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The Northern Star 05/14/18 Markets Post Week of Growth

Message from Jon

 

During 2018, we have noticed a few occurrences that may or may not end up being omens for the nearby future. For instance, in February we all witnessed and participated in a 10.8% correction in the markets. I would not say that it was this correction that was surprising but instead the velocity at which it occurred.

We have seen and are expecting the Federal Reserve System to raise interest rates in an attempt to combat inflation fears and a heating economy.

We are also experiencing an increase in volatility manifest in the markets which is causing big swings in investment values. This is exemplified by fluctuations like increased change in investment merit, often in the same investment, going from favored to un-favored and back to favored again. Becoming the new normal in the market, it can create a muting in the investors level of vigilance, which borders on complacency at times.

In addition to all of this, we are seeing an increase in geopolitical tensions which continues to add to the building fear and instability.

 

Why do I mention all of this in a way that appears relevant to investing?

 

What should your investments be if the market declines during the very same time that interest rates are on the rise? Stocks would be falling and so would bonds, so what then?

 

In a newsletter produced by Dividend.com, they raised a similar question. "For investors, this poses a problem. Many have simply forgotten about how dangerous steadily rising prices can be for your portfolio and your income." The article talks about inflation and its effects on investments and income. It specifically mentions how purchasing power becomes a problem in periods of rising prices (inflation). "Inflation impacts our returns and actually reduces them. During periods of rising inflation, stocks have actually shown poor real-adjusted returns while Treasury Bonds have been negative."

 

In the past newsletters, I have quoted Crestmont Research as well, indicating a near 0% chance of a greater than 7% return in investments and a higher percentage chance of 0-6% return.

 

These two pieces of information seem to be speaking of similar outcomes just in a different manner. Other like comments and concerns have also surfaced in past newsletters which bring to mind an old saying, "...if three people tell you that you're drunk, you better lay down!"

 

Have we gotten to a place where we need to take action? I do not think so, but we have arrived at a place to be thinking about it more and more every day.

 

Alternative investment behaviors and tools may be the key to survival here. We are currently researching what those might be and how they may benefit clients. "Use times that are quiet to prepare for times when they aren't," a quote from a teacher that has served me well.

 

*Next week, I will be in New Orleans at a conference and returning mid-week. Any emails may be returned with some delay.

 

Till we speak again,

 

Jon

 

Sources:

https://mailchi.mp/e6bf25f03736/the-fee-war-keeps-benefiting-investors-217569?e=ea7017e4e0
http://www.dividend.com/news/2018/05/13/what-really-happens-portfolio-with-rising-inflation/
https://www.crestmontresearch.com/  

Markets Post Week of Growth

WEEKLY UPDATE - MAY 14, 2018

On Friday, the markets closed the week gaining traction. The Dow had 7 days of consecutive growth, rising 2.34% - its largest weekly gain since March.[1]Meanwhile, the S&P 500 rose 2.41%, the NASDAQ jumped 2.68%, and the MSCI EAFE increased 1.41%.[2]

Various factors came together to support the growth. From geopolitical topics to strong corporate earnings, we'll focus on 3 key developments that drove movement.

1. Energy Shares Boosted by Iran Nuclear Deal Withdrawal

President Trump's decision on Tuesday to withdraw from the Iran nuclear deal helped push the energy sector higher. With the possibility of renewed sanctions on the horizon, the anticipation of a pullback from global oil supplies helped boost prices. Though oil prices fell from a 3½ - year high on Friday, it was the 2nd week of growth, driving energy shares to rise 3.8%.[3]  

2. Technology Sector Jumps Amid Strong Corporate Earnings

After the technology sector's months of stagnation - fueled in part by recent fears over privacy - it is now approaching all-time highs. Since April 25, the information technology sector has increased 9%. The movement is driving many investors to join the rally, while many analysts remain cautious.[4]Overall, the growth contributed 3.5%.[5]

This rally happened on the back of strong corporate earnings. Over 70% of total S&P 500 companies reported earnings growth that exceeded expectations. Last week's positive reports helped push the index past 50- and 100-day moving averages.[6]

3. Inflation Remains Steady

The Consumer Price Index (CPI), which measures the price of goods and services, rose only 0.2% for the month in April and 2.5% over the year. These reports both missed and met expectations, respectively.[7] The tepid growth caused some investors to worry that the Federal reserve would raise interest rates more quickly, as the U.S. dollar fell and held below its 2018 high.[8] Some analysts, however, believe that the missed expectations should ease the Fed's pressure to fast-track interest rates.[9]

Looking Ahead

We will continue tracking geopolitical developments - from potential actions against Syria, tariffs on Iran, and preparations for President Trump's upcoming meeting with North Korea's Kim Jong-un.[10] In addition, key discussions around the American Free Trade Act and trade relationships with China remain on the horizon.[11] We also will gain our first insights on how well consumer spending performed in the 2nd quarter.[12]

If you would like to discuss any developments or gain a clearer understanding of how these issues may affect your portfolio, contact us today. We are always here to help you make sense of your financial life and gain clarity for the road ahead.

ECONOMIC CALENDAR

Tuesday: Retail Sales, Housing Market Index
Wednesday: Housing Starts
Thursday: Initial Jobless Claims, Philadelphia Fed Business Outlook Survey, Bloomberg Consumer Comfort Index.


Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.


What You Need to Know about Early Withdrawals from Retirement Plans*

Taking an early withdrawal from your Individual Retirement Account (IRA) may be tempting. But the tax penalty can make a significant dent in your long-term financial plan. Here are some terms and requirements to keep in mind before considering an early withdrawal:
  • Early withdrawals are defined as taking distributions from your IRA or retirement plans before the age of 59½. 
  • Taxpayers must report withdrawals to the IRS when they file their tax returns. They may owe income tax on withdrawals and pay an additional 10% tax penalty.
  • Nontaxable withdrawals aren't subject to the 10% tax penalty. Examples include contributions on which taxpayers paid taxes before the money was deposited into the plan. 
  • Rollovers happen when plan holders move money or other assets from 1 plan to another. The IRS allows a maximum of 60 days to complete a rollover to keep it tax-free. 
  • Certain exceptions exempt plan holders from the 10% tax penalty. Many retirement plan and IRA rules differ. 
  • Disaster Relief provisions exempt plan holders in certain disaster areas from the 10% tax penalty. 
* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.


Tip adapted from IRS.gov[14]
Golf Tip
Golfer
Tips to Swinging Your Golf Club on a Plane

One of the best ways to improve your game for more accurate shots is to maintain your swing plane. Golf pros say the biggest mistake amateurs make is not focusing on their planes.
Maintaining your swing plane involves keeping your club parallel to the original shaft angle at impact as it rotates around your body.
While swing planes may vary according to players' postures, more even planes generate consistency and straighter shots. Here are 7 steps for developing an even plane:
  1. Step up and prepare to address.
  2. Place the sole of your club flat on the ground. 
  3. Ensure your shaft alignment points your club at your belt-line. 
  4. Put your body over the ball. Your hands should grip the club comfortably without extending your arms. Your arms should hang straight down.
  5. Draw back the club for a slow-motion swing while maintaining your shaft angle for consistency. 
  6. Continue the swing while monitoring the shaft angle. 
  7. Practice the swing motion to get comfortable with the movement.
Tip adapted from Golfweek[15]
Healthy Lifestyle
Medical Cross
The Ups and Downs of Diabetes


More than 30 million Americans (9.4% of the population) suffer from diabetes, a disease involving the pancreas' ability to produce insulin, according to the American Diabetes Association.
A healthy pancreas, which is an organ behind the stomach, releases insulin to help your body process sugar and fat.
In type 1 diabetes, your body's immune system destroys pancreatic cells that make insulin. In type 2 diabetes, the more common form, the pancreas produces insulin, but not enough for the body to be able to process it effectively.
Doctors check fasting blood sugar levels to diagnose diabetes. Treatment for those with type 1 diabetes involves careful monitoring of blood sugar levels, undergoing insulin therapy, consuming a healthy diet, and getting adequate exercise.
Treatment for type 2 diabetes includes a healthy diet, exercise, medication, and insulin.

Material adapted from WebMD[16]
Green Living
Leaf
Keep Oceans and Rivers Healthy by Eating Sustainable Seafood

You love seafood. And you want to be environmentally sensitive, especially about oceans, lakes, and rivers.
So how can you protect Earth's bodies of water and still enjoy a good shrimp scampi dinner?
A few simple lifestyle changes, such as buying fish that hasn't been obtained from unsustainable sources, can make all the difference. Your decision to buy from suppliers or stores that get their fish from sustainably harvested stocks will help improve how fisheries are managed.
Here are some resources to help you enjoy fish in environmentally good conscience:
Take a look at Marine Stewardship Council. This is an online sustainable seafood product finder.
You can download sustainable seafood recipes at Monterey Bay Aquarium's Seafood Watch.

Tip adapted from Conservation International[17]


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.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
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.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia.  
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
Consult your financial professional before making any investment decision.
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.
These are the views of Platinum Advisor Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
By clicking on these links, you will leave our server, as the links are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.


 [1] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US
www.cnbc.com/2018/05/11/us-stock-futures-dow-data-oil-and-politics-on-the-agenda.html

[2] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
www.msci.com/end-of-day-data-search

[3] www.marketwatch.com/story/us-oil-prices-hover-at-3-12-year-highs-as-analysts-entertain-the-idea-of-100-crude-2018-05-11
www.cnbc.com/2018/05/11/us-stock-futures-dow-data-oil-and-politics-on-the-agenda.html
[4] www.cnbc.com/2018/05/11/wall-street-underestimates-how-strong-this-tech-rally-is-strategist.html

[5] www.cnbc.com/2018/05/11/us-stock-futures-dow-data-oil-and-politics-on-the-agenda.html

[6] www.bloomberg.com/news/articles/2018-05-11/better-late-than-never-for-s-p-500-as-tech-ignites-weekly-rally

[7] wsj-us.econoday.com/byshoweventfull.asp?fid=485631&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

[8] www.reuters.com/article/uk-global-forex/cpi-miss-keeps-dollar-below-2018-peak-sterling-falls-idUSKBN1IB027 
[9] wsj-us.econoday.com/byshoweventarticle.asp?fid=494340&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top
[10] www.cnbc.com/2018/04/12/asia-markets-trade-geopolitics-stocks-and-currencies-in-focus.html www.cbsnews.com/news/tariffs-iran-sanctions-stoke-worries-of-a-global-slowdown/ [11] wsj-us.econoday.com/byshoweventarticle.asp?fid=494339&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

[12] wsj-us.econoday.com/byshoweventarticle.asp?fid=494340&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top [13] www.goodhousekeeping.com/food-recipes/dessert/a46792/chocolate-sundae-cupcakes-recipe/

[14] www.irs.gov/newsroom/things-to-remember-when-considering-early-withdrawals-from-retirement-plans

[15] golftips.golfweek.com/swing-golf-club-plane-2047.html

[16] www.diabetes.org/assets/pdfs/basics/cdc-statistics-report-2017.pdf

www.webmd.com/diabetes/default.htm
[17] www.conservation.org/pages/tips-to-live-green.aspx#eat-sustainable-seafood