During the last few days, the U.S. Congress took steps to move toward the passage of the very important tax reform legislation. Its passage is a plus for the stock market but will probably be a negative for bond investors. While passage is not assured, we estimate the probability of passage has increased to higher than 50%. And, if Congress is able to pass the tax reform bill, it is likely to have the power base necessary to pass an infrastructure spending bill which could authorize as much as $1 Trillion – another plus for the stock investors and a negative for bond investors.
Investors whose risk tolerance is aggressive or moderately aggressive or moderate will have their portfolio rebalanced to their long term portfolio model as soon as possible. For investors whose risk tolerance is preservation minded, conservative, or moderately conservative, we will wait to see if tax reform passage actually occurs before rebalancing to their long term portfolio model.
Note also that we have already structured the bond portion of the portfolio to reduce the negative effect of rising rates.
Valley National commits to providing our clients with the best our industry has to offer. For example, Valley National’s client portal, which we brand-name “eVault”, received the 2017 WealthManagement.com Industry Award for best client portal. We are honored to bring this Tamarac developed service to you – without charge.
What’s a “client portal”? It serves as a digital hub of communication between Valley National advisors and their clients, providing a comprehensive view of your financial picture. It is integrated with top custodians, including Schwab, TD Ameritrade, American Funds, and Fidelity, and offers advanced security features. In addition, clients access the portal through single-sign-on from the Valley National website where they can view their portfolio and performance reports.
Valley National eVault client portal also features:
Net Worth Reporting – Net worth reporting provides investors with a complete picture of their finances, including their assets, liabilities, 401(k) and other held-away accounts in their client portal. Investors can leverage this information as they work with their Valley National advisor to achieve their financial goals.
Document Vault – The eVault offers advisors a secure, convenient and efficient way to exchange files between you and Valley National, a necessity in today’s increasingly interconnected, digital world. The document vault is a secure cloud-based file storage system with an intuitive interface.
Goal-Based Reporting – Recognizing that clients want to have more goal-based planning discussions with their Valley National advisor, the portal offers deep two-way integrations with MoneyGuidePro®, which give Valley National advisors and investors the ability to view financial planning data and take action.
Budgeting Tools – Coming in 2018, personal finance budgeting tools will equip clients with the additional resources they need to benchmark their progress and help achieve their financial goals.
Your eVault client portal has already been created. If you are interested in getting this working for you, just email your Valley National team to get you up and running with very little effort.
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? It’s still to be determined!
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:
Tax cuts and tax reforms benefiting most individuals and businesses. SIGNIFICANT PROGRESS HAS BEEN MADE RECENTLY. CUMULATIVE PROGRESS TOWARD GOAL: 60%
Infrastructure spending of up to $1 Trillion over the upcoming 7 to 10 years. PROGRESS MADE ON TAX REFORM POINTS TOWARD PROGRESS IN THIS AREA, TOO. CUMULATIVE PROGRESS TOWARD GOAL: 25%
Affordable Care Act amendment, reform or reorganization. CONGRESS HAS STUMBLED EVERY TIME IT TRIED TO ACT. CUMULATIVE PROGRESS TOWARD THIS GOAL IS 0%.
Roll back of government regulations and Executive Orders considered to be difficult for businesses. ROLL BACKS HAVE CONTINUED. CUMULATIVE PROGRESS TOWARD GOAL: 50%
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.
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 B+ (favorable).
THE FED AND ITS POLICIES: This factor is rated C- (Below average).
BUSINESS PROFITABILITY: This factor’s grade is A- (very favorable). So far, earnings have been solid. More than 70% of the 88 companies that have reported so far have topped estimates. And sales have been even better—72% of those companies have reported better-than-expected revenue, well above the long-term average of 59% (Source: Barrons).
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, I rate these international risks collectively as a 5. These risks deserve our ongoing attention.
Last week, U.S. stocks increased, but Foreign Stocks and Bonds declined. During the last 12 months, STOCKS outperformed BONDS.
Returns through 10-20-2017
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
-.4
3.0
.3
2.1
2.0
4.2
US Stocks-Standard & Poor’s 500
.9
16.9
22.7
13.0
14.8
7.9
Foreign Stocks- MS EAFE Developed Countries
-.3
21.7
22.1
7.4
8.1
1.4
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.
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 hosts, Connie Nelson and Allan Tullar, will discuss: “4 hot topics in domestic relations- Divorce”
Laurie, Connie and Allan will take your calls on this topic 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.
A week that could have been a nightmare instead finished like a dream.
The Dow Jones Industrial Average climbed 456.91 points, or 2%, to 23,328.63 last week, while the Standard & Poor’s 500 index rose 0.9% to 2575.21. The Nasdaq Composite advanced 0.4% to 6629.05.
For a while there, though, it looked like it could go either way. On Thursday—the 30th anniversary of Black Monday—the Dow briefly traded down more than 100 points, raising concerns of a repeat. But the market rallied back to close at a new high, and the decline became just the latest example of investors buying the dip.
It wasn’t just the market that saw dip-buying. Shares of General Electric tumbled 6.3% in early trading on Friday after the industrial giant slashed its full-year profit guidance. Investors, betting that the worst was over, pounced, and GE’s shares finished up 1.1% on the day. “It’s another microcosm of buy-the-dip,” says Scott Clemons, chief investment strategist for private wealth management at Brown Brothers Harriman.
For investors, there’s little evidence to suggest dips in the market shouldn’t be bought. Earnings have been solid. How those earnings and sales continue to play out could go a long way toward determining whether the market can continue its long trek higher, especially with tech giants like Amazon.com (AMZN) and Alphabet (GOOGL) reporting on Thursday. “If tech continues in a great way, the market can head higher,” says JJ Kinahan, chief market strategist at TD Ameritrade.
Still, it took more than earnings to push the market higher last week. On Thursday night, Senate Republicans agreed to a budget framework that could allow a tax package to pass with only a majority of votes, rather than a filibuster-proof 60. That helped the Dow gain 165.59 points, or 0.7%, on Friday.
“We still say the line to tax cuts won’t be a straight one,” Michael Block, chief strategist at Rhino Trading Partners, wrote in a note to clients last week. “Optimism that this gets done quickly and without controversy is bubbling.”
But not too much optimism, as the market still refuses to get too excited by anything. The Dow, in fact, hasn’t gained more than 1% on any single day since Sept. 11, and yet it’s managed to hit 53 new highs this year, the most since 1995. “It’s the market equivalent of three yards and a cloud of dust,” says Brown Brothers’ Clemons. “It’s just one slow grind upward.”
