5 Minute Market Update – Holiday Edition

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 with international 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 materials are the strongest performers while energy and telecommunications are the only sectors with negative performance year-to-date.

Commodities: Commodities snapped a three-week losing streak as oil prices increased 1.94%. Oil prices continued to be supported by an outage of a North Sea pipeline (which is expected to be operational again by early January) and OPEC production cuts. Gold prices rose 1.72% as the dollar remained suppressed (but steady) following the passage of the new tax bill, helping gold to remain modestly positive with an 11.22% gain YTD. A weaker dollar makes dollar-denominated assets, such as gold, less expensive for holders of other currencies, pushing prices higher.

Bonds: The 10-year treasury yield increased from 2.35% to 2.48%, resulting in negative performance for treasury and aggregate bonds. Yields sharply increased early in the week as tax reform was passed by Congress, resulting in expectations the Fed may hike rates faster than originally anticipated amid stronger economic growth, but steadied to end the week as they neared the psychological level of 2.50%.

High-yield bonds were positive as riskier asset classes performed well during the week. 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: “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” – George Soros. The image that most people have of investing is derived from movies and television shows – investors sitting at their computers, buying and selling every day, and hooting and hollering through the entire process. However, smart investing is much different and less exciting than this. While it can be tempting to chase the next hot trend and speculate with all of your savings, it is important to keep a smart and disciplined investment strategy. By maintaining a broadly diversified blend of assets and eliminating emotions from the investment process when making decisions, 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 21.10, 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 fifth consecutive week as the Index remains firmly in the upward trend that began in mid-February 2016. Shorter-term momentum has accelerated in recent weeks as the Index has closed at a new all-time high 62 times in 2017, representing the second highest tally of new highs in history (behind the 77 all-times highs recorded in 1995) and illustrating there may still be further gains ahead. While volatility and downward pressure have 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 378 trading days – the third 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

Broad equity markets were positive for the week as the new US tax bill was signed into law.

President Trump signed the new tax bill into law early Friday morning, marking the largest tax reform experienced in the US in over three decades. While there have been mixed opinions regarding the new tax bill, it is broadly expected to provide a lift to household disposable income and corporate profitability. This is expected to result in stronger US economic growth as corporate earnings should receive a boost from lower tax liabilities. Furthermore, companies may have an incentive to bring cash held overseas back to the US with lower repatriation rates, adding to potential economic growth (companies in the S&P 500 currently hold over $1 trillion in cash overseas).

As investors and companies cheered the news of tax reform, with many companies announcing bonuses and raises for employees as well as committing to increasing company investments, a large amount of economic data was overlooked during the week. Most notably, the final estimate of Q3 2017 GDP showed economic growth of 3.2% on an annualized basis. While this was slightly lower than the 3.3% reported last month, it was still the fastest pace of growth since Q1 2015 and marks the first time since 2014 with two consecutive quarters of 3% or higher GDP growth.

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 – Holiday Edition appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

Milton Library

FormulaFolios Portfolio Recap | December 2017

In this recap, 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.

 

The post FormulaFolios Portfolio Recap | December 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

Stuff A Bus

We were honored to help out with Power 96.1’s annual Stuff-A-Bus!

We broadcasted LIVE from Atlantic Station December 11, 2017, with PK In the Morning, to collect toy donations for local families in need.

This year, we are proud to be partnering with both Children’s Healthcare of Atlanta and Ronald McDonald House Charities Atlanta to provide children in need across our city with a toy this holiday season.

Huge thank you to all of our 2017 sponsors including:
Atlantic Station, West Elm, Medieval Times Dinner & Tournament, Children’s Healthcare of Atlanta, and Ronald McDonald House Charities Atlanta

Children’s Healthcare of Atlanta

Trish went to visit a sick child with the Bert’s Big Adventure Foundation over the weekend at Children’s Healthcare of Atlanta. CHOA’s staff always does such a great job decorating and keeping the kids’ spirits up around the holidays while taking incredible care of all of the kids!

5 Minute Market Update – December 11, 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 large-cap US stocks experienced the largest gains and small-cap US stocks experienced losses. S&P 500 sectors finished the week mixed as cyclical sectors generally outperformed defensive sectors.

So far in 2017 technology, healthcare, and financials 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 1.71%, marking the largest weekly loss since early October. Oil prices have pulled back slightly from the recent two-year highs amid concerns that rising US production might offset the OPEC supply cuts which were extended through 2018. Gold prices fell 2.64% as the dollar firmed, though gold remains modestly positive with an 8.56% gain YTD. A stronger dollar makes dollar-denominated assets, such as gold, more expensive for holders of other currencies, pushing prices lower.

Bonds: The 10-year treasury yield increased slightly from 2.37% to 2.38%, resulting in mostly flat performance for treasury and aggregate bonds. Yields have been trending up since early September, but have subsided since President Trump nominated current Fed Governor Jerome Powell as the next Federal Reserve Chair in early November. While rates have somewhat leveled off in recent weeks, many experts expect a rate hike following the December Fed meeting scheduled for this week.

High-yield bonds were flat as credit spreads were little changed for the week. 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.

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

Lesson to be learned: “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” – George Soros. The image that most people have of investing is derived from movies and television shows – investors sitting at their computers, buying and selling every day, and hooting and hollering through the entire process. However, smart investing is much different and less exciting than this. While it can be tempting to chase the next hot trend and speculate with all of your savings, it is important to keep a smart and disciplined investment strategy. By maintaining a broadly diversified blend of assets and eliminating emotions from the investment process when making decisions, 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 21.10, 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 third consecutive week, following two weeks of small losses, as the Index 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 throughout 2017, illustrating there may still be further gains ahead. While volatility and downward pressure have 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 368 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

Investors cheered another strong jobs report, but await the upcoming Fed meeting and further tax reform news as broad markets finished the week mixed.

November was another strong month for the US labor market as payrolls advanced by 228,000 jobs, beating the expected gain of 199,000. Contributing to the positive news, job gains seems to be broad-based across many major industries and the unemployment rate remained at 4.1%, the lowest level in 17 years. This data, which was released on Friday, helped lift markets as there had been a slight downward trend through the earlier part of the week.

As we close in on the end of the year, investors will be keeping an eye on the Fed as well as the tax reform process. The Federal Reserve Board will conclude its final meeting of 2017 on Wednesday, where the committee is widely expected to raise interest rates for the third time this year. While many experts view a rate hike announcement on December 13 as extremely likely, there is much more uncertainty surrounding the likelihood of tax reform passage before the end of 2017. The Senate and House are now working in a conference committee to nail down the key differences between the separately passed bills, with the hopes of securing an agreement on a final tax proposal before Christmas.

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

Source: Phil Calandara

5 Minute Market Update – December 5, 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 mostly positive as large-cap US stocks experienced the largest gains and international stocks experienced losses. S&P 500 sectors finished the week mostly positive as cyclical sectors generally outperformed defensive sectors.

So far in 2017 technology, healthcare, and consumer discretionary 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 1.00%. Though oil prices pulled back slightly from the recent two-year highs, sentiment remains somewhat positive as OPEC officially extended output cuts through the end of 2018 to further support prices. Gold prices fell 0.74%, though gold remains modestly positive with an 11.50% gain YTD.

Bonds: The 10-year treasury yield increased slightly from 2.34% to 2.37%, resulting in mostly flat 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. While rates have somewhat leveled off in recent weeks, many experts expect a rate hike following the December Fed meeting.

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: “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” – George Soros. The image that most people have of investing is derived from movies and television shows – investors sitting at their computers, buying and selling every day, and hooting and hollering through the entire process. However, smart investing is much different and less exciting than this. While it can be tempting to chase the next hot trend and speculate with all of your savings, it is important to keep a smart and disciplined investment strategy. By maintaining a broadly diversified blend of assets and eliminating emotions from the investment process when making decisions, 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 21.10, 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 second consecutive 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 picked back up in recent weeks 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 have 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 363 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 ended the week higher amid tax reform optimism, despite late-week politically fueled volatility.

In the early hours Saturday morning, the Senate passed its version of a tax reform bill by a 51-49 margin. Though there is still much work to be done as the House of Representatives and Senate must now reconcile their versions of the bill, this was a major hurdle to clear in the tax reform process. The Senate and House will now likely go to a conference committee as lawmakers will aim to craft a joint bill that both chambers can pass. House Majority Leader Kevin McCarthy said the Senate’s passage of the tax bill on schedule proves the overhaul can be done this year.

While markets rallied through most of the week on tax reform optimism, gains were slightly eroded on Friday as it was announced Mike Flynn, President Trump’s former national security advisor, plead guilty to lying to the FBI and may testify regarding interference in the election. At one point during trading on Friday, the S&P 500 was down over 1.5% and small-cap US stocks were down over 3%. However, markets recouped a large portion of the losses and finished the day down only modestly as investors mostly shook off the seemingly bad news.

Investors will be keenly watching how the tax reform process plays-out through the rest of 2017 as it can be a major market mover, both positively and negatively.

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 – December 5, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara