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The Northern Star Newsletter 8/22/19 - Equities Face Some Volatility


Message from Jon

Market Update:

If you're watching Yield Curve data...these data points are equally important if not more relevant!

We have been hearing a lot of information lately on the yield curve and its indication of a recession. I thought it might be useful to touch once again on this topic to give insight into what the numbers say and what our thoughts on the conditions are.

Our position is that, while we agree that in the past, an inverted yield curve is associated with a recession, it is certainly not the only data that will be present when a recession is short to arrive or even on the doorstep.

In an article published on July 16th and updated on August 15th, Chief US economist, Lara Rhame speaks to the value of more relevant measurements of an impending recession-initial Jobless Claims and Consumer Confidence being top on her list. "Should claims rise to 275,000 over several months, I would become more pessimistic about our growth outlook." We the US have become a consumer-based economy rather than a past version of ourselves when we led the world in manufacturing. As such, Rhame indicates why she puts so high a value on the consumer confidence numbers. "The consumer is the single most important sector for the economy, making up 69% of GDP." 1 At present, we are at highs in confidence.

We have solid GDP numbers, highs in un-employment, and earnings that are beating expectations. Locally we are seeing help wanted signs everywhere and in almost every segment of our economy.

Let's play devil's advocate for a second anyway to see what the numbers say according to Marshall Shield, Chief Strategist at STIR Research, when a recession hits and the FED adjusts the rates-just for those cynics in the audience.

  • STIR Research LLC, analyzed the past 65 years of what happened to the market after a first rate cut following a period of stable or rising rates. 16 cases were found.2
  • Double digit gains follow the first rate cut when the secular trend is bullish. Gains of 6 and 11% are the norms regardless of Bullish or Bearish trends in the first 3-6 months.2
  • Gains are 3 times larger in secular bull markets than in secular bears.2
  • Would a recession change the outlook at all? NO.2
  • In 9 cases out of the 16, a recession followed the following year and yet 28% and 36% were the gains during recessions while 16% and 36% in bullish years.2

What does the data say?

At the moment, we are to remain in equities. Not saying the Yield Curve is irrelevant, because it does signal that shorter-term bonds offer better yields than longer-term bonds, but as far as a reason to hide from the markets...it's not enough of a reason by itself.3 What we are doing is paying close attention to a number of data points that will likely lead us to re-examine our approach sometime between 2020-2022, if I am a betting man. We are in a high volatility environment that can make one feel enough anxiety to choke a horse, but that comes with the territory, I guess.

A secular bear market-one that has been present since spring of 2000, in my opinion-can indeed have cyclical bull and bear periods that will undoubtedly cause investors to grow weary and chase returns. The reality is that during bear periods, you have elevated amounts of volatility and motion but very little advancement. Frustrating but true.

Can this time be different than the past 65 years? ...sure. Will it, I have no idea, but I am willing to bet that what we base everything on today is likely to change by year's end, so staying in the moment is the best approach for now.


Till we speak again, enjoy your week! 




  1. https://fsinvestments.com/perspectives/articles/recession-indicators-initial-jobless-claims-consumer-confidence-lara-rhame 
  2. http://proactiveadvisormagazine.com/rate-cuts-in-secular-bull-markets-are-extremely-bullish 
  3. https://nsinvest.com/recession-obsession/

Equities Face Some Volatility


The Week on Wall Street
U.S. stock indices saw significant ups and downs last week, with traders looking for economic cues from Treasury yields and also developments in the tariff fight between the U.S. and China.

The S&P 500 lost 1.03% on the week; the Dow Jones Industrial Average and Nasdaq Composite respectively declined 1.53% and 0.79%. Overseas shares also retreated: the MSCI EAFE index lost 2.34%.[1][2]

Attention on the Bond Market
Wednesday, the yield of the 2-year Treasury bond briefly exceeded that of the 10-year Treasury bond. When this circumstance occurs, it signals that institutional investors are less confident about the near-term economy. That view is not uniform. Asked whether the U.S. was on the verge of an economic slowdown, former Federal Reserve Chair Janet Yellen told Fox Business "the answer is most likely no," noting that the economy "has enough strength" to avoid one. 

The demand for bonds has definitely pushed prices for 10-year and 30-year Treasuries higher, and their yields are now lower (bond yields usually fall as bond prices rise). The 30-year Treasury yield hit a historic low last week.[3][4]

Some China Tariffs Postponed
Last week, the Office of the U.S. Trade Representative announced that about half the Chinese imports slated to be taxed with 10% tariffs starting September 1 would be exempt from such taxes until December 15.

The White House said that the reprieve was made with the upcoming holiday shopping season in mind, so that tariffs might have less impact on both retailers and consumers.[5] 

Final Thought
Lower interest rates on bonds are now influencing mortgages. According to mortgage reseller Freddie Mac, the average interest rate on a conventional 30-year home loan was just 3.6% last week. That compares to 3.81% roughly a month ago (July 18).[6] 

30-year and 15-year fixed rate mortgages are conventional home loans generally featuring a limit of $484,350 ($726,525 in high-cost areas) that meet the lending requirements of Fannie Mae and Freddie Mac, but they are not mortgages guaranteed or insured by any government agency. Private mortgage insurance, or PMI, is required for any conventional loan with less than a 20% down payment.

Wednesday: The minutes of the July Federal Reserve meeting and the latest existing home sales data from the National Association of Realtors.
Friday: Federal Reserve Chairman Jerome Powell delivers a speech at the Fed's annual Jackson Hole economic conference on monetary policy, and July new home sales numbers arrive from the Census Bureau.

Source: Econoday / MarketWatch Calendar, August 16, 2019
The 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.

Monday: Baidu (BIDU), Estee Lauder (EL)
Tuesday: Home Depot (HD), Medtronic (MDT), TJX Companies (TJX)
Wednesday: Analog Devices (ADI), Lowe's (LOW), Target (TGT)
Thursday: Salesforce (CRM), Intuit (INTU)

Source: Zacks, August 16, 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.


Quote Of The Week

Fountain Pen

"The way to get started is to quit talking and begin doing."

-Walt Disney

Recipe Of The Week

Fork and Knife

Homemade Vanilla Ice Cream

[1¼ quarts]
  • 2 cups heavy whipping cream
  • 2 cups half and half
  • 1¼ cups sugar
  • 3 tsp. vanilla extract
  • Sundae toppings, such as nuts, sprinkles, chocolate chips, syrup, or fresh fruit


If you're entertaining the grandkids this summer, this super-easy, homemade vanilla ice cream is sure to be a hit. Plus, you don't even need an ice cream maker! Cool down with this sweet treat.

  1. Combine all the ingredients (besides the sundae toppings) and stir until the sugar is completely dissolved.
  2. Place in a 13" x 9" baking dish in the freezer until the edges of the mixture begin to set, about 20 minutes.
  3. Take the mixture out and mix it with a hand mixer or a spoon. Mix until smooth, cover, and place back in the freezer. Freeze for about 3 more hours, beating again every 30 minutes.
  4. Scoop and top with your favorite sundae flavors!

Recipe adapted from Taste of Home[7]



Tax Tips


Selling Your Car or Buying From a Private Seller? Here are the Tax Tips You Should Know

Buying a new car is an exciting purchase. If you are buying your next vehicle from a private seller rather than a dealership or selling a used car to an individual, there are a few tax considerations you should know. The first is that if you are selling your car for less than you paid for it, you likely won't have to pay sales tax on the sale. This is because the IRS considers selling a used car for less than you paid a capital loss. But in contrast, if you are selling your car for more than you paid (like if it's a classic car you've restored and it's increased in value), you may have to pay sales tax. 

If you're buying a car from a private seller, you'll have to pay sales tax. But this sales tax doesn't go to the seller, it goes to the DMV. This sales tax is incorporated in your car's registration. 

* 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 CarGurus[8]

Golf Tip


Low and Slow to Get on the Green

When you're approaching the green, the common choice is to go with a pitching wedge to hit the ball high near the flag. But this might not actually be the best choice, depending on your game. If you focus too much on the actual flag, you risk overshooting it, and this pitching shot is hard to do consistently well.

Another option to this shot is to hit it low and closer rather than pitching it high and far. Using a 7-iron or similar, aim for a landing zone a few feet short of the flag rather than trying to get right to the flag. This way, the ball spends more time on the ground, and you have less risk overshooting it. Even if you get this low shot a little wrong, you'll still end up on the green, and the ball will still roll toward the hole. It's much easier to do consistently.

Tip adapted from Me and My Golf[9]

Healthy Lifestyle

Medical Cross

Stretches to Complement Your Workout

If you workout regularly, you're already doing something to take care of your body. But as important as exercise is, it's equally important to help your body recover. Here are some great stretches that will open up your hips, stretch out your hamstrings, and give your quads some love after a long run or lifting session:

  • Hamstring stretch - Lay on the ground with your legs straight up. Gently pull one leg toward you until you feel pressure. Repeat with the other leg.
  • Figure Four - Sit on the ground with your legs bent and knees up. Gently rest one ankle on the quad of the opposite leg. If this is too much, straighten one leg on the floor and rest your ankle on your thigh while it's on the ground. Here's a video demonstration.
  • Child's Pose - Child's pose is a common yoga movement, but it can also be a great stretch. Either hold the regular child's pose with your knees about hip width apart or intensify the stretch by bringing your knees out wider. You should feel it in your inner thighs, groin, and hips.

Tip adapted from Runner's World[10]

Green Living


GMO: What Does it Really Mean?

GMO stands for "genetically-modified organism." For plants and animals, this means that their genetic material has been changed in ways that don't occur naturally (for example, a genetically-engineered tomato might be redder than a non-GMO tomato). In order for plants and animals to be considered "non-GMO," they must meet a common standard set forth by the U.S. Department of Agriculture. 

For processed foods, eggs, and dairy products, there is currently no common standard that regulates GMO claims, so for these types of foods, look for verification through third parties, like The Non-GMO Project.

Tip adapted from Greener Choices[11]

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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.

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[1] www.wsj.com/market-data

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

[3] www.cnbc.com/2019/08/15/us-bonds-30-year-treasury-yield-falls-below-2percent-for-first-time-ever.html

[4] www.foxbusiness.com/economy/janet-yellen-to-wall-street-a-recession-is-unlikely

[5] www.reuters.com/article/us-usa-trade-china-tariffs/trump-delays-tariffs-on-chinese-cellphones-laptops-toys-markets-jump-idUSKCN1V31CX

[6] www.freddiemac.com/pmms/archive.html

[7] www.tasteofhome.com/recipes/homemade-vanilla-ice-cream/ 

[8] www.cargurus.com/Cars/articles/how_do_taxes_work_on_private_car_sales 

[9] youtu.be/De9DgJ3qKdM 

[10] www.runnersworld.com/uk/health/a760484/the-rw-complete-guide-to-stretching-for-runners/ 

[11] greenerchoices.org/2017/03/07/non-gmo-mean/

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