Our offices will be open at 9 a.m. today – Tuesday, April 16, and during normal business hours Wednesday through Friday this week. Tax season Saturday hours are on longer in effect, so weekend visits are by appointment only.
Daily Archives: April 16, 2019
The Numbers & “Heat Map”
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 |
Our consumer spending grade remains an A. Surveys of US consumers continue to indicate that the consumer is in a strong position, and a recent bounceback in existing home sales suggests that households are still willing to make large purchases, which bodes well for the economy and for markets. |
|
FED POLICIES |
C+ |
(Upgraded from C-) Following its March meeting, the Federal Reserve signaled to markets that it may not hike interest rates during 2019, and plans to halt its balance sheet reductions. The Fed’s future actions will remain data dependent, but the contractionary policies that have dominated the last two years appear to be on pause. |
|
BUSINESS PROFITABILITY |
B- |
(Downgraded from B+) Corporate earnings remain strong, but we anticipate earnings growth will taper off in 2019. According toFacset, the expected earnings growth rate for S&P 500 companies during 2019 is around 4%. This is below the long-term average for the current cycle. |
|
EMPLOYMENT |
A |
The US economy added 196,000 new jobs in March, helping to alleviate concerns from an unexpectedly weak February report. Encouragingly, we have also observed some healthy wage growth, which is currently above the rate of inflation. |
|
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.
FROM THE PROS… VIDEO
529 Plans: PA State Tax Benefits
Vice President Jaclyn Cornelius, EA, CFP®, offers some insights and options Pennsylvania taxpayers may want to know about 529 plan contributions and deductions. WATCH NOW
Quote of the Week
“Normality is a paved road: it’s comfortable to walk, but no flowers grow on it.’” – Vincent Van Gogh
The Markets This Week
by Connor Darrell
CFA, Assistant Vice President – Head of Investments
Most
major stock indexes posted small gains for the week, with U.S. stocks (as
measured by the S&P 500) slightly outperforming their international
counterparts. Q1 earnings season officially kicked off with some high-profile
earnings beats, including encouraging results from Walt Disney and JP Morgan. The
current earnings season is being tabbed as one of the more important in recent
years, as analyst surveys have pointed to a general expectation that corporate
profits may actually post negative growth when compared to the data from Q1
2018. The expectations for limited earnings growth stem from two primary
factors. First, the benefits of tax reform are no longer boosting the
year-over-year comparison since companies now are likely to have the same
effective tax rates as last year. Secondly, rising wages and raw materials costs
are putting downward pressure on profit margins. Across the market, analysts
are calling for 5% growth in revenues, but for that growth to be offset by
increases in the cost of doing business.
Labor Market Remains the Strongest Aspect of a Still Healthy Economy
On Thursday, the Labor Department reported that weekly jobless claims had fallen to their lowest level since 1969. Jobless claims are reported as an absolute measure, meaning that they are just a running tally of total new claims for unemployment insurance. What makes the most recent measure particularly impressive is that the last time jobless claims were this low, the labor market (total eligible workers within the economy that are either working or looking for work) was only 60% of its current size. The labor market continues to be an area of strength for the U.S. economy, and the Fed has made note of this in recent meeting notes. In fact, the minutes from the Fed’s most recent policy meeting were released on Wednesday and made specific reference to the tightness in the labor market, pointing out that it was “noteworthy” that the health of the labor market has not led to higher inflation.