Monthly Archives: December 2017

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 A- (favorable), an increase due to strong Holiday shopping indications accompanied by strong job growth and consumer sentiment.

THE FED AND ITS POLICIES: This factor is rated C- (Below average). The FED raised rates last week but indicated. Experts are forecasting either two or three more hikes in 2018.

BUSINESS PROFITABILITY: This factor’s grade is A- (very favorable).

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 5. These risks deserve our ongoing attention.

“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 will discuss:

“Gift giving for family-ways and benefits.”

Laurie will take your calls on this or other topics.  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. 

Heads Up!

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House and Senate Republicans are getting closer to an agreement on a final version of the extraordinarily important tax bill and could reach such a deal this week. We could see final version of the bill at the end of the week with a possible vote in both the Senate and the House next week.

No matter when we see the final version, there will be very little time to figure out how it affects you, and to take advantage of year-end tax planning opportunities. For example, some experts predict 90% of taxpayers will not itemize after 2017 if the Bill becomes law. This means 2017 could be the last year 90% of taxpayers can deduct charitable contributions (those affected taxpayers should consider prepaying 2018 and 2019 charitable contributions before 12/31/17). We will not know for sure which of these strategies are right for you until we see the final version of the bill. So, we will stay alert.

The Weekly Commentary will continue to report on this time critical topic as it is finalized.

Did You Know…?

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The FED has been raising interest rates. But, banks have been slow to raise interest rates in the same manner on their checking accounts, savings accounts and CD’s. There is an alternative which is becoming much more attractive. Money market funds now yield between .50% to 1.00% and by the end of next year could be yielding 1.25% to 2.00%.

As rates rise, it pays to shop for higher rates for your savings.

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? It is 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:

  1. Tax cuts and tax reforms benefiting most individuals and businesses. SIGNIFICANT PROGRESS HAS BEEN MADE RECENTLY.  CUMULATIVE PROGRESS TOWARD GOAL: 90%

  2. 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: 35%

  3. Affordable Care Act amendment, reform or reorganization. THE SENATE VERSION OF THE TAX BILL CONTAINS LANGUAGE TO REMOVE THE REQUIREMENT EACH INDIVIDUAL OBTAIN HEALTHCARE COVERAGE. PROGRESS TOWARD THIS GOAL IS 25%.

  4. 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. 

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 B+ (favorable).

THE FED AND ITS POLICIES: This factor is rated C- (Below average). Average hourly earnings rose only 0.2% in November from October which has a silver lining: while the Federal Reserve will likely go through with its all-but-certain interest-rate increase when it meets this week, it’s unlikely to feel the need to get too aggressive during the upcoming 6 months.

BUSINESS PROFITABILITY: This factor’s grade is A- (very favorable).

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 5.  These risks deserve our ongoing attention.

The Numbers

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Last week, both U.S. Stocks and Foreign Stocks increased.  Bonds were unchanged. During the last 12 months, STOCKS outperformed BONDS.

Returns through 12-1-2017

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

0.0

3.4

3.5

2.3

2.0

4.1

US Stocks-Standard & Poor’s 500

.4

20.7

20.5

11.1

15.7

8.2

Foreign Stocks- MS EAFE Developed Countries

.1

22.2

22.9

6.0

7.9

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.

“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 will discuss: “Tax reform or tax preparation-be prepared for either”

Laurie will take your calls on this or other topics.  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.