Special Alert!

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House Republicans stumbled in their first major attempt to reshape the U.S. government under President Donald Trump, as their long-promised health-care bill failed despite days of personal lobbying by the president and Speaker Paul Ryan. The fate of the bill could set a trajectory for the rest of Mr. Trump’s presidency. At issue is whether he can push ambitious goals through a Congress his party controls.

But, the U.S. stock market has already speculated the Affordable Care Act would pass, as well as, the legislation to cut income taxes, and the legislation to spend up to $1 Trillion on infrastructure.

Given the recent increase in equity values since the election and inauguration of President Trump, we want to caution investors to expect stock market volatility as Mr. Trump’s political agenda unfolds. Should the remainder of his legislative plan meet the same fate as the ACA bill, the downside risks of the stock market may outweigh its upside potential.

Per our previous weekly commentary dated February 23, 2017, we continue to recommend clients hold 12-18 months portfolio spending in cash or short term fixed investments. Additionally, if you have not contacted us since the 2/23/2017 Weekly Commentary,  we suggest setting up a 15 minute telephone call to re-evaluate your long term portfolio risk and asset allocation. In some cases, no changes will be needed as we are actively managing your portfolio risk. But it is our experience that being proactive in times of market uncertainty helps achieve long term success. Please contact our office at 610-868-9000 to set up a telephone appointment.

Update – Washington

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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? TBD

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.  I 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. THE HOUSE OF REPRESENTATIVES FAILED TO PASS LEGISLATION TO REVISE IT. NO TIMETABLE HAS BEEN PRESENTED TO RE-INTRODUCE THIS LEGISLATION SO THE CUMULATIVE PROGRESS TOWARD THIS GOAL IS REDUCED FROM 15% TO 0%.

  4. Roll back of government regulations and Executive Orders considered to be difficult for businesses. ROLL BACKS HAVE CONTINUED AND ALL BUT A FEW TRUMP NOMINEES HAVE BEEN SUCCESSFULLY CONFIRMED BY THE SENATE.  CUMULATIVE PROGRESS TOWARD GOAL: 20%

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’s Open Market Committee met last week and raised raise rates .25% as expected.

BUSINESS PROFITABILITY: This factor’s grade is raised to a B (above average). Fourth-quarter earnings are on pace to grow by 8.4%, according to Thomson Reuters I/B/E/S, nearly double the 4.3% gain reported during the third. And analysts see earnings advancing at a double-digit clip during 2017’s first two quarters

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

Returns through 3-24-2017

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

 .6

.7

1.0

2.4

2.3

4.2

US Stocks-Standard & Poor’s 500

-1.4

5.2

17.6

10.4

13.3

7.3

Foreign Stocks- MS EAFE Developed Countries

0.0

7.2

14.2

1.5

5.8

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 Kerry Pechter, author and journalist, will discuss:

“The Fiduciary Rule-where do we stand?”

Laurie and Kerry 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.

The Markets This Week

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Late Friday, Republican leaders pulled their health-care bill before it could be voted on. That hasn’t pulled the rug out from under the bull market, however.

Sure, the Dow Jones Industrial Average dropped 317.90 points, or 1.5%, to close at 20,596.72 last week, its largest weekly tumble since September 2016. The Standard & Poor’s 500 index fell to 2343.98, while the Nasdaq Composite slipped 1.2%, to 5828.74.

And that loss would seem to justify the talk on the Street that the failure to repeal Obamacare jeopardizes the Trump administration’s tax and infrastructure plans—and could cause the market to crater. The fact that the worst-performing stock in the S&P 500 on Friday was Martin Marietta Materials (ticker: MLM), which supplies the gravel and stones used in roads and other infrastructure projects, would only seem to add to the evidence.

Yet Friday’s drop was muted. The Dow, which was the biggest loser among the major averages, fell just 59.86 points, or 0.3%, while the Nasdaq rose 0.2%. “Markets breathed a sigh of relief on the notion that if Republicans can agree to [put the ACA aside] and move on towards tax reform and deregulation, then this is bullish,” says Jason Ware, chief investment officer at Albion Financial Group.

In fact, the major damage was done on Tuesday, when the S&P 500 fell 1.2%, ending its 160-day streak without a 1% drop. And while that decline provided ammunition for those predicting an imminent collapse, it was simply one bad day. “It is, of course, natural,” says Daniel Chung, CEO of asset manager Alger. “Things literally can’t go up forever.”

That hasn’t stopped the bears from looking for danger in every piece of data. Bank lending, for instance, has slowed since the election, and some observers have pointed to that fact as a sign that the animal spirits that were supposed to juice the economy have been a mirage. Deutsche Bank economist Torsten Sløk, however, notes that bank lending is a lagging indicator, and that it usually follows the ISM Manufacturing survey with a delay. The fact that the ISM data has been rising—it recently hit its highest level in two years—suggests that bank lending could increase in the months ahead. “It’s a red herring,” Sløk says.

(Source: Barrons Online)

The Markets This Week

Posted on by

Late Friday, Republican leaders pulled their health-care bill before it could be voted on. That hasn’t pulled the rug out from under the bull market, however.

Sure, the Dow Jones Industrial Average dropped 317.90 points, or 1.5%, to close at 20,596.72 last week, its largest weekly tumble since September 2016. The Standard & Poor’s 500 index fell to 2343.98, while the Nasdaq Composite slipped 1.2%, to 5828.74.

And that loss would seem to justify the talk on the Street that the failure to repeal Obamacare jeopardizes the Trump administration’s tax and infrastructure plans—and could cause the market to crater. The fact that the worst-performing stock in the S&P 500 on Friday was Martin Marietta Materials (ticker: MLM), which supplies the gravel and stones used in roads and other infrastructure projects, would only seem to add to the evidence.

Yet Friday’s drop was muted. The Dow, which was the biggest loser among the major averages, fell just 59.86 points, or 0.3%, while the Nasdaq rose 0.2%. “Markets breathed a sigh of relief on the notion that if Republicans can agree to [put the ACA aside] and move on towards tax reform and deregulation, then this is bullish,” says Jason Ware, chief investment officer at Albion Financial Group.

In fact, the major damage was done on Tuesday, when the S&P 500 fell 1.2%, ending its 160-day streak without a 1% drop. And while that decline provided ammunition for those predicting an imminent collapse, it was simply one bad day. “It is, of course, natural,” says Daniel Chung, CEO of asset manager Alger. “Things literally can’t go up forever.”

That hasn’t stopped the bears from looking for danger in every piece of data. Bank lending, for instance, has slowed since the election, and some observers have pointed to that fact as a sign that the animal spirits that were supposed to juice the economy have been a mirage. Deutsche Bank economist Torsten Sløk, however, notes that bank lending is a lagging indicator, and that it usually follows the ISM Manufacturing survey with a delay. The fact that the ISM data has been rising—it recently hit its highest level in two years—suggests that bank lending could increase in the months ahead. “It’s a red herring,” Sløk says.

(Source: Barrons Online)

Heads Up!

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Tamarac is honored to receive the 2017 Family Wealth Report Award for Best Portfolio Management Application for our Advisor View™ software. And, just last winter, Advisor Rebalancing® received the best-in-class award from WealthMangement.com.

Valley National Financial Advisors uses this software to help manage our relationship with you.  We really look at Tamarac as a strategic partner to our business. We think of Tamarac as thought leaders because they are always looking for innovative products and solutions to help us better service clients. That’s the reason we chose them a couple years ago after a long a due diligence project.

Tamarac supplies the e-Vault client portal for your use. During 2017, Tamarac and Valley National Financial Advisors will be rolling out important and useful advancements in the client portal. Stay tuned for more information.

Update – Washington

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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? TBD

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.  I 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 BUT A BILL IS WORKING ITS WAY THROUGH CONGRESS. CUMULATIVE PROGRESS TOWARD GOAL: 15%

  4. Roll back of government regulations and Executive Orders considered to be difficult for businesses. ROLL BACKS HAVE CONTINUED AND SEVERAL TRUMP NOMINEES HAVE BEEN SUCCESSFULLY CONFIRMED BY THE SENATE.  CUMULATIVE PROGRESS TOWARD GOAL: 15%

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.