Putting cash to work...
On Friday, we received confirming evidence that we should be putting our cash levels to work and using pullbacks and dips as opportunities to add to portfolios.
"While the market deals in probabilities, not certainties, all of the evidence currently suggests that any near term pullback is unlikely to develop into a major decline for the market. Therefore, investors should be ready for a renewed round of buying when our short term indicators have once again dropped back near oversold levels."
Our short-term indicator is bullish while our mid-term indicator is showing signs of the equities market gaining strength. We are also recognizing that while this election cycle closely resembles a middle school level fight between siblings, our belief is that regardless of who wins, the markets are likely to be beneficial(although for nearly opposite reasons). We are expecting a rise in volatility nearing the election which we will be scrutinizing, and until evidence surfaces that demonstrates a clear reason to shift to cash, we will be moving with the current.
Does this mean we are shifting from bearish/defensive to bullish/offensive? NO. We are merely deciding to buy on the dips, putting cash to work and using the evidence to our advantage.
"I hate to buy at a high and hope it goes higher from here though". I agree, which is why we are selectively buying, carefully examining our purchases, and buying in partial positions.
Till we speak again, enjoy your week.
Stocks Close Mixed on GDP Disappointment
WEEKLY UPDATE - August 1, 2016
Stocks broke their four-week winning streak, closing mixed after the release of a surprisingly low estimate of second-quarter economic growth. For the week, the S&P 500 lost 0.07%, the Dow fell 0.75%, the NASDAQ grew 1.22%, and the MSCI EAFE added 2.36%.
The preliminary estimate of Q2 Gross Domestic Product (GDP) growth showed that the economy grew a paltry 1.2% last quarter versus the 2.6% growth expected. Investors were understandably disappointed as they had hoped for a resurgence after a slow first quarter. Professional economists were also surprised. The New York Fed had forecasted GDP growth of 2.1% and the Atlanta Fed had predicted 2.3% growth. Why the surprise?
Digging deeper into the data, we find that the disappointment came from an unexpected fall in business inventories. On the positive side, the drop may boost future economic growth as businesses rebuild their stockpiles. Consumer spending was strong, growing 4.2% over the previous 12 months, and accounting for nearly all the GDP growth we saw.
So, though the headline number was a letdown, the underlying trends in consumer spending, labor market growth, and higher savings rates could set up a banner third and fourth quarter.
During last week's Federal Open Market Committee meeting, the Federal Reserve's monetary policy makers voted to hold rates steady, surprising no one. Citing recent economic data, the central bank said that "near-term risks to the economic outlook have diminished," setting the stage for the next rate hike.
Will rates increase in September? December? Or will the Fed wait until 2017? We don't know. Wall Street bets on future rate hikes suggest that most traders don't think the Fed will move until December if they don't wait until 2017.
On the positive side, the Fed seems confident enough in economic growth to cut back on stimulus. On the negative side, speculation around the timing of future rate hikes will continue to be a major market theme this year and may stoke additional volatility.
This week, investors will be watching Friday's July labor market release and digesting more corporate earnings reports. We'll keep you informed.
Monday: PMI Manufacturing Index, ISM Manufacturing Index, Construction Spending
Tuesday: Motor Vehicle Sales, Personal Income and Outlays
Wednesday:ADP Employment Report, ISM Non-Manufacturing Index, EIA Petroleum Status Report
Thursday:Jobless Claims, Factory Orders
Friday:Employment Situation, International Trade
Weekly jobless claims rise. The number of Americans filing claims for new unemployment benefits rose by 14,000, but the underlying trend still shows strength in the labor market.
Consumer sentiment drops in July. A measure of how consumers feel about the U.S. economy slipped as worries about the Brexit and the presidential election weighed on Americans.
June new home sales surge. Sales of new single-family homes rose to the highest levels in nearly 8-1/2 years. Sales were up 25.4% over June 2015, indicating that the housing market may be gaining momentum.
Durable goods plunge in June. Orders for long-lasting manufactured goods dropped, indicating weak overseas demand is affecting U.S. factories. Economists had predicted a 1.4% decline over June, but orders for goods like aircraft, appliances, and machinery actually fell 4.0%.
Tax Tips for Vacation Rentals
The IRS generally requires that you report all rental income on your tax return. However, if you only occasionally rent out a property for short periods of time and use it as a home for the rest of the year, you may not have to report the income. Here's what the IRS says about vacation homes:
- A vacation property is defined as "a house, apartment, condominium, mobile home, boat, or similar property."
- If you rent out a home for less than 15 days per year and use it as a home the rest of the time, you may not need to report the income.
- If your house is considered a rental property, you may deduct rental expenses related to the property from your taxes as long as they do not exceed the income received. If you also use the house as a home, you must segregate expenses accrued during the personal use period.
- Personal use may include use by family, friends, or anyone who pays you less than market rate in rent.
For more information about tax issues around rental or vacation homes, consult a tax professional in your area or see IRS Publication 505, Publication 527, "Residential Rental Property (Including Rental of Vacation Homes)."
Tip courtesy of IRS.gov
In The Rough? Think Wedge.
When you find yourself in the deep rough, it's hard to get out using longer irons or fairway woods. Why? Because longer clubs need a shallow angle of attack, causing you to put too much rough between the clubhead and the ball. The angle makes it very hard to get the ball airborne and robs the shot of power and distance. Next time you find yourself in the rough, reach for a high-lofted iron or your wedge, which uses a short, steep angle, allowing you to pitch the ball up and out to a comfortable distance.
Tip courtesy of Bobby Hinds, PGA | Golf Tips Mag
Live "Superlong" With These Longevity Tips
Geriatrician Harvey Jay Cohen, M.D. says that staying healthy as you age is strongly influenced by your attitude and a healthy lifestyle. Here are some tips for tilting the longevity odds in your favor:
- Laugh often: Studies show that laughter reduces stress and improves your immune system function.
- Sleep late: Research suggests that adults 50 and older who get six to nine hours of sleep think better and have stronger brain function.
- Lose the middle: The circumference of your waist is a big predictor of current and future health. Dropping some extra weight may help you live a longer, healthier life.
Tip courtesy of AARP
Consider Switching to Recyclable Batteries
Switching to rechargeable nickel-metal hydride (NiMH) batteries is a great way to reduce the amount of toxic waste your household produces. AA and AAA NiMH batteries have longer lifespans and better performance than alkaline rechargeables, making them a greener choice. Depending on where you live, your community may offer battery and gadget collection centers that make it easy to recycle batteries when they're no longer usable. Visit www.call2recycle.org to find out about battery recycling centers in your area.
Tip courtesy of Green Living Tips
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
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The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
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The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
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Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
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