Monthly Archives

May 2017

May 30, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Letter

Is preparing for the future more important than enjoying the present? There is a lot to enjoy today. Last week, Financial Times wrote:

“Wall Street ended an impressive week on a steady note – eking out a tiny gain to a fresh record close – as oil prices recouped some of the previous day’s steep losses and the latest U.S. Gross Domestic Product data reinforced expectations for a June rate rise.”

In fact, U.S. equities have been performing well for some time. The Standard & Poor’s (S&P) 500 Index achieved new highs 18 times during 2016 and, so far in 2017, we’ve scored 20 closing highs, including three last week.

While it’s important to enjoy current gains in U.S. stock markets, it’s equally important to prepare for the future. Bull markets don’t continue forever. They often experience corrections. A correction during a bull market is a 10 percent decline in the value of a stock, bond, or other investment. Often, corrections are temporary adjustments followed by additional market gains, but they can be a signal a bear market or recession is ahead.

We hope you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster

Weekly Economic Update

CONSUMER SENTIMENT DECLINES JUST A BIT

Ending May at a mark of 97.1, the University of Michigan’s consumer sentiment index fell 0.6 points from its preliminary reading for the month. Economists polled by MarketWatch had forecast the gauge to remain at 97.7.1

FEWER HOMES WERE BOUGHT IN APRIL

Both new and existing home sales tapered off last month. The National Association of Realtors said that resales fell 2.3% for April, while the Census Bureau announced an 11.4% retreat for new home purchases. While demand was high, tight supply reduced the number of buyers.2

FED MINUTES: Q1 SLUMP “LIKELY TO BE TRANSITORY”

With the Federal Open Market Committee expressing that exact opinion in the record of its May 2-3 meeting, investors saw little that would delay the central bank from raising interest rates in June. Still, the minutes sounded a cautious note. Fed policymakers “generally judged that it would be prudent to await additional evidence,” confirming that the winter economic slowdown was short lived prior to tightening further. The Bureau of Economic Analysis did revise its Q1 GDP estimate up to 1.2% last week, compared with an initial evaluation of 0.7%.1,3

MORE RECORD HIGHS FOR NASDAQ, S&P 500

A great week for stocks saw gains of 2.08% for the Nasdaq Composite, 1.43% for the S&P 500, and 1.32% for the Dow Jones Industrial Average. Friday’s settlements: Dow, 21,080.28; S&P, 2,415.82; Nasdaq, 6,210.19. Friday’s S&P and Nasdaq closes were historic peaks for both indices. The S&P advanced for a seventh straight trading session to end the week, something it had not done since February. The Nasdaq 100 ended last week up 19.01% YTD.4,5

THIS WEEK

Monday is Memorial Day – U.S. stock and bond markets will be closed. Tuesday, the April personal spending report and PCE price index appear. A new Federal Reserve Beige Book and the NAR’s April pending home sales report surface Wednesday, plus earnings from Analog Devices, Hewlett-Packard Enterprise, Michael Kors, and Palo Alto Networks. Thursday is heavy on jobs data, as investors look at the ADP payroll and Challenger job-cut reports and the latest initial claims numbers; ISM’s May factory PMI also arrives, along with earnings from Boot Barn, Broadcom, Dollar General, Express, Five Below, and Lululemon Athletica. Friday, the Department of Labor issues its May employment report, and Hovnanian announces earnings.

May 22, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Letter

If there was any doubt whether Wall Street was taking its cues from Washington D.C. that should have been put to rest on Wednesday of this past week, when the Dow Jones Industrial Average closed 372 points, or 1.78 percent, lower on the day, following concerns that President Trump may have pressured former FBI director James Comey to end the investigation of Retired General Michael Flynn, after he had been fired.

Of course, this story-line may come and go as fast as the three-day news cycle. However, what worried investors is that the accusations being made by President Trump’s opposition, if proven true, could cripple the President’s ability to carry out his pro-business agenda, and even if not proven true could greatly slow it down. This would mean no fiscal stimulus to the U.S. economy later this year due to tax reform, and no repatriation of U.S. corporate dollars currently being held overseas in foreign banks. It would also mean the continuation of the current low interest rate environment.

Those areas of the stock market that are most sensitive to lower interest rates fell among the hardest sectors on Wednesday, namely financials and basic materials. Fearing that low interest rates would cut the potential profitability of banks, the Dow Jones U.S. Financial index declined 2.18 percent, where as fears of low inflation sent the value of the Dow Jones U.S. Basic Materials index down 2.15 percent on Wednesday.

Late Wednesday evening we learned of the appointment of former FBI director Robert Muller as special council to lead the investigation into Russia’s involvement in the 2016 U.S. election. Since investigations of this nature can go on from months to years, the appointment of a special council may let congress spend more time legislating and less time conducting investigations into similar matters. This should also help diminish investor’s concerns over the President and allow them to refocus on the legislative process.

Also, this past week we saw a shift to higher quality bonds, as investors ran to the safety of U.S. Treasury bonds. Investors are still expecting a roughly 90 percent probability that the Federal Reserve will raise interest rates when the FOMC meets on June 14th. However, in the short term, investors appear less concerned with inflation and more concerned with preservation until the current storm or concerns blows over. The type of stock market event like we saw this past week is typically short lived, similar to the fallout and recover shortly after the Brexit vote in June of 2016.

Sincerely,
Laif E. Meidell, CMT® AIF

We hope you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster

Weekly Economic Update

CONSTRUCTION ACTIVITY SLOWED IN APRIL

Against expectations, both housing starts and building permits declined in the fourth month of the year. Newly released Census Bureau data shows a 2.5% retreat for permits and a 2.6% pullback for starts last month. The key factors: a 9.2% drop in starts for multi-family projects (which have declined for four straight months) and a 4.5% fall for single-family permits.1

INDUSTRIAL OUTPUT SURGES

Economists polled by Briefing.com expected industrial production to rise 0.3% in April, following a 0.4% advance in March. The number surprised to the upside – the Federal Reserve reported a 1.0% improvement.2

GOLD & WTI CRUDE STAGE MAJOR RALLIES

As both stocks and the dollar hit a rough patch last week, investors turned to commodities. Gold advanced 2.1% on the COMEX in five trading days, settling at $1,253.60 Friday. Oil gained a little more than 5% for the week to a Friday close of $50.33 on the belief that OPEC would extend its current production cut.3,4

STOCKS FINISH A CHOPPY WEEK LOWER

Wall Street took a plunge Wednesday on political concerns, then rebounded for two days. Still, all three major indices saw 5-day retreats. The Nasdaq Composite lost 0.61%; the Dow Jones Industrial Average, 0.44%; and the S&P 500, 0.38%. Friday, the big three settled as follows: Dow, 20,804.84; S&P, 2,381.73; Nasdaq, 6,083.70.5

THIS WEEK

On Monday, earnings results roll in from Agilent Technologies, America’s Car-Mart, Booz Allen Hamilton, Sportsman’s Warehouse, and Valspar. Tuesday, the April new home sales report complements earnings news from AutoZone, Container Store, Cracker Barrel Old Country Store, DSW, Intuit, Kirkland’s, Popeyes, Take-Two Interactive, and Toll Brothers. On Wednesday, existing home sales numbers appear along with minutes from this month’s Federal Reserve policy meeting and earnings from Advance Auto Parts, Chico’s FAS, Fred’s, GUESS?, HP, Lowe’s, Sears Holdings, and Williams-Sonoma. A new initial claims report arrives Thursday, plus earnings news from Abercrombie & Fitch, Best Buy, Burlington Stores, Costco, Dollar Tree, GameStop, Hormel Foods, Lions Gate, Medtronic, Shoe Carnival, and Toro. Friday offers the second estimate of first quarter GDP, the final May University of Michigan consumer sentiment index, data on April hard goods orders, and Q1 results from Big Lots.

May 15, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Letter

Investors have had plenty of news to digest lately to include better than expected corporate earnings, solid U.S. economic news, and politics. However, even with all the positives in both the U.S. economy and corporations, Washington politicians and their policies are still what matters most to investors.

So far, many of the companies that have reported first quarter earnings have exceeded analyst’s expectations, but if you hadn’t noticed don’t feel bad, Wall Street doesn’t seem to be too focused on it either. Notice how the major market averages drifted sideways from mid-April until the end of May, while congress was on recess for two weeks, then briefly popped higher for a few days once congress returned to Washington D.C. and political news cycles resumed.

After being in the doldrums over the past week, stocks got a lift on Monday after Saudi Arabian and Russian energy minsters reaffirmed their commitment to extend production cuts to support oil prices. Previously, it was believed that to return the global oil supply to its five-year average, production cuts would only need to be carried out until the end of June of this year. However, thanks in part to rising U.S. production, on Monday OPEC leaders concluded that the production cuts will need to be extended until the end of the first quarter of 2018. U.S. crude oil prices rallied roughly 2.1 percent following the news, to its highest level in two weeks, while the Dow Jones U.S. Energy index gained 0.70 percent on the day.

Monday’s above average performance of U.S. small and mid-cap stocks opens the door for a market rally, at least for the short term, as the momentum of advancing to declining stocks turned positive for the first time in nearly two weeks.

Sincerely,
Laif E. Meidell, CMT® AIF

We hope you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster

Weekly Economic Update

A SOLID RETAIL SALES READING

Americans bought more in April. The pace of retail purchases hastened by 0.4% last month, and the Bureau of Economic Analysis revised the 0.2% March retreat into a 0.1% gain. Headline retail sales were up 4.5% across the 12 months ending in April. Core retail sales rose 0.3% in the fourth month of the year.1,2

INFLATION PICKS UP AS SPRING ARRIVES

After falling 0.3% for March, the Consumer Price Index rose 0.2% last month. (The major factor: a 1.1% leap for energy costs.) This increase left annualized inflation at 2.2%. The core CPI (minus food and energy prices) advanced 0.1% in April. On the wholesale front, the Producer Price Index jumped up 0.5% in April, taking its year-over-year advance to 2.5%.1,2

A GAIN FOR A CONSUMER SENTIMENT INDEX

The University of Michigan’s monthly barometer of household sentiment rose 0.7 points in its preliminary May reading to a mark of 97.7. Its consumer expectations component advanced 1.1 points to a reading of 88.1.2

MAJOR INDICES RIDE THROUGH A MIXED WEEK

Earnings misses from big retailers weighed on the S&P 500, which declined 0.35% across five trading sessions to a 2,390.90 Friday close. The Dow Jones Industrial Average gave back 0.53% in the same time frame, ending the week at 20,896.61. The Nasdaq Composite, however, advanced 0.34% last week to 6,121.23. At the closing bell Friday, all three indices were up 2.1% or more for the month.

THIS WEEK

Monday, Cumulus Media presents Q1 results. Dick’s Sporting Goods, Home Depot, Jack in the Box, Red Robin, Staples, TJX Companies, Urban Outfitters, and Weibo announce earnings Tuesday, as investors also consider data on April industrial output, housing starts, and building permits. On Wednesday, the earnings parade features American Eagle Outfitters, Cisco, L Brands, Stein Mart, and Target. Thursday, Wall Street looks at the Department of Labor’s latest initial jobless claims numbers, the Conference Board’s April leading indicators index, and earnings from Alibaba, Applied Materials, Autodesk, Gap, Perry Ellis, Ralph Lauren, Ross Stores, Stage Stores, and Walmart. Earnings announcements from Campbell Soup, Deere, and Foot Locker arrive Friday.

May 8, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Letter

The past week was mildly positive for markets. The jobs report showed that the U.S. economy created 211,000 jobs in April and unemployment dropped to 4.4%, the lowest rate since the middle of 2007. Oddly, we have yet to see strong wage or economic growth generally associated with this strong of an employment report.

The Federal Reserve held short-term interest rates steady at 0.75% to 1.00%. According to Bloomberg as of today, the Fed Funds Futures are currently showing a 100% probability of a rise in rate at their Junie 14, 2017 meetings. If there will be another raise in the remainder of the year still seems fairly mixed.

Internationally, the European Union negotiators are attempting to bump the Brexit Bill to $110 Billion. This is the amount that Britain would have to pay the EU to officially separate; this number started around $50 billion.

Also this week, Puerto Rico filed for court protection under a version of bankruptcy afforded by Congress last year, after failing to reach a deal with creditors. This could be an ugly process for bondholders as the implications could serve as a model for other struggling U.S. states like Illinois.

Sincerely,
Heidi A. Foster, CFP®

We hope you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster

Weekly Economic Update

NEW DATA SHOWS MORE HIRING, LESS SPENDING

Unemployment hit a 10-year low in April as payrolls swelled with 211,000 net new jobs, a rebound from the meager gains of March. The Department of Labor’s monthly report showed the headline jobless rate declining 0.1% to 4.4%; the U-6 rate measuring underemployment was at 8.6%, falling 0.3%. The latest consumer spending report from the Department of Commerce was less impressive. Personal spending was flat in March, with personal incomes up 0.2%.1,2

ISM PMIS WENT OPPOSITE WAYS IN APRIL

America’s factory sector grew at a slower rate last month than it did during March, while the country’s service sector picked up its pace of expansion. The Institute for Supply Management’s April purchasing manager index dipped to 54.8 from its previous 57.2 mark; ISM’s non-manufacturing PMI rose 2.3 points in April to 57.5.2

FEDERAL RESERVE LEAVES RATES ALONE

As expected, the central bank left the benchmark interest rate in the 0.75-1.00% target range last week. The Federal Open Market Committee felt that the poor economic growth of the first quarter was likely “transitory,” and in its view, economic activity should “expand at a moderate pace” with “gradual” monetary policy adjustments. On May 5, Fed futures traders put the odds of a June rate hike at 79%.3,4

BLUE CHIPS TOP 21,000

The Dow Jones Industrial Average reached another milestone Friday, settling at 21,006.94 after rising 0.32% on the week. Slightly better 5-day performances were posted by the Nasdaq Composite (+0.88% to 6,100.76) and the S&P 500 (+0.63 to 2,399.29). Small caps lost 0.25% for the week – the Russell 2000 closed at 1,397.00 Friday. During the past five market days, the CBOE VIX retreated 2.31% to 10.57.5

THIS WEEK

Investors will keep an eye on France’s national election Monday, and review earnings from Sysco and Tyson Foods. On Tuesday, earnings roll in from Allergan, Discovery Communications, and Valeant Pharmaceuticals. Wednesday features earnings from Dillard’s, NetEase, Snap, Sotheby’s, Spectra Energy, Symantec, Wendy’s, and Whole Foods. Thursday offers the federal government’s latest reading on wholesale inflation, a new initial jobless claims report, and earnings from Kohl’s, Macy’s, and Nordstrom. April retail sales and consumer inflation data appear Friday, plus the University of Michigan’s initial May consumer sentiment index and earnings news fromJCPenney.

May 2, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Letter

This newsletter is updated for one that contained dated information sent out last night.

Last week while generally positive for market returns was relatively flat. The past week was filled with economic information that was not compelling markets to move.

GDP for the quarter came in with growth of 0.7%, the slowest quarterly growth since the first quarter of 2014 when GDP contracted by 1.4%. The quarter did show strong non-residential business investment at 9.4%. The lack in GDP growth seems to be led by an absence of consumer spending, which came in at a paltry 0.3%, a number not seen since 2009.

Housing remained incredible strong. New home sales were up 5.8% in March with the average price moving up 7.5% to $315,000. New home sales are up 15.6% over last year, however it may be helpful to realize that this is still an annualized rate of 621,000, less than half of the height of the housing boom.

President Trump released a brief proposal on tax reform calling for simplifying the tax code by reducing the tax brackets, lowering tax rates and eliminating numerous deductions. His brief was one page long and rather short on details. It did call for reducing corporate taxes to 15%, in line with other nations. This should be beneficial for everyone as corporations don’t really pay taxes, they just pass them on to everyone who buys from them.

Sincerely,
Heidi A. Foster, CFP®

We hope you have a great week,
Pat Meidell, Laif Meidell and Heidi Foster

Weekly Economic Update

CONSUMER CONFIDENCE DIPS SLIGHTLY

The University of Michigan and Conference Board consumer confidence indices descended a little last month, but remained in great shape. The CB index displayed an April reading of 120.6, down from 124.9 in March. Slipping a point from its initial April mark, the Michigan barometer fell to 97.0.1

LATEST HOUSING DATA IS MOSTLY POSITIVE

New home sales rose 5.8% in March, the Census Bureau noted last week; headline sales were 15.6% improved from a year earlier. The latest 20-city S&P/Case-Shiller home price index (January) showed 5.8% average yearly house price appreciation, up from 5.6% in December. Pending home sales retreated 0.8% in March, the National Association of Realtors reported.1,2

FIRST QUARTER SAW LITTLE ECONOMIC GROWTH

According to the Bureau of Economic Analysis, America’s economy expanded at a pace of 0.7% in Q1, well below the 2.1% growth seen in Q4. Economists polled by MarketWatch had projected a 0.8% Q1 GDP reading.1

NASDAQ POSTS SIXTH WINNING MONTH IN A ROW

The tech benchmark added 2.32% this past week and 2.30% for April, shattering the 6,000 ceiling in the process. Upbeat earnings news and talk of corporate tax cuts also aided the S&P 500 – that index rose 0.91% for April, capping things off with a 1.51% weekly gain. How did the blue chips perform? The Dow advanced 1.34% on the month and 1.91% during April’s last five trading sessions. Friday, the big three settled like so: Dow, 20,940.51; Nasdaq, 6,047.61; S&P, 2,384.20.3,4

THIS WEEK

Monday, investors study March personal spending figures, ISM’s April factory PMI, and earnings from Edison International. Earnings announcements from Altria, Anadarko Petroleum, Apple, ConocoPhillips, Cummins, Gilead Sciences, Hilton Worldwide, MasterCard, Merck, PG&E, Pfizer, and Twenty-First Century Fox appear Tuesday. Wednesday, the Street considers the latest Federal Reserve policy statement, ISM’s March service sector index, the April ADP payrolls report, and earnings from Alibaba, Allstate, Estee Lauder, Facebook, Humana, Kraft Heinz, MetLife, Prudential Financial, Tesla, Time Warner, and Yum! Brands. Thursday offers a new Challenger job-cut report, initial jobless claims numbers, and earnings from Activision Blizzard, Anheuser-Busch, Berkshire Hathaway, Occidental Petroleum, and Viacom. March employment figures are out Friday, along with earnings from Cigna; also, Federal Reserve chair Janet Yellen speaks at Brown University in Rhode Island.

May 1, 2017 – Weekly American Wealth Review

By | Weekly Newsletter

Weekly Economic Update

FED MAY WAIT LONGER TO TIGHTEN

March’s Federal Reserve policy statement provided less forward guidance than many investors expected. As anticipated, the word “patient” disappeared – but the Federal Open Market Committee also lowered its 2015 GDP forecast (to a range of 2.3-2.7%) and nearly halved its 2015 inflation projection (to a range of 0.6-0.8%). Seconding this weaker economic outlook, the Fed indicated it might wait until late 2015 to tinker with interest rates, altering the commonly held perception that a rate hike might be in store before Q2 ends.1

OIL PRICES RISE

Light sweet crude rose 3.9% on the NYMEX last week, settling at $45.72 Friday. It was the first winning week in five for the commodity, and a short-term decline in the dollar and lower U.S. rig counts helped. Gasoline advanced 2.0% on the NYMEX for the week, natural gas 2.2% and heating oil 1.2%.2

FEWER STARTS, BUT MORE PERMITS

The Census Bureau measured a 17.0% drop in groundbreaking for February, which took housing starts to a 13-month low. Declining builder sentiment, higher construction costs and fewer available parcels were all contributing factors. Building permits increased 3.0% last month; apartment permits jumped 18.3%.3

TERRIFIC WEEK FOR U.S. EQUITIES

A little dollar weakness, a rebound in energy prices, easing in Europe, the latest FOMC statement and pleasing corporate earnings all supported a 5-day rally. From March 16-20, the S&P 500 gained 2.66% to settle Friday at 2,108.06. The Dow and Nasdaq posted weekly gains of 2.13% and 3.17% on their way to respective closes of 18,127.65 and 5,026.42.4

THIS WEEK

Existing home sales figures for February appear Monday, courtesy of the National Association of Realtors. On Tuesday, February new home sales data arrives from the Census Bureau, and the Street also interprets February’s CPI, manufacturing PMIs for Japan and China and earnings from H.B. Fuller, Sonic and Steelcase. Wednesday brings durable goods data for February plus earnings from Pacific Sunwear, Paychex and Red Hat. In addition to the latest initial jobless claims report, Thursday also brings earnings from Accenture, Restoration Hardware, Lululemon Athletica, ConAgra Foods, GameStop, Fred’s Super Dollar and Scholastic. Friday, the University of Michigan publishes its final March household sentiment survey, the federal government’s final estimate of Q1 growth arrives, and Fed chair Janet Yellen speaks on monetary policy in San Francisco.