5 Minute Market Commentary – July 19, 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

Equities: Broad equity markets finished positive for the third straight week as the post-Brexit rally continued. Equity markets have gained between 8% to 11% since the Monday following the Brexit decision. Most major S&P 500 sectors were positive with only utilities posting negative returns.

So far in 2016 telecommunications, utilities, and energy are the strongest performers while financials is the only sector with negative performance.

Commodities: Commodities were moderately positive as oil gained 1.19%, recovering a portion of the 7.31% losses experienced in the previous week. Gold fell 2.22%, snapping a streak of 6 straight weeks of gains.

Bonds: The 10-year treasury yield rose for the first time in seven weeks, increasing from 1.37% to 1.60%. Increasing rates led to negative performance in treasury and corporate bonds.

High yield bonds were slightly positive as an increase in interest rates somewhat offset gains as money flowed into riskier, higher yielding assets.

Most indices remain positive (modestly) for 2016, with high yield bonds leading the way.

Screen Shot 2016-07-18 at 8.39.10 AM

Lesson to be learned: Emotions can be our greatest enemy when it comes to investing. Do not let emotions guide your investment decisions and lead to self-destructive behavior. Instead, maintain a smart and disciplined investment strategy to improve your chances of long term portfolio success.

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 read least 67% bullish.  When those two things occur, our research shows market performance is strongest and least volatile.

The Recession Probability Index (RPI) most recently increased from 25.33 to 29.8, which signaled a slightly negative shift in the US Economy (though overall the index remains positive).  The Bull/Bear indicator is currently 33.33% bullish, 33.33% neutral, and 33.33% bearish (averaging 50% bullish and 50% bearish). This means our models remain neutral regarding the stock market direction in the near term (think <18 months).

Screen Shot 2016-07-11 at 8.49.36 AM

Weekly Comments & Charts

The S&P 500 increased for the third straight week and finally reached a new all time high level. Equity markets as a whole have seen strong performance since the Brexit decision, which has helped push the S&P 500 past the resistance level set back in May 2015. Though this can be seen as an optimistic sign for the markets moving forward, it will be important over the next few weeks to see if the markets continue this positive momentum. The coming weeks should give some valuable insight about whether the S&P 500 will turn the old level of resistance into a level of support or if the markets pull back again and retreat into the sideways/downward trading pattern.

Screen Shot 2016-07-18 at 8.42.01 AM

US equity markets have seen significant gains over the past few weeks as initial fears over the Brexit decision have eased and the US has recently reported some stronger than expected economic data. Adding to the recent bullish sentiment, increasing global challenges in regions such as Asia and Europe have actually increased investor risk tolerance for the time being as the likelihood of additional stimulus around the world continues to grow. Equity markets may seem as if it is smooth sailing ahead for now, but this is not necessarily the case.

Q2 2016 earnings season is just beginning, which will be something to keep an eye on as companies report their numbers. Earnings have been in a negative trend since the beginning of 2015, and when earnings decline it puts downward pressure on equities. Economic fundamentals and earnings growth ultimately drive equity prices in the long-run, and if companies do not produce positive & consistent earnings over time investors will choose to sell the companies’ stocks which will in turn send prices lower. The perception of continued stimulus around the world may add some upward pressure to the markets in the short-term, but global growth uncertainty will continue to be a long-term headwind until stronger, more consistent economic data and earnings growth returns.

While market trends and history are useful for study, there’s always more to investing than just the charts and trends. We need to be a little cautious about increasing global uncertainties and the election that is right around the corner.

Most importantly, as investors we need to stay committed to our long term financial goals. All the short term news and market movements can be the most debilitating of all when it comes to making sound investment decisions; especially if we allow them to influence knee-jerk decisions.

More to come soon.  Stay tuned.

Regards,

Phil Calandra

Attend the CFG / TrustDale.com MID-YEAR REVIEW….

The first half of 2016 is behind us and the markets have been grappling with many issues, including Britain leaving the EU. Uncertain times like these leave investors anxious and nervous about their financial future.

IF YOU ARE LOOKING FOR CLARITY PLEASE JOIN:

Calandra Financial    &   Consumer Investigator Dale Cardwell

For this town hall style informational Mid-Year Review.

We will review the first half of the year and look at what might affect investors for the remainder of 2016. Invite friends and family who will also benefit from this timely information-packed session. You will leave confident and positive about your financial future.

 Find answers to questions like:

  • WILL THE BULL MARKET CONTINUE OR IS A MARKET CRASH COMING
  • HOW WILL THE PRESIDENTIAL ELECTION AFFECT MARKETS? 
  • DO HIGHER INTEREST RATES SPELL DISASTER FOR THE ECONOMY? 
  • HOW CAN INVESTORS PREPARE FOR A POSSIBLE RECESSION?

EVENT DATE:

Saturday, July 30th

 EVENT LOCATION:

Brawner Hall

3180 Atlanta Road, Smyrna, GA 30080

EVENT TIME:    

10am-Noon

        Seating is limited, Call Today!!!

678-218-5925 to reserve your seats.

    (Coffee and Donuts will be served)

5 Minute Market Commentary – July 12, 2016

Trust Dale CFG

2016 Mid-Year Review…July 30th, Brawner Hall in Smyrna @ 10:00am

RSVP TODAY – 678-218-5925

 

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

Equities: Broad equity markets finished generally positive (excluding developed international equities) for the holiday shortened week. Equity markets were negative for the week through Thursday, but the stronger than expected US employment report helped boost equity markets between 1.40% to 2.33% on Friday. Most major S&P 500 sectors were positive with only telecommunications and energy posting negative returns.

So far in 2016 telecommunications, utilities, and energy are the strongest performers while financials is the only sector with negative performance.

Commodities: Commodities saw significant losses as oil fell 7.31% for the week, mostly due to the continuing strength in the dollar and the weakening demand projected for the second half of 2016. Gold increased for a sixth straight week, posting a 1.49% gain.

Bonds: The 10-year treasury yield fell for a sixth straight week from 1.46% to 1.37%, the lowest on record (with data dating back to January 1990 at www.treasury.gov). These extremely low yields helped treasuries and aggregate bonds to have another positive week.

High yield bonds were also positive as a decrease in general interest rates coupled with gains in equity assets helped boost performance.

Most indices remain positive (modestly) for 2016, with high yield bonds leading the way.

Screen Shot 2016-07-11 at 8.49.26 AM

Lesson to be learned: Emotions can be our greatest enemy when it comes to investing. Do not let emotions guide your investment decisions and lead to self-destructive behavior. Instead, maintain a smart and disciplined investment strategy to improve your chances of long term portfolio success.

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 read least 67% bullish.  When those two things occur, our research shows market performance is strongest and least volatile.

The Recession Probability Index (RPI) most recently increased from 25.33 to 29.8, which signaled a slightly negative shift in the US Economy (though overall the index remains positive).  The Bull/Bear indicator is currently 33.33% bullish, 33.33% neutral, and 33.33% bearish (averaging 50% bullish and 50% bearish). This means our models believe there is no clear direction for the stock market in the near term (think <18 months).

Screen Shot 2016-07-11 at 8.49.36 AM

Weekly Comments & Charts

The S&P 500 increased for the second straight week and closed within a few points of its all time high. Although markets have regained the losses incurred immediately following the Brexit decision, there is still no clear momentum evident for the S&P 500. Markets are poised to retest the ceiling that has been acting as a resistance level since May 2015, but for any real positive market momentum to pick back up we would need to see the index finally break through the current all time high level. Until the markets can hit a new all time high and break through this resistance point, we will continue to trade in a sideways / downward pattern.

Screen Shot 2016-07-11 at 8.51.55 AM

US equity markets turned positive for the week thanks to a better than expected jobs report on Friday. The US added 287,000 jobs compared to the estimated 175,000, helping alleviate concerns of a slowdown in the labor market. This seems to be good short-term news for the US economy, but what does this mean in the long-run?

Withstanding the recent US job report, economic data remains mixed. Wages have been increasing and unemployment has remained low, but earnings have been declining and numerous global economic concerns remain. The Fed is still expected to keep rates suppressed until closer to the end of the year, which should offer support for US equity markets, but overall global uncertainty continues to be a headwind. Until overall data becomes more consistent, either positively or negatively, markets are expected to remain volatile as headwinds and tailwinds clash together.

While market trends and history are useful for study, there’s always more to investing than just the charts. We need to be a little cautious about earnings (they are broadly declining), increasing global uncertainties, and the election that is right around the corner.

Most importantly, as investors we need to stay committed to our long term financial goals. All the short term news and market movements can be the most debilitating of all when it comes to making sound investment decisions; especially if we allow them to influence knee-jerk decisions.

More to come soon.  Stay tuned.

Regards,

Phil Calandra

2016 Mid-Year Review – RSVP TODAY!

The first half of 2016 is behind us and the markets have been grappling with many issues, including Britain leaving the EU. Uncertain times like these leave investors anxious and nervous about their financial future.

IF YOU ARE LOOKING FOR CLARITY PLEASE JOIN:

Calandra Financial    &   Consumer Investigator Dale Cardwell

For this town hall style informational Mid-Year Review.

We will review the first half of the year and look at what might affect investors for the remainder of 2016. Invite friends and family who will also benefit from this timely information-packed session. You will leave confident and positive about your financial future.

 Find answers to questions like:

  • WILL THE BULL MARKET CONTINUE OR IS A MARKET CRASH COMING
  • HOW WILL THE PRESIDENTIAL ELECTION AFFECT MARKETS? 
  • DO HIGHER INTEREST RATES SPELL DISASTER FOR THE ECONOMY? 
  • HOW CAN INVESTORS PREPARE FOR A POSSIBLE RECESSION?

EVENT DATE:

Saturday, July 30th

 EVENT LOCATION:

Brawner Hall

3180 Atlanta Road, Smyrna, GA 30080

EVENT TIME:    

10am-Noon

        Seating is limited, Call Today!!!

678-218-5925 to reserve your seats.

    (Coffee and Donuts will be served)

5 Minute Market Commentary – July 6, 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

Equities: Broad equity markets had a poor start to the week on the Monday immediately following the Brexit decision, but rebounded sharply Tuesday through Friday to finish with the strongest weekly gains so far in 2016. All major S&P 500 sectors were positive with defensive sectors leading the way.

So far in 2016 telecommunications, utilities, and energy are the strongest performers while financials and technology are the only sectors with negative performance.

Commodities: Commodities as a whole saw gains as most commodity sectors were positive for the week. Oil snapped a two week losing streak gaining 2.83% and gold increased for a fifth straight week, posting a 1.27% gain.

Bonds: The 10-year treasury yield fell for a fifth straight week from 1.57% to 1.46%, resulting in yields dropping to the lowest levels since July 2012 and helping treasuries and aggregate bonds to have another positive week.

High yield bonds were also positive as a decrease in general interest rates coupled with a shift back into riskier assets helped boost performance.

Most indices remain positive (modestly) for 2016, with commodities still leading the way.

Screen Shot 2016-07-05 at 1.48.34 PM

Lesson to be learned: Emotions can be our greatest enemy when it comes to investing. Do not let emotions guide your investment decisions and lead to self-destructive behavior. Instead, maintain a smart and disciplined investment strategy to improve your chances of long term portfolio success.

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 read least 67% bullish.  When those two things occur, our research shows market performance is strongest and least volatile.

The Recession Probability Index (RPI) most recently fell from 31.29 to 25.33, which signaled a slightly positive shift in the US Economy.  The Bull/Bear indicator is currently 33.33% bullish, 33.33% neutral, and 33.33% bearish (averaging 50% bullish and 50% bearish). This means our models believe there is no clear direction for the stock market in the near term (think <18 months).

Screen Shot 2016-06-27 at 9.23.06 AM

Weekly Comments & Charts

The S&P 500 experienced its best week in 2016 following three straight weeks of negative performance. We stated last week that if the market continued downward for the coming week(s), it would be important to see if the downward trend ceiling acted as a level of support or if prices would fall through this ceiling. It looked as if the index was bound to fall through the ceiling as of Monday, which would have led to the re-entrance into a definitive downward trend, but the negative momentum ended Tuesday and the S&P 500 is once again looking like it may test the all time highs set in May 2015. It appears the ceiling acted as a level of support for now, but there is still no clear momentum evident for the S&P 500. For any real positive market momentum to pick back up we would need to see the index break through the all time high level set back in May 2015. Until the markets can hit a new all time high and break through this resistance point, we will continue to trade in a sideways / downward pattern.

Screen Shot 2016-07-05 at 1.53.40 PM

Equity markets rallied last week and seem to have returned to a sense of equilibrium as investors shrugged off initial Brexit fears. This is a major turnaround from Friday, June 24 when it appeared as if markets were heading for a major correction, so where did this sudden sense of optimism come from? Many investors are betting that central banks will rescue the global economy if necessary. Some projected central bank moves include the Bank of England cutting rates, the European Central Bank increasing stimulus, and the US further delaying plans to raise interest rates. Japanese Prime Minister Shinzō Abe even set up an emergency meeting on June 27 to instruct the Bank of Japan to take aggressive action if necessary to support the economy and ensure stability in the financial and currency markets. The post-Brexit market turnaround and expectations for central bank intervention if necessary is proving to be consistent with the term “don’t fight the Fed.” Historically, investors will generally do better if they just go with the flow of the current monetary policy rather than swimming against the stream. In an environment where central banks are expected to stimulate economic growth at any sign of a threat, markets naturally want to trend up.

Other investors are starting to bet that the impact of the Brexit decision could be limited to the UK as long as other economies such as the US and China show positive signs of growth. This could be true, but as shown by the chart below there has been a negative trend in US earnings since the beginning of 2015 (S&P 500 index is the red line, S&P 500 earnings is the blue line).

Screen Shot 2016-07-05 at 1.56.46 PM

Historically, when earnings begin to decline it puts downward pressure on equities. The reasoning is simple: if companies do not produce positive & consistent earnings over time, investors will choose to sell the companies’ stocks which will in turn send prices lower. Eventually a lack of earnings growth should drive stock prices down. We can see that overall earnings have been declining recently, but why have stock prices seemed to oscillate sideways and test new highs rather than falling concurrently with earnings? Again, this goes to show that you shouldn’t fight the Fed.

While market trends and history are useful for study, there’s always more to investing than just the charts. We need to be a little cautious about increasing global uncertainties and the election that is right around the corner.

Most importantly, as investors we need to stay committed to our long term financial goals. All the short term news and market movements can be the most debilitating of all when it comes to making sound investment decisions; especially if we allow them to influence knee-jerk decisions.

More to come soon.  Stay tuned.

Regards,

Phil Calandra