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The Northern Star Newsletter 3/29/19 - Treasury Yields Prompt Concerns

Message from Jon

Market Update:

This weekend, the country learned that the infamous Mueller report exonerated President Trump of any collusion with Russia to influence the 2016 elections.1On Monday, the markets seem to be quiet while it digests the report and tries to figure out what, if any, market impact there is. At this point, the indicators are saying that we are back into (barely) a bullish trend in the market sentiment.

That being said, how long will this last? My opinion is probably 8-12 months...MAYBE, before we could see again the indications that we should retrace our steps to higher ground. This last quarter and into the first quarter, we had quite a jolt to investor's systems and seemed to test their resolve a bit. There seemed like "historic" reports on a daily frequency, almost, and enough mixed signals, false positives, and whiplash to last me the rest of my career, I think! 2

Ask yourself the question, "if I was concerned about a 6-8% loss in my investment portfolio but still think I am okay taking risk, am I correct or just kidding myself?" Liquid courage can take many shapes, although it is normally synonymous with a drunk person becoming emboldened in their actions while their inhibitions are lower. Just like a bar, many investors become emboldened when the market rebounds or rallies and decide (often incorrectly) to raise their risk levels and chase the return. Do not be that person nobody likes in the bar...because when you sober up, you will come to realize your mistaken behavior and regrets are soon to follow. 

Unusual Activity:

Last year's 4th quarter resulted in a historical quarter and an unusual amount of investment movements for us. Normally whenever the markets lose over 20%, we have an official bear market situation. This situation would historically be expected to last 14 months on average.3

 We had a loss in the S&P 500 from peak to trough of 20.20% (Sept 21st to Dec 26th).4 This should have continued for longer than it did and gone deeper than it did. In my opinion, we should still be speaking about losses, decline, and bear market condition, and yet, we are not.

 Unusual conditions call for patience, acceptance, and focus.

  • Patience: investing is a marathon, not a sprint. We have to understand that we do not always have the ability to see far enough out to develop a comfort with a particular market sentiment since it seems to change frequently. We must wait to see what the market gives us and go from there-and that requires an understated amount of patience!
  • Acceptance is necessary that we will not always see an increase in our investment values, yet we must be willing to continue the path and action forward to be successful long-term. Investors need to accept what they cannot control and pay attention to what they can.
  • Focus on what we can control, our attitudes, and our actions. Remember what really matters in the end: achieving your goals and not the "how" behind achieving said goals. I have never met a client who, at retirement, tried to find out how much of their nest-egg was comprised of returns and how much was what they put in, because it simply does not matter. It's about the total amount and whether it will be enough that matters.

Will 2019 be a profitable year? Maybe. A lot can change in 90 days in the markets, let alone 9 months!


Till we speak again, enjoy March Madness; it has dual meaning this year!




  1. https://www.ft.com/content/42c1913e-4e48-11e9-b401-8d9ef1626294 
  2. https://www.cnbc.com/2018/12/31/the-sp-500-will-make-history-when-it-ends-the-year-with-a-loss.html 
  3. bear market pdf 
  4. https://stockcharts.com/h-sc/ui

Treasury Yields Prompt Concerns


The Week on Wall Street
Friday, the yield of the 3-month Treasury bill exceeded the yield of the 10-year Treasury note for the first time in 12 years. For some analysts, this "inverted yield curve" may imply a short-term lessening of confidence. (Treasury yields move inversely to Treasury prices.)[1]

As a result, the S&P 500 ended the week 0.94% lower. The Nasdaq Composite fell 0.80%, and the Dow Industrials lost 1.19%.[2][3][4]

In contrast, the MSCI EAFE index following international stocks rose, gaining 0.52% for the week.[5]

Fed Sees No Hikes in 2019
On Wednesday, the Federal Reserve held interest rates steady, but lowered its estimate of 2019 economic growth to 2.1%.

Last December, the central bank forecast two rate hikes in 2019. It now expects to leave rates unchanged this year, with one quarter-point hike projected for 2020.

This pivot may acknowledge a slight change in economic conditions. The Fed's latest policy statement noted that the "growth of economic activity has slowed from its solid rate in the fourth quarter."[6]

Oil Hovers Near $60
At Friday's closing bell, a barrel of West Texas Intermediate (WTI) crude oil was valued at $58.85 on the New York Mercantile Exchange (NYMEX). Its value briefly climbed to $60 earlier in the week.

Month-over-month, the price of WTI crude has risen nearly 5%. Historically, higher oil prices can have a significant impact on retail gasoline prices.[7]

What's Next
A U.S. delegation is scheduled to accompany Treasury Secretary Steven Mnuchin to China this week for further trade negotiations. Finally, Brexit will not occur this Friday, as the European Union has extended the United Kingdom's deadline in response to Prime Minister Theresa May's request.[8][9]

Tuesday: The Conference Board's latest reading on consumer confidence.
Thursday: February pending home sales, and the federal government's second estimate of fourth-quarter Gross Domestic Product (GDP).
Friday: Reports on consumer spending and new home sales, and March's final University of Michigan consumer sentiment index, another measure of consumer confidence levels.

Source: Econoday / MarketWatch Calendar, March 22, 2019
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 release of data may be delayed without notice for a variety of reasons, including the shutdown of the government agency or change at the private institution that handles the material.

Monday: Winnebago (WGO)
Tuesday: KB Home (KBH)
Wednesday: Lennar (LEN), Lululemon Athletica (LULU), Paychex (PAYX)
Thursday: Accenture (ACN)
Friday: Blackberry (BB), CarMax (KMX)

Source: Morningstar.com, March 22, 2019
Companies 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.

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.

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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.

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[1] www.bloomberg.com/news/articles/2019-03-22/u-s-treasury-yield-curve-inverts-for-first-time-since-2007

[2] quotes.wsj.com/index/SPX

[3] quotes.wsj.com/index/NASDAQ

[4] quotes.wsj.com/index/DJIA

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

[6] www.cbsnews.com/news/fed-rate-hikes-none-in-2019-federal-reserve-projects-no-rate-hikes-slower-growth-this-year

[7] money.cnn.com/data/commodities

[8] www.cnbc.com/2019/03/20/trump-says-china-tariffs-could-stay-in-place-amid-trade-deal-talks.html

[9] www.nytimes.com/2019/03/21/world/europe/brexit-extension-eu-uk.html

[10] www.simplyrecipes.com/recipes/tomato_and_bread_soup_pappa_al_pomodoro/ 

[11] www.irs.gov/newsroom/irs-issues-standard-mileage-rates-for-2019

[12] www.pga.com/golf-instruction/golf-tip-day/hybrids-and-irons/handy-sandy

[13] amazingwellnessmag.com/departments/buying-using-collagen

[14] leadersinenergy.org/tips-and-tricks-for-clean-green-business-operations/

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