Northern Star Newsletter 07/07/2017
Message from Jon
According to Dr. Van Tharp, the current market status is "Bull Quiet," meaning that we are still in the positive trend and should remain the course of investments in equities for the time being. Having leveled off from the strong bullish sentiment over the past several weeks, we are seeing volatility creeping its way back into the markets. This is nothing out of the norm for summer investing periods. Exposure to headline risks increases when the volume of the markets decrease during the summer, lending to increased swings.
Is any of this actionable, should we DO anything about it? NO.
Changing gears a bit, I occasionally come across an article that I find of interest as I read. Sometimes it is of the more industry type and sometimes it is more technical in nature. This time it was an interview with a retired, award-winning portfolio manager, Bob Rodriguez. I found interest in his remarks about the active managers and how the markets have been functioning. To use his words "Given that I am no longer involved professionally in managing money, I believe the standards in the industry are being compromised; monetary policy has so totally distorted the capital markets. You are now into the eighth year of a period that is unprecedented in the likes of human history."
"Thus, since 2007, indexing or passive activities have risen from approximately 7% to 9% of total managed assets to almost 40%. As you shift assets from active managers to passive managers, they buy an index. The index is capital weighed, which means more and more money is going into fewer and fewer stocks. We've seen this act before. If you didn't own the nifty 50 stocks in the early 1970s, you underperformed and, thus, money continued to go into them. If you were a growth stock manager in 1998-1999 and you were not buying "net" stocks, you underperformed and were fired. More and more money went into fewer and fewer stocks. Today you have a similar case with the FANG stocks. More and more money is being deployed into a narrower and narrower area. In each case, this trend did not end well." I have attached his full article at the bottom should you feel the need to read it, but suffice it to say, he makes several bold statements and remarks that are both enlightening and insightful.
Right now, the fundamental analysis of the markets is showing a rising risk level with a status of overbought. This status is being ignored by investors who are afraid or impatient or anxious about missing the boat but are completely ignoring the cardinal rule of investing...BUY LOW AND SELL HIGH! They are buying high and hoping to sell higher...yeah, good luck with that.
Right now, the technical analysis is saying there is no evidence that we should be pulling back or going to higher, more risk averse positions. The supply vs. demand ratio firmly favors demand. The two dominant asset classes are domestic and international equities and by a wide margin. So what do you do?
Since fundamental analysis is more of a long-term view and technical analysis is more of a present view, we will stay the present course and remain invested. Why? Because this present trend could last several more months OR it could reverse a couple of weeks from today - but until we have evidence that the trend has reversed, we stay the course!
Till we speak again, enjoy your weekend!
Market Volatility Returns
WEEKLY UPDATE - JULY 3, 2017
As Q2 ended, markets hit a six-week volatility high.While the tech sector declined during the week, consumer discretionary and industrial sectors drove stocks higher on Friday. On Friday, the tech-heavy NASDAQ slumped 1.99%. The S&P fell 0.61% and the DOW dropped 0.21%. Globally, the MSCI EAFE declined 0.32%, and European markets and most of the Asian markets finished the week down.
The Fed reported during the week that the largest U.S. banks passed the stress test evaluating their financial soundness. The test results indicate that banks have the capital structures to withstand difficult economic times. In addition, the results gave banks a green light to pay shareholders dividends and engage in share buybacks.
Other Market News
- Q1 Gross Domestic Product Numbers Go Up: The Q1 GDP estimate improved to 1.4% on an annualized basis. Previous estimates were 1.2% and 0.7%. Consumer spending was also revised upward to 1.1% from previous estimates of 0.6% and 0.3%.
- Durable Goods Orders Fall: Weakening commercial aircraft sales contributed to a 1.1% fall in May's durable goods orders. Core capital goods also fell 0.2%, surprising expectations for a 0.5% increase.
- Consumer Confidence and Sentiment Rise: Consumer confidence exceeded expectations by 2 points in June as individuals who reported that jobs are difficult to find fell by 0.3%. The Consumer Sentiment Index rebounded in the second half of June to 95.1, but remains less than May's 97.1 reading.
- Pending Home Sales Weaken: Despite an expected 0.5% gain, pending home sales dropped 0.8% in May. The 3-month run of slowing sales suggests a weakening housing sector.
- Home Price Index Softens: The Home Price Index fell from an annual increase of 5.9% to 5.7% year-over-year. This index reflects monthly changes in housing prices over 20 metropolitan regions. San Francisco, Boston, and Cleveland all reported lower housing price data.
- Oil Prices Climb: Although oil prices ended last Friday at $46.04 a barrel, oil closed the first half of the year down 14%, its weakest performance since 1998. Ongoing concerns about an oversupplied market continue to influence investors despite a dip in U.S. production slowing the bearish outlook.
- Import/Export Data Modestly Brightens: Imported goods dropped to $193 billion and exports improved to $127.1 billion in May. While the $65.9 billion difference remains significant, this quarter's goods gap is averaging $66.5 billion a month.
- The Dollar Drops: Though marginally recovering on Friday, the U.S. dollar reported its largest quarterly decline in almost 7 years against other major currencies.
The Week Ahead
U.S. markets close on Tuesday for the July 4th holiday. During the shortened trading week, the markets will look at manufacturing indices, motor vehicle sales, and employment data reports. As the data becomes available, investors will focus on how Q2 numbers roll out and what might be developing for the rest of the year.
As you reflect on this data and the week ahead, feel free to contact us should questions arise. We are here to serve your complete financial goals and help you navigate your investing choices.
ECONOMIC CALENDAR Monday: ISM Manufacturing Index, PMI Manufacturing Index, Motor Vehicle Sales, Construction Spending
Wednesday: Factory Orders
Thursday: ADP Employment Report, ISM Non-Mfg Index
Friday: Employment Situation 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.
Protect Your EFIN from Fraud*
Preventing identity theft and protecting accounts filed with the IRS is a year-round responsibility for taxpayers. Thieves commonly break into tax professionals' online accounts to steal taxpayers' Electronic Filing Identification Number (EFIN). Fortunately, you can take steps to manage your account and monitor suspicious activity throughout the year.
To check your EFIN records:
1. Register for the IRS e-services. If you've not yet registered with IRS e-services, then you'll need to do so before checking your EFIN records. You can create an account through the IRS website.
2. Check the EFIN records associated with your account. Log in to your e-services account. From there, you can opt to view your "EFIN Status," which updates weekly and lists the number of tax returns associated with your account.
3. Report suspicious activity. Promptly contact the IRS if you see discrepancies between your listed file returns and your personal records. You can report your concern by calling the IRS e-Help Desk at 866-255-0654.
Other details may apply, and you can find more information on the IRS website. * This information is not intended to be a substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax advisor.
Tip courtesy of IRS.gov
Avoid Chunking Your Chip
Chunking your chip most often happens when golfers try to avoid swinging their club too hard. They stand too far away from the ball, take a full swing, and try to slow the impact at the last moment. The result: a chunked chip. Try moving closer to the ball, making your shaft vertical so the clubhead is on its toe.
If you find yourself chunking the ball, follow these steps to improve your stance and swing.
Step 1:Stand directly across from the ball, about 10 inches away. You'll want to step in with your back foot.
Step 2:Identify your target and aim your clubface directly at it.
Step 3:Settle your weight forward by stepping in with your front foot; keep your weight shifted as such throughout your swing.
Step 4:Make sure you lean the shaft slightly toward the target. From there, brush back and through.
Tip courtesy ofGolf Digest
|Control Bruising with Self-Care|
Bruises result when blood vessels break and leak into tissues near the surface of your skin. The often black-and-blue bruise will stay visible and change colors until it fully heals. Here are some ways that you can care for any bruises once they happen.
Tip courtesy ofMayo Clinic
|Alternative Ways to Use Baking Soda|
The baking soda you store in your cabinets is more helpful than you may think. As a chemical compound, sodium bicarbonate is a great pH neutralizer and buffer, making it helpful for a variety of home and personal care needs. As many beauty and cleaning products can contain harmful chemicals, swapping some of these items with baking soda can help you minimize the toxins in your home. Here are some easy ways to use baking soda beyond baking.
Tip courtesy ofCare2.com
|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 servesas a benchmark ofthe performance inmajor international equity markets as represented by21 major MSCI indices from Europe, Australia andSoutheast Asia.
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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