in the news
The story of the bull market, in four charts
"The past decade has been a dramatic one for stock investors, as equities rebounded from their crisis lows, put in dozens of new highs, and shrugged off all manner of headwinds, from debt crises abroad, three U.S. presidential elections and multiple government shutdowns, a lengthy earnings recession that turned into record corporate profits."
U.S.-China Trade Issues Appear To Worry Investors As Downbeat September Continues
Forbes | JJ Kinahan | September 11, 2018
"President Trump’s threat of a further $267 billion in tariffs on Chinese goods, in addition to the potential $200 billion the market has been fretting about for some time, appears to be weighing on investors' minds." Kinahan, Chief Market Strategist at TD Ameritrade, warns of market choppiness going forward as investors continue to grapple with geopolitical issues such as tariffs, as well as the Fed's interest rate expectations. Stocks did end higher on Tuesday, which was led by a bounce-back in the tech sector. This surge supported a 114 point rise in the Dow Jones Industrial Average.
Is the Flattening Yield Curve a Cause for Concern?
Morningstar | Karen Wallace | September 7, 2018
There has been consistent speculation in regards to the flattening of the yield curve in 2018. In a "normal" yield curve, shorter-term yields are lower than longer-term yields because investors expect to be compensated for taking on more risk with longer bond maturities. When the yield curve starts to flatten, that is, when the spread between the yields of shorter- and longer-term bond maturities (typically the 10-year Treasury and the 2-year Treasury) starts to narrow, investors believe it signals a rocky road ahead for the bull market. In reality, Wallace argues, a flattening curve is hard to read, and indicates that many investors only "believe" we're headed towards a recession. Wallace states that the Fed needs to proceed with caution going forward: "Even if the flattening yield curve on its own doesn't herald imminent danger, it's an indication that uncertainty abounds. Hopefully, near-term monetary policy decisions will calm the uncertainty and not exacerbate it."
Fed Chairman Powell Says Gradual Hikes Likely Needed If Economy Stays Healthy
Fed Chairman Powell is confident in U.S. fundamentals and believes that economic expansion looks strong, further supporting the case for a continued gradual interest rate increase. He believes that this steady rise will help to keep inflation at bay while giving our expanding economy room to grow further. Although there are a variety of macro uncertainties, including but not limited to both estimates of full employment and the neutral policy rate, Powell believes that the systematic increase of interest rates is a way for the FOMC to mitigate these risks. The Chairman is not concerned about overheating at this time.
“The economy is strong. Inflation is near our 2 percent objective, and most people who want a job are finding one,” Powell said. “My colleagues and I are carefully monitoring incoming data, and we are setting policy to do what monetary policy can do to support continued growth, a strong labor market, and inflation near 2 percent.”
Bull market, on cusp of becoming longest in history for stocks, has room to run
USA Today | Adam Shell | August 22, 2018
On August 22, the bull market turns 3,453 days old, putting it one day beyond the bull market that ran from October 1990 and ended with the bursting of the tech bubble in March 2000. The upward rise in U.S. stock prices that began in March 2009, at the end of the Great Financial Crisis, is about to transcend this famous stock climb from the 1990s. This would make the more recent rise the longest-running bull market in Wall Street History.
"No bull market lasts forever, of course, and Wall Street pros are on the lookout for signs of this one's eventual demise. But the upward climb for the Standard & Poor's 500 stock index, which on Wednesday is almost certain to reach a record-breaking 3,453 calendar days without suffering a 20 percent drop, could keep going."
The Dow registered its longest stint in correction territory in nearly 60 years
MarketWatch | Mark DeCambre | August 16, 2018
On August 15th, the Dow Jones Industrial Average registered its longest stint in correction territory since 1961. "The blue-chip benchmark failed to move 10% above the closing low hit earlier in the year, and has now spent the longest period in correction territory — 131 trading sessions — since the 223 sessions in 1961, according to Dow Jones Market Data."
THE S&P 500 JUST ENDED ITS LONGEST STINT IN CORRECTION TERRITORY SINCE 1984
MarketWatch | Mark DeCambre | July 26, 2018
"On Wednesday, the S&P 500 Index SPX, -0.18% soared 0.9% to 2,846.07, bursting above its Feb. 8 closing low of 2,581. Any finish above 2,839.10 would have officially marked a conclusion to the so-called correction."
What the Fed Will Signal Next Week
Bloomberg | Mohamed A. El-Erian | July 23, 2018
"Although domestic growth and inflation have been picking up in line with Fed expectations, the overall operating economic and financial environment is uncertain in several respects."
U.S. stocks rally after earnings and Powell testimony; Nasdaq hits record
MarketWatch | Anora M. Gaudiano & Ryan Vlastelica | June 17, 2018
"U.S. stock rose on Tuesday, extending a recent upswing after Federal Reserve Chairman Jerome Powell indicated the U.S. central bank wouldn’t move too quickly in changing monetary policy, and that it would be flexible in the face of changing conditions."
The stock market’s next step could be its most pivotal
MarketWatch | Ryan Vlastelica | July 12, 2018
So far in 2018, the market has seen both bear and bull conditions, leading it to be range-bound since the beginning of the year. Both the Dow Jones and the S&P 500 have been unable to escape an approximate 10% wide spread of prices since February, the longest stretch since the Financial Crisis. Analysts are predicting that what happens when they move out of the range will determine market conditions longer-term. "Eventually...either the bull case or the bear case will dominate, and indexes will move out of their range. Whichever side “wins” remains to be seen, but analysts say that the first side of the range to be breached could set the tone going forward. In other words, if stocks put in a new high for the year, expect more records to follow. If they put in a new low, don’t be surprised if the selling accelerates."
Stocks advance for third straight session as strong data overshadow trade fears
MarketWatch | July 9, 2018 | Barbara Kollmeyer, Victor Reklaitis, & Ryan Vlastelica
"U.S. stocks rallied in early trading on Monday, putting Wall Street on track to extend its recent rally as positive economic news, notably last week’s jobs report, continued to overshadow escalating trade tensions."
trump trade war arrives in the data as china awaits tariffs
Bloomberg | Jeff Black, Yinan Zhao, and Xiaoqing Pi | July 1, 2018
"Purchasing manager index readings for June released on Saturday showed a gauge of export orders tumbling into contraction, the clearest sign yet that the oncoming trade war is having a real, negative impact on growth. From this Friday, the world’s two largest economies are set to begin charging higher tariffs on each other’s goods, marking a major escalation of the conflict."
Powell Wants ‘Real Economy’ to Guide Fed
Bloomberg | Craig Torres, Jeanna Smialek, Christopher Conlon | June 28, 2018
Fed Chairman Powell is looking to utilize real economic data instead of models to formulate interest rate policy, a big change from the years of Bernanke and Yellen.
First-quarter GDP marked down to 2% from 2.2%
MarketWatch | Jeffry Bartash | June 28, 2018
Growth in the U.S. economy in the first quarter fell from 2.2% to 2.0%. Some of the decline can be attributed to decreased spending in health care, especially seen by nonprofit groups, as well as a smaller buildup of inventory. However, due to the tax cuts, business spending remained strong, as companies spent more dollars on things such as office equipment and software for employees. Economists are predicting that GDP could land at over 5% in the second quarter, approaching record levels as seen in 2003, although it may not be sustainable as trade tensions remain high.
"Big picture: The first quarter is like a distant memory now. The economy has surged in the spring, led by a big rebound in consumer spending and strong business investment."
20 Reasons the Stock Market Has "Plunged" Since 2010, and 1 Remarkable Constant
The Motley Fool | Sean Williams | June 25, 2018
"According to data provided by market analytics company Yardeni Research, there have been 36 corrections totaling at least 10% since the beginning of 1950 in the S&P 500. That works out to about one correction every two years in the broad-based index."
UNITIZED MODEL PORTFOLIOS: A CRUCIAL NEXT-STEP IN RETIREMENT PLAN PRODUCT INNOVATION
Securian Financial | June 20, 2018
“Okay, target-date funds are a reasonable tool for retirement plans, but they are not necessarily the best Qualified Default Investment Alternative solution as they tend to contain proprietary fund options, many of which they would never hire for use in retirement plans as standalone investments.” So, if you’re an investment advisor with the capability to build your own models, you’re going to conclude that, “I can do it better.” -- At GCM, we agree!
What the stock market’s most crucial week of the year tells us about the road ahead
MarketWatch | Mark DeCambre | June 18, 2018
"Stock-market investors navigated, virtually unscathed, a gauntlet of central-bank gatherings, a historic summit between President Donald Trump and North Korean Kim Jong Un, and flaring trade tensions." DeCambre discusses stock market conditions during these events, and offers his suggestion on where investors may want to focus their attention in the coming weeks.
Fed raises rates once more, projects 2 more hikes in 2018
Pensions&Investments | Brian Croce | June 13, 2018
"The Federal Open Market Committee on Wednesday raised the federal funds rate 25 basis points to a range of 1.75% to 2% as expected, but increased the projected number of rate hikes this year." The FOMC has changed their rate hike prediction from three hikes to four in 2018. The members credit this to a increasingly strong labor market and a sustained return to the Fed's 2% inflation target. The group predicts that by the end of this year, the federal funds rate will rise to 2.4%. This is indicative that Powell and other members of the FOMC have taken a bullish stance on the U.S. economy.
"Growth is strong, labor is strong and inflation is close to target," Mr. Powell said. Powell also mentioned that the U.S. unemployment rate reached 3.8% in May, down from 10% during the GFC.
An Investing Road Map for Early Career Accumulators
Morningstar | Christine Benz | March 26, 2017
Although early career accumulators are just starting out, they have assets that they are able to take advantage of, such as a long time horizon to capitalize on compounding interest when it comes to investing. Younger investors can also tolerate higher volatility leading to higher returns over the longer-term. Putting debt in its place, investing in additional education to increase the value of ones human capital, building a safety net, taking advantage of company-offered retirement accounts, and investing in line with your risk capacity are all topics Benz describes in detail.
"The 22-year-old who starts saving $200 a month and earns a 5% return per year will have more than $362,000 at age 65. Meanwhile, an investor who waits until 35 to start investing yet socks away $300 a month and earns a 6% return will have a little more than $300,000 at age 65."
Italy Finally Has a Government, but Volatility May Remain
Morningstar | Valerio Baselli | June 10, 2018
Events in Italy have been a main driver of markets over the past two weeks, and Italy finally has a new government. Although the economic conditions in Italy are more positive compared to that of 2011, we expect some volatility to remain in the near future.
Get financial advice first, Investment advice later
Morningstar | Christine Benz | June 8, 2018
Investors with more human than financial capital should seek advice on their entire financial life and not just investments.
nasdaq scores record close as tech leads stock-market gains
MarketWatch | William L. Watts | June 4, 2018
The week started off with a market rally in the tech sector, pushing the NASDAQ Composite to a record close of +0.69%. The index has rallied over 10% this year. Many analysts are beginning to view the rally as the bull market being firmly in place, and is indicative of growth in the tech sector around the world.
How Should Nonportfolio Assets Affect Your Asset Allocation?
Morningstar | Christine Benz | June 4, 2018
Benz discusses how nonportfolio assets should affect how an investor should position their portfolio, covering topics such as social security, pensions, fixed annuities, and real estate investments. It is important to keep these in mind as more and more workers will have just two nonportfolio assets to rely on going forward: social security and personal portfolios.
Other G-7 members issue rare condemnation of U.S. tariffs
MarketWatch | Joshua Zumbrun | June 3, 2018
On Saturday, the ministers of the six non-U.S. members of the Group of Seven issued a joint statement expressing their "unanimous concern and disappointment" with the U.S. decision to impose tariffs on steel and aluminium imported from the EU, Canada, and Mexico. "Six finance ministers, representing some of the closest allies of the U.S., issued a stern rebuke of the protectionist policies of the administration of President Donald Trump, signaling a deep rift in the relations underpinning the post-World War II trading system."
U.S. Payrolls Rise 223,000; Jobless Rate Matches 48-Year Low
Bloomberg | Sho Chandra | June 1, 2018
Strength in the jobs market continue to propel economic growth. The unemployment rate continues to decline as more people enter the workforce. Average hourly earnings continues to rise at a moderate pace keeping wage inflation in check. US stock markets will continue to be the beneficiary of these conditions.
Italy's Populists Just Took Over The Fed — And The Stock Market Is OK With That
Investor's Business Daily | Jed Graham | May 30, 2018
Something for investors to keep a look out for the rest of the year. While the Italian bond crisis might be good for overall stock and bond markets, be prepared for greater volatility as events move forward.
Investors See Largest Ever Decline in Fund Fees
Morningstar | Patricia Oey | April 26, 2018
"Investors paid lower fund expenses in 2017 than ever before. Our study of U.S. open-end mutual funds and exchange-traded funds found the asset-weighted average expense ratio across funds was 0.52% in 2017, an 8% decline from 2016."