Calandra Event: How Could The 2016 Elections Affect Your Investments?

Presented by Phil Calandra & Dale Cardwell

“How could the 2016 elections affect my investments?”

If this is your question, you’re not alone.

Every four years, investors face the uncertainty of who will take the White House and which party will control congress.

The 2016 Presidential Election promises to be one of the most contested in history.

We invite you to join us for a special presentation on investing & politics.

Where we’ll find the answers to questions such as:

  • Should “We The People” worry about the 2016 election?
  • What does history teach us about market performance in election years?
  • How does Democrat vs. Republican affect the market?
  • What actions should investors take, NOW?

Join us on Thursday, October 13th, 2016 at 6:30pm

Seating is limited. Please register in advance.
Call 678-218-5925 or send an email to info@calandrafinancialgroup.com to reserve your spot today!

Event Location:
TrustDALE Studios
3300 N.E. Expressway Bldg. 4 Suite 100
Atlanta, Georgia

Seating is limited. Please register in advance.
Call 678-218-5925 or send an email to info@calandrafinancialgroup.com to reserve your spot today!

Fed Decides to Keep Rates Unchanged

5-Minute Market Update  |  September 26, 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 positive for the week with international stocks experiencing the largest gains. All S&P 500 sectors finished the week positive with defensive sectors generally outperforming cyclical sectors.

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

Commodities: Commodities were positive for the week as oil gained 3.37%. Oil continues bounce around the $40 – $50/bbl level experienced since April as there is no clear direction for prices at the moment. Gold increased 2.40% and remains considerably positive for the year.

Bonds: The 10-year treasury yield decreased from 1.70% to 1.62%, leading to positive performance in treasury and aggregate bonds.

High yield bonds were slightly positive as broad interest rate decreases furthered the gains experienced from the positive performance in riskier assets.

All indices are currently positive (modestly) for 2016, with high yield bonds leading the way.

screen-shot-2016-09-26-at-8-48-30-am

Lesson to be learned: Benjamin Graham once said “In the short run, the market is a voting machine, but in the long run it is a weighing machine.” There is a lot of daily market “noise” that can cause unnerving volatility at times, but it is important not to let short-term speculations drive your investment decision making process. Instead, you should 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 decreased from 25.33 to 22.76, 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-2016-09-12-at-3-31-49-pm

Weekly Comments & Charts

The S&P 500 finished the week positive as the index attempts to regain positive momentum. Prices stalled during the summer as there had not been a definitive move up or down since the S&P 500 broke through the ceiling set back in May 2015, but the past couple of weeks have seen an increase in price movement. This could indicate an important inflection point in the equity markets. If the S&P 500 continues to use this old ceiling as a level of support, it could signal that markets are experiencing true positive momentum and are ready to continue making new all time highs. However, if the S&P 500 fall below the ceiling, it could signal a decline back into the sideways/downward trading pattern experienced earlier in the year. The coming weeks should give some valuable insight about the near-term direction of the S&P 500.

screen-shot-2016-09-26-at-8-50-17-am

Broad US equity markets ended positive for the week as the Fed decided to keep rates unchanged in the announcement on Wednesday.

This decision was largely expected as the implied probability of a rate hike going into the meeting was only 15%. The Federal Open Market Committee stated the case for a rate hike has strengthened, but made the decision to wait for further evidence of continued progress before raising rates. Most market participants believe a rate hike will likely happen at the December meeting, if there is to be a rate hike at all in 2016, as the November meeting falls just before the upcoming presidential election.

Future rate hike expectations were further reduced in the September meeting as more committee participants believe there will lower rates for longer. The current projection is that rates will rise to only 1.125% by the end of 2017, compared to the 1.625% estimate from June. Rate projections for 2017 were as high as 1.875% earlier in the year.

Coincident with the lower future rate projections, the Fed decreased its forecast for economic growth in 2016 for the third time this year. The Fed expects GDP to end the year at 1.8%, compared to the 2% expectation in June. Job data has remained mostly positive over the past few months, but inflation continues to run well below the 2% goal. Lower rates should provide some tailwinds for equity markets in the near-term, but the failure of the Fed to increase interest rates illustrates how fragile the current economy may be.

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 Fed Decides to Keep Rates Unchanged appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

Market Braces for Upcoming Fed Meeting

Trust Dale CFG5-Minute Market Update  |  September 20, 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 positive for the week as only international stocks experienced losses. S&P 500 sectors finished the week mixed with defensive sectors generally outperforming cyclical sectors.

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

Commodities: Commodities were negative for the week as oil dropped 6.21%. Oil has been negative three of the past four weeks, but remains well above the year-to-date lows from February. Gold fell 1.83%, but remains considerably positive for the year.

Bonds: The 10-year treasury yield increased slightly from 1.67% to 1.70% as treasury and aggregate bonds ended the week mostly flat.

High yield bonds were slightly positive, but broad interest rate increases somewhat negated the gains experienced from the positive performance in riskier assets.

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

screen-shot-2016-09-19-at-8-42-03-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 25.33 to 22.76, 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-2016-09-19-at-8-42-22-am

Weekly Comments & Charts

The S&P 500 finished the week positive as the index remained near the critical support level of 2,130. Prices stalled during the summer as there had not been a definitive move up or down since the S&P 500 broke through the ceiling set back in May 2015, but the past couple of weeks have seen an increase in price movement. This could indicate an important inflection point in the equity markets. If the S&P 500 uses this old ceiling as a level of support, it could signal that markets are experiencing true positive momentum and are ready to continue making new all time highs. However, if the S&P 500 continues to fall, it could signal a decline back into the sideways/downward trading pattern experienced earlier in the year. The coming weeks should give some valuable insight about the near-term direction of the S&P 500.

screen-shot-2016-09-19-at-8-41-42-am

Broad US equity markets ended positive for the week as they halted the losses from the previous week.

The S&P 500 had been trading in a historically narrow pattern throughout the summer, but September 9 snapped a 59-day streak in which the S&P 500 had no daily moves of 1% or more. This was the narrowest trading range in the history of the S&P 500 dating back to 1928. Since the streak of low volatility has ended, four of the past six trading days for the S&P 500 have seen movements of 1% or more. The increase in recent volatility has mostly been driven by the speculation surrounding the upcoming Fed meeting scheduled for September 20 – 21 and the decision to raise interest rates.

A 0.25% rate hike wouldn’t necessarily impact the economy too much over the course of a couple of months, but the remaining uncertainty leading up to a decision will likely cause a higher level of market volatility to persist until a clearer path is formed. Though there has been increasing speculation surrounding the topic, market participants are not expecting any rate increases until at least the end of 2016. The implied probability of a rate hike for the upcoming September meeting this week remains low at only 15%, but increases to 56.5% for the December meeting. One thing is certain though, all eyes will be on the Fed this week.

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.

Phil Calandra

The post Market Braces for Upcoming Fed Meeting appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

September Market Update

Stock Market RollercoasterAs many of you may have noticed, equity markets experienced a sharp increase in volatility and negative performance between September 9 and September 13 as the S&P 500 fell 2.49%. Most of the losses can be attributed to the 2.45% drop last Friday. Prior to the drop on Friday, the S&P had been in a historically narrow trading pattern with the most recent 40 closes finishing within a 1.75% range. This was the narrowest 40-day trading range in the history of the S&P 500 dating back to 1928. The sudden negative breakout raises some important questions:

What caused the negative breakout from the recent narrow trading range?

The S&P 500 opened trading almost 1% lower on Friday due to the unexpected decision of the European Central Bank to keep interest rates unchanged instead of lowering rates and increasing monetary stimulus. Prices continued to fall throughout the day as Eric Rosengren, a voting member for the Fed, made comments hinting a rate hike may happen sooner rather than later. Rosengren stated that a “reasonable case” can be made for a rate increase due to the recent positive labor data and the slow climb towards a 2% inflation rate. These comments scared many market participants because stocks have been benefiting from low borrowing costs since 2009. Higher interest rates could lead to a slowdown in economic activity as it becomes more expensive for individuals and businesses to borrow money, leading to lower levels of consumer spending and lower expectations about the growth of companies and stocks as a whole.

What do we expect going forward?

Though most individuals would agree that rates are expected to increase at some point in the future, the timing of a rate hike decision from the Fed is still unclear. Dan Tarullo, another voting member for the Fed, stated there is still “room for robust discussion” over what may happen in the coming months. Since there is still a large amount of uncertainty remaining about the path of interest rates through the end of 2016, market speculation is expected to increase as investors eye the upcoming Fed meetings. A 0.25% rate hike wouldn’t necessarily impact the economy too much over the course of a couple of months, but the remaining uncertainty leading up a decision could cause an increase in volatility until a more clear path is formed. As of now, the expectation for a rate hike before the end of 2016 remain relatively low with 15%, 22%, and 51.8% implied probabilities for September, November, and December.

How are our models currently positioned to remain successful moving forward?

Our models remain well positioned for success in the near-term and long-term:

  • Tactical Growth has a 33.33% exposure to the gold, real estate, and US stock asset classes, providing a strong level of diversification between traditional growth and safe-haven assets
  • FFI US Equity (FFILX) has the potential to hold 50 individual stocks but is only 70% invested, reducing overall equity exposure while retaining the ability to achieve strong gains if markets see an upside movement
  • Flexible Growth is currently invested in 50% broad US equities and 50% short-term treasury bonds, creating a strong intra-model hedge

As illustrated by the above examples, our blended portfolios are cautiously optimistic about near-term growth in the markets. We have slowly been increasing overall exposure throughout 2016, but still maintain some safe-haven assets (such as gold and short-term treasuries) to mitigate downside risk. Markets can fluctuate a considerable amount day-to-day, especially if there is a large amount of uncertainty surrounding seemingly important catalysts such as the Fed rate hike decision. By keeping a non-biased, emotion-free, and consistent investment philosophy we believe our portfolios are well positioned for long term success regardless of the short-term market conditions.

Regards,

Phil Calandra

The post September Market Update appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

FormulaFolios Portfolio Recap – September 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.

Warmest Regards,

Jason Wenk
Chief Investment Strategist
FormulaFolio Investments, LLC

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

Source: Phil Calandara

S&P Ends Month Negative for First Time Since February

5-Minute Market Update  |  September 6, 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 positive for the week with international equities leading the way. S&P 500 sectors finished the week mixed with cyclical sectors generally outperforming defensive sectors.

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

Commodities: Commodities were negative for the week as oil fell 6.72%. Oil had seen positive performance through most of August, but prices dropped sharply as the prospects of Russia and Saudi Arabia collaborating to stabilize oil production waned. Gold was mostly flat with only a 0.05% gain, but remains considerably positive for the year.

Bonds: The 10-year treasury yield fell slightly from 1.62% to 1.60%, leading to positive performance in treasury and aggregate bonds.

High yield bonds were positive as broad interest rate declines enhanced gains experienced from the positive performance in riskier assets.

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

Screen Shot 2016-09-06 at 8.52.52 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 finished the week positive, but remained within the narrow trading range experienced over the past month and a half. 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. Generally, in technical analysis, a prolonged narrow trading range leads to either a sharp upside or sharp downside breakout. Over the next few weeks we would like to see increasing volume accompanied by a positive breakout in 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 2016-09-06 at 8.52.27 AM

Broad equity markets ended positive for the week, but the S&P 500 finished the month of August negative. This is the first time the S&P 500 has finished a month negative since February.

The Index was mostly flat throughout the month as it did not move 1% or more in any direction for a single day the entire month. Though it seems the US equity markets have decided to take a break, the lack in action is not expected to last much longer. Investors will be speculating about the possibility of a rate hike as they eye the next Fed meeting later in September.

The recent jobs report on September 2 came in lower than expected, but showed the job market supply is still strong enough to keep pace with the recent demand. Employment figures were not strong or weak enough to provide much guidance of when the Fed may decide to raise rates, so there is still a large amount of uncertainty surrounding the timing of a decision. This uncertainty is expected to lead to an increase in volatility until there is more firm guidance for the path of interest rates in the near-term.

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 S&P Ends Month Negative for First Time Since February appeared first on The Blog of Phil Calandra.

Source: Phil Calandara