The “Heat Map”

Posted on by

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 equals B+ (very favorable). Gasoline prices continue to drop. Imports have become cheaper due to the strength of the U.S. dollar. Low interest rates will help real estate, an important component for the consumers’ wealth effect. These trends put more money in the pockets of Americans in the all-important Holiday shopping season.

THE FED AND ITS POLICIES: This factor was decreased to a B (favorable) because the FED increased short term interest rates by .25% last week. The U.S. economy can handle higher rates as long as the pace of future interest rate increases is slow. Fed Chair Janet Yellen made clear in her press conference after the meeting that the path higher would be “gradual”.

The Fed’s plan to gradually raise rates in the coming years won’t derail the economy and brings some certainty to the market, says Morningstar’s Bob Johnson.  The market consensus on the 2016 pace of increase is somewhere around two to possibly three rate increase of .25% each.

BUSINESS PROFITABILITY: This factor’s grade is a C (average).

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

Posted on by

Last week, Bonds, U.S. Stocks and Foreign Stocks all declined. During the last 12 months, BONDS outperformed STOCKS.

Returns through 12-18-2015

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

-.4

.8

1.1

1.7

3.4

4.6

US Stocks-Standard & Poor’s 500

-.3

-.6

-.6

13.9

12.4

6.9

Foreign Stocks- MS EAFE Developed Countries

-.2

-2.6

-2.1

4.4

3.7

2.8

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”

Posted on by

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®. Due to the Holiday this week, the show will be pre-recorded.

No call-ins are possible this week. 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.

The Markets This Week

Posted on by

Stocks fell 0.3% last week, but the pain was worse than it looked. A 3% market surge ahead of the Federal Reserve’s widely expected interest-rate hike Wednesday proved fleeting and was followed by a nasty hangover of selling in the last two days of trading.

Investors are dissatisfied with the Fed’s indicated pace of future rate hikes. The selloff was also driven by further weakness in commodity prices, which reignited fears of a slowing global economy. Crude lost 2.5% to $34.73 per barrel, the third consecutive weekly drop and a 52-week low.

The Dow Jones Industrial Average fell 137 points, or 0.8%, to 17,128.55, and the Standard & Poor’s 500 gave up 7 to 2005.55. As of Friday the S&P 500 index was down 2.6% for the year, while the Dow was off 4%. The Nasdaq Composite Index is down 10, or 0.2%, to 4923.08.

There was some euphoria going into the Fed meeting, but afterwards the reality of four hikes set in, as weak U.S. economic data was released, says Timothy Ghriskey, chief investment officer of Solaris Asset Management. The market is telling the Fed that the U.S. economy isn’t strong enough for four increases, says Andrew Ahrens, CEO of Ahrens Investment Partners in Lafayette, La.

Economic data outside employment continues to be flat to weak. In November U.S. industrial production fell 0.6%, the Fed said Wednesday, the biggest drop in over three years. The flash purchasing-managers’ index compiled by Markit hit 51.3 from a final reading of 52.8 in December.

“It’s not terrible data but it shows the American economy is choppy and anemic,” Ghriskey adds.

Cameron Hinds, regional chief investment officer for Wells Fargo Private Bank, says that weak oil prices and slowing global growth remain overriding investor concerns. Look for more volatility in coming weeks if oil isn’t seen to be making a bottom, he says.

Volatility might increase over the near term for a couple of other technical reasons. Institutional investors will be selling their dogs to take advantage of tax losses in 2015, both Hinds and Ahrens note. That, plus the likelihood that many market participants will be away in the next two holiday-shortened weeks, and you have the makings of potentially big swings—up or down—in the rest of December because of low trading volume.

(Source: Barrons Online)

Heads Up!

Posted on by

Nine out of 10 FED-watching experts believe the FED will raise rates Wednesday. This event has been heavily anticipated for quite some time. Experience tells us, when an important event (like the FED initiating a program of interest increases) can be foreseen for a long period before it occurs, the markets will have already factored the event into their models and portfolios by the time the event occurs. The preamble to the event is frequently more volatile than the actual event itself. At times like this, it is important to keep a long-term view of your portfolio and keep an eye on the indicators listed below in the “Heat Map”.

The “Heat Map”

Posted on by

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 equals B+ (very favorable). Gasoline prices continue to drop. Imports have become cheaper due to the strength of the U.S. dollar. Low interest rates will help real estate, an important component for the consumers’ wealth effect. These trends put more money in the pockets of Americans in the all-important Holiday shopping season.

THE FED AND ITS POLICIES: We continue to grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices.

The next big milestone is the Fed (Open Market Committee) meeting which will occur December 16 – 17.

BUSINESS PROFITABILITY: This factor’s grade is a C (average).

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. This is reduced from 6. These risks deserve our ongoing attention.

The Numbers

Posted on by

Last week, Bonds increased but U.S. Stocks and Foreign Stocks declined. During the last 12 months, BONDS outperformed STOCKS.

Returns through 12-11-2015

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

.5

1.2

1.4

1.6

3.5

4.7

US Stocks-Standard & Poor’s 500

-3.7

-.3

1.0

14.5

12.5

7.0

Foreign Stocks- MS EAFE Developed Countries

-2.4

-2.4

-3.0

5.0

3.7

3.1

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”

Posted on by

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: “Last minute tax strategies and updates.”

Laurie will take your calls on these topics and other inquiries this week. This show will be broadcast at the regular time. Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie. 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.