5 Minute Market Commentary – March 29, 2016

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

With the market facing a little resistance, and a shortened trading week, most asset classes were flat to down from last week. Broadly speaking, March is shaping up to be a very good month, and has largely erased the losses of January and February.

Screen Shot 2016-03-28 at 8.30.37 AM

Lesson to be learned: Never get too upset. And never get too excited. Markets have been flustering some of the smartest people on the planet for many, many years.

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) increased slightly in January, signaling a modest slowdown in the US Economy.  The Bull/Bear indicator is unchanged this week (100% bearish).  Historically, this means our models think there is a slightly higher likelihood of stock market declines in the near term (think <18 months).

Screen Shot 2016-03-15 at 12.17.29 PM

Weekly Comments

We’re continuing to watch the S&P 500 to see if it can break loose of the downward trend it’s been on for the past 30 weeks or so. It’s still at the top end of the trading range (the parallel red bars in the chart), but definitely needs to break out to the upside before we get really confident that the March rally will be sustained. Below are the last two weeks worth of comments on this, followed by this week’s chart…

2 Weeks Ago

The financial markets continue to battle back early year losses, and are broadly very close to turning positive. This is great news, though we’re not out of the woods just yet.

Per the chart below, we can still see the market is in a downtrend. It’s at the high end of the range, but definitely needs to break out of the red “channel” you can see drawn over the chart.

Screen Shot 2016-03-15 at 11.12.07 AM

A definitive breakout would be an S&P 500 move above 2050, and then staying there or higher for a few weeks.

1 Week Ago

Checking back in on the same chart, here’s how last week changed it:

Screen Shot 2016-03-21 at 10.22.14 PM

In a nutshell, not much.

The broad markets still are at the top end of what looks like the start to a possible downward trend. Should we get a week or two of additional gains, this would be a solid breakout to the positive, and likely the start of a new bull market. Should the market head lower, and eventually close a week below 1,850, then we’re likely heading into a longer term downtrend.

The only way to know how this plays out is to remain patient, and see what happens over the next couple of weeks. Taking any action while at a market level like this (i.e., getting more aggressive or conservative) is pretty dangerous. Rather, the smart investor remains well balanced and sticks to their long term investment plan.

Current chart

Screen Shot 2016-03-27 at 10.25.06 PM

We’ll be keeping a close eye on this trend in the next few weeks, and should a breakout start (good or bad), I’ll be sure to report it here on the blog quickly.

More to come soon.  Stay tuned.

Regards,

Phil Calandra

March Economic Update Video

Good Afternoon!

I am happy to announce that I will begin sending a monthly economic update video to all my blog followers.  Please click below to view this months update and feel free to share the video with your family and friends!  If we can be of service, please contact the office at 678-218-5925.

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5 Minute Market Commentary – March 22, 2016

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

While it was a little up and down, the past week finished nicely in the positive for all asset classes. This has gotten most “growth” asset classes positive year to date, and kept all “income” asset classes positive. Even the 1-year numbers are close to flat across nearly all asset classes (except the large losses still showing in commodities).

Screen Shot 2016-03-21 at 10.16.57 PM

Lesson to be learned: One week up (sometimes a few weeks up), one week down (sometimes a few weeks 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) increased slightly in January, signaling a modest slowdown in the US Economy.  The Bull/Bear indicator is unchanged this week (100% bearish).  Historically, this means our models think there is a slightly higher likelihood of stock market declines in the near term (think <18 months).

Screen Shot 2016-03-15 at 12.17.29 PM

Weekly Comments

Following up on last weeks comments (see below for the initial thoughts, as well as S&P 500 chart)…

The financial markets continue to battle back early year losses, and are broadly very close to turning positive. This is great news, though we’re not out of the woods just yet.

Per the chart below, we can still see the market is in a downtrend. It’s at the high end of the range, but definitely needs to break out of the red “channel” you can see drawn over the chart.

Screen Shot 2016-03-15 at 11.12.07 AM

A definitive breakout would be an S&P 500 move above 2050, and then staying there or higher for a few weeks.

Checking back in on the same chart, here’s how last week changed it:

Screen Shot 2016-03-21 at 10.22.14 PM

In a nutshell, not much.

The broad markets still are at the top end of what looks like the start to a possible downward trend. Should we get a week or two of additional gains, this would be a solid breakout to the positive, and likely the start of a new bull market. Should the market head lower, and eventually close a week below 1,850, then we’re likely heading into a longer term downtrend.

The only way to know how this plays out is to remain patient, and see what happens over the next couple weeks. Taking any action while at a market level like this (i.e., getting more aggressive or conservative) is pretty dangerous. Rather, the smart investor remains well balanced and sticks to their long term investment plan.

We’ll be keeping a close eye on this trend the next few weeks, and should a breakout start (good or bad), I’ll be sure to report it here on the blog quickly.

More to come soon.  Stay tuned.

Regards,

Phil Calandra and Jason Wenk
Chief Investment Strategists

5 Minute Market Commentary – March 16, 2016

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

Financial markets have put in a strong push the past few weeks, continuing with gains the last 5 days. Most “growth” asset classes are close to break even for the year now, and all “income” asset classes are positive.

Screen Shot 2016-03-15 at 11.02.44 AM

 

Lesson to be learned: One week up (sometimes a few weeks up), one week down (sometimes a few weeks 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) increased slightly in January, signaling a modest slowdown in the US Economy.  The Bull/Bear indicator is unchanged this week (100% bearish).  Historically, this means our models think there is a slightly higher likelihood of stock market declines in the near term (think <18 months).

Screen Shot 2016-03-15 at 12.17.29 PM

 

Weekly Comments

The financial markets continue to battle back early year losses, and are broadly very close to turning positive. This is great news, though we’re not out of the woods just yet.

Per the chart below, we can still see the market is in a downtrend. It’s at the high end of the range, but definitely needs to break out of the red “channel” you can see drawn over the chart.

Screen Shot 2016-03-15 at 11.12.07 AM

A definitive breakout would be an S&P 500 move above 2050, and then staying there or higher for a few weeks.

Until then we need to stay balanced, a touch more conservative than normal, and committed to our long term investment plan.

In our models we’re still cautious, but feeling more optimistic then we did in January and February. Our longer term trend indicators are still pointing to a good possibility of a bear market at some point this year. Because of this we need to be nimble, and pay close attention to potential warning signs. Should this happen, I’ll be sure to share them here on our blog.

More to come soon.  Stay tuned.

Regards,

Phil Calandra
Chief Investment Strategist

Sticking With Your Financial Plan is Important

Blue Puzzled by your financial futureA sailboat without a rudder will drift aimlessly with the tide. It cannot seek safe harbor from a storm or explore the open sea with a way to return to port. Too many investors and savers approach the task of building wealth without a rudder. They either lack a plan, or they have a plan, that gets swept under the rug. Less than 20 percent of Americans have a comprehensive financial plan, according to one survey.

In decades past, the guidance that investors often received was to get into a portfolio of stocks or equity mutual funds, and then just leave their money there for many years in hopes the portfolio might appreciate. With the exception of some major drops in the market, like in October of 1987, there have been periods of a general rise in the price of stocks. In recent years, the stock market has been all over the map with 2015 ending nearly flat. Investors have even more reason to stick to a plan that is not just buy and hold, but one that conforms to the reality of the market as one component of a financial plan.

But, before having the discretionary funds to invest, creating a plan to put aside money, and to stop wasting money, is key.

Constructing a Financial Plan
What’s important is to decide why money is important to you; what are your eventual goals for any savings or investment accounts? Like the sailboat, you have to have something you are steering towards. Without knowing what you are saving for, or how much you may need, you are a boat adrift, at the mercy of the tide.

Create a balance sheet; what are you left with after you deduct obligations from assets? Have you been saving consistently or making frivolous purchases frequently that don’t have any utilitarian benefit? Being aware of areas where money is wasted can lead to a change in behavior.

Part of a financial plan is to know what you really have and what you can reasonably save. It includes creating priorities, goals and a method for accumulating wealth while providing an exit strategy. In addition to saving as much as a person reasonably can, paying off debt should be a concurrent activity. Besides a mortgage, any other debt, especially credit card debt, only defeats the benefits of growing wealth.

The purpose of an exit strategy is especially true with individual stocks. Put the emotions aside and determine that when a stock is in free-fall, there is a point where you will exit and reduce your downside risk. To help mitigate some of the risk of investing in individual stocks in the first place, using an index fund or an ETF can allow for more diversification and potentially spread your risk out over a large number of equities. Committing to sticking with these strategies is key though.

One way to remove the emotions of investing, or to get support in your effort to stick to a plan, is to get some guidance from a financial advisor. This may be one of the best ways to stick to a financial plan. The advisor can take the emotion out of investing and help formulate a plan that make sense for accumulating wealth and meeting many other financial goals.

As with the sailboat, the most important aspect of meeting those financial goals is to have a rudder in the first place. Hold onto it tight and chart a course towards achieving your aspirations without letting the winds of distraction blow you off course.

5 Minute Market Commentary – March 7, 2016

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

After a terrible start to 2016, most financial markets of the growth variety (stocks and commodities, namely), have put in 3 consecutive winning weeks. This rally has the S&P 500 close to break even over the past year and only down about 5% from the all time highs set in 2015.

Screen Shot 2016-03-07 at 8.06.38 AM

Lesson to be learned: One week up, one week down (sometimes a few weeks 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) increased slightly in January, signaling a modest slowdown in the US Economy.  The Bull/Bear indicator is unchanged this week (100% bearish).  Historically, this means our models think there is a slightly higher likelihood of stock market declines in the near term (think <18 months).

Weekly Comments

The financial markets of 2016 have been rather schizophrenic. What started like a sure thing bear market, has turned rather unexpectedly, now only down a couple percent for the year. Markets like this can be confusing, but not all that difficult.

The key, is simply staying committed. When we have a sound financial plan and risk appropriate investment portfolio, we just need to stick with it. Sounds easy, but it’s not always that simple.

Many of our models are turning a little more bullish, with the majority of our growth based strategies close to fully invested. This can change, sometimes quickly, but we’re not as conservative as we’ve been in the past 6 months.

All in all, we’re still cautious. Some of the new “growth” like positions are in non-traditional assets like gold. Others are well balanced across US stocks and real estate. We’ve yet to participate in international stocks for quite some time. On our bond models we’re adding some high yield bond positions, an asset class that saw steep declines in 2015.

The impetus for these new positions is that the US economy never got that bad, and many stocks and other growth assets prices fell further and faster than their valuations would suggest they should have.

Despite this, our longer term trend indicators are still pointing to a good possibility of a bear market at some point this year. Because of this we need to be nimble, and pay close attention to potential warning signs. Should this happen, I’ll be sure to point them out here on our blog.

More to come soon.  Stay tuned.

5 Minute Market Commentary – March 1, 2016

If you know someone that can benefit from my Blog, please forward this to them and encourage them to sign up to receive my commentary every week!

Trust Dale CFG

I 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

Last week marks two positive weeks in a row (broadly speaking). This is the first back to back positive investing weeks for most asset classes, and looks to make February close out slightly positive for the month. Markets are still more ugly than pretty over the past year, but positive months are always a welcome sign to weary investors.

Screen Shot 2016-02-29 at 10.23.27 AM

Lesson to be learned: One week up, one week down (sometimes a few weeks 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) increased slightly in January, signaling a modest slowdown in the US Economy.  The Bull/Bear indicator is unchanged this week (100% bearish).  Historically, this means our models think there is a slightly higher likelihood of stock market declines in the near term (think <18 months).

Weekly Comments

With each positive week in the markets, we’re moving further away from a possible bear market. Sure, indexes are still down close to or slightly more than double digits, but the fears from January seemed much more than a month ago.

The danger here is chasing the market direction. We saw this with investors abandoning their portfolios a few weeks ago, at exactly the wrong time. Now, some of those same investors, are thinking it’s time to get back in. Sadly, they’ve already missed 4% or more of the recovery, and are doomed from the same mentality that made them panic now that the markets are off their lows.

I’ve said it many times before, but the price of admission to the long term gains of capital markets is the short term volatility that comes with it. If we have a sound investment strategy, risk-appropriate portfolio, and coordinated financial plan; there’s no reason to worry about that price of admission.

Looking forward, our models are still cautionary. We are invested, but balanced and leaning toward being conservative. We’ve been this way for quite a while now and it’s served us well in dealing with all the market volatility. Until we see a little more follow-through on the current short term rally, our models are not likely to change in a major way.

More to come soon.  Stay tuned.

Regards,

Phil Calandra