facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause

The Northern Star 07/18/18 Special Report: Quarterly Update


Message for Jon

What if this time is different?
The good and bad about what I do is that I am consuming so much data and so many materials on a daily basis that I sometimes get oversaturated. I run the risk of becoming biased towards a principal, idea, methodology, and philosophy to the point that it contaminates my thinking.
As a result, I am always aware of what I am reading and more importantly the sources so that I remain on stable, solid footing when making decisions on behalf of my clients.
The one thing I can bet on though is the consistency of change throughout time. Progress moves forward and is evident in the transitions from horse and buggies to cars, hand-written letters to email, and corded, rotary phones to wireless phones to our modern smartphones. Change has always remainedthe one constant through time, and if you do not become comfortable with change, you will ultimately be left behind as a result.  
Changes happen in all realms both physical and metaphysical. For example, the buy-n-hold camp grew up investing during our last bull market condition (the 1980s through 2000) when all the academic material began to surface "proving" that active rebalancing was not enhancing the returns.  As a result,the majority of the now retiree investors grew up believing that the market was efficient and therefore one could never outperform it.
Bull markets and bear markets being different made sense to me. I have come to realize the differences are more important than what many realize since they define philosophy, strategy, deployment of strategy, and maintenance of expectations as a result. Just like the investors during the '80s, the 40-year-old investors will come to depend on active management now as the buy-n-hold investors did back then. They, too will come to realize that change is constant and you must remain flexible in your philosophy to finish the game strong.
The condition of the current market seems to be over-valued; however, according to Crestmont Research, there is a shift underway that will likely cause the criteria for market valuations to change. As a result, although we will see an underperformance take place in the coming years, we may see a correction rather than a crash. We may see a lower level of P/E and EPS as a result of a decline in historical GDP growth from 3.3% to 2%.It is likely that the next century will look nothing like the one that preceded it.
At Summit, we have continued to evolve over nearly twodecades. We have gone from a commission-based business model to a fee-based one. We have gone from a buy-and-hold approach to a sophisticated active management approach. We have added technology, staff, software and completely updated the manner in which we help our clients obtain their financial summit's over the years as well.
We have always embraced change, and the next wave of change in the markets will undoubtedly require more of it.
You can read the article on the BIG SHIFT here.
Till we speak again, enjoy this mild weather!


Last week, trade tensions with China lessened somewhat, while the 2nd quarter corporate earnings season started with mixed results. Against this backdrop, domestic stocks experienced sizable growth. By market's close on Friday, July 13, the S&P 500 was above 2,800 for the first time since February 1. Meanwhile, the Dow was above 25,000, and the NASDAQ had hit a new record.[1] For the week, the S&P 500 gained 1.50%, the Dow added 2.30%, and the NASDAQ was up 1.79%.[2] International stocks in the MSCI EAFE increased as well by 0.16%.[3]
We are now two weeks into July, which means the 1st half of 2018 is behind us. As we analyze what may be ahead in the markets, we'll also strive to understand what has happened so far this year.
2nd Quarter Update: Key Details to Know
  • Domestic indexes had mixed results.
At the end of the 1st quarter, the NASDAQ was up by 2.3%, while both the S&P 500 and Dow were in negative territory for the year.[4] Fast-forward to the 2nd quarter's end, and the Dow was still down with a 1.8% loss between January and June. During the same time period, the S&P 500 gained 1.7% and the NASDAQ added 8.8%.[5]  
  • Trade tension persisted.
Global trade was a major topic throughout the 2nd quarter. In April, the U.S. proposed $50 billion of tariffs on Chinese products - and China announced its own tariffs in response.[6] The trade tension also extended to Canada, the EU, and Mexico as the U.S. added tariffs to steel and aluminum imports from these countries.[7] While this situation attracted significant news coverage, investors were able to put much of their focus on economic details - such as corporate earnings - instead.[8]
  • Interest rates rose.
In June, the Federal Reserve increased interest rates by 0.25%, which marks the 2nd rate hike so far this year. The Fed gave an optimistic view of the economy and said that two more increases could be ahead in 2018.[9]
  • The labor market stayed strong. 
In May, unemployment hit its lowest level since 2000.[10] June's labor report showed unemployment increasing to 4% but for a positive reason: more people reentering the job market. The latest report also showed better-than-expected job growth.[11] Wage increases missed expectations and still have room to expand more quickly.[12] At the same time, their steady pace should help keep inflation in check and interest rate increases continue gradually.[13]
Looking Ahead 
More 2nd-quarter data is still to come. Gross Domestic Product may have increased by as much as 5% annually between April and June. That growth rate would be over twice what we experienced in the 1st quarter.[14] We are also at the very beginning of 2nd-quarter corporate earnings season, and analysts predict earnings growth of 20%.[15]
Moving into the 3rd quarter, trade will likely continue to be a hot topic, but it's far from being the only detail worth following. As we gain more information about what happened in the 2nd quarter, we will combine those perspectives with the performance we're experiencing now. In the meantime, if you have any questions, we're here to talk.
ECONOMIC CALENDARMonday: Retail SalesTuesday: Industrial Production, Housing Market IndexWednesday: Housing StartsThursday: Jobless Claims

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.

Check the background of this firm/advisor on FINRA’s BrokerCheck.