February 11th Market Commentary

February 11, 2019
The Markets

Central banks take a turn.

At its first policy meeting of 2019, the U.S. Federal Reserve changed direction. After four rate increases in 2018, Chair Jerome Powell announced interest rates were on hold. Last week, banks in the United Kingdom, Australia, and India followed suit by either reducing rates or cautioning rate reductions were likely, reported Sam Fleming and Jamie Smyth of Financial Times.

The dovish tone of central banks owes much to slowing global growth. January’s International Monetary Fund World Economic Outlook lowered global growth estimates for 2019 and 2020. Changing expectations were fueled both by factors that slowed momentum in the second half of 2018 and by issues that pose a potential risk to continued economic growth. These included:

• The negative effects of higher tariffs
• New auto emission standards in Germany
• A slowdown in domestic demand in Italy
• Economic contraction in Turkey
• High levels of public and private debt
• Escalating trade tensions
• A no-deal British exit from the European Union
• A severe slowdown in China

These issues have had limited effect on the U.S. economy; however, global risks are affecting the performance of some U.S. companies. Financial Times explained:

The U.S. domestic economy has continued to put in a robust performance, with the number of new jobs in January coming in well ahead of Wall Street expectations and wage growth running comfortably above inflation. But corporate giants in the S&P 500 index, which generate over a third of their earnings overseas, are sounding the alarm about faltering overseas demand in markets including China, where the government has been battling against a slowdown. Smaller U.S. firms are feeling the global chill as well.”

Randall Forsyth at Barron’s reported major U.S. benchmarks finished last week higher, while the yield on 10-year U.S. Treasuries hit a 13-month low. Outside the United States, some global stock markets moved lower.

 

AT THE INTERSECTION OF ECONOMICS AND VALENTINE’S DAY…Author and illustrator Liz Fosslien has thought a lot about economics and Valentine’s Day. In ‘14 Ways an Economist Says I Love You,’ she offers this advice:

Give your loved one a nerdy Valentine and they'll be yours forever! Why? Because if you give them diamonds/cufflinks this year, anything you get them next year will fall short. Give them [a nerdy Valentine] and anything they receive next year will be a step up. It's called expectation management and is the key to a long and happy relationship.”

Fosslien suggests a variety of approaches to saying, ‘I love you,’ in economic terms. (Each is accompanied by an illustrative chart or graph at Fosslien.com/heart.) If you’re looking for a way to express the magnitude or enduring nature of your feelings, you could try:

I don’t think your great, / I think you’re fantastic, / For what you’re supplying, / My demand’s inelastic.
• The monopoly you have on my heart is all natural.
• Our risk of default is zero.
• The S&P was in the red, / But I wasn’t blue, / Because I shorted the market, / And went long on you.
• The marginal returns of spending time with you will never diminish.
• Irrational, asymmetric, / Love is so foolish. / But I could not care less, / If you’re the stock then I’m bullish.

If the dismal science of economics doesn’t deliver the level of romance your relationship requires, you can always go for the cufflinks or the diamonds.

Weekly Focus – Think About It

“Taking in the good, whenever and wherever we find it, gives us new eyes for seeing and living.”
--Krista Tippett, American journalist

* These views are those of Carson Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in 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.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.

Sources:
https://www.ft.com/content/24508f0e-2b91-11e9-88a4-c32129756dd8 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-11-19_FinancialTimes-Global_Economy-Why_Central_Bankers_Blinked-Footnote_1.pdf)
https://www.imf.org/en/Publications/WEO/Issues/2019/01/11/weo-update-january-2019
https://www.barrons.com/articles/the-global-slowdown-could-soon-hit-the-u-s-51549676496 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/02-11-19_Barrons-The_Global_Slowdown_Could_Soon_Hit_Home-Footnote_3.pdf)
https://finance.yahoo.com/news/global-markets-asia-stocks-slip-renewed-anxiety-over-005019341--finance.html
http://fosslien.com/heart/
https://www.goodreads.com/author/quotes/225253.Krista_Tippett

 

February 6th Market Commentary

February 6, 2019
The Markets

And, U.S. stock markets celebrated.

Last week, the Federal Reserve put itself on hold. The Federal Open Market Committee met on Wednesday, January 30, 2019, to discuss the state of the economy and determine policy. After the meeting, Fed Chair Jerome Powell offered a positive assessment of U.S. economic strength that was leavened with a few concerns.

We continue to expect that the American economy will grow at a solid pace in 2019, although likely slower than the very strong pace of 2018…Despite this positive outlook…Growth has slowed in some major foreign economies, particularly China and Europe. There is elevated uncertainty around several unresolved government policy issues, including Brexit, ongoing trade negotiations, and the effects from the partial government shutdown in the United States…We are now facing a somewhat contradictory picture of generally strong U.S. macroeconomic performance, alongside growing evidence of cross-currents. At such times, common sense risk management suggests patiently awaiting greater clarity…”

The Standard & Poor’s 500 Index (S&P 500) welcomed the news and delivered its best January performance since 1987, reported Reuters.

Earnings may have helped. Through the end of last week, almost one-half of companies in the S&P 500 had shared fourth quarter 2018 earnings. FactSet reported the blended year-over-year earnings growth – which includes earnings for companies that have reported and earnings estimates for companies that have not yet reported – was 12.4 percent. That’s lower than the 20-plus percent growth companies have delivered since late 2017, and it’s the fifth straight quarter of double-digit earnings growth.

There was good news to close the week, too. The Bureau of Labor Statistics reported far more jobs were created in January than analysts had anticipated, although unemployment ticked higher for the month because of the government shutdown, reported Bloomberg.

 

HERE THEY ARE: SOME OF THE BEST INVENTIONS OF 2018. Time Magazine asked its editors and correspondents to nominate inventions that are making the world smarter and more fun. The magazine whittled down the suggestions to 50 inventions it considers to be the very best. They include:

Off-the-rack bespoke clothing. If you have ever found yourself between two sizes or have had difficulty figuring out women’s swimsuit sizing, you’ll appreciate an innovation offered by a Japanese retailer. All you have to do is put on one of the company’s “…stretchy black bodysuits…covered in white dots, which enables consumers to make a ‘3-D scan’ of their bodies in the comfort of their own home, via a companion mobile app.” Once you’ve completed the scan, you can order custom-fit clothing. Next up: custom shoes.

Blankets that ease anxiety. Science suggests there is a connection between insomnia and anxiety – and we all know how important sleep is. Weighted blankets offer gentle pressure that may help soothe the nervous system and improve sleep, according to Time. Retailers suggest consumers opt for blankets with a weigh equal to 10 percent of body weight. Be forewarned. The blankets come with a hefty price tag.

A gravity-defying toolbox. If you’re looking for the perfect Valentine’s gift for a friend or family member who uses tools in tough environments, this might be a good choice. A former F-16 aircraft mechanic designed a flexible toolbox that stays on curved surfaces without slipping.

A compass that points to friends and family. If you stress over the possibility of a child or pet getting lost at a crowded event or in an unfamiliar place, you may appreciate these paired compasses. They use GPS technology, in tandem with long-wave radio frequencies, to help people keep track of each other.

Just for fun, check out the other inventions at Time.com.

Weekly Focus – Think About It

“The fact is that my brain goes out to play. That’s what creativity is – intelligence having fun.”
--Joey Reiman, American businessman

* These views are those of Carson Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in 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.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.

Sources:
https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20190130.pdf?mod=article_inline
https://www.reuters.com/article/us-usa-stocks-weekahead/fed-pause-validates-market-fears-about-u-s-growth-idUSKCN1PQ4MW
https://insight.factset.com/earnings-season-update-february-1-2019
https://www.bls.gov/news.release/empsit.nr0.htm
https://www.bloomberg.com/news/articles/2019-02-01/u-s-payrolls-rise-304-000-while-wage-gains-cool-amid-shutdown
http://time.com/5453189/how-we-chose-50-best-inventions-2018/
http://time.com/collection/best-inventions-2018/5454324/zozosuit/
http://time.com/collection/best-inventions-2018/5454469/gravity-blanket/
https://www.researchgate.net/publication/243970419_A_Systematic_Review_Assessing_Bidirectionality_between_Sleep_Disturbances_Anxiety_and_Depression
https://www.healthline.com/health/mental-health/weighted-blanket-for-anxiety-review#5
http://time.com/collection/best-inventions-2018/5454282/grypmat/
http://time.com/collection/best-inventions-2018/5454439/lynq/
https://quoteinvestigator.com/2017/03/02/fun/#note-15588-5

January 28th Market Commentary

January 28, 2019
The Markets

Like competitors who’ve completed a difficult section in an endurance race, U.S. stock investors took a breather last week.

The Standard & Poor’s 500 Index, which has gotten off to its best start since 1987, ended the week with a slight loss, while the Dow Jones Industrial Average and Nasdaq Composite finished slightly higher, reported Ben Levisohn of Barron’s.

News the U.S. government shutdown would end, albeit temporarily, appeared to be of little interest to investors. Barron’s suggested the markets’ muted response to the government reopening was in balance with its response to the shutdown – there wasn’t much of one. In fact, the S&P 500 has gained 10 percent since the federal government closed.

Despite apparent disinterest, the shutdown could negatively affect sentiment, according to Sam Fleming and Brooke Fox of Financial Times. They reported:

“The record-breaking US government shutdown is triggering ripple effects across the US economy and risks denting confidence among companies that have already been fretting about trade disputes and stock market turbulence. Shutdowns have historically had only fleeting economic effects, but Jay Powell, the Federal Reserve chairman, warned last week that a dispute that outlasts past impasses could begin to change the picture for the worse.”

Last week, stock investors weren’t all that impressed by earnings, either. Earnings indicate how profitable companies were in the previous quarter. At the end of last week, 22 percent of companies in the S&P 500 had reported earnings and, overall, they were 3 percent above estimates, according to John Butters at FactSet.

However, indications the Federal Reserve may decide to keep more Treasuries on its balance sheet than originally anticipated gave U.S. stocks a boost late in the week, reported Nick Timiraos of The Wall Street Journal. The Fed began shrinking its balance sheet in 2017 by letting Treasury and mortgage bonds mature. We’ll know more after this week’s Fed meeting.

WHAT IS GOING ON ACROSS THE POND? Last November, BBC commentator Chris Mason reflected the frustration of a nation with his report on the rapidly approaching deadline for the British exit from the European Union (EU). He said:

“So, where are we in all of this Brexit process…people like me are paid, aren’t we, to have insights and foresights and hindsight about these things, to be able to project where we’re going to go. To be quite honest, looking at things right now, I haven’t got the foggiest idea what is going to happen in the coming weeks. Is the prime minister going to get a deal with the EU? Dunno. Is she going to be able to get it through the Commons? Don’t know about that, either.”

The report went viral.

Since then, we’ve gotten some answers. The Prime Minister did indeed negotiate a deal with the EU and, on January 15, the British Parliament soundly rejected it. Heather Stewart of The Guardian reported it was, “…the heaviest parliamentary defeat of any British prime minister in the democratic era.”

The lack of an agreement in combination with a looming Brexit deadline – it’s just 9 weeks out – has created tremendous uncertainty about the future of British trade with the EU. One response has been stockpiling goods. Last week, Sarah Butler of The Guardian reported three-fourths of warehouse space in the United Kingdom is at capacity.

One intrepid entrepreneur has been marketing Brexit survival kits that provide 30 days of food rations for £295 ($380). Reuters reported the kit includes, “…60 portions of freeze-dried British favorites: Chicken Tikka, Chili Con Carne, Macaroni Cheese and Chicken Fajitas, 48 portions of dried mince and chicken, firelighter liquid, and an emergency water filter.”

As they say, necessity is the mother of invention.

Weekly Focus – Think About It

“Courage is like – it’s a habitus, a habit, a virtue: you get it by courageous acts. It’s like you learn to swim by swimming. You learn courage by couraging.”
--Marie M. Daly, Chemist

* These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in 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.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.

Sources:
https://www.barrons.com/articles/the-s-p-500-goes-nowhere-after-its-big-runup-51548462969?mod=hp_DAY_8 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-28-19_Barrons-The_S_and_P_500_Goes_Nowhere_After_Its_Big_Runup-Footnote_1.pdf)
https://www.ft.com/content/b4970904-1907-11e9-9e64-d150b3105d21 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-28-19_FinancialTimes-Government_Shutdown_Begins_to_Harm_US_Economy-Footnote_2.pdf)
https://insight.factset.com/earnings-season-update-january-25-2019
https://www.wsj.com/articles/fed-officials-weigh-earlier-than-expected-end-to-bond-portfolio-runoff-11548412201 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-28-19_WSJ-Fed_Officials_Weigh_Earlier-Than-Expected_End_to_Bond_Portfolio_Runoff-Footnote_4.pdf)
https://www.washingtonpost.com/world/2018/11/14/bbc-reporter-replaced-his-brexit-analysis-with-exasperated-noises-now-hes-hero/?utm_term=.d696c195120b (Watch brief video)
https://www.theguardian.com/politics/2019/jan/15/theresa-may-loses-brexit-deal-vote-by-majority-of-230
https://www.theguardian.com/politics/2019/jan/21/uk-warehouse-space-nears-capacity-firms-stockpile-for-brexit
https://www.reuters.com/article/us-britain-eu-boxes/brexit-survival-kit-helps-britons-face-the-worst-with-freeze-dried-fajita-idUSKCN1PG1G4
https://femaleentrepreneurs.institute/15-amazing-female-scientists/