5 Minute Market Update – January 31, 2017

Trust Dale CFGMarket Update

Equities: Broad equity markets finished positive for the week with the Dow Jones Industrial Average experiencing the largest gains. S&P 500 sectors finished the week mixed as cyclical sectors generally outperformed defensive sectors.

So far in 2017 materials, technology, and consumer discretionary are the strongest performers while telecommunications, energy, and utilities are the only sectors with negative performance year-to-date.

Commodities: Commodities were negative for the week, though oil prices increased 1.43%. 2017 is off to a slow start for oil, but prices increased 14.64% in the last two months of 2016 and seem to have stabilized from the extreme drops experienced in 2014 & 2015. Gold prices fell 1.23%, marking the first week of losses since mid-December.

Bonds: The 10-year treasury yield increased slightly from 2.48% to 2.49% as treasury and aggregate bonds finished the week mostly flat.

High yield bonds were positive as riskier assets performed well and credit spreads continued to fall.

Most indices are currently positive for 2017, with international stocks leading the way.

Screen Shot 2017-01-30 at 9.09.29 AM

Lesson to be learned: Fred Schwed Jr. once said “Speculation is an effort, probably unsuccessful, to turn a little money into a lot. Investment is an effort, which should be successful, to prevent a lot of money from becoming a little.” It can be difficult to avoid the urge of speculating about “hot” stock tips which can allegedly make you rich overnight. The truth, however, is markets often act in ways that are unforeseen. This is why it is important to maintain a smart and disciplined investment strategy while avoiding knee-jerk reactions based on daily market noise.

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 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) has a current reading of 25.44, forecasting further economic growth and not warning of a recession at this time. The Bull/Bear indicator is currently 100% bullish. This means our models believe there is a slightly higher than average likelihood of stock market increases in the near term (within the next 18 months).

Screen Shot 2017-01-30 at 9.09.44 AM

Weekly Comments & Charts

The S&P 500 finished the week positive and remains well above the support level that was set following the breakout in July last year. This positive price movement snapped the recent narrow trading range experienced by the S&P 500, in which the Index had closed within a 1.75% range for 31 consecutive trading days. It appears that US equity markets are currently in an intermediate-term upward trend as many indices have reached new all time highs multiple times in recent weeks. The coming weeks should continue to give valuable insight about the near-term direction of the S&P 500, but it seems the sideways/downward pattern experienced from 2015 through mid-2016 has shifted to a more bullish pattern for now.

Screen Shot 2017-01-30 at 9.11.55 AM

US stock markets began the week on a slightly negative note, but quickly regained post-election momentum as the Dow Jones Industrial Average reached 20,000 for the first time on Wednesday.

20,000 is not necessarily predictive, as it is not notably different than levels of 19,999 or 20,001 and is has no fundamental meaning, but it does represent a psychological milestone. Humans tend to be attracted to clean, round numbers because they look nice and have a nice ring to them. So what does a Dow above 20,000 mean for the markets going forward?

Though the Dow reaching 20,000 does not mean markets are guaranteed to keep moving in a positive direction, the recent rally seems to have some support. Rising earnings, stronger economic growth, and improving sentiment have helped US equities regain positive momentum following the volatility of 2015 and much of 2016.

The first estimate of Q4 2016 US GDP came in below expectations as it was reported the economy grew 1.9% on an annualized basis compared to a 2.2% consensus, but this value still exceeds the average of 1.7% over the prior four quarters. Q4 2016 earnings have been strong so far as well, with the blended S&P 500 earnings growth rate at 4.2% compared to an initial estimate of 3% before earnings season started. If these positive economic and fundamental trends continue, it could signal the bull market still has legs, though there is still a large amount of political and global uncertainty to be aware of.

While market trends and history are useful for study, there’s always more to investing than just the charts and trends.

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 – January 31, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

FormulaFolios Portfolio Recap – January 2017

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

The post FormulaFolios Portfolio Recap – January 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – January 18, 2017

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, investing should be simple, not complicated.

Market Update

Equities: Broad equity markets finished mixed for the week with international equities experiencing the largest gains. S&P 500 sectors finished the week mixed as cyclical sectors generally outperformed defensive sectors.

So far in 2017 technology, consumer discretionary, and healthcare are the strongest performers while telecommunications, energy, and consumer staples are the weakest performers year-to-date.

Commodities: Commodities were positive for the week, though oil prices fell 3.00%. Oil prices increased 45.03% in 2016 and prices seem to have stabilized from the drops experienced in 2014 & 2015. Gold prices increased 2.00%, marking third straight week of gains.

Bonds: The 10-year treasury yield increased slightly from 2.42% to 2.45%, though treasury and aggregate bonds were positive for the week. This is the fourth straight week of gains for bonds.

High yield bonds were positive, but mostly flat as riskier assets were mixed and credit spreads increased marginally.

Most indices are currently positive for 2017, with international stocks leading the way.

Screen Shot 2017-01-17 at 9.25.58 AM

Lesson to be learned: Benjamin Graham once said “The individual investor should act consistently as an investor and not as a speculator.” Nobody can predict the future, but it can be difficult to avoid the urge of speculating about “hot” market topics. Markets often act in ways that are unforeseen which is why it is important to maintain a smart and disciplined investment strategy while avoiding knee-jerk reactions based on daily market noise.

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 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) has a current reading of 25.44, forecasting further economic growth and not warning of a recession at this time. The Bull/Bear indicator is currently 100% bullish. This means our models believe there is a slightly higher than average likelihood of stock market increases in the near term (within the next 18 months).

Screen Shot 2017-01-17 at 9.26.10 AM

Weekly Comments & Charts

The S&P 500 ended the week mostly flat and remains well above the support level that was set following the breakout in July last year. The market has rebounded sharply from the lows of 2016 and has reached new all time highs multiple times in recent weeks. With the recent momentum and upward price pressure, it appears that US equity markets are currently in an intermediate-term upward trend. The coming weeks should continue to give valuable insight about the near-term direction of the S&P 500, but it seems the sideways/downward pattern experienced from 2015 through mid-2016 has shifted to a more bullish pattern for now.

Screen Shot 2017-01-17 at 9.25.36 AM

It was a quiet week in the US stock markets as major indices closed mixed, but mostly flat.

Though the excitement of the Dow almost reaching the 20,000 milestone has died down for the moment, Q4 2016 earnings season is off to a strong start. On December 31, total S&P 500 earnings were expected to grow 3.0% year-over-year, but an initial group of upside surprises has boosted the growth estimate to 3.2%. Only 6% of companies in the S&P 500 have reported earnings so far, but of the companies that have reported 70% have beat the average earnings growth estimate. If the index reports earnings growth for Q4 2016, it will mark the first time it has achieved year-over-year growth for two consecutive quarters since Q4 2014 – Q1 2015.

The return of positive earnings growth in the US economy is welcomed news as the forward 12-month price-to-earnings (P/E) ratio for the S&P 500 remains somewhat high. The current forward P/E ratio is 17.0, while the 5-year and 10-year average levels are 15.1 and 14.4. Though there is no exact signal level, an inflated P/E ratio can indicate an overvalued market. To fall back to the average P/E ratios, we would need to see earnings increase, stock prices decrease, or a combination of both. If earnings continue to grow, it could help the recent bull-market continue through 2017 by keeping valuations at a reasonable level.

While market trends and history are useful for study, there’s always more to investing than just the charts and trends.

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 – January 18, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – January 18, 2017

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, investing should be simple, not complicated.

Market Update

Equities: Broad equity markets finished mixed for the week with international equities experiencing the largest gains. S&P 500 sectors finished the week mixed as cyclical sectors generally outperformed defensive sectors.

So far in 2017 technology, consumer discretionary, and healthcare are the strongest performers while telecommunications, energy, and consumer staples are the weakest performers year-to-date.

Commodities: Commodities were positive for the week, though oil prices fell 3.00%. Oil prices increased 45.03% in 2016 and prices seem to have stabilized from the drops experienced in 2014 & 2015. Gold prices increased 2.00%, marking third straight week of gains.

Bonds: The 10-year treasury yield increased slightly from 2.42% to 2.45%, though treasury and aggregate bonds were positive for the week. This is the fourth straight week of gains for bonds.

High yield bonds were positive, but mostly flat as riskier assets were mixed and credit spreads increased marginally.

Most indices are currently positive for 2017, with international stocks leading the way.

Screen Shot 2017-01-17 at 9.25.58 AM

Lesson to be learned: Benjamin Graham once said “The individual investor should act consistently as an investor and not as a speculator.” Nobody can predict the future, but it can be difficult to avoid the urge of speculating about “hot” market topics. Markets often act in ways that are unforeseen which is why it is important to maintain a smart and disciplined investment strategy while avoiding knee-jerk reactions based on daily market noise.

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 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) has a current reading of 25.44, forecasting further economic growth and not warning of a recession at this time. The Bull/Bear indicator is currently 100% bullish. This means our models believe there is a slightly higher than average likelihood of stock market increases in the near term (within the next 18 months).

Screen Shot 2017-01-17 at 9.26.10 AM

Weekly Comments & Charts

The S&P 500 ended the week mostly flat and remains well above the support level that was set following the breakout in July last year. The market has rebounded sharply from the lows of 2016 and has reached new all time highs multiple times in recent weeks. With the recent momentum and upward price pressure, it appears that US equity markets are currently in an intermediate-term upward trend. The coming weeks should continue to give valuable insight about the near-term direction of the S&P 500, but it seems the sideways/downward pattern experienced from 2015 through mid-2016 has shifted to a more bullish pattern for now.

Screen Shot 2017-01-17 at 9.25.36 AM

It was a quiet week in the US stock markets as major indices closed mixed, but mostly flat.

Though the excitement of the Dow almost reaching the 20,000 milestone has died down for the moment, Q4 2016 earnings season is off to a strong start. On December 31, total S&P 500 earnings were expected to grow 3.0% year-over-year, but an initial group of upside surprises has boosted the growth estimate to 3.2%. Only 6% of companies in the S&P 500 have reported earnings so far, but of the companies that have reported 70% have beat the average earnings growth estimate. If the index reports earnings growth for Q4 2016, it will mark the first time it has achieved year-over-year growth for two consecutive quarters since Q4 2014 – Q1 2015.

The return of positive earnings growth in the US economy is welcomed news as the forward 12-month price-to-earnings (P/E) ratio for the S&P 500 remains somewhat high. The current forward P/E ratio is 17.0, while the 5-year and 10-year average levels are 15.1 and 14.4. Though there is no exact signal level, an inflated P/E ratio can indicate an overvalued market. To fall back to the average P/E ratios, we would need to see earnings increase, stock prices decrease, or a combination of both. If earnings continue to grow, it could help the recent bull-market continue through 2017 by keeping valuations at a reasonable level.

While market trends and history are useful for study, there’s always more to investing than just the charts and trends.

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

5 Minute Market Update – January 10, 2017

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, investing should be simple, not complicated.

 

Market Update

Equities: Broad equity markets finished positive for the week with international equities experiencing the largest gains. Most S&P 500 sectors finished the week positive while cyclical sectors generally outperformed defensive sectors.

So far in 2017 healthcare, technology, and consumer discretionary are the strongest performers while telecommunications is the only sector with negative performance year-to-date.

Commodities: Commodities were negative for the week, though oil prices increased 0.50%. Oil prices increased 45.03% in 2016 and prices seem to have stabilized from the drops experienced in 2014 & 2015. Gold prices increased 1.90%, the largest weekly gain since October 2016.

Bonds: The 10-year treasury yield decreased slightly from 2.45% to 2.42%, leading to positive performance in treasury and aggregate bonds. This is the third straight week rates have fallen.

High yield bonds were positive as riskier assets performed well and credit spreads continued to fall.

Most indices are currently positive for 2016, with international stocks leading the way.

screen-shot-2017-01-08-at-9-35-23-pm

Lesson to be learned: Benjamin Graham once said “The individual investor should act consistently as an investor and not as a speculator.” Nobody can predict the future, but it can be difficult to avoid the urge of speculating about “hot” market topics. Markets often act in ways that are unforeseen which is why it is important to maintain a smart and disciplined investment strategy while avoiding knee-jerk reactions based on daily market noise.

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 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) has a current reading of 25.44, forecasting further economic growth and not warning of a recession at this time. The Bull/Bear indicator is currently 100% bullish. This means our models believe there is a slightly higher than average likelihood of stock market increases in the near term (within the next 18 months).

screen-shot-2017-01-03-at-9-02-48-am

Weekly Comments & Charts

The S&P 500 ended the week positive and remains well above the support level that was set following the breakout in July last year. Prior to the presidential election, the S&P 500 had closed negative in four of five weeks, but the market has rebounded sharply and has reached new all time highs multiple times in recent weeks. With the recent momentum and upward price pressure, it appears that US equity markets are currently in an intermediate-term upward trend. The coming weeks should continue to give valuable insight about the near-term direction of the S&P 500, but it seems the sideways/downward pattern experienced since mid-2015 has shifted to a more bullish pattern for now.

screen-shot-2017-01-08-at-9-38-10-pm

US stocks began 2017 on a positive note as the S&P 500 closed at a record high and the Dow Jones Industrial Average came excruciatingly close to the psychological milestone of 20,000.

The Dow came within 0.37 points of hitting 20,000 on Friday, but fell just short as markets refused to continue pushing higher to end the week. Investors will have to wait a little longer to see the Dow reach this milestone, but US stock markets experienced strong gains to kickoff 2017 nonetheless.

Some of the gains can be attributed to the employment report released on Friday, which was largely positive even though the data may have seemed negative on the surface. The report showed the US economy added 156,000 jobs in December. This number was lower than the expected figure of 175,000, but it illustrates the labor market continues to grow at a steady pace during its seventh year of expansion.

The unemployment rate increased from 4.6% to 4.7%, which is generally seen as unfavorable. However, the rise in unemployment was due to an increase in the labor force participation rate, which is a positive sign for the economy. Wage growth was also positive as average hourly earnings increased by 2.9% compared to a year ago – the largest year-over-year increase since 2009.

You have to do a little digging to find the positives in the most recent employment report, but the numbers illustrate job growth remains moderately strong, more Americans are seeking employment, and wages are growing at the fastest pace seen in years. The labor market will need to continue this positive trend if US stocks are going to continue the recent positive trend through 2017.

While market trends and history are useful for study, there’s always more to investing than just the charts and trends.

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

5 Minute Market Update – January 4, 2017

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, investing should be simple, not complicated.

Market Update

Equities: Broad equity markets finished mostly negative in the final week of 2016 with the only gains in international equities. All S&P 500 sectors finished the week negative while defensive sectors generally outperformed cyclical sectors.

Energy, financials, and telecommunications were the strongest performers in 2016 while healthcare was the only sector with negative performance.

Commodities: Commodities were positive for the week as oil prices increased 1.32%. Oil prices ended the year up 45.03% as prices seem to have stabilized from the drops experienced in 2014 & 2015. Gold gained 1.60%, snapping a seven-week losing streak. Gold finished 2016 with an 8.46% gain.

Bonds: The 10-year treasury yield decreased from 2.55% to 2.45%, leading to positive performance in treasury and aggregate bonds. This is only the second week since the election that rates have fallen, though the 10-year treasury yield remains about 30% higher than pre-election levels.

High yield bonds were slightly negative as the losses experienced in riskier assets negated the positive effects of broad interest rate declines.

All indices finished 2016 positive, with small-cap stocks leading the way.

screen-shot-2017-01-03-at-9-02-33-am

Lesson to be learned: Benjamin Graham once said “The individual investor should act consistently as an investor and not as a speculator.” Nobody can predict the future, but it can be difficult to avoid the urge of speculating about “hot” market topics. Markets often act in ways that are unforeseen which is why it is important to maintain a smart and disciplined investment strategy while avoiding knee-jerk reactions based on daily market noise.

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 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) has a current reading of 25.44, forecasting further economic growth and not warning of a recession at this time. The Bull/Bear indicator is currently 100% bullish. This means our models believe there is a slightly higher than average likelihood of stock market increases in the near term (within the next 18 months).

screen-shot-2017-01-03-at-9-02-48-am

Weekly Comments & Charts

The S&P 500 closed negative in the final week of trading for 2016, but remains well above the support level that was set following the breakout in July. Prior to the presidential election, the S&P 500 had closed negative in four of five weeks, but the market has rebounded sharply and has reached new all time highs multiple times in recent weeks. With the recent momentum and upward price pressure, it appears that US equity markets are currently in an intermediate-term upward trend. The coming weeks should continue to give valuable insight about the near-term direction of the S&P 500, but it seems the sideways/downward pattern experienced since mid-2015 has shifted to a more bullish pattern for now.

screen-shot-2017-01-03-at-9-06-30-am

Now that 2016 is in the rear-view mirror, what can we take away from the past year going into 2017?

2016 started with a bang, albeit not a positive one, as the US stock markets were off to the worst start in recorded history. Midway through February the S&P 500 was down over 10%, small-cap stocks were down almost 16%, and oil continued to plunge losing over 29%. Safe-haven asset classes such as gold (+17%) and 10-year treasury bonds (+5.7%) were significantly positive as it appeared the year was pointing towards significant losses for equities, but then the markets started to shift.

Equity markets experienced a strong rebound from mid-February through mid-June as the S&P 500 gained 16% and small-cap stocks gained 23%. Even with this market shift, safe-haven asset classes continued to experience gains (though not at the same pace experienced earlier in the year). It seemed that the markets had settled into a nice trend until June 23, when the UK voted to leave the European Union.

Following the “Brexit” vote, volatility hit the stock markets as US equities fell between 4% – 7% over the next two trading days, only to rebound and recoup the losses two weeks later. Though US stocks rebounded quickly, the added market uncertainty from Brexit helped gold gain over 8% and 10-year treasury bonds gain 3% between June 24 and July 8. Many investors expected a continuation of the recent stock market volatility, but then the markets shifted again.

Between early July and early September, the S&P 500 experienced the narrowest trading range in history, dating back to 1928. During this two-month time period, there was a 59-day streak in which the S&P 500 had no daily moves of 1% or more. Safe-haven assets experienced some slight losses as investors shook-off the Brexit jitters, but remained largely positive for the year. The summer months were mostly uneventful, but then focus turned toward the election.

Stocks, bonds, and gold remained mostly flat in the month’s prior the election, as a majority of investors expected Clinton to win. During election night on November 8, when it became apparent Trump would be the next US President, US stock futures were trading down 5% from the previous close as markets began to panic. Again, it appeared the stock markets were poised for a significant downturn, until the markets experienced a complete shift. US stocks finished the day following the election positive and went on a strong run to end the year. As stocks soared to new all-time highs, interest rates began to rise, causing bonds to experience losses.

All-in-all, US stocks experienced strong returns while bonds trailed well behind by year-end. However, the final numbers do not tell the whole story of what happened to the markets in 2016. There were numerous times when bonds were outperforming and it appeared that stocks were poised for a major correction. The past year showed why it is important to stay focused on long-term investment objectives. 2016 was a perfect example of how unpredictable and unstable markets can be, and how devastating it can be to make knee-jerk decisions based on short-term news and market movements. Had an investor panicked and sold after the stock markets were down sharply in early February or immediately following the Brexit, they would have missed the gains experienced shortly after. Emotions and panic can cause investors to make poor decisions at the most inopportune times, which is why it is imperative to stay committed to a smart investment strategy over the long-run. By maintaining a non-biased, emotion-free, consistent investment philosophy, long-term success is more likely to be achieved regardless of short-term market conditions.

While market trends and history are useful for study, there’s always more to investing than just the charts and trends.

More to come soon.  Stay tuned.

Regards,

Phil Calandra