Federal Reserve Chair Janet Yellen Gives Speech About US Economy

Trust Dale CFG5-Minute Market Update  |  August 29, 2016

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 mostly negative for the week as only small cap US stocks experienced gains. Most S&P 500 sectors saw negative performance, with defensive sectors suffering the largest losses.

So far in 2016 telecommunications, energy, and utilities are the strongest performers; no sectors currently have negative performance year-to-date.

Commodities: Commodities were negative for the week as oil fell 1.81%. Oil prices still remain well below the high year-to-date levels seen in the beginning of June. Gold dropped 1.41% for the week, but remains considerably positive for the year.

Bonds: The 10-year treasury yield increased slightly from 1.58% to 1.62%, leading to negative performance in treasury and aggregate bonds.

High yield bonds were flat as a decrease in credit spreads helped offset the broad interest rate increase.

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

Screen Shot 2016-08-29 at 8.45.11 AM

Lesson to be learned: Warren Buffett once said “the stock market is a device for transferring money from the impatient to the patient.” Impatient investors allow emotions to guide their decisions, often leading to self-destructive portfolio behavior. This is why is is important to remain patient. Maintaining a smart and disciplined investment strategy will 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 decreased from 29.8 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 remain neutral regarding the stock market direction in the near term (think <18 months).

Screen Shot 2016-08-29 at 8.45.26 AM

Weekly Comments & Charts

The S&P 500 ended negative after a volatile week of trading, keeping prices within the narrow trading range experienced over the past few weeks. Since the S&P 500 broke through the ceiling set back in May 2015, prices seem to have stalled as there has not been a definitive move up or down. Over the next few weeks we would like to see increasing volume accompanying increasing prices. This would signal that the momentum has officially shifted to a more positive outlook. 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 2016-08-29 at 9.09.36 AM

Markets became more cautions during the week as investors waited for Federal Reserve chair Janet Yellen to speak at the annual Economic Symposium in Jackson Hole, Wyoming.

Yellen stated the case for raising interest rates has strengthened recently, but there is still little guidance about the timing of such a decision. This was in line with what the markets expected, but other committee members hinted there may be rate hikes sooner rather than later.

The uncertainty surrounding the speeches on Friday helped illustrate how fragile the markets can be. The S&P 500 fell over 1% due to the fear of sooner than expected rate hikes, but pared some of the losses at the end of the day with the relief that rate hikes may still be in the distant future. Increasing rates could be a sign that the U.S. economy is showing strong growth and seems healthy, but many investors fear this could cause more harm than good in the equity markets. A tightening monetary policy would reduce liquidity in the financial markets, potentially pushing money from riskier assets to safe-haven assets.

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

The post Federal Reserve Chair Janet Yellen Gives Speech About US Economy appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Commentary – April 16, 2016

Trust Dale CFG

S&P 500 P/E Ratio at Highest Level Since Early 2010

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 mostly positive lead by international stocks. Higher oil prices and stronger than expected earnings reports from large retailers such as Kohl’s and Nordstrom helped push equities higher. S&P 500 sectors finished the week mixed with no discernable difference between cyclical and defensive sectors.

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

Commodities: Commodities had a strong week as oil gained 6.44%. However, oil is still almost 14% lower than the high year-to-date levels seen in the beginning of June. Gold traded flat but remains considerably positive for the year.

Bonds: The 10-year treasury yield decreased slightly from 1.59% to 1.51%, leading to positive performance in treasury and aggregate bonds.

High yield bonds were positive as credit spreads continued their broad decline since mid-February and the markets continue to gain confidence in riskier assets.

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

Screen Shot 2016-08-15 at 8.59.51 AM

Lesson to be learned: Warren Buffett once said “the stock market is a device for transferring money from the impatient to the patient.” Impatient investors allow emotions to guide their decisions, often leading to self-destructive portfolio behavior. This is why is is important to remain patient. Maintaining a smart and disciplined investment strategy will 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 decreased from 29.8 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 remain neutral regarding the stock market direction in the near term (think <18 months).

Screen Shot 2016-08-08 at 8.37.29 AM

Weekly Comments & Charts

The S&P 500 was mostly flat during another week of low volume trading compared to the rest of 2016. Though prices have been trending up recently, trading volume (the number of shares traded during a specified period of time) has been in a slow decline since the beginning of the year as illustrated by the second chart below. This could be a warning of a potential reversal due to a lack of interest in the market. Price increases (or decreases) on weak volume is not necessarily a strong signal. We would like to see increasing volume accompanying increasing prices. This would signal that the momentum has officially shifted to a more positive outlook. 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 2016-08-15 at 8.58.36 AM

Screen Shot 2016-08-15 at 8.58.54 AM

The trailing 12-month price-to-earnings (P/E) ratio for the S&P 500 currently stands at 19.5, the highest level since early 2010. What does this mean for equity markets moving forward?

The P/E ratio simply takes the closing price of the S&P 500 and divides it by the trailing 12-month earnings per share (EPS) of the index. In essence, the P/E ratio indicates the amount of money an investor is willing to invest in order to receive a dollar of earnings. Though there is no “set in stone” value for analyzing P/E ratios, higher P/E ratios can indicate an overvalues market while lower P/E ratios can indicate an undervalued market.

The current 19.5 P/E ratio is above the trailing 5-year (15.9), 10-year (15.9), and 15-year (17.6) ratios for the S&P 500. At the end of 2015, the trailing 12-month P/E ratio was 17.9. Since then, the price of the S&P 500 has increased by almost 7% while the trailing 12-month earnings-per-share has decreased by almost 2%. An increase in the S&P 500 price combined with a decrease in earnings has placed upward pressure on the P/E ratio.

Though the P/E ratio can fluctuate regularly and does not give much insight as to the timing in market movements, this is something to keep an eye on. Compared to the most recent 5, 10, and 15-year time periods, the S&P 500 seems to be slightly overvalued at the moment. To fall back to the average P/E ratios, we would need to see an increase in earnings or a decrease in prices. Many companies have beat earnings estimates for Q2 2016, but the overall earnings decline for the quarter still stands at -3.5% which illustrates that the earnings portion of this ratio will not necessarily provide much support in the near-term. If prices continue to increase without earnings support it could create an overvalued market, making it more difficult to continue the broad bull market that began in 2009.

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

The post 5 Minute Market Commentary – April 16, 2016 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

Portfolio Recap – July 2016

In this recap, we cover the prior month and YTD performance, touch on current asset allocation of our tactical models, as well as the most up to date economic analysis of our proprietary economic model – the Recession Probability Index.

Regards,

Phil Calandra and Jason Wenk
Chief Investment Strategist
Calandra Wealth Management, LLC & FormulaFolio Investments, LLC

The post Portfolio Recap – July 2016 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5-Minute Market Update – August 09, 2016

Trust Dale CFGEquities Regain Momentum Following US Employment Report

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 mostly positive after a moderately volatile week of trading. Most growth indices were negative going into the end of the week, but a stronger than expected US employment report on Friday helped push the markets into positive territory. S&P 500 sectors finished the week mixed with cyclical sectors generally performing the best.

So far in 2016 telecommunications, utilities, and energy are the strongest performers; no sectors currently have negative performance year-to-date.

Commodities: Commodities rebounded slightly in the first week of August after a considerably negative July. Oil gained 0.48%, but is still almost 19% lower than the high year-to-date levels seen in the beginning of June. Gold fell 0.93% but remains significantly positive for the year.

Bonds: The 10-year treasury yield increased slightly from 1.46% to 1.51%, leading to negative performance in treasury and aggregate bonds.

High yield bonds were positive as credit spreads decreased for the week. Credit spreads had been inching higher through the first part of the week putting downward pressure on high yield debt, but a market shift into riskier assets at week end reversed the momentum.

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

Screen Shot 2016-08-08 at 8.37.05 AM

Lesson to be learned: Warren Buffett once said “the stock market is a device for transferring money from the impatient to the patient.” Impatient investors allow emotions to guide their decisions, often leading to self-destructive portfolio behavior. This is why is is important to remain patient. Maintaining a smart and disciplined investment strategy will 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 decreased from 29.8 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 remain neutral regarding the stock market direction in the near term (think <18 months).

Screen Shot 2016-08-08 at 8.37.29 AM

Weekly Comments & Charts

The S&P 500 continued its recent positive price momentum last week but did so, once again, on low volume compared to the rest of 2016. Though prices have been trending up recently, trading volume (the number of shares traded during a specified period of time) has been in a slow decline since the beginning of the year. When prices increase and volume decreases, it can be a warning of a potential reversal due to a lack of interest in the market. Price increases (or decreases) on weak volume is not necessarily a strong signal. We would like to see increasing volume accompanying the increasing prices. This would signal that the momentum has officially shifted to a more positive outlook. 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 2016-08-08 at 8.48.56 AM

US equity indices were negative for the week going into Friday, but a stronger than expected employment report helped stocks to finish the week positive. Total payroll employment rose by 255,000 in July, compared to an expected 175,000. Though jobs increased more than expected, the unemployment rate remained at 4.9% as more workers began to participate in the job market. The strong job numbers brought a wave of relief to the markets at the end the week following a lackluster Q2 2016 GDP report. Employment has been strong (excluding May) in 2016, but the recent stall in unemployment rate declines suggests we may be in a mature stage of the labor market in which the recent large gains would not be expected to continue in the future.

While economic data remains mixed, Q2 2016 earnings have been better than expected. So far, 86% of companies in the S&P 500 have reported earnings. Of these companies, 69% have beat earnings estimates and 54% have beat sales estimates. This is positive news for most companies, but the blended earnings decline for Q2 2016 is still -3.5% (before companies began reporting, the estimate was a decline of -5.5%). If total S&P 500 earnings do finish negative for Q2 2016, it will mark the first time the index has recorded five consecutive quarters of year-over-year earnings declines since Q3 2008 through Q3 2009.

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

The post 5-Minute Market Update – August 09, 2016 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Commetary – August 2, 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 mixed for the week with large-cap stocks finishing slightly lower while small-cap and international stocks finished higher. Most S&P500 sectors were negative as technology, healthcare, and materials were the only sectors with positive performance for the week.

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

Commodities: Commodities traded sharply negative for the third time in four weeks as oil lost another 5.86%, falling to below $42 a barrel. Since the recent highs in the beginning of June, oil has dropped about 19% over the past two months. Gold climbed 1.96% and remains significantly positive for the year.

Bonds: The 10-year treasury yield declined for the eighth time in nine weeks, falling from 1.57% to 1.46% (but remaining above the recent lows of 1.37%). Decreasing rates led to positive performance in treasury and aggregate bonds.

High yield bonds were negative as credit spreads increased through the week. The increasing credit spread signaled a slight shift away from riskier debt.

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

Screen Shot 2016-08-01 at 9.13.30 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

Not much new has happened in the technical world as the S&P 500 snapped a four-week streak of gains but ended mostly flat for the week. The halt in recent momentum is nothing to fear as of now, but it will be important to see if the markets continue the recent positive momentum over the upcoming weeks. Though prices have been trending up recently, trading volume (the number of shares traded during a specified period of time) has been in a slow decline since the beginning of the year. When prices increase and volume decreases, it can be a warning of a potential reversal due to a lack of interest in the market. Price increases (or decreases) on weak volume is not necessarily a strong signal. We would like to see increasing volume accompanying the increasing prices. This would signal that the momentum has officially shifted to a more positive outlook. 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 2016-08-01 at 9.25.55 AM

The past week saw many newsworthy updates in the markets; S&P 500 companies continued reporting Q2 2016 earnings, the Q2 2016 U.S. GDP growth rate was announced, and the Federal Reserve released its most recent statement. So far, earnings have been better than expected as 71% of reporting companies have reported earnings above the mean estimate. This is positive news for most companies, but the blended earnings decline for Q2 2016 is still -3.8% (before companies began reporting date, the estimate was a decline of -5.5%). If total S&P 500 earnings do finish negative for Q2 2016, it will mark the first time the index has recorded five consecutive quarters of year-over-year earnings declines since Q3 2008 through Q3 2009.

On a more macro level, U.S. GDP data disappointed as the economy grew only 1.2% on an annualized basis compared to the 2.6% estimate. This suggests the economy is expanding at a slower than expected pace. Consumer spending surged 2.83%, but company investment spending continued to fall.

As we received a mixture of data from earnings and GDP growth, the Fed maintained its “wait and see” policy as rates remained the same. This was the projected outcome for the meeting, but the Fed did display a much more optimistic tone than what was displayed in the June meeting. Job growth was much stronger than expected in June, pointing to potential near-term rate hikes, but inflation remains lackluster which could further delay the Fed’s decision. Many investors expect the Fed to raise rates at least once before the end of the year.

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

The post 5 Minute Market Commetary – August 2, 2016 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara