by Connor Darrell CFA, Assistant Vice President – Head of Investments
With the exception of emerging markets, most global equity indices gained ground last week as investors continued to wait patiently for new details on the progress of the U.S.-China trade negotiations. Since learning last month that a “Phase One” deal was close to being reached, markets have been deprived of any substantive news as to whether there has been real progress. The apparent improvement in U.S.-China relations over the course of the past couple of months has helped to alleviate some pressure on global equities, and some of that relief came through on corporate earnings calls. During these calls, it is not uncommon for CEOs to discuss the global landscape as they explain company performance throughout the quarter. According to Factset, the third-quarter earnings season brought with it a 13% reduction in the number of companies commenting on “tariffs” when discussing quarterly performance. Unsurprisingly, tariffs were still a major talking point for corporate leaders throughout earnings season, particularly among large industrial conglomerates, but the reduction is a sign that companies are beginning to look beyond the near-term uncertainty.
Daily Archives: November 19, 2019
VNFA NEWS
Our team was pleased to present a check to fund almost 12,000 meals for Second Harvest Food Bank of Lehigh Valley and Northeast Pennsylvania. The donation was a result of a partnership with WDIY 88.1 FM during their Fall Membership Drive. Thank you to all of the members and donors who not only supported local public radio but also helped feed more people in our Lehigh Valley region.
OUR
TEAM IN THE NEWS
Tune into radioamerica.com this Sunday, November 24 at
10 a.m. to listen to an interview with our CEO, Matt Petrozelli, on the
nationally broadcast Executive Leaders Radio Program (executiveleadersradio.com).
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
U.S. ECONOMIC HEAT MAP
The health of the U.S. 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 despite a recent decline in retail sales numbers. US consumer confidence remains high, but we will be watching this metric closely over the next couple of weeks and throughout earnings season. The consumer has been the bedrock of the US economy through much of the current expansion. |
|
FED POLICIES |
A- |
The Federal Reserve cut its interest rate target by an additional 25 bps last month. This was the third cut this year, but Chairman Jerome Powell signaled to markets that we this may be the last adjustment to the Fed’s policy target until there is a meaningful shift in the economic data (either positive or negative). |
|
BUSINESS PROFITABILITY |
B- |
As was largely expected by markets, corporate earnings growth was weak during Q3 as a result of the global slowdown and trade policy uncertainty. However, according to Factset, 75% of S&P 500 companies reported a positive earnings surprise, meaning things were not quite as weak as many had feared. |
|
EMPLOYMENT |
A |
The US economy added a healthy 128,000 new jobs in October. Furthermore, there were upward revisions to data from the September and August reports in addition to evidence of strong wage growth. Considering the slew of negative sentiment leading up to its release, this was one of the more uplifting release in recent memory. |
|
INFLATION |
A |
Inflation is often a sign of “tightening” in the economy, and can be a signal that growth is peaking. Recent inflationary data has increased slightly, but inflation remains benign at this time, which bodes well for the extension of the economic cycle. |
|
OTHER CONCERNS |
||
|
INTERNATIONAL RISKS |
7 |
Despite the US & China being close to a “Phase One” agreement, we are keeping our “international risks” metric at an elevated level of 7 for now. Other key areas of focus for markets include the ongoing Brexit negotiations, rising economic nationalism around the globe, and escalating tensions in the Middle East. |
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.
Quote of the Week
“The great use of life is to spend it for something that will outlast it.” – William James
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“Your Financial Choices”
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: “Holiday discussions – family and money.”
Laurie will take your questions live on the air at 610-758-8810 or in advance via yourfinancialchoices.com/contactlaurie.
Recordings of past shows are available to listen or download at both yourfinancialchoices.com and wdiy.org.