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The Northern Star 09/24/18 New Records and Changes

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Message from Jon


Markets Update:

The markets continue to show signs of strength. We still are hearing about and seeing trade war rhetoric for the time being, and so long as this remains a constant, it is our opinion that foreign investments should be looked at with extra scrutiny and their risks inflated when evaluating portfolio risks and reallocations.1

The interesting approach here is that President Trump is not hindered by the prospect of losing votes or the economics of the influence of Political Wholesalers (you know them as lobbyists) as long as he is using his own income to provide support to himself while in office. This makes him a harder target to read, predict, and bet on with regard to the markets and geopolitical politics in our opinion.

In our opinion, should the tariff discussion come out as President Trump would prefer, we could in fact see this market condition and strength remain intact for quite a while longer. Should the Tariff discussion escalate into a Trade War, we could see the market conditions change drastically and not for the better. Time will certainly tell which side of the fence we should plant our flag on, but for the time being-steady as she goes-we remain fully invested in the strategy and approach that suites your plans the best.

New Faces:

We are excited to welcome the newest members of our team, Morgan Wicks and Devin McCardle.

Morgan comes to us as an intern at the moment studying financial planning as a senior at Purdue University. She is eager to learn and has a talent for picking up materials very quickly. It will be enjoyable to see how she develops over the remaining semester.

Devin is our middle child who just graduated McCutcheon and is now enrolled at Ivy Tech to get his basic undergrad courses completed and will be transferring in 2 years to PU to finish his degree in Finance. He is on a 4-year apprenticeship at the firm in which he will be learning many aspects of the business along the way. He is finding out that it is not as fun as he thought to be the boss's son and is not given any extra credit for being so! 

Till we speak again, enjoy the fall weather and bon fires!

Jon

Sources:

1: www.cnbc.com/2018/09/25/trade-war-china-white-paper-on-trade-bullyism-practices-by-the-us.html

New Records and Changes

WEEKLY UPDATE - SEPTEMBER 24, 2018

Last week brought new tariffs and data, and another look at changes coming to equity classifications. Overall, the S&P 500 gained 0.85% and the Dow was up 2.25%, while the NASDAQ dropped 0.29%.[1]International stocks in the MSCI EAFE had sizable growth, posting a 2.89% increase.[2]

A Look Back: Last Week's Tariffs and Mixed Housing Data

For months, fears of a global trade war have dominated headlines. Last week, China and the U.S. launched new tariffs on each other's products, but the latest round of this trade skirmish had an interesting effect. Rather than feeling concerned, both analysts and investors interpreted the tariffs to be lower than what they expected. As concerns about the global trade war calmed, both the S&P 500 and Dow reached new record highs.[3]  

In addition, we received some important economic information last week, including key updates on the housing industry. While the economy and markets are performing well, recent data indicates that the housing market isn't keeping up. The data revealed: 
  • The Housing Market Index remained at the same relatively low point it reached in August.[4]
  • Housing starts jumped, but new building permits declined.[5] 
  • Existing home sales were flat, marking the first time in 4 months that they didn't decline.[6]
A Look Ahead: This Week's Global Industry Classification Standard (GICS) Update

Since 1999, the GICS has been classifying stocks based on their sectors and industries, including most of the world's equities.[7]  

As of Monday, the S&P 500 has adjusted its sectors to change telecom into communications services and moved several big stocks into new classifications. This move is the largest GICS change since 1999 and is partly an attempt to reduce tech stocks' weight in the markets. As technology companies have grown in the past few years, they have come to represent 26% of the S&P 500. Some experts believe that is an unbalanced level and allows tech to have too much influence on the markets.[8]  

The GICS reclassification affects many notable companies, including Facebook, Netflix, Alphabet, and Twitter. They all now join the new communications services sector.[9] This sector name change may not actually alter the sway that technology companies have on the markets, but it will likely have other effects on investors. In the near term, volatility may increase as stocks move to new industries and fund managers adjust their holdings.[10]

Many factors determine the reclassification's specific effects on individual investors, so if you have questions about your portfolio, please let us know. We want to ensure you understand what you hold - and why - and how we are helping you adapt to both short- and long-term changes. If you would like guidance on any of the details we've shared today, we are always ready to help.
 
ECONOMIC CALENDAR
Tuesday: Consumer Confidence
 Wednesday: New Home Sales, FOMC Meeting Announcement
Thursday: Durable Goods Orders, GDP, Jobless Claims
Friday: Personal Income and Outlays, Consumer Sentiment

Gray

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.

Sources:

[1] 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=!DJI®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO

[2] www.msci.com/end-of-day-data-search

[3] www.cnbc.com/2018/09/21/wall-street-turns-to-economic-data-and-trade-spat-news.html 

[4] wsj-us.econoday.com/byshoweventfull.asp?fid=496710&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

[5] wsj-us.econoday.com/byshoweventfull.asp?fid=485719&cust=wsj-us&year=2018&lid=0&prev=/byweek.asp#top

[6] www.ftportfolios.com/Commentary/EconomicResearch/2018/9/20/existing-home-sales-were-unchanged-in-august 

[7] www.investopedia.com/terms/g/gics.asp

[8] www.cnbc.com/2018/09/21/on-monday-google-facebook-and-netflix-will-make-a-big-market-move.html

[9] www.reuters.com/article/us-usa-stocks-gics-explainer/what-sector-overhaul-means-for-tech-stocks-wall-street-idUSKCN1LZ2JT

[10] www.reuters.com/article/us-usa-stocks-gics-explainer/what-sector-overhaul-means-for-tech-stocks-wall-street-idUSKCN1LZ2JT