5 Minute Market Update – April 19, 2017

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, investing should be simple, not complicated.

Market Update

Equities: Broad equity markets finished the week negative with small-cap stocks experiencing the largest losses. S&P 500 sectors finished the week mostly negative as defensive sectors generally outperformed cyclical sectors.

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

Commodities: Commodities were positive for the week as oil prices rose 1.80%. Oil prices had experienced some recent downward pressure as investors began to fear the current OPEC production cuts may not be enough to reduce global oversupply, but prices have spiked back up following news of support for a potential OPEC production cut extension. Gold prices rose 2.48% for the week and remains positive for the year as volatility and investor uncertainty have increased in recent weeks.

Bonds: The 10-year treasury yield fell from 2.38% to 2.24%, resulting in gains for treasury and aggregate bonds.

High yield bonds were slightly negative as risky assets faltered and broad interest rates fell during the week.

Indices are mostly positive for 2017, with equity markets leading the way while commodities and bonds lag behind.

Lesson to be learned: Paul Samuelson once said “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” Proper investing requires a large amount of patience, which can be difficult for many investors to maintain at times. However, if you create and stick to a disciplined investment strategy, the gains you see over time will become exciting in the long-term.

FFI Indicators

FormulaFolios has two simple indicators we share that help you see how the economy is doing (we call this the Recession Probability Index, or RPI), as well as if the US Stock Market is strong (bull) or weak (bear).

In 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).

Weekly Comments & Charts

The S&P 500 finished the week negative, but remains well above the support level that was set following the breakout in July last year. Though the index has hit the pause button on the recent rally, short and intermediate-term momentum remains positive as many indices have reached new all time highs multiple times so far this year. 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.

US stocks finished negative for the week as geopolitical risks – such as tensions between the US and countries like Syria and North Korea – have become an increasing concern in recent weeks.

Worry regarding North Korea’s nuclear weapons program increased last week as threatening language and actions from the country has escalated. National security adviser Lt. Gen. H.R. McMaster has stated “this problem is coming to a head. And so it’s time for us to undertake all actions we can, short of a military option, to try to resolve this peacefully.” The US has recently leaned on China to apply pressure to North Korea to reduce its nuclear aspirations by using economic forces, such as reducing imports from the country until it becomes more cooperative.

Adding to the recent bout of geopolitical uncertainty, France will be holding a presidential election next week. This is the second significant election in Europe so far this year (following the Netherlands election in March). Opinion polls suggest Emmanuel Macron and Marine Le Pen remain the frontrunners, but the results are still largely unpredictable as numerous candidates are within striking distance. While Macron is the favorite to win the election, it could create additional political turmoil and uncertainty in Europe if Le Pen is elected. Le Pen is in support of France exiting the European Union, and anti-immigration policies.

It is still unclear if these risks will have a long-term effect on global equity markets, as they appear to be more smoke than fire as of now, but it has increased market volatility and investor uncertainty in the short-term.

Stocks had been performing well since the US presidential election with minimal volatility and virtually no drawdowns, but recent weeks have shown why it is still important to include a broad range of asset classes in your portfolio for more consistent and more stable longer-term results.

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 – April 19, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

Portfolio Recap – April 2017

In this recap, we cover the prior month and YTD performance, touch on the 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

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

Source: Phil Calandara

5 Minute Market Update – April 11, 2017

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, investing should be simple, not complicated.

 Market Update

Equities: Broad equity markets finished the week flat to negative with small-cap stocks experiencing the largest losses. S&P 500 sectors finished the week mixed as defensive sectors generally outperformed cyclical sectors.

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

 Commodities: Commodities were positive for the week as oil prices rose 3.24%. Oil prices had experienced some recent downward pressure as investors began to fear the current OPEC production cuts may not be enough to reduce global oversupply, but prices have spiked back up following news of support for a potential OPEC production cut extension. Gold prices rose 0.49% for the week as gold remains moderately positive for the year.

Bonds: The 10-year treasury yield fell slightly from 2.40% to 2.38%, resulting in small gains for treasury and aggregate bonds.

High yield bonds were flat as risky assets faltered and broad interest rates fell slightly during the week.

Indices are mostly positive for 2017, with equity markets leading the way while commodities and bonds lag behind.

Lesson to be learned: Paul Samuelson once said “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” Proper investing requires a large amount of patience, which can be difficult for many investors to maintain at times. However, if you create and stick to a disciplined investment strategy, the gains you see over time will become exciting in the long-term.

FFI Indicators

FormulaFolios has two simple indicators we share that help you see how the economy is doing (we call this the Recession Probability Index, or RPI), as well as if the US Stock Market is strong (bull) or weak (bear).

In 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).

Weekly Comments & Charts

The S&P 500 finished the week slightly negative, but remains well above the support level that was set following the breakout in July last year. Though the index has hit the pause button on the recent rally, short and intermediate-term momentum remains positive as many indices have reached new all time highs multiple times so far this year. 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.

US stocks finished flat to negative for the week as investors turned focus to job growth.

The employment report released on Friday showed payrolls increasing by only 98,000 in March, well short of the expected of 180,000. This is a notable slowdown from January and February and seems weak on the surface, but the labor markets remain relatively healthy. Payroll gains were strong in previous months in part due to seasonal factors and a mild winter. The additional hiring at the beginning of the year that would have occurred in March was compounded by March’s unusually harsh weather, which further depressed job growth for the month.

While job growth fell flat, the unemployment rate declined to 4.5%, marking the lowest level since the financial crisis. This was positive news as the participation rate remained steady at 63%.

With the most recent employment report past and the next Fed meeting not until early May, investors will now turn attention toward earnings. For Q1 2017, the estimated earnings growth rate for the S&P 500 is 8.9%. If the index meets this growth rate for the quarter, it will mark the highest year-over-year earnings growth rate for the index since Q4 2013.

Stocks have been performing well for the past five months with minimal volatility and virtually no drawdowns, but it is still important to include a broad range of asset classes in your portfolio for more consistent and more stable longer-term results.

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 – April 11, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – April 4, 2017

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, investing should be simple, not complicated.

Market Update

 Equities: Broad equity markets finished the week positive with small-cap stocks 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 energy and telecommunications are the only sectors with negative performance year-to-date.

 Commodities: Commodities were positive for the week as oil prices rose 5.48%. Oil prices had experienced some recent downward pressure as investors began to fear the current OPEC production cuts may not be enough to reduce global oversupply, but prices spiked following news of support for a potential OPEC production cut extension. Gold prices fell 0.07% for the week, though gold remains moderately positive for the year.

Bonds: The 10-year treasury yield remained at 2.40% with minimal fluctuations throughout the week, resulting in mostly flat performance for treasury and aggregate bonds.

High yield bonds were positive as credit spreads fell and risky assets performed well during the week.

Indices are mostly positive for 2017, with equity markets leading the way while commodities and bonds lag behind.

Lesson to be learned: Paul Samuelson once said “Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” Proper investing requires a large amount of patience, which can be difficult for many investors to maintain at times. However, if you create and stick to a disciplined investment strategy, the gains you see over time will become exciting in the long-term.

FFI Indicators

FormulaFolios has two simple indicators we share that help you see how the economy is doing (we call this the Recession Probability Index, or RPI), as well as if the US Stock Market is strong (bull) or weak (bear).

In 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).

Weekly Comments & Charts

The S&P 500 finished the week slightly positive and remains well above the support level that was set following the breakout in July last year. Though the index has hit the pause button on the recent rally, short and intermediate-term momentum remains positive 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.

The week of March 20 marked the largest weekly decline in broad US equities since the election, but markets recovered some of these losses during the past week of trading.

As the first quarter came to a close on Friday, it was evident the recent trends experienced since the election remain in place for the time-being. Stocks continued to outperform bonds throughout the quarter, though the gap has closed slightly in recent weeks. In addition, cyclical market sectors continued to generally outperform defensive sectors during the quarter.

While US equity markets remain in a strong up-trend, recent weeks have illustrated a more “normalized” investment environment. Stock markets have experienced a historically low level of volatility since the election, but markets have seen higher levels of fluctuation since mid-March. There is still a large amount of optimism surrounding the outlook for further US economic growth, resulting in further potential gains for stocks, but investors should expect more volatility than what has been experienced since November.

Stocks have been performing extremely well for the past five months with minimal volatility and virtually no drawdowns, but it is still important to include a broad range of asset classes in your portfolio for more consistent and more stable longer-term results.

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 – April 4, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara