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The Northern Star Newsletter 8/29/19 - China Announces More Tariffs

4

Message from Jon


Market Indications

As I take a deep and prolonged inhale and then a sigh, I thought it would be good to shoot out an update as to what is happening and what the data is saying and our thoughts overall.

In our opinion, we are witnessing an increase in the intensity of market volatility and swings as a result of a news cycle that has been relentless. We are seeing the Trump v China trade war rhetoric continue to drag out and as of this am, China retaliating with an increase of 10% on $75B worth of US goods.3 We are hearing where there is a concern about Germany's economy slowing to a point where a recession is now within sight, assuming everything stays as is and no governmental intervention.4

We have now been informed that the 2 year treasury bill has more yield than the 10 year treasury note creating what is known as an inverted yield curve for the 3rd time and a federal reserve who is facing it's first decent in opinion since the newly appointed Chairman Powell has taken the helm.6,7

The sigh comes from the fact that any good news seems to fade quickly into the background at present which leads to this massive wave of pessimism and "bearish" tone washing through news outlets and local conversations.

Does this come as a surprise? Not exactly, however, it doesn't make it pleasant just because you are not surprised by what's taking place. It just allows you to not over-react with everyone else.

Back in December, we posted some information about a bear market condition setting in and even posted an article that was good at describing the anatomy of a bear market. The criteria, the historical numbers and longevity that may be a good point of reference here as a refresher to the relevance of what is happening today. See newsletter dated 12/17/2018.

Click here for the article we posted

This does not automatically translate to a move to higher ground now just because we are seemingly and the key word here is seemingly seeing what we thought we would see earlier this year. For one, we did not see the FED cutting rates which historically indicates that the markets show a positive return post mid-cycle adjustment.1,5  We thought (or hoped) that the Trade war would have been close to or completely resolved by now but it appears to be no closer today than earlier this spring.

We are thankful to our technical analysis for doing a great deal to help us navigate through all the noise at present in the newscycles. In my opinion, if you did not have this approach, trying to navigate the volatility and velocity of changes unfolding would be nearly impossible leaving one to simply be all out of the market due to the intensity and fear of one's emotions OR to simply buy and hold and turn a blind eye and deaf ear to all of it and throw up one's hands in capitulation!

Are we seeing the indications we follow weaken, of course. Are they still bullish in their trend and signals at this point?   YEP.

Do we watch them daily to make sure that we are quick to make changes as the changes are necessary? Yes we do.

When do we think that will be and what will be the cause? Since our crystal ball has long since cracked and in the closet, we do what we can do which is stay diligent, remain patient and in the moment as it were and on the look-out for opportunity to profit from or protect from disconnects in the markets that would serve our clients best interests which are defined by their individual needs, wants and wishes.

"OMG reaction vs That's it" reality is striking at times! 2

If you have $100,000 invested and experience a 20% decline, what is the actual income impact to your situation in retirement?

  • $100,000 *80% = $80,000.
    • Income from $100,000 at a 4% distribution = $4,000 per year or $333.33 per month
    • Income from $80,000 at 4% distribution = $3,200 per year or $266.66 per month.

A loss of $66.66 per month. While this is a loss, it is likely a temporary one at best since the markets don't go straight down to stay just like they fail to go straight up and stay. At a point in time, this condition too will pass if only the investor can resist the urge to react emotionally. That is not to say you should avoid acting at all, it just means that emotion is often more than reality. Be patient, remain calm and carry on with your needs, wants and wishes as a focus and not the seemingly daily/weekly or monthly movements of your investments.

Till we speak again, stay focused and productive!

Jon


Sources:

  1. proactiveadvisormagazine.com/rate-cuts-in-secular-bull-markets-are-extremely-bullish
  2. proactiveadvisormagazine.com/lets-be-realistic-about-drawdowns/
  3. https://www.cnn.com/2019/08/23/business/china-tariffs-trade-war/index.html
  4. https://www.nytimes.com/2019/08/14/business/german-economy.html
  5. https://www.washingtonpost.com/business/economy/dont-worry-too-much-about-all-the-uproar-over-the-inverted-yield-curve/2019/08/22/077d0648-c51d-11e9-b72f-b31dfaa77212_story.html
  6. https://www.ft.com/content/6c532d0c-c4fc-11e9-a8e9-296ca66511c9
  7. https://www.nytimes.com/2019/08/21/business/economy/federal-reserve-minutes.html



    China Announces More Tariffs

    WEEKLY UPDATE - AUGUST 26, 2019


    The Week on Wall Street Traders assumed that the week's biggest news event would be Federal Reserve Chairman Jerome Powell's speech at the annual Jackson Hole banking conference. Instead, China seized the headlines by announcing new tariffs on U.S. goods.

    Domestic stocks ended up lower for the week. The Nasdaq Composite fell 1.83%; the S&P 500, 1.44%; the Dow Jones Industrial Average, 0.99%. International stocks posted a weekly gain: the MSCI EAFE benchmark rose 0.96%.[1][2]

    Beijing Plans New Tariffs

    Friday morning, China's finance ministry stated it would levy import taxes of 5-10% on an additional $75 billion of American imports. One set of tariffs is slated to start September 1, targeting U.S. crops, meats, and seafood. A second set, effective December 15, will put tariffs on U.S.-made cars and car parts. In total, these taxes are scheduled for more than 5,000 American products.

    Friday evening, the White House announced two rounds of 5% increases on existing U.S. tariffs on Chinese goods, to be successively implemented on September 1 and October 1.[3][4]

    Powell Reflects at Jackson Hole

    Friday, Jerome Powell delivered an address on monetary policy at the Kansas City Fed's annual Jackson Hole symposium. He noted that the global economy currently presented a "complex, turbulent picture," and added that the Fed was "carefully watching developments" and would "act as appropriate."

    Investors wonder if the central bank will consider another rate cut at its September meeting. Comments from other Fed officials at Jackson Hole did not indicate a consensus on that matter.[5] 

    Leading Indicators Rise

    The Conference Board, the business research group known for its monthly Consumer Confidence Index, also publishes a monthly Leading Economic Indicator (LEI) Index. The Conference Board LEI provides a forward-looking analysis of the health of the business cycle, looking at ten factors ranging from consumer expectations to stock prices to construction activity.

    In July, the LEI rose 0.5%, following 0.1% descents in May and June. This sudden increase offers optimism at a time when investors are wondering about the momentum of the economy.[6] 


    Final ThoughtBond prices have risen around the world, leading to lower bond yields. In some instances, yields have turned negative. While the yield on the 10-year Treasury has also declined, it is still above 1.5%, notably exceeding the yields of similar-duration bonds in France, Germany, Spain, and the United Kingdom.[7]


    THE WEEK AHEAD: KEY ECONOMIC DATATuesday: The Conference Board's July Consumer Confidence Index.Thursday: The Bureau of Economic Analysis presents the second estimate of second-quarter economic growth, and the National Association of Realtors publishes new data on pending home sales.Friday: July consumer spending data from the Department of Commerce, and July's final University of Michigan Consumer Sentiment Index (a gauge of consumer confidence levels). Source: Econoday / MarketWatch Calendar, August 23, 2019The Econoday and MarketWatch economic calendars list upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision. THE WEEK AHEAD: COMPANIES REPORTING EARNINGSTuesday: Autodesk (ADSK)Thursday: Abercrombie & Fitch (ABF), Best Buy (BBS), Lululemon Athletica (LULU) Source: Zacks, August 23, 2019Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.


    Gray

    Quote Of The Week

    Fountain Pen


    "The pessimist sees difficulty in every opportunity. The optimist sees opportunity in every difficulty."

    -Winston Churchill

    Recipe Of The Week

    Fork and Knife

    DIY Pesto

    [2 cups]
    Ingredients:
    • 2 cups (or more) of fresh basil leaves
    • 2 Tbsp. of pine nuts
    • 2 cloves of garlic
    • ½ cup olive oil
    • ¾ cup parmesan cheese, grated 

    Directions:

    Pesto is the perfect summer dish because it doesn't require turning on a hot oven or stove, it can be enjoyed on its own or added to pastas and pizzas, and it's a great way to use that basil you might have been growing this summer.

    1. Remove the stems from the basil leaves.
       
    2. Combine the basil, pine nuts, and garlic in a food processor and process until finely minced.
       
    3. As the food processor continues to mix, slowly add in the oil until smooth.
       
    4. Add the cheese and process to combine.
       
    5. Enjoy!

    Recipe adapted from New York Times Cooking[8]

     

    Gray


    Tax Tips

    Document

    Protect Your Financial Safety in the Case of a Natural Disaster

    We never want to think of a natural disaster happening, but the truth is that floods, fires, hurricanes, and tornadoes can happen at any time, especially during the summer. No matter where you live, you should be aware of the possible natural disasters in your area and plan accordingly. Prepare for these natural disasters by considering the following tax tips:

    • Update your emergency plan.
       
    • Create electronic copies of all important documents.
       
    • Document your valuables. Documenting these items ahead of time makes it easier to claim insurance and tax benefits if a disaster strikes.
       
    • You can call the IRS at 866-562-5227 with any natural disaster-related questions. They can provide copies of previous tax returns, order transcripts showing most line items, and more.
       
    • Net personal, casualty, and theft losses may be deductible if they're attributable to a federally declared disaster.
    The IRS also has a video all about preparing for disasters. In it, it includes more tax tips for planning ahead.

    * 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 professional.


    Tip adapted from IRS.gov[9]


    Golf Tip

    Golfer

    Don't Accelerate When Putting


    Many golf instructors teach novice (and advanced) golfers to accelerate when putting, meaning that the front of their swing has more power than the back of their swing. While this might work well in some situations; for example, when you're in a setup that requires two putts, not accelerating might be a better bet. 

    Instead, try to let the length of your backswing dictate the length of the front of your swing. To practice this, try just moving the club in a constant pace, almost like a pendulum. The momentum of this constant pace should be the same throughout the swing.

    Now, try it during a putt. You might notice that you're able to be more consistent, which sets you up for success for your second putt. It almost feels like instead of hitting the golf ball, the ball is interrupting your club's forward momentum. Hitting harder isn't always your best option, but hitting evenly might be.



    Tip adapted from Me and My Golf[10]


    Healthy Lifestyle

    Medical Cross

    The Scale Isn't Everything: More Comprehensive Ways to Measure Your Health


    We live in a world driven by data, and if you're trying to lose a few extra pounds, you might turn to the scale to watch those numbers drop. But the scale doesn't tell the full story. Neither do stats like BMI (body mass index) because these calculations don't consider muscle mass, water weight, or other fluctuations.

    Luckily, there are many other ways to measure your health. Put the scale away for a little while, and try these techniques to focus on your overall health rather than just a number:

    • Keep a journal and track your healthy habits, such as working out or eating veggies with every meal. Celebrate these small victories!
       
    • Take progress photos and compare them throughout your journey. Take your photos in the same pose, wearing the same outfit, at the same time every week (preferably in the morning before you've had breakfast).
       
    • Check in on other parts of your health, such as your energy levels, skin, tummy health, and more. Developing a healthy routine does so much more for your body than just lower the number on the scale. 

    These are just a few of the ways you can check in with yourself on your fitness and wellness journey without the scale. 


    Tip adapted from Daily Burn[11]

    Green Living

    Leaf

    Supporting Environmentally Friendly Companies

    Our purchases are our vote, which is why many people choose to support environmentally conscious companies to share the green love. Here is a list of some of the biggest companies in the world that are choosing to be green in 2019:
    • IKEA - The Swedish furniture manufacturer is taking steps to be environmentally friendly in multiple ways, including sourcing nearly half their wood from sustainable foresters, all their cotton from Better Cotton farms, and having solar panels powering their stores.
       
    • Allergan - Allergan is the parent company of many cosmetic brands, including Botox. They've taken great strides to reduce water and energy consumption, waste, and emissions. In 2016, they won the EPA's Energy STAR award for the 5th time.
       
    • Seventh Generation - Seventh Generation creates environmentally friendly household cleaners and other products. Not only has Seventh Generation done their part, but they've also pressured other brands to do the same. 

     

    Tip adapted from Virgin[12]
     

    Share the Wealth of Knowledge!

     

    Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!

     

    Gray 

    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] www.wsj.com/market-data

    [2] quotes.wsj.com/index/XX/990300/historical-prices

    [3] www.cnn.com/2019/08/23/business/china-tariff-products-soybeans-oil/index.html

    [4] www.marketwatch.com/story/trump-says-us-tariffs-will-increase-on-chinese-goods-2019-08-23

    [5] www.marketwatch.com/story/powell-says-fed-carefully-watching-developments-and-will-act-as-appropriate-2019-08-23-10103027

    [6] www.conference-board.org/data/bcicountry.cfm?cid=1

    [7] www.cnbc.com/2019/08/20/investing-in-the-strange-negative-yield-world-its-very-hard-to-wrap-your-arms-around.html

    [8] cooking.nytimes.com/recipes/2653-basic-pesto 

    [9] www.irs.gov/newsroom/all-taxpayers-should-plan-ahead-for-natural-disasters 

    [10] youtu.be/De9DgJ3qKdM 

    [11] dailyburn.com/life/health/weight-loss-success-non-scale-victories/ 

    [12] www.virgin.com/virgin-unite/10-global-companies-are-environmentally-friendly

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