5 Minute Market Update – August 15, 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 mostly negative as defensive sectors generally outperformed cyclical 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 1.53%. Oil prices have been volatile so far in 2017 as the positive effects of strengthening demand have been conflicting with the negative effects of high global supply. The most recent large move was to the positive side three weeks ago as reports showed US oil and gasoline inventories fell more than expected and Saudi Arabia announced it would further reduce output. Gold prices rose 2.32% amid increasing tensions between the US and North Korea. Gold has been supported by doubts about further near-term rate hikes, a weak dollar, and recent geopolitical uncertainty, leading to a 12.52% gain YTD.

Bonds: The 10-year treasury yield fell from 2.27% to 2.19%, resulting in positive performance for treasury and aggregate bonds.

High-yield bonds were negative as riskier asset classes experienced moderate downward pressure for the week.

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

Lesson to be learned: “Remember that the stock market is a manic depressive.” –  Warren Buffett. Sometimes the market is sensible and prices are based on economic and business developments. However, at other times the market can be emotionally unstable, swinging from euphoria to pessimism in an instant. By sticking to a disciplined investment strategy you can minimize the effect that emotions can have on your portfolio, improving your chances for long-term portfolio 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 24.69, 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 negative for the week but remains firmly in the upward trend that began in mid-February 2016. Though the current rally has slowed slightly in recent months, short and intermediate-term momentum remains positive as many indices have reached new all time highs multiple times this year, illustrating there may still be further gains ahead. 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 experienced its second-worst week of the year as tensions between the US and North Korea heightened.

Prior to the past week, US stocks had been experiencing an extremely smooth ride this year. The Dow Jones Industrial Average just recently achieved 10 consecutive days of gains (the second time this has happened in 2017) and the S&P 500 Volatility Index had been near historical low levels (recently reaching the lowest levels since 1993). However, broad equity markets traded down on Thursday and volatility spiked as tensions between the US and North Korea escalated.

Throughout the week North Korea threatened to launch missiles near Guam while President Trump stated there would be “fire and fury” if there are any more threats to the United States. These statements sent a sense of restlessness through the markets as investors feared the US and North Korea may be near war, but security officials say the chance of an actual attack on Guam is still very low.

While it may seem stock markets were sharply negative following the increasing political uncertainty, the pullback was not extraordinarily large. Even after a bad week in the markets, the S&P 500 has not experienced a 5% decline from a prior high-water mark since June 27, 2016 (284 trading days). This is the fourth longest streak in history without a 5% correction for the Index.

Broad US stocks were slightly positive on Friday, illustrating markets may already be ready to shrug-off the recent geopolitical risks as long as things do not escalate any further. Generally, as long as there are not further clear reasons for a sell-off (such as an economic slowdown or an actual war ensuing), political tensions are short-lived and end up just becoming a bump in the road. With earnings and job growth remaining strong, the economy seems to remain on solid footing for now.

The recent spike in volatility reminds us why it is important to include a broad range of asset classes in your portfolio for more consistent and more stable longer-term results. Individual stocks, sectors, and indices can go from periods of over-performance to under-performance without a moments notice.

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 – August 15, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – August 8, 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 mixed with large-cap US stocks experiencing the largest gains and small-cap US stocks experiencing losses. S&P 500 sectors finished the week mixed 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 week as oil prices fell 0.26%. Oil prices have been volatile so far in 2017 as the positive effects of strengthening demand has been conflicting with the negative effects of high global supply. The most recent large move was to the positive side two weeks ago as reports showed US oil and gasoline inventories fell more than expected and Saudi Arabia announced it would further reduce output in August. Gold prices fell 0.84% following three consecutive weeks of increases. Gold has been supported by doubts about further near-term rate hikes and a weak dollar, leading to a 9.97% gain YTD.

Bonds: The 10-year treasury yield fell slightly from 2.30% to 2.27%, resulting in positive performance for treasury and aggregate bonds.

High-yield bonds were flat as interest rates remained mostly stable and riskier asset classes were mixed.

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

Lesson to be learned: “To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game.” – Rich Dad. Many investors allow emotions to guide their investment decision making process, but the most successful investors are able to take emotions out of the equation. By sticking to a disciplined investment strategy you can minimize the effect that emotions can have on your portfolio, improving your chances for long-term portfolio 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 23.43, 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 mostly flat for the second consecutive week but remains firmly in the upward trend that began in mid-February 2016. Though the current rally has slowed slightly in recent months, short and intermediate-term momentum remains positive as many indices have reached new all time highs multiple times this year, illustrating there may still be further gains ahead. 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 finished mixed for the second consecutive week as earnings continued to roll in and investors reacted to numerous economic data reports.

We are well into Q2 2017 earnings season, and so far earnings have been moderately strong. Of the 84% of companies in the S&P 500 that have reported Q2 earnings so far, 72% have beat the average earnings estimate and 70% have beat the average sales estimate. The blended S&P 500 earnings growth rate currently stands at 10.1%, compared to the initial estimate of 6.5% on June 30 before earnings season started.

While earnings remain strong, there was a slew of economic data reported over the past week. Many of the reports exhibited mixed signals for investors, but broad equity markets ended the week on a positive note as the employment report released on Friday showed there were 209,000 jobs added in July compared to the expected 185,000. As job growth continued its positive momentum the unemployment rate fell from 4.4% to 4.3%, matching its lowest level since 2001 for the second time this year.

While the economy seems stable at the moment, it is important to include a broad range of asset classes in your portfolio for more consistent and more stable longer-term results. Individual stocks, sectors, and indices can go from periods of over-performance to under-performance without a moments notice. It is crucial not to chase returns just because a stock is “hot” at the moment.

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 – August 8, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – August 1, 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 mixed with large-cap US 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, 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 positive for week as oil prices rose 8.61%, the largest weekly gain so far in 2017. This sharp increase follows reports showing US oil and gasoline inventories fell more than expected and Saudi Arabia announcing it would further reduce output in August. However, oil prices remain volatile and many experts do not expect the recent gains to last. Gold prices rose 1.08%, marking the third consecutive week of gains. Gold had faced some recent downward pressure, but investors continue to have doubts about further near-term rate hikes, adding support to gold.

Bonds: The 10-year treasury yield increased from 2.24% to 2.30%, resulting in negative performance for treasury and aggregate bonds.

High-yield bonds were positive as credit spreads tightened and most riskier asset classes performed well for the week.

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

Lesson to be learned: “To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game.” – Rich Dad. Many investors allow emotions to guide their investment decision making process, but the most successful investors are able to take emotions out of the equation. By sticking to a disciplined investment strategy you can minimize the effect that emotions can have on your portfolio, improving your chances for long-term portfolio 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 23.43, 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 flat and remains firmly in the upward trend that began in mid-February 2016. Though the current rally has slowed slightly in recent months, short and intermediate-term momentum remains positive as many indices have reached new all time highs multiple times this year, illustrating there may still be further gains ahead. 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 finished the week mixed as the Fed announced it would leave interest rates unchanged.

The Federal Open Market Committee (FOMC) announced it would leave the target federal funds rate unchanged at a range of 1.00% – 1.25%. Though this was the expected outcome and the meeting seemed somewhat uneventful on the surface, the FOMC did provide some hints regarding the path of monetary policy through the end of 2017.

In her statement following the two-day meeting, Fed Chair Janet Yellen said the economy is expected to warrant gradual increases in rates going forward. Most Fed officials expect one more rate hike before the end of the year. Beyond increasing interest rates, central bankers said they expect to begin the process of shrinking its $4.5 trillion balance sheet “relatively soon,” leading many investors to believe the unwinding will begin in October (following the next Fed meeting in late September).

If the Fed begins to unwind the balance sheet this year, it would likely result in a steepening of the yield curve (longer-term interest rates such as 10-year treasury yields increasing faster than shorter term interest rates). While rising interest rates generally adds downward pressure to the economy and equity markets, with the slow and steady expected pace of monetary tightening there should be room for further growth as long as economic data remains strong.

While the economy seems stable at the moment, it is important to include a broad range of asset classes in your portfolio for more consistent and more stable longer-term results. Individual stocks, sectors, and indices can go from periods of over-performance to under-performance without a moments notice. It is crucial not to chase returns just because a stock is “hot” at the moment.

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 – August 1, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – July 25, 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 mostly positive with small-cap stocks experiencing the largest gains. S&P 500 sectors finished the week mixed as defensive sectors generally outperformed cyclical 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 week as oil prices fell 1.65%. Oil prices have experienced a high level of volatility recently as the positive effects of strengthening demand has been conflicting with the negative effects of high global supply. Gold prices rose 2.23%, marking the second consecutive week of strong gains. Gold had faced some recent downward pressure, but investors continue to have doubts about further near-term rate hikes, adding support to gold.

Bonds: The 10-year treasury yield fell from 2.33% to 2.24%, resulting in positive performance for treasury and aggregate bonds.

High-yield bonds were positive as interest rates fell and most riskier asset classes performed well for the week.

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

Lesson to be learned: “To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game.” – Rich Dad. Many investors allow emotions to guide their investment decision making process, but the most successful investors are able to take emotions out of the equation. By sticking to a disciplined investment strategy you can minimize the effect that emotions can have on your portfolio, improving your chances for long-term portfolio 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 23.43, 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 positive and remains firmly in the upward trend that began in mid-February 2016. Though the current rally has slowed slightly in recent months, short and intermediate-term momentum remains positive as many indices have reached new all time highs multiple times this year, illustrating there may still be further gains ahead. 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 finished the week mostly positive as stock market volatility remained historically low.

The CBOE Volatility Index (VIX) closed below 10 for a record seventh straight day on Friday. Further illustrating the historically low volatility environment we are currently in, the VIX ended the week at a level of 9.36 which is the lowest reading for the Index since December 27, 1993. As volatility continues to be suppressed, US stocks markets continue to climb higher.

The S&P 500 has been increasing with virtually no drawdowns for over a year, as the Index has not experienced a 5% decline from a prior high-water mark since June 27, 2016. This is now the fourth longest streak in history without a 5% correction for the S&P 500 (269 trading days). However, this does not mean markets will continue to go up with now downside risk forever.

Volatility is expected to remain somewhat low for the near-term, but increases from current levels would not be unreasonable to expect as markets normalize. With the recent string of positive market movements, it can be easy for investors to forget that corrections of 5-10% are a normal market occurrence and can actually be healthy in the long-term.

While the economy seems stable at the moment, it is important to include a broad range of asset classes in your portfolio for more consistent and more stable longer-term results. Individual stocks, sectors, and indices can go from periods of over-performance to under-performance without a moments notice. It is crucial not to chase returns just because a stock is “hot” at the moment.

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 – July 25, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – July 18, 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 international stocks experiencing the largest gains. S&P 500 sectors finished the week mostly positive as cyclical sectors 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 week as oil prices increased 5.22%. Oil prices have experienced a high level of volatility recently as the positive effects of strengthening demand has been conflicting with the negative effects of high global supply. Gold prices rose 1.47%, snapping a five-week streak of losses. Gold had faced some recent downward pressure, but comments made by Federal Reserve chair Janet Yellen led investors to have doubts about further near-term rate hikes, adding support to gold prices.

Bonds: The 10-year treasury yield fell from 2.39% to 2.33%, resulting in positive performance for treasury and aggregate bonds.

High-yield bonds were positive as interest rates fell and riskier asset classes performed well for the week.

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

Lesson to be learned: “To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game.” – Rich Dad. Many investors allow emotions to guide their investment decision making process, but the most successful investors are able to take emotions out of the equation. By sticking to a disciplined investment strategy you can minimize the effect that emotions can have on your portfolio, improving your chances for long-term portfolio 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 23.43, 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 positive and remains firmly in the upward trend that began in mid-February 2016. Though the current rally has slowed slightly in recent months, short and intermediate-term momentum remains positive as many indices have reached new all time highs multiple times this year, illustrating there may still be further gains ahead. 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 finished the week positive as earnings season kicked off and investors reacted to some economic data reports.

Going into Q2 2017 earnings, the estimated blended earnings growth rate for the S&P 500 is 6.6%. Though this would be a slowdown from the double-digit growth experienced in Q1, many analysts expect broad earnings to be relatively strong as the economy remains mostly healthy for now. Energy, technology, and Financials are expected to report the highest level of earnings growth while consumer discretionary and utilities are expected to report slightly negative earnings growth for the quarter.

As the markets gear up for earnings, investors reacted to some economic data reports to close the week. On Friday it was announced inflation was unchanged in June (missing expectations of an increase) and retail sales experienced a slowdown from May to June (compared to an expected increase). Though these reports were somewhat weak, broad stocks markets rallied as the overall economy remains healthy and investors believe this disappointing data may point to lower rates for a longer period of time, which would be more accommodative to further economic growth.

While the economy seems stable at the moment, it is important to include a broad range of asset classes in your portfolio for more consistent and more stable longer-term results. Individual stocks, sectors, and indices can go from periods of over-performance to under-performance without a moments notice. It is crucial not to chase returns just because a stock is “hot” at the moment.

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

Source: Phil Calandara

5 Minute Market Update – July 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 mixed with large-cap US 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, 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 week as oil prices fell 3.93%. Oil prices had experienced some support, rising 7.04% in the previous week following data showing falling gasoline stockpiles. However, oil fell almost 3% on Friday after a report showed US production increased and OPEC exports hit a 2017 high, casting doubts over efforts to reduce global supply. Gold prices fell 2.62%, marking the fifth consecutive week of losses. Gold started the year strong, but has faced some recent downward pressure due to speculation about higher interest rates and a stronger US dollar.

Bonds: The 10-year treasury yield increased from 2.31% to 2.39% as investors continued to speculate that global central banks are getting ready to raise rates, resulting in negative performance for treasury and aggregate bonds.

High-yield bonds were negative as credit spreads increased slightly.

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

Lesson to be learned: “To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game.” – Rich Dad. Many investors allow emotions to guide their investment decision making process, but the most successful investors are able to take emotions out of the equation. By sticking to a disciplined investment strategy you can minimize the effect that emotions can have on your portfolio, improving your chances for long-term portfolio 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 23.43, 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 mostly flat and remains firmly in the upward trend that began in mid-February 2016. Though the current rally has slowed slightly in recent months, short and intermediate-term momentum remains positive as many indices have reached new all time highs multiple times this year, illustrating there may still be further gains ahead. 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 US stock markets finished the holiday-shortened week slightly positive as the June employment report helped equities eke out small gains.

US stocks were on track for moderate weekly losses following the private-sector jobs report on Thursday. Private-sector job gains were 158,000 compared to an expected 187,000. Though this was a relatively strong number considering the labor market has experienced over eighth consecutive years of expansion, the lower than expected gains added downward pressure to stock markets as many investors feared there would be underwhelming data for the more widely followed employment report released on Friday.

However, Friday’s employment report showed total payroll gains of 222,222, exceeding the expected figure of 180,000. This suggests even though the labor market has tightened, there may still be room for jobs to continue growing at a steady pace before reaching a full-employment level. The better than expected data pushed US equity markets higher on Friday as investors grew more confident the economy remains on healthy footing.

While the economy seems stable at the moment, it is important to include a broad range of asset classes in your portfolio for more consistent and more stable longer-term results. Individual stocks, sectors, and indices can go from periods of over-performance to under-performance without a moments notice. It is crucial not to chase returns just because a stock is “hot” at the moment.

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

Source: Phil Calandara

5 Minute Market Update – July 6, 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 large-cap US stocks experiencing the largest losses. S&P 500 sectors finished the week mostly negative 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 positive for the first time in six weeks as oil prices increased 7.04%. Rising production in the United States, Nigeria, and Libya, coupled with faltering demand in Asia, has offset OPEC’s attempt to support prices by cutting output. However, oil prices bucked the recent negative trend after data showed gasoline stockpiles fell more than expected. Gold prices fell 1.12% for the week, but gold remains moderately positive (+8.03%) for the year.

Bonds: The 10-year treasury yield increased from 2.15% to 2.31% as investors speculated global central banks are getting ready to raise rates, resulting in negative performance for treasury and aggregate bonds.

High-yield bonds were positive as credit spreads narrowed slightly.

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

Lesson to be learned: “To be a successful business owner and investor, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game.” – Rich Dad. Many investors allow emotions to guide their investment decision making process, but the most successful investors are able to take emotions out of the equation. By sticking to a disciplined investment strategy you can minimize the effect that emotions can have on your portfolio, improving your chances for long-term portfolio 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 23.43, 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 firmly in the upward trend that began in mid-February 2016. Though the current rally has slowed slightly in recent months, short and intermediate-term momentum remains positive as many indices have reached new all time highs multiple times this year, illustrating there may still be further gains ahead. 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 finished the week flat-to-negative as financial stocks soared and technology stocks continued to weigh on the market.

Last week, the Federal Reserve announced the results of its stress test for US banks, which determine whether banks are financially strong enough to weather a severe recession. For the first time in seven years of testing, all 34 banks that were tested passed and were granted permission to increase dividends and buy back stock shares. These results sent the financial sector soaring as many analysts expect positive news for many banks.

As bank stocks experienced strong gains, the technology sector continued to falter as investors remain concerned large tech companies such as Apple and Google may be overvalued. Since June 9, when Goldman Sachs published an article about the high valuations of large tech companies, the technology sector has fallen over 4.5% and has been the worst performing sector in the S&P 500.

This is a significant reversal from the first five months of the year where technology was by far the best performing S&P sector (+19.67%) while financials was one of the only three negative sectors (-0.33%). With technology as the largest weighted sector in the S&P 500, making up approximately 22.3% of the index, this trend has created a drag on broad market returns over the past month.

While the economy seems stable at the moment, it is important to include a broad range of asset classes in your portfolio for more consistent and more stable longer-term results. Individual stocks, sectors, and indices can go from periods of over-performance to under-performance without a moments notice. It is crucial not to chase returns just because a stock is “hot” at the moment.

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 – July 6, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – June 27, 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 mixed with small-cap US stocks experiencing the largest gains. S&P 500 sectors finished the week mostly negative with no discernable difference between defensive and cyclical sectors.

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

Commodities: Commodities were negative for the fifth consecutive week as oil prices fell 3.87%. Rising production in the United States, Nigeria, and Libya, coupled with faltering demand in Asia, has offset OPEC’s attempt to support prices by cutting output. Gold prices were flat for the week as gold remains moderately positive (+9.25%) for the year.

Bonds: The 10-year treasury yield fell slightly from 2.16% to 2.15%, resulting in mostly flat performance for treasury and aggregate bonds.

High-yield bonds were flat as well, as there was not much movement in the US stock and bond markets over the past week.

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

Lesson to be learned: “Every once in a while, the market does something so stupid it takes your breath away.” – Jim Cramer. It can be easy to spot the moments of “market stupidity” in hindsight, but it is not always so clear at the time they are happening. As investors, we need to be prepared for the unexpected so we do not get caught up in the irrationalities the markets so often display. By sticking to a disciplined investment strategy you can minimize the effect that emotions can have on your portfolio, improving your chances for long-term portfolio 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 8.94, 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 marginally positive for the second consecutive week, reaching a new record high on Monday. Though the current rally has slowed slightly in recent months, the Index remains in the upward trend that began in mid-February 2016. Short and intermediate-term momentum remains positive as many indices have reached new all time highs multiple times this year, illustrating there may still be further gains ahead. 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

Global equity markets finished the week mixed as falling oil prices has raised concern for some investors.

The week started off strong as the S&P 500 and Dow Jones Industrial Average reached new all-time highs on Monday. However, US stock markets gave back most of the gains on Tuesday as oil prices continued to tumble amid supply concerns. Markets finished the week mostly unchanged as oil leveled off on Thursday and Friday. With oil prices already down 20% YTD, what is ahead for oil and how might this impact US stock markets?

Oil prices hit a 10-month low as the OPEC-led production cuts have so far failed to significantly reduce the global supply glut. Though compliance with the OPEC cuts has been surprisingly high, higher production in Nigeria and Libya (countries exempt from the deal) as well as higher production in the US has pushed oil prices significantly lower. US oil production has increased more than 10% in the past year, offsetting the lower levels of OPEC production. As oversupply remains a problem, demand is not expected to accelerate sufficiently to help decrease inventory levels. Many experts see even lower prices ahead for oil in the near-term.

As oil prices remain relatively low, it is still somewhat unclear whether this is good or bad for the US economy overall. Some argue the effect of lower oil prices is positive as it lowers the prices at gas pumps, resulting in more money being spent on other sectors of the economy. Others argue the negative impact on the oil industry offset the minor benefits of lower prices, resulting in fewer jobs and less money being spent in the economy.

In reality, the effects of oil prices on the stock market is debatable. Oil prices have experienced both positive and negative correlations with stocks over time. This is because stock markets do not necessarily respond to oil prices directly, but rather they respond to the underling reason behind oil prices. When lower oil prices are caused by low demand due to a weaker global economy, stock prices would generally be expected to trend down with oil. However, when lower oil prices are caused by oversupply while the global economy remains relatively strong, stock prices would generally be expected to trend up even as oil prices fall (as experienced so far in 2017).

While the economy seems stable at the moment, it is important to include a broad range of asset classes in your portfolio for more consistent and more stable longer-term results. Individual stocks and indices can go from periods of over-performance to under-performance without a moments notice. It is crucial not to chase returns just because a stock is “hot” at the moment.

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 – June 27, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara