Northern Star Newsletter 03/08/2016
Message from Jon
With this rally, we have got to be out of the woods?!?
It is "normal market mechanics" to see a short-term rally come on the heels of a significant market correction. From it's high point in May of 2015, the market had fallen over 17% before catching hold and seeing a rally.
Jan 25th, our indicators demonstrated a change from favoring stocks to favoring bonds for the first time since Nov of 2007. Since this change, we continue to see a weakening in the equities and strengthening in Gold and Bonds. On the 11th of Feb, we saw the market catch and rally back upwards.
On this rally, all surface signs showed things we getting better and investors began to return. However, if you knew your history and looked closer, you could see that not all things were sound and sunny in the kingdom.
It is normal to see a short-term rally followed by an even further decline. I hesitate to use the word "bigger" since it may not be. I.E. If we decline 17.5% from it's top and recover 70% before declining another 10-15% then one could argue that the 2nd decline wasn't bigger but I would argue from top to bottom, it was significant.
When will this happen is anyone's guess and the majority would be wrong, including me. However, remaining cautious and treading lightly would be the correct play right now.
- Short-term Indicator is at present: Neutral
- Mid-term indicator is favoring bonds with a score of 23.8% followed closely by cash at 22.6% and then equities with a 21.6%. This suggests that the recent rally does not have the breadth or significant to be sustainable nor to be very robust in nature.
- Bonds were ranked as high as 24% and have receded as of late but that should not be a surprise to anyone since the equities have shown a rally from 21.5% to almost 22% and receded back down to 21.6%
Client Appreciation Event:
Our Summer Cookout is on the horizon. We are nailing down the date and location and when that is finished, we will broadcast it and you can save the date! As you know, this is a family event and grandparent event so don't be shy about including those loved ones to share in the festivities.
Till we speak again, enjoy this beautiful weather!
Jon
Stocks Rally for Third Week
WEEKLY UPDATE - MARCH 7, 2016
Markets closed out a third week of gains, putting the Dow at a two-month high and erasing much of the year's losses. Higher oil prices and an upbeat February jobs report contributed to the rally.[1] For the week, the S&P 500 increased 2.67%, the Dow added 2.20%, and the NASDAQ grew 2.76%.[2]
Investors cheered at a reasonably solid jobs report. The February Employment Situation report showed that the economy gained 242,000 new jobs last month. That's the 65th straight month of job increases, and the trend shows that the labor market continues to improve.[3] The headline unemployment rate remained unchanged at 4.9%; however, the labor force participation rate rose slightly to 62.9% as a greater percentage of Americans joined the labor market by working or actively looking for jobs. A declining participation rate had worried economists, and an uptick could indicate that discouraged workers are returning to the search.[4]
Source: BLS
The report showed that the biggest job gains were in healthcare, retail, and hospitality. The construction industry also added thousands of new jobs, which is a sign that builders expect economic demand to pick up in the coming months. Unsurprisingly, the mining sector was the biggest job loser.[5]
However, the news wasn't all rosy.
Digging deeper into the data, we also see that wages slipped last month. Average hourly wages are up just 2.2% from 12 months ago, slower than the 2.5% rate we have seen recently and well below target rates of 3-4%. Though the decline might be a seasonal issue or involve data technicalities, it could be a sign that jobs growth isn't being reflected in wages. It could also mean that employers are offering incentives like benefits or vacation time that aren't reflected in income.[6]
Overall, the report is a mixed bag for the Federal Reserve, though the data shows that there isn't a slowdown in the labor market and will help tamp down fears of a recession. Is a March interest rate hike in play? Realistically, the data probably isn't solid enough for the Fed, which is looking for positive economic data to counterbalance global concerns and the recent market declines. Current bets on the next hike are all over the place. Some economists believe an April or June hike is likely while some futures traders are placing bets on a November hike.[7]
This week's economic calendar is thin, highlighted by trade data on Friday and a speech by Federal Reserve Vice President Stanley Fischer. Though the Fed isn't likely to raise rates at next month's meeting, Fischer may give some insight into the timing of the next rate hike. Most attention will be on presidential debates, caucuses, and the primary race.[8]
ECONOMIC CALENDAR:
Wednesday: EIA Petroleum Status Report
Thursday: Jobless Claims, Treasury Budget
Friday: International Trade
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices, and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the SPUSCIG. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
HEADLINES:
Motor vehicle sales jump in February. Sales of cars and trucks soared by 7% last month, soaring to a 15-year high for the month of February-traditionally a slow time for auto sales.[9]
U.S. factory activity slows for fifth straight month. A gauge of manufacturing activity shows that the sector contracted again in February, but the pace of decline slowed, indicating that relief may be on the horizon.[10]
Beige book shows economic activity increased. A mid-quarter indicator of U.S. economic growth showed that overall activity increased, but it varied widely by region. This mixed picture may be a headache for the Fed.[11]
Oil prices jump 10%. Benchmark oil prices logged their biggest weekly gain this year as traders digested news of falling U.S. production and possible supply freezes. West Texas Intermediate closed at $35.92 on the likelihood of lower production in the coming weeks.[12]
Tax Tips
Be On Alert for IRS Scams
With tax season underway, the IRS expects an uptick in tax-related scams. In most cases, IRS "phishing" scams are bogus phone calls and emails that claim to come from the IRS. Fraudsters use fake refunds or threats of a tax bill or audit to convince recipients to give up their personal and financial information. They then use it to steal a victim's money or identity. The IRS has the following tips:
- Fraudsters may know a lot about you when they call and may be able to spoof your caller ID to show that they are calling from an official number. Don't be fooled.
- If you don't answer the phone, they may leave an urgent callback request.
- If you receive a call that you think might be from the IRS, take down the agent's information and call them back at the official IRS hotline: 1-800-829-1040.
Remember, the IRS will never:
- Call you without mailing an official notice first.
- Demand that you immediately pay your taxes over the phone.
- Take a debit or credit card number over the phone.
- Threaten to call law enforcement or immigration services to arrest you for failure to pay.
If you believe that you (or someone you know) have been the victim of tax fraud, you can report the incident to TIGTA at 1-800-366-4484 or at www.tigta.gov. You can also contact the Federal Trade Commission at FTC.gov. Use their "FTC Complaint Assistant" to report the scam. Please add "IRS Telephone Scam" to the comments of your complaint.
If you are worried about owing money to the IRS, contact a qualified tax expert or call the IRS directly at 1-800-829-1040.
Tip courtesy of IRS.gov[14]
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.
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 indexes from Europe, Australia and Southeast Asia.
The S&P U.S. Investment Grade Corporate Bond Index contains U.S.- and foreign-issued investment-grade corporate bonds denominated in U.S. dollars.
The SPUSCIG launched on April 09, 2013. All information for an index prior to its Launch Date is back-tested, based on the methodology that was in effect on the Launch Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.
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.
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 Marketing 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.
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1 http://www.cnbc.com/2016/03/04/us-markets.html
2 http://finance.yahoo.com/q/hp?s=%5EGSPC&a=01&b=29&c=2016&d=02&e=4&f=2016&g=d
http://finance.yahoo.com/q/hp?a=01&b=29&c=2016&d=02&e=4&f=2016&g=d&s=%5EDJI%2C+&ql=1
http://finance.yahoo.com/q/hp?a=01&b=29&c=2016&d=02&e=4&f=2016&g=d&s=%5EIXIC%2C+&ql=1
3 https://www.glassdoor.com/research/jobs-report-feb-2016/
4 http://www.bls.gov/news.release/empsit.nr0.htm
5 http://www.bls.gov/news.release/empsit.nr0.htm
6 https://www.glassdoor.com/research/jobs-report-feb-2016/
7 http://www.marketwatch.com/story/fed-could-hike-as-early-as-april-economists-after-jobs-report-2016-03-04
http://www.reuters.com/article/us-usa-fed-futures-idUSKCN0W61MR
8 http://www.foxbusiness.com/markets/2016/03/04/week-ahead-fed-speech-debates-and-primaries.html
9 http://www.reuters.com/article/us-usa-autos-idUSKCN0W34LC
10 http://www.foxbusiness.com/markets/2016/03/01/u-s-manufacturing-remained-in-contraction-in-february.html
11 http://www.foxbusiness.com/markets/2016/03/02/fed-u-s-economic-activity-expanded-but-conditions-mixed.html
12 http://www.marketwatch.com/story/hope-that-us-production-is-shrinking-drives-gains-for-oil-2016-03-04
13 http://www.realsimple.com/food-recipes/browse-all-recipes/last-minute-lasagna
14 https://www.irs.gov/uac/Scam-Calls-and-Emails-Using-IRS-as-Bait-Persist
15 http://www.golftipsmag.com/equipment/more-golf-equipment/its-all-in-the-grip.html
16 http://travel.aarp.org/articles-tips/articles/info-2016/health-wellness-vacations-photo.html#slide8
17 http://www.seattlepi.com/news/article/52-tips-for-living-green-1269861.php