Daily Archives: June 18, 2018

Valley National News

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InvestmentNews selected our CEO, Matt Petrozelli, as one of its 2018 40 Under 40. investmentnews.com/40

Matt was selected was selected as an honoree from a pool of almost 1,000 nominees by a panel of reporters, editors, and other representatives of InvestmentNews. Winners were chosen based on their level of accomplishment, contribution to the financial advice industry, leadership and promise for the future.

“It is an honor to represent our firm and our Lehigh Valley community with this recognition,” said Matt. “I am grateful to be named among the nation’s top emerging talent in our industry.”

He is featured as part of the 5th annual 40 Under 40 list in the June 18 issue of InvestmentNews.

The Numbers & “Heat Map”

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THE NUMBERS

Sources: Index Returns: 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. Interest Rates: Federal Reserve, Freddie Mac

US ECONOMIC HEAT MAP
The health of the US economy is a key driver of long-term returns in the stock market. Below, we grade 5 key economic conditions that we believe are of particular importance to investors.

CONSUMER SPENDING

A+

Consumer spending is expected to remain healthy as individuals with lower tax rates spend their windfalls.

FED POLICIES

C-

The Federal Reserve implemented the second rate hike of 2018 last week, and suggested that two more hikes should be expected before year-end. Rising interest rates tend to reduce economic growth potential and can lead to repricing of income producing assets.

BUSINESS PROFITABILITY

A

Q1 Earnings were very strong, with US companies reporting YoY earnings growth of 25%.

EMPLOYMENT

A+

The unemployment rate has dropped below 4% for the first time since 2000. Additionally, there are over 6 million unfilled job openings throughout the economy; close to an all-time record.

INFLATION

B

Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. The inflation rate remains benign at this time, but we see the potential for an increase moving forward. This metric deserves our attention.

OTHER CONCERNS

INTERNATIONAL RISKS

5

The above ratings assume 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 “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

The Markets This Week

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by Connor Darrell, Head of Investments
It was “Much Ado About Nothing” last week, as one of the busiest weeks of the year proved to be one of the least memorable in terms of market moves. The Trump Administration once again managed to make things interesting when it announced on Friday its intentions to impose a 25% tariff on up to $50 Billion of imported Chinese goods, prompting a small pullback in U.S. equities. The move wasn’t major, but it was enough to erase the small gains that had been posted over the week’s first four trading days. As is common when equity markets react to negative news, bonds produced small gains despite the Fed’s decision to increase interest rates.

There were no less than four key events last week (three of them were officially scheduled ahead of time) that had the potential to influence markets in a meaningful way. We go through the key details below:

  1. The Summit with North Korea
    While historically significant, there were few details emerging from the summit that caught the attention of financial markets. In post-meeting press conferences, President Trump made a case for the North Korean Government to consider opening up to foreign investment, stating that Chairman Kim has a “great opportunity” to improve the livelihood of his people. In the long run, geopolitical uncertainties tend to be overtaken in significance by economic fundamentals, and it is unlikely that (short of a war) the ongoing concerns in North Korea will prove to have a lasting impact on markets.
  2. Federal Reserve Policy Meeting
    The Federal Reserve raised the federal funds rate a further 0.25% on Wednesday. The move was highly telegraphed and was already priced into markets, so the net impact was minimal. However, we did gain further insights into how the Fed views the current state of the economy (quite favorably) and learned that two more hikes this year are expected.
  3. ECB Policy Meeting
    The European Central Bank also held policy discussions this week, and officially announced its intention to wind down its massive bond-buying program. The European economy is a bit behind the U.S. in its recovery but has undergone the same type of monetary policy “stimulus” as has been experienced here in the U.S. The ECB made clear in its communications that while the aggressive bond purchases will cease, interest rates will remain unchanged until at least September 2019. The monetary policy environment overseas remains more accommodative; a sign that the U.S. economy stands on more solid footing. Markets took the news well, and any fears that the adjustments would lead to market turmoil proved unfounded.
  4. Tariff Announcements
    The most influential “event” of the week was the only one not officially listed on the calendar ahead of time, as the Trump Administration offered details on its plans to impose tariffs against Chinese goods. China was quick to respond with its own plans, and fears of an escalating trade war were stirred up yet again. Markets opened Friday sharply lower but managed to claw back a decent portion of early losses. The concerns over tariffs continue to linger, though the market has remained resilient overall.