5 Minute Market Update – January 29, 2018

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 as large-cap US stocks experienced the largest gains. All S&P 500 sectors finished the week positive as cyclical sectors slightly outperformed defensive sectors.

So far in 2018 healthcare, consumer discretionary, and technology are the strongest performers while utilities and real estate are the only sectors with negative performance year-to-date.

Commodities: Commodities were positive as oil prices increased 4.37%. US crude oil prices reached $65 a barrel for the first time since December 2014, setting a new 3-year high following the 10th consecutive weekly drop in US inventories.

Gold prices rose 1.43% as the dollar continued to slide. 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 rose slightly from 2.64% to 2.66%, resulting in mostly flat performance for treasury and aggregate bonds. Yields have continued to trend higher recently on expectations that the Fed may hike rates faster than originally anticipated amid stronger economic growth and fiscal stimulus in 2018.

High-yield bonds were positive as riskier asset classes performed well and credit spreads fell 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 riskier asset class indices are currently positive in 2018, but treasury and US aggregate bonds are currently negative.

Lesson to be learned: “The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” – Seth Klarman. Markets tend to move in broad cycles. However, when crisis seems to strike (or even when things appear too good to be true), a herd mentality can form as investors copy the behavior of others because they are influenced to act and think in a certain way. By maintaining a broadly diversified blend of asset classes and eliminating emotions from the investment process when making decisions, you can look to take advantage of the major trends caused from the herd mentality, improving your probability of long-term success.

FFI Indicators

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

In 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 19.28, 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 ninth time in ten weeks as the Index has started 2018 on a strong note and remains firmly in the upward trend that began in mid-February 2016. Since February 12, 2016, the S&P 500 is up 57.07%. Shorter-term momentum has continued as the Index recorded fresh all-time highs and remained above the upper trading range that has been in place over the past two years, illustrating there may still be further gains ahead. 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 399 trading days – the 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

Stocks continued to soar, and the S&P 500 is trading in a way it hasn’t seen in decades.

Through the end of last week, the S&P 500 has closed at a record-high 14 times since the beginning of the new year, marking the most records in any month since June 1955. Furthermore, the 7.45% gain so far in January has put the S&P 500 on track for its strongest first month since 1989. There have been 13 years where the S&P 500 has risen by more than 5% in January – in those years, the Index has averaged an additional 11% gain for remainder of the year and has never finished the year negative (though this does not guarantee gains through the remainder of 2018).

While some economists may attribute this recent performance to the “January effect”, which is the hypothesis that stock prices increase more in January than any other individual month, the strong start to 2018 seems to have supportive data behind it. January’s gains reflect recent positive economic conditions and encouraging corporate earnings announcements, which are in part benefiting from the optimism around tax reform. With strong employment, the prospects of rising wages, high consumer confidence, a healthy housing market, and strong corporate earnings, the broad economy looks healthy. However, it would not be unreasonable to expect higher volatility and downside risk than what has been experienced in the past couple years.

Though the prospects of 2018 remain positive as we start the year, economic data and market sentiment can change quickly. 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 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 – January 29, 2018 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – January 23, 2018

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 large-cap US stocks experienced the largest gains. S&P 500 sectors finished the week mixed as there was no discernable difference in the performance between cyclical sectors and defensive sectors.

So far in 2018 consumer discretionary, healthcare, and technology are the strongest performers while utilities, real estate, and telecommunications are the only sectors with negative performance year-to-date.

Commodities: Commodities were negative for the first time in five weeks as oil prices fell 1.45%. While the OPEC-led output cuts have been supporting oil in recent weeks, the International Energy Agency warned rapidly increasing production in the United States could threaten market balancing, pushing prices slightly lower.

Gold prices fell 0.13%, snapping a streak of five consecutive weeks of gains for the metal.

Bonds: The 10-year treasury yield rose from 2.55% to 2.64%, resulting in negative performance for treasury and aggregate bonds. Yields have continued to trend higher recently on expectations that the Fed may hike rates faster than originally anticipated amid stronger economic growth and fiscal stimulus in 2018.

High-yield bonds were mostly flat as the negative impact of higher interest rates was largely offset by the positive performance in riskier asset classes. 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 riskier asset class indices are currently positive in 2018, but treasury and US aggregate bonds are currently negative.

Lesson to be learned: “The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” – Seth Klarman. Markets tend to move in broad cycles. However, when crisis seems to strike (or even when things appear too good to be true), a herd mentality can form as investors copy the behavior of others because they are influenced to act and think in a certain way. By maintaining a broadly diversified blend of asset classes and eliminating emotions from the investment process when making decisions, you can look to take advantage of the major trends caused from the herd mentality, improving your probability of long-term success.

FFI Indicators

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

In 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 19.28, 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 time in nine weeks as the Index has started 2018 on a strong note and remains firmly in the upward trend that began in mid-February 2016. Since February 12, 2016, the S&P 500 is up 53.65%. Shorter-term momentum has continued as the Index recorded fresh all-time highs and remained above the upper trading range that has been in place over the past two years, illustrating there may still be further gains ahead. 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 394 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

US stocks logged another positive week in spite of rising concerns surrounding a government shutdown.

As of Friday afternoon, the Senate had failed to pass a new budget deal. Without a deal in place the government shuts down and many federal employees stop receiving their paychecks until a new funding deal is reached. The last time this happened was in 2013, where approximately 800,000 federal employees were furloughed between October 1 – October 17. Though the true impact of a government shutdown depends on the unique scenario in which it happens, historically, for each week a deal is not reached it reduces GDP by 0.20% for the quarter in which the shutdown occurred.

However, once the government re-opens, federal workers receive back pay for the time they missed—meaning that GDP growth typically rebounds in the following quarter. Due to this typical rebound, financial markets tend to shrug off the anxieties of a shutdown, treating the news as normal market noise and not something that will shift the fundamentals of the underlying economy in the long-term. This mindset, coupled with another strong week of earnings reports helped push equity markets higher, even in the face of the growing negative press at the end of the week.

*As of Monday evening president Trump signed a bill to fund the government through February 8.

Though the prospects of 2018 appear positive as we start the year, economic data and market sentiment can change quickly. 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 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 – January 23, 2018 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

FormulaFolios Portfolio Recap | January 2018

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.

 

Warmest Regards,

Phil Calandra

The post FormulaFolios Portfolio Recap | January 2018 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

State of the Markets

5 Minute Market Update – January 16, 2018

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 small-cap US stocks experienced the largest gains. S&P 500 sectors finished the week mixed as cyclical sectors generally outperformed defensive sectors.

So far in 2018 energy, consumer discretionary, and industrials are the strongest performers while utilities, real estate, consumer staples, and telecommunications are the only sectors with negative performance year-to-date.

Commodities: Commodities were positive for the fourth consecutive week as oil prices increased 4.65%. Comments from Russia’s oil minister stating global supplies are not yet balanced helped alleviate concerns about a wind-down of the OPEC-led output cuts, further supporting the recent streak of gains in oil.

Gold prices rose 0.95% as the dollar continued to declined, marking the fifth straight week of gains for the metal. 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 rose from 2.47% to 2.55%, resulting in negative performance for treasury and aggregate bonds. Yields have continued to trend higher recently on expectations that the Fed may hike rates faster than originally anticipated amid stronger economic growth and fiscal stimulus in 2018.

High-yield bonds were negative as credit spreads slightly increased during the week. 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 riskier asset class indices are currently positive in 2018, but treasury and US aggregate bonds are currently negative.

Lesson to be learned: “The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” – Seth Klarman. Markets tend to move in broad cycles. However, when crisis seems to strike (or even when things appear too good to be true), a herd mentality can form as investors copy the behavior of others because they are influenced to act and think in a certain way. By maintaining a broadly diversified blend of asset classes and eliminating emotions from the investment process when making decisions, you can look to take advantage of the major trends caused from the herd mentality, improving your probability of long-term success.

FFI Indicators

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

In 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 19.28, 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 seventh time in eight weeks as the Index has started 2018 on a strong note and remains firmly in the upward trend that began in mid-February 2016. Since February 12, 2016, the S&P 500 is up 52.33%. Shorter-term momentum has increased as the Index recorded fresh all-time highs and broke through the upper trading range that has been in place over the past two years, illustrating there may still be further gains ahead. 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 390 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

The S&P 500 just experienced its best start to a year since 1987 as investors remained optimistic about equity markets heading into earnings season.

With Q4 earnings season kicking off, broad stock markets remained strong as many investors expect positive news from corporations. The expected blended earnings growth rate for the S&P 500 is 10.2%, and all sectors are expected to report positive earnings growth for the quarter. While it will be important to track current earnings reports, experts are looking for guidance through 2018 as many companies have made positive comments about the potential benefits of tax reform since its passage in late December.

Contributing to the positive market movement for the week, there was more strong economic data released as retail sales rose a solid 0.4% in December, which was particularly positive following the 0.9% gain in November. Core CPI also continued to firm as there was a 0.3% increase in December, illustrating there may be some positive inflationary pressure after being mostly lackluster since the 2008 financial crisis.

Though the prospects of 2018 appear positive as we start the year, economic data and market sentiment can change quickly. 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 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 – January 16, 2018 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – January 9, 2018

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 mixed as cyclical sectors generally outperformed defensive sectors.

So far in 2018 technology, materials, and energy are the strongest performers while utilities, real estate, and telecommunications are the only sectors with negative performance year-to-date.

Commodities: Commodities were positive for the third consecutive week as oil prices increased 1.69%. Oil prices are near three-year highs as a decline in the number of US rigs drilling for new production and sustained OPEC output cuts have recently supported prices.

Gold prices rose 0.99% as the dollar declined, marking the fourth straight week of gains for the metal. 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 rose from 2.40% to 2.47%, resulting in negative performance for treasury and aggregate bonds. Yields have continued to trend higher recently on expectations that the Fed may hike rates faster than originally anticipated amid stronger economic growth and fiscal stimulus in 2018.

High-yield bonds were positive as credit spreads decreased 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 riskier asset class indices are currently positive in 2018, but treasury and US aggregate bonds are currently negative.

Lesson to be learned: “The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” – Seth Klarman. Markets tend to move in broad cycles. However, when crisis seems to strike (or even when things appear too good to be true), a herd mentality can form as investors copy the behavior of others because they are influenced to act and think in a certain way. By maintaining a broadly diversified blend of asset classes and eliminating emotions from the investment process when making decisions, you can look to take advantage of the major trends caused from the herd mentality, improving your probability of long-term success.

FFI Indicators

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

In 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 19.28, 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 sixth time in seven weeks as the Index started 2018 on a strong note and remains firmly in the upward trend that began in mid-February 2016. Since February 12, 2016, the S&P 500 is up 49.97%. Shorter-term momentum has increased as the Index recorded fresh all-time highs and experienced its strongest week of gains in over a year, illustrating there may still be further gains ahead. 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 385 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

While the past week started a new year, it appeared to be a continuation of 2017 as major US indices recorded new all-time highs and volatility reached new all-time lows.

US markets started the year strong as the Dow Jones Industrial Average reached 25,000 for the first time and the S&P 500 recorded its best weekly performance in over a year. As stocks continued to push higher, the CBOE Volatility Index (VIX) reached a new record low during the week, falling to 9.01.

Many economic data points – including US manufacturing, construction spending, and auto sales – surprised on the upside. However, the heavily watched jobs report on Friday was somewhat disappointing as payroll employment increased by only 148,000 compared to the expected 188,000 increase. Though this was lower than expected, the trailing three-month average remained above 200,000 and the unemployment rate remained unchanged at 4.1%, indicating the overall labor market remains healthy.

The mostly positive economic data, as well two consecutive quarters of GDP growth above 3%, has provided a strong foundation to support the markets in 2018.

Though the prospects of 2018 appear positive as we start the year, economic data and market sentiment can change quickly. 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 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 – January 9, 2018 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – January 2, 2018

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 international stocks experienced the largest gains and small-cap US stocks experienced the largest losses. S&P 500 sectors finished the week mixed as defensive sectors generally outperformed cyclical sectors.

Technology, consumer discretionary, and materials were the strongest performers in 2017 while energy and telecommunications were the only sectors with negative performance for the year.

Commodities: Commodities were positive for the second consecutive week as oil prices increased 3.34%. US crude oil rose above $60 a barrel for the first time since June 2015 on the finial trading day of the year as an unexpected fall in American output pushed prices higher. Oil prices have closed the year with strong gains as there are signs the global supply glut that started in 2014 is finally shrinking.

Gold prices rose 2.39% as the dollar declined, helping push gold to a 13.85% gain for the year (its strongest annual gain since 2010). 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 fell from 2.48% to 2.40%, resulting in positive performance for treasury and aggregate bonds. Yields have retreated from the highs experienced immediately following the passage of tax reform, but expectations that the Fed may hike rates faster than originally anticipated amid stronger economic growth remain.

High-yield bonds were positive credit spreads remained steady 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 finished 2017 positive, with equity markets leading the way while commodities and bonds lag behind.

Lesson to be learned: “The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” – Seth Klarman. Markets tend to move in broad cycles. However, when crisis seems to strike (or even when things appear too good to be true), a herd mentality can form as investors copy the behavior of others because they are influenced to act and think in a certain way. By maintaining a broadly diversified blend of asset classes and eliminating emotions from the investment process when making decisions, you can look to take advantage of the major trends caused from the herd mentality, improving your probability of long-term success.

FFI Indicators

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

In 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 slightly negative for the week, snapping a streak of five consecutive weeks of gains. However, the Index experienced strong gains in 2017 and remains firmly in the upward trend that began in mid-February 2016. Shorter-term momentum has slowed in recent weeks, but the Index 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 381 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

With 2017 in the books, what can we expect going into the new year?

2017 started on a positive note for broad equity markets and never looked back. US stocks experienced their strongest year since 2013 while international stocks saw their strongest gains since 2009. As equity markets soared, volatility and downside risk were all but non-existent for most of the year as any “pullback” seemed to offer further buying opportunities for investors. Even geopolitical fears such as tensions between the US and North Korea and tax reform uncertainty did not derail stocks. In fact, the largest drawdown for the S&P 500 based on daily closing values was only 2.86% in mid-April, marking the least severe drawdown in a calendar year ever (the previous record was a 3.3% peak-to-trough drawdown in 1995).

As stock markets moved higher with little resistance, other asset classes experienced more headwinds. Commodities were sharply negative at the midway point of 2017 before rebounding sharply to finish the year positive overall. Bonds also experienced some resistance as the expectations of higher interest rates persisted through the year, though broad bonds experienced modest gains.

Moving into 2018, many experts expect a similar story to 2017, though maybe to a lesser extent than the past year. With improving economic growth and rising corporate earnings, along with a potential boost from tax reform, stocks seem to still have room to run higher. However, investors should prepare for higher volatility at some point as it is unrealistic we will see the same low levels volatility and essentially no drawdowns through the upcoming year.

If economic growth continues to improve, interest rates may continue to rise at a gradual pace as the Fed currently has plans for three rate hikes in 2018. With potentially higher interest rates, bonds may experience another year of steady, but suppressed gains as bond prices move inversely to interest rates.

Though the prospects of 2018 appear positive as we start the year, economic data and market sentiment can change quickly. 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 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 – January 2, 2018 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara