Now What: A Guide to Retirement During Volatile Times

Ken Mahoney tells CNBC that the market is like ‘Teflon’.

by ken | 10:34 in |


Ken Mahoney tells CNBC that the market is like ‘Teflon’.

 

Ken was on CNBC this past Friday http://video.cnbc.com/gallery/?play=1&video=3000211347

(Link is only part of the segment)

 

Ken told Maria Bartiromo on CNBC that this market is like ‘Teflon’, negativity does not stick to it! He also mentioned that Washington only ‘hit the snooze button, and that the alarm will be going off again soon’. Ken believes that this puts a short term ceiling to the market because of the uncertainty from Washington.

 

Markets extended their post-deal rally for another week, putting up several new records: The S&P 500 closed out the week at another all-time high, while the Nasdaq ended at a 13-year high. No records yet for the Dow, but it’s putting up a good fight, gaining 5.4% over the last 13 trading sessions. For the week, the S&P 500 gained 0.88%, the Dow increased 1.11%, and the Nasdaq grew 0.74%.[i]

 

After a delay of several weeks, investors finally got a look at September’s jobs report and the news was mixed. While the unemployment rate dropped to 7.2%, hiring appears to have slowed. Employers added just 148,000 new jobs in September, well below the 180,000 that economists had expected.[ii]

 

On a more positive note, third quarter earnings have been slightly better than expected with earnings growth averaging 6.8% among the 243 S&P 500 companies that have already reported in. So far, 68% have beaten earnings estimates and 54% have beaten revenue estimates, trends that are above the historical averages. However, with the price-to-earnings ratio (a broad measure of the value of stocks) of the S&P 500 currently above its long-term average, some analysts are debating how much higher the market can go if the pace of earnings growth doesn’t pick up.[iii]

 

Weak economic data means that the Federal Reserve is unlikely to make any changes to its policy of quantitative easing at this week’s FOMC meeting. Instead, they’ll pore over the economic data to see how badly Washington’s battles have hurt the U.S. economy. Consumer and business confidence may suffer lasting harm after the shutdown, especially as the current deal only postpones the fight until the New Year. Making matters worse, the shutdown interrupted regular data-gathering and analysis functions, muddying the economic picture for Fed policymakers. Some analysts believe that they could stand pat the rest of the year, delaying a taper until March, after the next round of fiscal debates and the new Fed Chairman takes over.[iv]

 

Investors may be in for choppy waters this week as analysts struggle to parse economic data that’s muddled by seasonal factors as well as disruption caused by the government shutdown. Earnings will also be front and center as nearly a quarter of S&P 500 companies are due to report, including heavy hitters like Apple (AAPL), General Motors (GM), and Exxon (XOM.) While no major action is expected out of the two-day Fed FOMC meeting, a surprise could cause additional market volatility.

 

As always, if you have any questions about how recent events may affect your investments, please reach out, we’d be delighted to speak with you.

 

 

 

ECONOMIC CALENDAR:

Monday: Industrial Production, Pending Home Sales Index, Dallas Fed Mfg. Survey

Tuesday: Producer Price Index, Retail Sales, S&P Case-Shiller HPI, Business Inventories, Consumer Confidence

Wednesday: ADP Employment Report, Consumer Price Index, EIA Petroleum Status Report, 7-Yr Note Auction, FOMC Meeting Announcement

Thursday: Jobless Claims, Chicago PMI

Friday: Motor Vehicle Sales, PMI Manufacturing Index, ISM Mfg. Index

.

HEADLINES:

U.S. construction spending reaches 4-½ year high. August construction spending increased 0.6%, the highest level since April 2009, largely because of a rise in public construction projects.[v]

Consumer sentiment drops after government shutdown. Sentiment among U.S. consumers dropped in October to its lowest level since the Fiscal Cliff days as Americans worried about congressional dysfunction. Consumers also also worried about how the budgetary impasse may have affected fourth-quarter growth.[vi]

Wholesale inventories rose in August. Inventories rose 0.5% in August, the biggest jump since January, indicating that business experienced a robust summer shopping period. Inventory growth was boosted by increases in stocks of autos and professional equipment.[vii]

UK economy grows at fastest pace since 2010. Britain’s economy picked up speed in the third quarter, growing 0.8%, driven by growth in the services sector and rising housing prices. The unexpected growth gives Britons hope that their economic recovery is picking up steam.[viii]

 

 

“The best and most beautiful things in the world cannot be seen or even touched-

they must be felt with the heart.” – Helen Keller




 

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. Securities offered through Aurora Captial Member FINRA/SIPC.

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

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 indexes from Europe, Australia and Southeast Asia.

The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.

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.

Google 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.

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.

 

. 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.

 

By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.

 

 

Was the Washington Deal a trick or treat?

by ken | 09:05 in |


Was the Washington Deal a trick or treat?


Markets experienced one of the best weeks in months, with the S&P 500 setting a new high after lawmakers finally struck a deal to reopen the government and raise the debt ceiling. For the week, the S&P 500 gained 2.42%, the Dow gained 1.07%, and the NASDAQ gained 3.23%.[i]

 

An agreement was finally reached last Wednesday to reopen the government, raise the debt ceiling, and avert a default on U.S. debt. The deal came on the 16th day of the shutdown and just one day before the U.S. Treasury would have hit the debt ceiling and exhausted its ability to borrow money. Now here’s the bad news: the deal maintains the sequester and only funds the government through January 15 and raises the debt ceiling until February 15.[ii]

 

Unfortunately, kicking the can down the road means that we’ll be revisiting the issue again after the New Year. There’s a tremendous amount of mistrust not only between the parties, but also within the Republican Party, meaning that the next fiscal showdown may be just as acrimonious and drawn out.

 

An eye-popping new report suggests that Congressional budget battles, debt ceiling standoffs, and federal spending cuts have cost the country nearly 3% of GDP growth since 2011 – roughly $700 billion in lost economic growth. Digging a little deeper into the numbers, we discover that spending cuts alone have taken a significant chunk – 0.7% - out of annual GDP growth since 2010. Worse, this is an annual reduction in GDP growth, meaning the effects compound over time.[iii]

 

On the positive side, it’s looking unlikely that the Fed will begin tapering this year since economists will have difficulty weeding out the effects of the shutdown from broader economic trends. According to Dallas Fed president Richard Fisher, Congress didn’t just put on the economic brakes during the shutdown, they “smashed the instrument panel,” making the timing of a taper extremely uncertain.[iv] While some believe that a December taper is still possible, it’s possible that the Fed will delay until mid-2014.[v]

 

With the default crisis averted, investors are now turning their attention to third quarter earnings season. Overall, earnings are looking anemic again as companies struggle with weak demand and declining profit margins. Thus far, most of the earnings and revenue growth is coming from the finance sector, which is reporting total earnings growth of 14.6%. As for the rest, even with reduced earnings estimates, companies are having trouble meeting or exceeding those expectations. Total earnings for the 99 S&P 500 companies that have reported in are up 1.0% from the same period last year, with 62.6% beating earnings expectations. However, excluding finance, total earnings growth from those companies falls into the negative territory: -6.2%.[vi]

 

Markets have a big week ahead of them as a slew of earnings reports will be released, including major players DuPont (DD), Amazon (AMZN), Netflix (NLFX), and Ford (F). Investors will also finally get a look at the delayed September jobs report on Tuesday. It’s hard to know which way markets will move next week as investors digest earnings reports and take a look at fourth quarter expectations. If earnings data beats expectations, we could see the rally continue. However, if the fundamentals look weak, investors could take profits from the recent market highs and consolidate, waiting for good news. As always, we’ll continue to keep an eye on things and keep you updated.

 

 

ECONOMIC CALENDAR:

Monday: Existing Home Sales, EIA Petroleum Status Report

Tuesday: Employment Situation (Delayed)

Wednesday: Import and Export Prices, EIA Petroleum Status Report

Thursday: Jobless Claims, PMI Manufacturing Index Flash, New Home Sales

Friday: Durable Goods Orders, Consumer Sentiment

 

.

HEADLINES:

China’s economic growth rebounds. After several periods of anemic growth, China’s GDP growth surged to 7.8%, easing pressure on leaders for more economic stimulus and allowing them to focus on long-term reforms.[vii]

476,000 new Obamacare applications. Administration officials released a report stating that nearly half a million applications for insurance coverage have been filed through state and federal insurance exchanges. However, no information on how many have successfully enrolled in coverage was made available, leaving analysts to wonder how close the administration is to their goal of 7 million insured.[viii]

Treasuries gain on Fed bet. Treasury yields dropped to the lowest level in 12 weeks as investors bet that the Fed will delay tapering until next year. A falling yield is an indicator of rising demand for Treasury bonds, indicating that investors may feel more confident about the strength of Treasuries.[ix]

Dollar slides on economy worries. The U.S. dollar fell to its lowest rate in more than eight months against the euro. Analysts say that the surprise decision by the Fed to delay tapering caused the dollar to reverse its gains and fall against the euro and basket of currencies. The Fed’s loose monetary policies will continue to push the dollar down, making American exports cheaper but having the opposite effect on imports and foreign travel.[x]

 

 

“Life isn't a matter of milestones, but of moments.”

- Rose Kennedy




 

 

Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!

 

If you would like to opt-out of future emails, please reply to this email with UNSUBSCRIBE in the subject line.

Securities offered through Aurora Capital Member FINRA/SIPC.

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

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 indexes from Europe, Australia and Southeast Asia.

The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.

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.

Google 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.

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.

 

. 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.

 

By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.


Will the market's be 'spooky' for the remainder of October?

by ken | 11:25 in |


Will the market’s be ‘spooky’ for the remainder of October?

The market experienced another tumultuous week as investors responded to fear about the looming debt ceiling and hope about a possible resolution. Despite the volatility, markets rebounded on Friday as hopes of a deal circulated in the media. For the week, the S&P 500 gained 0.75%, the Dow increased by 1.09%, and the NASDAQ lost 0.42%.[i]

The government shutdown continued for another week, reaching its 11th day on Friday. Currently, about 500,000 federal employees are still furloughed, after many essential personnel were returned piecemeal to their jobs. Unfortunately, even if the shutdown were to end today, there will still be lasting effects as critical inspections have been left undone, research projects have been delayed, and workers have been left without pay for weeks. Some economists believe that the disruption of spending patterns among those affected by the shutdown – including civilian contractors not counted among the official furlough numbers – could affect consumer spending and economic growth numbers.[ii]

 

Congress is also grappling with the debt ceiling issue. The Treasury Department has informed Congress and the White House that it will reach the debt limit by Thursday, October 17, leaving it with enough cash for a few days of operations. If a deal is not reached by then, the U.S. will be faced with a potential default, which would cause major shocks throughout the economy and global financial system. While most analysts don’t think lawmakers will allow a default to happen, financial institutions are quietly preparing for that eventuality.[iii]

 

There are however, signs of hope. The House of Representatives seems to be at a complete impasse and attention has now turned to the Senate, where Republican and Democrat leaders sat down over the weekend to try and hammer out a compromise. Relations between the two sides are much less fraught in the Senate and we can hope for a reasonable deal. However, any bill passed by the Senate would still have to pass muster in the House, where the environment is still highly politicized. On the other hand, failure by the House to pass a bill ending the shutdown and preventing a default would be highly costly to lawmakers at election time.

 

Earnings season is in full swing, but reports are largely overshadowed by the impasse in Washington. So far, it’s too early to see a trend, but S&P 500 companies are expected to post third-quarter earnings growth of 4.2%. Out of the 31% of S&P 500 companies that have reported so far, only about 55% have beat expectations, below the historical average of 63%.[iv]

 

Looking ahead, it’s likely to be another tumultuous week for markets. We don’t know how close lawmakers are to a compromise, but we know from experience that Congress often waits until that last possible minute for a deal.

 

While we’re optimistic, we are closely monitoring the situation and realize there are several potential market scenarios. As financial professionals, it’s our job to worry about market movements so that our clients don’t have to. If you have any concerns about your portfolio or any questions about how these issues may affect your investments, please reach out to us. We are always happy to help.

 

 

ECONOMIC CALENDAR:

Monday: Ben Bernanke Speaks 8:00 PM ET

Tuesday: Empire State Mfg. Survey

Wednesday: Consumer Price Index, Treasury International Capital, Housing Market Index, Beige Book

Thursday: Housing Starts, Jobless Claims, Industrial Production, Philadelphia Fed Survey, EIA Petroleum Status Report

 




HEADLINES:

Tweet causes oil prices to jump. Oil traders were jolted last week by a Twitter post by the Israeli Defense Force that suggested they might have bombed Syrian airports. Traders are increasingly turning to social media to stay on top of quickly evolving situations.[v]

China’s export growth fizzles. The Asian giant’s export growth slid 0.3% as sales to Southeast Asia tumbled. The data was a disappointing break with a raft of other indicators suggesting China’s economy might be on the rebound.[vi]

Consumer sentiment falls to 9-month low. The government shutdown and consumer malaise caused sentiment to decline, but only a small amount. Consumers were still optimistic about inflation and income, indicating that a quick rebound is possible if the government impasse ends.[vii]

Small business confidence dips. Confidence among U.S. small businesses fell in September as owners worried about the economy’s near-term outlook. However, owners remain upbeat about sales forecasts and expansion prospects.[viii]

 

 

“When you can do the common things of life in an uncommon way, you will command the attention of the world.” – George Washington Carver

 

 

Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!

 

If you would like to opt-out of future emails, please reply to this email with UNSUBSCRIBE in the subject line.

. Securities offered through Aurora Capital Member FINRA/SIPC.

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

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 indexes from Europe, Australia and Southeast Asia.

The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.

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.

Google 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.

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

. 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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