5 Minute Market Commentary – Happy New Year Edition

Trust Dale CFGI am happy to present this week’s market commentary from FormulaFolio Investments. The goal is to give our clients and friends a simple way to see everything they need to know about the financial markets on a weekly basis, in 5 minutes or less.  After all, finances should be simple, not complicated.

Market Update

In a holiday shortened week the markets put together a very nice 3-day rally. As a result, many asset classes that were negative YTD just last week, are now positive. With another short week this week, the fate of 2015 rests in the next few days. If they are down, the markets will likely post their first broadly negative year since 2008. Should they stay flat or go up, the 6 year bull market (at least on paper) continues.

Big difference though in modest single digit losses, compared to large, double digit losses like those most asset classes were seen in 2008.

Screen Shot 2015-12-28 at 3.22.16 PM

Lesson to be learned: One week up, one week down, one week flat. Markets can do this in the short term, which is why we have to invest for the long term.

FFI Indicators

FormulaFolios has two simple indicators we share that help you see how the economy is doing (we call this the Recession Probability Index, or RPI), as well as if the US Stock Market is strong (bull) or weak (bear). In future posts I’ll write more about how these indicators are built and why we feel they are important.

In a nutshell, we want the RPI to be low on the scale of 1 to 100. For the US Equity Bull / Bear indicator we want it to be at least 67% bullish. When those two things occur, our research shows market performance is strongest and least volatile.

The Recession Probability Index (RPI) improved slightly in November, signaling an improvement in the US Economy. The Bull/Bear indicator had no change this week. Historically, this means our models think there is a slightly higher likelihood of stock market declines in the near term future (think <18 months).

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Weekly Comments

Since little has happened last week, it’s important to continue to set the stage for what a possible down year means for investors. See below for some perspective…

As we move into 2016 it’s important to know that years like 2015 happen. In fact, in the last 50 years the S&P 500 has gone down in value 11 times (might be 12 depending on the next week). That means a little more often than every 5 years, the market went down. Yet, over those 50 years the average annualized return (including the reinvestment of dividends) has been 9.84%.

There are a lot of opinions about investing, but what we know for sure is that over the long haul, markets have historically gone up. And the price of admission to realize those long-term gains is that every few years there are steps back.

Looking into the new year, we continue to advocate investors remaining balanced to cautious, and no matter how hard it might be, remaining patient. The markets still haven’t made up their mind as to the current trend, and until that happens, we’re best to remain partially committed.

I would like to take a second to wish all of you a very Happy, Healthy and Prosperous New Year.  Thank you for the opportunity to be of service in the old year and I passionately await 2016!

More to come soon. Stay tuned.

Regards,

Phil Calandra and Jason Wenk
Chief Investment Strategists

5 Minute Market Commentary – Merry Christmas Edition

Trust Dale CFGI am happy to present this week’s market commentary from FormulaFolio Investments. The goal is to give our clients and friends a simple way to see everything they need to know about the financial markets on a weekly basis, in 5 minutes or less.  After all, finances should be simple, not complicated.

Market Update

Markets continued their roller coaster ways of 2015 with a big up and down week. Monday to Wednesday the markets were up big, nearly 3% for many asset classes. Thursday and Friday, however, saw pretty much all of those gains wiped out. When the dust settled it ended up a flat to slightly down week, much like 2015 as a whole.

Screen Shot 2015-12-21 at 12.02.26 PM

Lesson to be learned: One week up, one week down, one week flat. Markets can do this in the short term, which is why we have to invest for the long term.

FFI Indicators

FormulaFolios has two simple indicators we share that help you see how the economy is doing (we call this the Recession Probability Index, or RPI), as well as if the US Stock Market is strong (bull) or weak (bear). In future posts I’ll write more about how these indicators are built and why we feel they are important.

In a nutshell, we want the RPI to be low on the scale of 1 to 100. For the US Equity Bull / Bear indicator we want it to be at least 67% bullish. When those two things occur, our research shows market performance is strongest and least volatile.

The Recession Probability Index (RPI) improved slightly in November, signaling an improvement in the US Economy. The Bull/Bear indicator had no change this week. Historically, this means our models think there is a slightly higher likelihood of stock market declines in the near term future (think <18 months).

Screen Shot 2015-12-21 at 10.29.13 AM

Weekly Comments

With only a few trading days left in 2015, it’s all but certain to be a year that most investors would soon forget. The year started with a bang, but has since sputtered out.

As we move into 2016 it’s important to know that years like 2015 happen. In fact, in the last 50 years the S&P 500 has gone down in value 11 times (might be 12 depending on the next week). That means a little more often than every 5 years, the market went down. Yet, over those 50 years the average annualized return (including the reinvestment of dividends) has been 9.84%.

There are a lot of opinions about investing, but what we know for sure is that over the long haul, markets have historically gone up. And the price of admission to realize those long-term gains is that every few years there are steps back.

Looking into the new year, we continue to advocate investors remaining balanced to cautious, and no matter how hard it might be, remaining patient. The markets still haven’t made up their mind as to the current trend, and until that happens, we’re best to remain partially committed.

I would like to take a moment to thank all of you loyal blog subscribers and readers.  I am grateful you value this information.  I want to wish you a Merry Christmas and especially to my client family, may this season of be filled with comfort and joy!

Regards,

Phil Calandra and Jason Wenk

5 Minute Market Commentary – 12/15/2015

Trust Dale CFGI am happy to present this week’s market commentary from FormulaFolio Investments. The goal is to give our clients and friends a simple way to see everything they need to know about the financial markets on a weekly basis, in 5 minutes or less.  After all, finances should be simple, not complicated.

Market Update

Las week was tough for financial markets, with losses in many asset classes of 3% or greater. The bad week pushes most indexes negative for 2015. As pointed out in last weeks post (see that here), the markets are not in a strong uptrend, so being balanced to cautious is wise at this time. The balanced investor will still have losses in awful weeks, but they are much easier to stomach, as well as recover from.

Screen Shot 2015-12-15 at 8.21.01 AM

Lesson to be learned: One week up, one week down, one week flat. Markets can do this in the short term, which is why we have to invest for the long term.

FFI Indicators

FormulaFolios has two simple indicators we share that help you see how the economy is doing (we call this the Recession Probability Index, or RPI), as well as if the US Stock Market is strong (bull) or weak (bear). In future posts I’ll write more about how these indicators are built and why we feel they are important.

In a nutshell, we want the RPI to be low on the scale of 1 to 100. For the US Equity Bull / Bear indicator we want it to be at least 67% bullish. When those two things occur our research shows market performance is strongest and least volatile.

There were no changes to our economic or Bull/Bear indicators this week. Historically, this means our models think there is a slightly higher likelihood of stock market declines in the near term future (think <18 months).

Screen Shot 2015-12-14 at 1.36.28 PM

Weekly Comments

With just over two weeks to go in 2015, it looks very possible most US (and international, for that matter) markets will finish down for the year. For US stock, that would be the first negative year since 2008.

The good news is there is little risk at this point 2015 will come anywhere close to the losses of 2008. The bad news is this could just be the start to a larger correction in 2016.

Time will tell, and hopefully soon. Technically speaking the markets are still trading in a sideways pattern, with neither bulls nor bulls winning. Instead, this market has largely just frustrated investors. If this continues, people will take their money elsewhere, which is not a good thing for long term investors. When investors sell because they are frustrated, it drives prices down, which causes more investors to sell.

And so starts a market correction or bear market.

It’s still too early to know if this will happen, which is why we continue to advocate investors remain balanced to cautious, and no matter how hard it might be, to remain patient. Once a clear market trend develops it tends to last awhile, and once that is the case it’s a lot easier to make smart investment choices.

More to come soon. Stay tuned.

Regards,

Phil Calandra and Jason Wenk

Being a Smart Long Term Investor Can be Difficult

bull bearThis year a lot of investors are frustrated. The market is close to flat, but many (perhaps most) investors are down for the year. Professional money managers are always trying to find the balance of staying invested to realize long-term returns, while getting defensive at times to avoid really large short-term losses, and an awful lot of professionals could not figure out this year.

This is why 2015 has been so tough.

That said, it’s actually really simple to show why investors should not panic if they are down a few percent in 2015, even if the benchmarks are a few percent higher. The reason is in order to be a smart long-term investor, we sometimes have to stomach the perils of short-term underperformance.

Sounds a bit crazy, but it’s the truth, we have the statistics to back it up. This is information I strongly feel all investors should have.

If any of this is sounding familiar to you, please watch the below video. It’s about 20 minutes long, but if you care about reaching your long-term investment goals, you should definitely have a watch. Maybe even twice.

The difference in using a smart long term investing approach can be multiple hundreds of thousands of dollars for some investors. Even millions if you have a larger portfolio.

But staying committed in the face of investing frustration requires education to why you should bother. I believe this video will help if you’re feeling frustrated as an investor, and ultimately allow you to realize the goals you started with.

To Smarter Investing,

Phil Calandra and Jason Wenk
Chief Investment Strategists
Calandra Wealth Management and FormulaFolio Investments

The Santa Clause Rally

Santa at NYSEThere is always much anticipation about what Santa might leave under the tree for deserving boys and girls. Much of that decision can depend on the state of the economy. Like many other cyclical trends, that seem to influence the stock market year-in and year-out, the fabled “Santa Claus rally” has provided a year-end boost to investors for years.

But, this year, there are those saying “bah-humbug.” They say that the constant printing of money, and the uncertainty caused by geopolitical events, may provide a lump of coal instead. New tensions between Russia and Turkey already impacted financial markets. China and Brazil continue to accumulate debt. France and Belgium have been under a high terror alert. Pundits believe that the specter of inflation, outside the U.S., looks like it is rearing its ugly head. They say that emerging markets show little growth potential right now.

There are other prognosticators who feel much more positive that the brief rally will repeat again this year. It has caused stock prices, during the month of December, to be up slightly higher than other months on average. The real time period for the oft-repeating trend in prices is really much shorter; occurring during the last five trading days of December and the first two days of the new year. The short rally was first identified in 1972.

Since 1969, the S & P 500 index has registered an average 1.4 percent gain. There have been only four years, in the past 21, where the trend has failed to appear. An interesting side note is that the average rise in stock prices has been greater in July than December by a slight margin.

Holiday Period Behavior
Thanksgiving week is more often than not a very good week for stocks. But, this time around, the results were mixed, with the S & P closing up slightly and the DOW falling a little more. The anticipated raising of rates by the Fed, when they meet in mid-December, will likely jar the market, although it has known to expect as much. Any hint of further rate hikes in the new year might send a chill through Wall Street. On the first trading day after the Thanksgiving Day holiday, the S & P fell in early trading. Black Friday sales were said to be off of last year’s numbers.

Despite the current problems globally, the Santa Claus rally has been a more likely outcome of the trading days around Christmas and New Years.

There is often a lull or drop in the middle of December that proceeds the turn upwards at the end. Many experts attribute this to the need by fund managers to create some “window dressing” at the end of the year. They unload some poor performers from their portfolios. Tax loss selling by investors may explain the behavior of the market earlier in the month of December as well.

What do you take away from the Santa Claus rally? Since 1896, the Dow, at the end of the year, has risen 76 percent of the time. This statistic means that the rally begins at Christmas though. That, you can hang your Christmas stockings from. Is it a certainty though? Only if you believe that a guy in a red suit flies around the world in a sleigh once a year.  I hope you live with the true meaning of Christmas in you heart this month and every month.

5 Minute Market Commentary – December 1, 2015

Trust Dale CFGI am happy to present this week’s market commentary from FormulaFolio Investments. The goal is to give our clients and friends a simple way to see everything they need to know about the financial markets on a weekly basis, in 5 minutes or less.  After all, finances should be simple, not complicated.

Market Update

In a light trading, Holiday week, most markets were just a hair positive. With just a day left in the month, it looks like the month will finish similarly. No fireworks seems to be a good thing considering the very up and down nature of the last three months, though December will prove pivotal in order to for 2015 to finish with more than just very modest gains for the year.

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Lesson to be learned: One week up, one week down, one week flat. Markets can do this in the short term, which is why we have to invest for the long term.

FFI Indicators

FormulaFolios has two simple indicators we share that help you see how the economy is doing (we call this the Recession Probability Index, or RPI), as well as if the US Stock Market is strong (bull) or weak (bear). In future posts I’ll write more about how these indicators are built and why we feel they are important.

In a nutshell, we want the RPI to be low on the scale of 1 to 100. For the US Equity Bull / Bear indicator we want it to be at least 67% bullish. When those two things occur our research shows market performance is strongest and least volatile.

There were no changes to our economic or Bull/Bear indicators this week. Historically, this means our models think there is a slightly higher likelihood of stock market declines in the near term future (think <18 months).

Screen Shot 2015-11-02 at 2.41.49 PM

Weekly Comments

I hope everyone enjoyed a safe and happy Thanksgiving! With more holidays right around the corner, it’s easy to coast through without watching the markets, but this year I think you’ll want to pay a little extra attention. If December rallies, 2015 will finish fairly well. If December fizzles, we might have our first losing year in US Stocks since 2008.

As pointed out in last weeks comments, the markets really need to break to new highs to officially re-form an uptrend. If they can’t, more volatility and further declines are very possible. Much of December traditionally hangs on a phenomena known as “The Santa Claus Rally”. This rally is dependent on shoppers moods heading into the holidays and the early reports on retailers of such, as well as general investor and fund manager happiness to enjoy the holidays. Not real scientific, but expect to hear a lot about this over the coming month from financial media.  For more reading on this, see the links below:

http://www.investopedia.com/terms/s/santaclauseffect.asp

http://www.cnbc.com/2015/11/22/are-stock-markets-going-to-rally-around-christmas.html

http://www.sfchronicle.com/business/networth/article/Good-news-for-investors-History-favors-a-Santa-6665912.php

What do we think? Smart investing says we’re still in a vulnerable (though slightly more optimistic than pessimistic) phase of the markets. While incredibly boring, the smart investor should be balanced, but slightly conservative. Until there is a more meaningful trend the next move is anyones guess, and guessing is not a smart investing philosophy. If a new bull market trend forms, there’s a good chance it will last awhile, so there will be plenty of time to make up for what has been a rather frustrating 2015.

More to come soon. Stay tuned.

Regards,

Phil Calandra and Jason Wenk
Chief Investment Strategists