5 Minute Market Update – November 28, 2017

I am happy to present this week’s market commentary written by 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 as international stocks experienced the largest gains. S&P 500 sectors finished the week positive as cyclical generally outperformed defensive sectors.

So far in 2017 technology, healthcare, and materials 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 4.24%. Oil prices hit fresh two-year high levels on Friday as markets tightened due to a partial closure of the Keystone pipeline connecting Canadian oilfields with the United States following a spill. Gold prices fell 0.71%, though gold remains modestly positive with a 11.94% gain YTD.

Bonds: The 10-year treasury yield fell slightly from 2.35% to 2.34%, resulting in marginally positive performance for treasury and aggregate bonds. Yields have been trending up since early September, but have subsided since President Trump nominated current Fed Governor Jermoe Powell as the next Federal Reserve Chair in early November. Powell’s views on raising interest rates are similar to current Fed Chair Janet Yellen – investors expect a slow-and-steady path of rate increases over the coming year with the nomination.

High-yield bonds were positive as credit spreads continued to level-off following the spike higher in recent weeks. If the economy remains strong and healthy, higher-yielding bonds are expected to continue outperforming aggregate bonds as they offer higher interest payments and the risk of default is moderately low.

All indices are currently positive in 2017, with equity markets leading the way while commodities and bonds lag behind.

Lesson to be learned: “It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” – Warren Buffett. Sadly, the same can be said about your portfolio (see global stock markets in 2008). However, by keeping a smart and disciplined investment strategy and maintaining a broadly diversified blend of assets, you can improve your probability of long-term success and minimize the negative impacts that extreme bear markets can have on your financial well-being.

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 19.40, 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 positive for the week, following two consecutive weeks of small losses, as the Index remains firmly in the upward trend that began in mid-February 2016. Shorter-term momentum has continued in recent months as the Index has continued to reach new all-time highs throughout 2017, illustrating there may still be further gains ahead. While volatility and downward pressure had slightly increased, stock markets are still in a historically low risk and volatility environment as there has not been a 5%+ correction for the S&P 500 in 358 trading days – the fourth longest streak in the history of the Index. The coming weeks should continue to provide valuable insight about the near-term direction of the S&P 500, but it seems to remain in a bullish pattern for now.

*Chart created at StockCharts.com

US stocks were higher during the holiday-shortened week as earnings season wraps up.

Broad US markets traded on lighter volume than normal as markets were closed on Thursday and only open for a partial day on Friday. However, that did not stop stocks from experiencing modest gains as investor confidence remains high and economic data remains mostly positive.

With markets continuing to trend higher, Q3 2017 earnings season is wrapping up as 98% of companies in the S&P 500 have already reported results. Of the companies that have already reported, 74% have beat the average earnings estimate and 66% have beat the average sales estimate. The blended S&P 500 earnings growth rate is now at 6.3% year-over-year, higher than the initial 3.1% estimate in September when earnings season began.

Though markets remain strong, it is important to remember the future is largely independent of the past. Broad US stocks have been experiencing strong gains with minimal volatility and virtually no drawdowns so far in 2017. In this environment, it can be easy to forget there are risks to investing. However, it was still less than two years ago (at the beginning of 2016) when the US stock market experienced the worst start to a year in recorded history. This is 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, rather than chasing “hot” short-term returns.

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 – November 28, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – November 21, 2017

I am happy to present this week’s market commentary written by 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 mixed as small-cap US stocks experienced the largest gains and international stocks experienced the largest losses. S&P 500 sectors finished the week mixed with no discernable difference between cyclical and defensive sectors.

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

Commodities: Commodities were negative for the week as oil prices fell 0.33%, marking the first decline in six weeks. While oil prices remain near the recent two-year high levels, concerns have been growing over Russia’s support for extending production cuts. Gold prices increased 1.75% as the US dollar weakened for the second consecutive week, helping gold to remain modestly positive with a 12.74% gain YTD.

Bonds: The 10-year treasury yield fell from 2.40% to 2.35%, resulting in positive performance for treasury and aggregate bonds. Yields have been trending up since early September, but have subsided since President Trump nominated current Fed Governor Jermoe Powell as the next Federal Reserve Chair in early November. Powell’s views on raising interest rates are similar to current Fed Chair Janet Yellen – investors expect a slow-and-steady path of rate increases over the coming year with the nomination.

High-yield bonds were positive as credit spreads leveled-off following the spike higher in recent weeks. If the economy remains strong and healthy, higher-yielding bonds are expected to continue outperforming aggregate bonds as they offer higher interest payments and the risk of default is moderately low.

All indices are currently positive in 2017, with equity markets leading the way while commodities and bonds lag behind.

 

Lesson to be learned: “It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” – Warren Buffett. Sadly, the same can be said about your portfolio (see global stock markets in 2008). However, by keeping a smart and disciplined investment strategy and maintaining a broadly diversified blend of assets, you can improve your probability of long-term success and minimize the negative impacts that extreme bear markets can have on your financial well-being.

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 19.40, 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 slightly negative for the second consecutive week, following a streak of eight consecutive weeks of gains (the longest weekly winning streak since 2006). However, the Index remains firmly in the upward trend that began in mid-February 2016. Shorter-term momentum has continued in recent months as the Index has continued to reach new all-time highs, illustrating there may still be further gains ahead. While volatility and downward pressure had slightly increased, stock markets are still in a historically low risk and volatility environment as there has not been a 5%+ correction for the S&P 500 in 353 trading days – the fourth longest streak in the history of the Index. The coming weeks should continue to provide valuable insight about the near-term direction of the S&P 500, but it seems to remain in a bullish pattern for now.

*Chart created at StockCharts.com

US stocks finished the week mixed as investors look forward to the holiday season.

Large-cap US stock indices were slightly negative for the week while smaller-cap US stock indices experienced modest gains. While there were no major movements throughout the week, the S&P 500 broke a 50-day streak of avoiding a daily decline of greater than 0.50% (the Index fell just 0.55% on Wednesday). This was the longest stretch without a 0.50% daily loss since 1965, reaffirming the trend of extremely low volatility in the US stock markets so far in 2017.

As broad markets were somewhat mixed, US retail sales data was stronger than expected for October and revised upward for September. Though the 0.2% growth rate experienced was not much higher than the 0.1% expectation, the recent string of positive sales data could bode well for retailers heading into the holiday shopping season. With the labor market remaining healthy and consumer sentiment strong, sales could increase through the end of the year as shoppers feel comfortable and confident about spending their money. All things equal, higher sales and consumer spending would help boost broad US economic growth.

Though markets remain in an upward trend, it is important to remember the future is largely independent of the past. Broad US stocks have been experiencing strong gains with minimal volatility and virtually no drawdowns so far in 2017. In this environment, it can be easy to forget there are risks to investing. However, it was less than two years ago (at the beginning of 2016) when the US stock market experienced the worst start to a year in recorded history. This is 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, rather than chasing “hot” short-term returns.

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 – November 21, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – November 13, 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 US 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, healthcare, and materials 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 increased 1.98%. Oil prices remained at the highest levels in over two years, largely supported by continuing expectations that OPEC and other producing countries will extend a deal to cut output. Gold prices increased 0.39%, snapping a three week losing streak and helping gold to remain modestly positive with a 10.80% gain YTD.

Bonds: The 10-year treasury yield rose from 2.34% to 2.40%, resulting in negative performance for treasury and aggregate bonds. Yields have been trending up since early September, but have subsided since President Trump nominated current Fed Governor Jermoe Powell as the next Federal Reserve Chair. Powell’s views on raising interest rates are similar to current Fed Chair Janet Yellen – investors expect a slow-and-steady path of rate increases over the coming year with the nomination.

High-yield bonds were negative as the renewed uncertainty surrounding tax reform caused riskier asset classes to falter and credit spreads to increase. However, if the economy remains strong and healthy, higher-yielding bonds are expected to continue outperforming aggregate bonds as they offer higher interest payments and the risk of default is moderately low.

All indices are currently positive in 2017, with equity markets leading the way while commodities and bonds lag behind.

Lesson to be learned: “It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” – Warren Buffett. Sadly, the same can be said about your portfolio (see global stock markets in 2008). However, by keeping a smart and disciplined investment strategy and maintaining a broadly diversified blend of assets, you can improve your probability of long-term success and minimize the negative impacts that extreme bear markets can have on your financial well-being.

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 19.40, 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, snapping a streak of eight consecutive weeks of gains (the longest weekly winning streak since 2006). However, the Index remains firmly in the upward trend that began in mid-February 2016. Shorter-term momentum has continued in recent weeks as the Index has continued to reach new all-time highs, illustrating there may still be further gains ahead. While volatility and downward pressure had slightly increased in recent months, stock markets are still in a historically low risk and volatility environment as there has not been a 5%+ correction for the S&P 500 in 348 trading days – the fourth longest streak in the history of the Index. The coming weeks should continue to provide valuable insight about the near-term direction of the S&P 500, but it seems to remain in a bullish pattern for now.

*Chart created at StockCharts.com

US stock and bond markets ended the week negative on tax reform uncertainties as investors reflect on the one-year anniversary of the US presidential election.

Last week marked the one-year anniversary of the US presidential election. While there was a large amount of uncertainty leading up to (and immediately following) the election, the US stock market has experienced a steady rally since early November 2016. The S&P 500 has returned over 23% since the election and is in the midst of the fourth longest streak without a 5% correction in history. During this run, the Index has recorded 59 new record highs so far in 2017, as investor confidence has been on the rise and earnings growth has been modestly strong. Sector performance has also reflected this trend as cyclical sectors have been outperforming defensive sectors significantly over the past year.

Broad economic growth has also gained some traction as GDP has averaged 2.4% in the first three quarters of 2017, including two consecutive quarters of 3% or higher growth for the first time since 2014. The labor market has continued to strengthen as the unemployment rate has fallen to a 17-year low of 4.1%. As the economy has remained healthy, the Federal Reserve has raised rates three times in the past year – the most rate hikes in a 12-month period since 2004 – 2005.

While this positive market performance cannot singularly be credited to the outcome of the election, there are some underlying political reasons behind the past 1-year market trends. Generally speaking, consumer confidence has been rising on the prospects of deregulation and tax reform, helping boost the prospects of continued economic expansion and leading to higher household spending (the largest contributor to GDP growth). As the past week illustrated there is still much uncertainty surrounding tax reform, but the coming weeks should provide more clarity about this major topic.

Though markets remain in an upward trend, it is important to remember the future is largely independent of the past. Broad US stocks have been experiencing strong gains with minimal volatility and virtually no drawdowns so far in 2017. In this environment, it can be easy to forget there are risks to investing. However, it was less than two years ago (at the beginning of 2016) when the US stock market experienced the worst start to a year in recorded history. This is 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, rather than chasing “hot” short-term returns.

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 – November 13, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

Holiday Wine Tasting

Women, Wealth, and Wine

5 Minute Market Update – November 7, 2017

I am happy to present this week’s market commentary written by 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 mixed with international stocks experiencing the largest gains and small-cap US stocks experiencing the largest losses. S&P 500 sectors finished the week mixed though there was no discernable difference in the performance of cyclical sectors and defensive sectors.

So far in 2017 technology, healthcare, and materials 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 increased 3.23%. Oil prices have reached their highest levels in nearly two years, supported by rising global demand and continuing expectations that OPEC and other producing countries will extend a deal to cut output. Gold prices fell 0.20%, marking the seventh week of losses in the last eight weeks, though gold remains positive with a 10.37% gain YTD.

Bonds: The 10-year treasury yield fell from 2.42% to 2.34%, resulting in positive performance for treasury and aggregate bonds. Yields had been trending up since early September, but subsided through the week as President Trump nominated current Fed Governor Jermoe Powell as the next Federal Reserve Chair. Powell’s views on raising interest rates are similar to current Fed Chair Janet Yellen – investors expect a slow-and-steady path of rate increases over the coming year with the nomination.

High-yield bonds were slightly negative as an increase in credit spreads offset lower broad interest rates. However, if the economy remains strong and healthy, higher-yielding bonds are expected to continue outperforming aggregate bonds as they offer higher interest payments and the risk of default is moderately low.

All indices are currently positive in 2017, with equity markets leading the way while commodities and bonds lag behind.

Lesson to be learned: “It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” – Warren Buffett. Sadly, the same can be said about your portfolio (see global stock markets in 2008). However, by keeping a smart and disciplined investment strategy and maintaining a broadly diversified blend of assets, you can improve your probability of long-term success and minimize the negative impacts that extreme bear markets can have on your financial well-being.

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 19.40, 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 positive for the eighth consecutive week (its longest weekly winning streak since 2006) and remains firmly in the upward trend that began in mid-February 2016. Shorter-term momentum has picked back up in recent weeks as the Index has continued to reach new all-time highs, illustrating there may still be further gains ahead. While volatility and downward pressure had slightly increased in recent months, stock markets are still in a historically low risk and volatility environment as there has not been a 5%+ correction for the S&P 500 in 343 trading days – the fourth longest streak in the history of the Index. The coming weeks should continue to provide valuable insight about the near-term direction of the S&P 500, but it seems to remain in a bullish pattern for now.

*Chart created at StockCharts.com

US markets finished mixed for the second consecutive week as President Trump nominated a new Federal Reserve Chair and the House of Representatives released details on tax reform.

On Thursday, President Trump nominated current Fed Governor Jermoe Powell as the next Federal Reserve Chair. Powell has served on the Fed’s board of governors since 2012 and will replace Janet Yellen, pending approval from the US Senate, in February 2018. While other candidates were in contention for the position, Powell became the favorite in recent weeks and was expected to receive the nomination. Historically, Powell has voted in the majority (lead by Janet Yellen) regarding interest rates, so the change in leadership should not have a significant on the macroeconomic environment as Powell is expected to maintain a consistent approach to monetary policy.

House of Representatives Republicans also unveiled a tax reform bill on Thursday, titled the Tax Cuts and Jobs Act. The bill looks to simplify the tax code by cutting down the number of income tax brackets and slashing itemized deductions, while raising standard deductions for individuals. For businesses, the major modification would be to reduce the maximum federal corporate tax rate to 20% from its current level of 35%. House Speaker Paul Ryan has stated the goal is to have a final bill passed and signed by the end of the year, though there are still many steps to take and there may still be further adjustments to the bill before it is considered final.

Though markets remain in an upward trend, it is important to remember every day is independent of the day before. Broad US stocks have been experiencing strong gains with minimal volatility and virtually no drawdowns so far in 2017. In this environment, it can be easy to forget there are risks to investing. However, it was less than two years ago (at the beginning of 2016) when the US stock market experienced the worst start to a year in recorded history. This is 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, rather than chasing “hot” short-term returns.

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 – November 7, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

Portfolio Recap – November 2017

In this recap from Formula Folio Investments, we 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

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

Source: Phil Calandara