5 Minute Market Update – September 18, 2017

I am happy to present this week’s market commentary written by FormulaFolio Investments. The goal is to give our clients and friends a simple way to see everything they need to know about the financial markets on a weekly basis, in 5 minutes or less. After all, investing should be simple, not complicated.

Market Update

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

Commodities: Commodities were positive for the week as oil prices rose 5.08%. Oil prices experienced strong upward pressure through the week as Hurricane Irma was less devastating than initially anticipated, resulting in higher near-term demand expectations. Gold prices fell 1.92% amid increasing interest rates and a stronger dollar, but remain positive with a 15.23% gain YTD.

Bonds: The 10-year treasury yield increased from 2.06% to 2.20% as recent geopolitical concerns eased, resulting in negative performance for treasury and aggregate bonds.

High-yield bonds were positive as credit spreads 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: “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 22.06, forecasting further economic growth and not warning of a recession at this time. The Bull/Bear indicator is currently 100% bullish. This means our models believe there is a slightly higher than average likelihood of stock market increases in the near term (within the next 18 months).

Weekly Comments & Charts

The S&P 500 finished positive for the week and remains firmly in the upward trend that began in mid-February 2016. While shorter-term momentum has slowed in recent months, the Index reached a new all-time high and closed above 2,500 for the first time in history, illustrating there may still be further gains ahead. While volatility and downward pressure has slightly increased in recent months, stock markets are still in a historically low risk and volatility environment as there has not been a 5%+ correction for the S&P 500 in 308 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 reached new highs as concerns surrounding Hurricane Irma dissipated and optimism regarding tax reform took center stage.

The S&P 500 reached 2,500 for the first time as the Index recorded its strongest week since early January. Helping push the Index to new highs, US House Speaker Paul Ryan said an outline on tax reform legislation would be released during the week of September 25. While it is still unclear how detailed the outline will be, many investors are becoming more optimistic regarding the prospects for tax reform by the end of 2017.

As US stocks pushed higher, the S&P 500 is on track to do something it hasn’t done since 1959. If the Index finishes positive for the month of September, it will mark the 11th consecutive month in which there was either an increase in prices or a decrease of less than 0.1% (the only negative month over this time period has been a 0.04% decrease in March). Going back to 1928, the S&P 500 has only seen four such streaks in history. This streak helps exemplify the abnormally low levels of volatility in broad stock markets over the past year.

While markets remain healthy, it is important to remember every day is independent of the day before. Long-term market movements are based on forward guidance, not on what happened over the past week/month/year. This is 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 – September 18, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – September 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 mostly negative with small-cap US stocks experiencing the largest losses and international stocks experiencing the only gains. S&P 500 sectors finished the week mostly negative as defensive sectors generally outperformed 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 mostly flat for the week as oil prices rose 0.40%. Oil prices had experienced six consecutive days of increases, but fell sharply (over 3%) on Friday as Hurricane Irma continued its path toward Florida, sending a bearish sentiment through investors believing demand may edge lower in the near-term while production remains unaffected. Gold prices rose 1.56% for the third consecutive week of gains and remain positive with a 16.91% gain YTD amid various political uncertainties.

Bonds: The 10-year treasury yield fell from 2.16% to 2.06%, resulting in positive performance for treasury and aggregate bonds. This marks the lowest level longer-term bond yields have reached since the election last November, even though there have been three Fed rate hikes over this period (illustrating a significant flattening of the yield curve in recent months).

High-yield bonds were negative as credit spreads slightly increased and riskier asset classes were mostly negative 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 22.06, 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. While intermediate and long-term momentum remains positive, shorter-term momentum has slowed. Many indices have reached new all time highs multiple times this year, illustrating there may still be further gains ahead, but volatility and downward pressure has slightly increased in recent months. However, 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 303 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

Broad US stock markets finished negative for the week as concerns surrounding Hurricane Irma and political headlines weighed on investor sentiment.

US equity markets, and specifically insurance companies, were dragged down last week as Hurricane Irma headed toward Florida. Hurricane Irma had ripped through the Caribbean and was expected to result in catastrophic losses throughout a large part of Florida. While damages throughout the weekend were severe and will impact many lives, the hurricane was less damaging than the “worst-case” scenario many investors expected, resulting in a more-positive sentiment for insurance companies and broad markets to start this week. Although there is a sense of relief in the markets, it is still important to note JPMorgan believes this may be among the top 5 costliest hurricanes in US history.

Adding to the negative sentiment for the week, President Trump agreed to a deal to increase the debt ceiling and provide funding for the government for an additional three months. While the short-term bill was easily approved by the House and Senate, there has been open criticism from notable Republicans such as John McCain and Speaker of the House Paul Ryan. Many investors fear this adds to the narrative of deteriorating relations between President Trump and other members of the Republican party, which could lead to complications in tax-reform negotiations. Trump has traveled to multiple states speaking about tax reform in recent weeks, so it will be important to keep an eye out for further specific details as more information becomes available.

While markets remain healthy, the recent increase in volatility and political risks 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 – September 11, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – September 7, 2017

I am happy to present this week’s market commentary written by FormulaFolio Investments. The goal is to give our clients and friends a simple way to see everything they need to know about the financial markets on a weekly basis, in 5 minutes or less. After all, investing should be simple, not complicated.

Market Update

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

Commodities: Commodities were positive for the week, though oil prices fell 1.21%. 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. Recent sentiment towards oil remains bearish amid fears the OPEC supply cuts may fall apart as countries continue to fall short of the pledged reductions. Gold prices rose 2.50% and remain positive with a 15.34% gain YTD amid various political uncertainties.

 Bonds: The 10-year treasury yield fell slightly from 2.17% to 2.16%, resulting in mostly flat performance for treasury and aggregate bonds.

High-yield bonds were positive as credit spreads tightened 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: “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 22.06, 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 and remains firmly in the upward trend that began in mid-February 2016. While intermediate and long-term momentum remains positive, shorter-term momentum has slowed, though the Index is back above its three-month moving average after recently closing below it for the first time since April. Many indices have reached new all time highs multiple times this year, illustrating there may still be further gains ahead, but volatility and downward pressure has slightly increased in recent months. 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 positive for the second consecutive week as economic data remains mostly positive and a renewed optimism for tax reform remains in place.

The second estimate of Q2 2017 GDP revealed the US economy grew by an estimated 3.0% on an annualized basis – a notable acceleration from the lethargic 1.2% reported in Q1 earlier this year. This number was upwardly revised from the initial growth estimate of 2.6% and represents the strongest quarterly expansion since Q2 2015. A major contributor to the stronger economic growth was an increase in consumer spending as consumers are benefiting from a strong job market and credit remains easily accessible.

While job growth in August was slightly disappointing, with a payroll increase of only 156,000 compared to the estimate of 185,000, the labor market remains healthy. Unemployment is still near its lowest level since 2001 (currently sitting at 4.4%) and the labor force participation rate remained steady. Also, August payroll numbers are often revised higher due to a relatively low response rate by employers taking vacations before the school year starts, so the weakness may be temporary and the data could be shifted higher next month.

The mostly positive economic data, combined with the rejuvenated optimism regarding tax reform, helped offset geopolitical concerns for the moment. Relations between the US and North Korea remain tense as North Korea fired a missile over Japan into the Pacific Ocean early Tuesday morning. This test was seen as a direct challenge to President Trump, similar to when North Korea launched rockets over Japan at the beginning of the Obama administration in 2009. While it still seems unlikely anything will actually materialize from the recent events, the persistent political tensions have introduced a higher level of volatility into US stock markets and pushed US treasury yields lower as investors have increased exposure to safe-haven asset classes. However, history shows us that geopolitical risks generally dissipate after short periods of time while broader fundamentals drive the markets over the longer term, so these trends may reverse if tensions ease over the coming months.

While markets remain healthy, the recent increase in volatility and political risks 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 – September 7, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – August 29, 2017

I am happy to present this week’s market commentary from FormulaFolio Investments. The goal is to give our clients and friends a simple way to see everything they need to know about the financial markets on a weekly basis, in 5 minutes or less. After all, investing should be simple, not complicated.

Market Update

Equities: Broad equity markets finished the week positive with small-cap US stocks experiencing the largest gains. S&P 500 sectors finished the week mostly positive 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 week as oil prices fell 1.32%. 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. Recent sentiment towards oil remains bearish amid fears the OPEC supply cuts may fall apart as countries continue to fall short of the pledged reductions. Gold prices rose 0.49% and remain moderately positive with a 12.82% gain YTD amid various political uncertainties.

Bonds: The 10-year treasury yield fell from 2.19% to 2.17%, resulting in positive 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: “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 second consecutive week, but remains in the upward trend that began in mid-February 2016. While intermediate and long-term momentum remains positive, shorter-term momentum has slowed as the Index closed below its three-month moving average for the first time since April. Many indices have reached new all time highs multiple times this year, illustrating there may still be further gains ahead, but volatility and downward pressure has slightly increased in recent weeks. 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 snapped their recent losing streak to finish the week positive on renewed optimism for tax reform.

Stocks received a boost as chief economic advisor Gary Cohn announced President Trump will start publicly campaigning for tax reform in the upcoming week. According to Cohn, “starting next week, the president’s agenda and calendar is going to revolve around tax reform… He will start being on the road making major addresses justifying the reasoning for tax reform and why we need it in the U.S.” Cohn mentioned the administration does not have a fixed / detailed tax reform plan, but they do expect it to include a one-time corporate tax repatriation on overseas profits as well as include protections for personal charitable, mortgage, and retirement savings deductions while taking away other deductions for individuals.

Further illustrating the renewed optimism regarding tax reform, small-cap US stocks markedly outperformed large-cap US stocks for the first week since June 26 – 30. Small-cap stocks surged immediately following the election with the idea lower corporate tax rates coupled with rising bond yields would drive investor cash to smaller companies. However, year-to-date the large-cap S&P 500 (SPY) is up 10.42% compared to only a 2.24% gain for the small-cap Russell 2000 (IWM) as interest rates remained suppressed and talks about tax reform seemed to have stalled. While it remains to be seen, if US growth continues to improve and tax reform gets pushed forward, it could lead to a resurgence of the smaller-cap US stock rally.

The recent divergences in stocks and increased 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 29, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

5 Minute Market Update – August 22, 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 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 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 week as oil prices fell 0.63%. 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 four 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 fell 0.19%, but remain moderately positive with a 12.32% gain YTD.

Bonds: The 10-year treasury yield remained at 2.19%, resulting in mostly flat performance for treasury and aggregate bonds.

High-yield bonds were slightly positive as the negative impact of riskier asset classes experiencing losses was offset by lower credit spreads.

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 second consecutive week, but remains in the upward trend that began in mid-February 2016. While intermediate and long-term momentum remains positive, shorter-term momentum has slowed as the Index closed below its three-month moving average for the first time since April. Many indices have reached new all time highs multiple times this year, illustrating there may still be further gains ahead, but volatility and downward pressure has slightly increased in recent weeks. The coming weeks should continue to provide valuable insight about the near-term direction of the S&P 500, but it seems to remain in a bullish pattern for now.

*Chart created at StockCharts.com

US stocks were broadly negative for the second consecutive week as political tensions continued to drive markets lower.

Since reaching record-low levels of volatility in July, the S&P 500 has recorded two of its three worst trading days over the past two weeks. The most recent pullback follows heightened concerns that focus is being diverted from President Trump’s agenda with other political distractions. However, there have been similar short-term pullbacks in 2017 that markets have quickly shrugged-off (a 1.8% drop in March as the initial health care reform bill failed to find support and a 1.9% drop in May following the controversy with former FBI Director James Comey).

While political worries have pushed stocks lower in recent weeks, market fundamentals seem to remain healthy for now. Q2 2017 earnings have been strong as the blended S&P 500 earnings growth rate currently stands at 10.2%, compared to the initial estimate of 6.5% on June 30 before earnings season started. The labor market also remains strong as the economy continues to add jobs at a resilient pace and unemployment is at its lowest level since 2001.

Though healthy economic data cannot protect markets against normal levels of volatility, history shows fundamentals drive longer-term market performance a majority of the time. Generally, as long as there are no further clear reasons for a sell-off (such as an economic slowdown or a war), 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 22, 2017 appeared first on The Blog of Phil Calandra.

Source: Phil Calandara

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