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

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 recent softening in retail sales numbers. US consumer confidence remains high, and we anticipate a strong holiday shopping 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 three times during 2019, but projections in the Fed’s “Dot Plot” following its most recent meeting yielded, on balance, no changes in 2020. We expect this to remain the case moving forward until we see 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

November’s headline jobs growth number of 266,000 smashed consensus estimates and provided further evidence that the US economy remains on solid footing.

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

6

Following progress made last week on two key geopolitical concerns (Brexit and US/China trade relations), we are reducing our International Risks metric to a 6. Other key areas of focus for markets include the 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.

Did You Know…?

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OUR VNFA STORY
Valley National Financial Advisors will celebrate 35 years in business in 2020. Our founder, Thomas M. Riddle, CPA, CFP® created the Valley National Group of companies with a mission to help his clients make the right financial choices in pursuit of their goals and dreams. His vision was to create a place where clients could address as many areas of their financial life as possible all in one place, under the supervision of one trusted advisor.

Since 1985, Tom has brought together a trusted team around him to expand the resources available to clients and ensure that his original mission is sustained for generations to come. Tom continues to work with clients as a Financial Advisor, in addition to serving as Chairman of the Board.

Today, our business is run under the leadership of Matthew Petrozelli. Matt has been a part of the team since 2011, serving as a Financial Advisor and Chief Operating Officer before taking on the role of CEO at the beginning of 2018. Over the years, our team has grown to just about 40 employees who are all devoted to our original mission to help our clients with our personalized, one-stop service model.

Throughout 2020, we will be celebrating our past, highlighting the journey to where we are today, and sharing more with you about our future as a VNFA family.

“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 share her years of experience helping people plan and complete: “Financial New Year’s Resolutions.”

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.

VNFA NEWS

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Our team will be taking a break to celebrate the holiday season and the close of our 34th year in business this Friday afternoon. Our offices will close at 11:30, but we will be accessible via phone should you need us.

The Markets This Week

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by Connor Darrell CFA, Assistant Vice President – Head of Investments
Global equity markets ended the week higher as Friday’s very strong U.S. employment report helped erase losses from earlier in the week. Of particular note was that the report showed evidence of strong growth in the manufacturing sector, an area which has been a source of concern due to the uncertainty of global trade. From almost every angle, the report provided reason for optimism. The unemployment rate ticked back down to match its 50-year low of 3.5% and wage growth was over 3%; well above the current inflation rate. The data continues to suggest that the strength of the U.S. consumer is helping the economy to weather the impact of the ongoing U.S.-China trade war.

The Impact of E-Commerce on U.S. Employment
No matter how the data is sliced and diced, Friday’s jobs report was a blockbuster. But it’s interesting to note some trends that have emerged with respect to employment patterns during the holiday season. It’s no secret that over the past several years, holiday shoppers have begun to favor making purchases from the comfort of their own homes rather than braving the elements and long lines at brick and mortar retailers. As a result, there’s been a shift in hiring practices for seasonal employees in the jobs data. Last week’s employment report showed a 6% decline in retail employment gains compared to just one year ago, but that loss was more than made up for in other areas such as wholesale (likely a result of more hiring at warehouses and fulfillment centers supporting online shopping). It’s still debatable whether the methodology used to track retail sales data does enough to capture the massive shift in consumer preferences toward online shopping, but this week’s round of retail sales data should help lend further support to the idea that the U.S. consumer can continue to carry the expansion forward. 

“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 dedicate the show to listener questions – past and present: “What Questions Do You Have?” 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.

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

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 recent softening in retail sales numbers. US consumer confidence remains high, and we anticipate a strong holiday shopping 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 three times during 2019, but Chairman Jerome Powell signaled to markets that the most recent cut 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

November’s headline jobs growth number of 266,000 smashed consensus estimates and provided further evidence that the US economy remains on solid footing.

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.