As Markets Continue Rebound, Investors Should Remain Focused on Risks – Week Ended 2/22/19

US financial markets continued their rebound during the President’s Day shortened trading week ended Friday the 22nd.  The S&P500 added another +0.7% and international markets also responded with the MSCI EAFE improving by +1.6% (now up +9% YTD).  Whereas January was fueled by a softer, more comforting tone by the US Federal Reserve and other foreign central banks, progress in February is being supported by increasing optimism over a trade/tariff resolution being finalized between the US and China.  On that front, talks continue to carry a deal-seeking tone; a stark contrast from the war of words and relentless lobbing of verbal grenades that characterized 2018.

Continue reading

Impressive Recovery Continues, But Time for the Rally to Fade? – Week Ended 2/15/19

Major US indexes added to already impressive gains last week with the Dow, S&P500 and Nasdaq each adding between +2.4% – 3.0%.  Just eight trading weeks into the new year, the Dow and S&P500 are up roughly +11% from where they entered; and higher-beta corners of the market (such as small-caps and cyclical transportation stocks) are enjoying  even stronger recoveries in the neighborhood of +15%.  The numbers are even more impressive if one begins their count from the Christmas Eve low.  Interestingly, as equities have improved back to, and even through, the most obvious levels of technical resistance the pace does not seem to be slowing despite what remains a quite lengthy list of items that need to “go right” for the US economy to manage a soft economic landing.

Continue reading

“Was the January Rebound Too Fast?” – February Commentary

Thank the Fed for the surge! The S&P500 posted its best January performance in 30 years (since 1989). Following a nasty 4th quarter and very difficult December which ruined the year, the Fed offered numerous reassurances in January that it was not inclined to make a policy error. Fed Chairman Powell shared that policy action would be more data dependent; rate increases and tightening monetary policy would not be on “auto pilot” in 2019; this was a stark difference from the tone conveyed in December. We believe January market action was mostly a reaction to a pause in rate hikes. It provided tremendous “fuel” for the strong rebound of +8.0% in the last month. Hey, that’s a bit stronger than the January 2018 performance start of +5.6%. Yet, there is one notable difference…last January, 51% of investors expected higher stock prices which did not materialize for the year; today, only 31% expect higher prices. Domestic and foreign stocks rebounded, and client portfolios benefited from the market boost in January (note the difference a month makes).

Continue reading

Government Re-opens; But Busy Week Ahead – Market Notes for Week Ended 1/25/19

After an impressive 4-week rally, US equities appear to be butting up against arguably their first formal area of technical resistance being near the 200-day moving average.  The broad-based strength that began the day after Christmas is in recent days turning decidedly more sideways; for the week ending January 25 the Dow managed to finish slightly higher and extend its weekly winning streak to 5, but the S&P500 (considered to be broader and more representative of the overall market) slipped slightly.

Continue reading

As Both Conclude Week 4, Stock Market Rally and Gov’t Shutdown Continue – Week Ended 1/18/19

US equities capped a 4th consecutive week of gains, bringing US equities back roughly +13% thru this past Friday from its Christmas-eve lows. As one might anticipate, the markets are also off to an extraordinarily strong New Year start with the S&P500 up +6.6%; encouraging, more economically sensitive areas of the market like small-size companies are faring even stronger over that period with gains of roughly +10% (Russell 2000). Most of that strength is being attributed to a more collaborative narrative surrounding trade negotiations between the US and China, as well as a more data-dependent and cautious Federal Reserve as it relates to normalization of monetary policy. The only missing element of full improvement from a domestic policy perspective at this point is that the US government remains partially shut down and there is little sign of either side appearing willing or desirous of reaching compromise. In any event, the stock market’s strong rebound serves valid reminder of how quick and suddenly direction can reverse course in financial markets, even as worries are not fully resolved.

Continue reading

Government Dysfunction and Uncertainty Remains, but Tone Improved In Early-’19 – Week Ended 1/11/19

Following the worst performance for the S&P500 since 1931, the tone so far in these early weeks of 2019 is more hopeful.  This is evidenced by broad and strong consecutive-day winning streaks; the S&P for instance was up +2.6% last week and +3.6% month-to-date.  Even stronger are some areas of the market traditionally considered risk-seeking; the small-cap Russell 2000 climbed +4.8% last week and +7.4% in January.  Key commodities viewed as a bellwether to economic growth including oil are also seeing their price recover notably off stressed December lows and international equities are participating in-line with the S&P.  The cause?  From a fundamental perspective, very little.  But Fedspeak turned decidedly more dovish from the worrisome pre-disposed and not-so-data-dependent (toward additional hikes) tone that Chairman Powell conveyed with the rate decision in December.

Continue reading

“Confused? Understandable”; “Shilly-Shally Prone”; and “Working With Rock Stars” – Nvest Nsights Q4 Newsletter

Below, we submit our latest quarterly installment of Nvest Nsights.  The first article reviews how chaotic, volatile, and disappointing was the market’s performance during 2018.  But more important from our perspective is how swift selloffs like witnessed during the 4Q can cause one to suddenly feel confused and uncertain about the future; in these times it is most critical to step back and consider facts and fundamentals to avoid short-term action based on emotion.  The article “Shilly-Shally Prone” reminds how long-term investment success accrues to those who remain steadfast to a repeatable and disciplined process.  There are two remarkably similar historical backdrops which suggest it is very possible that present-day concerns could resolve or fade quickly against a still-sound economy, providing swift relief to recent market volatility here in 2019.  Finally, “We Work With Rock Stars” provides insight into our investment selection philosophy with rationale motivating several portfolio adjustments being executed over recent weeks and as we enter the New Year.

The full printer-friendly version of our newsletter, including data tables for selected mutual fund and ETF performance as well as portfolio benchmarking, can be downloaded here: NVEST NSIGHTS 4Q.

Continue reading

Plan for a High Definition Life

According to a recent study, 90% of Americans will spend more time planning for vacation than they spend planning for retirement.   Similarly, we often observe firsthand how many do not truly know where their money is spent; and they do not devote time to gain more clarity about it.  Life becomes a foggy trip without rich meaning.

No one purposely sets out to have an undefined financial life… it just happens to us as we become a part of the culture in which we live.  It’s human nature which spans all of time; we repeat actions generation after generation.  One of the wisest men to ever live, Solomon, offers sage points in the Bible’s Ecclesiastes which can be simplified to these thoughts:

Continue reading

Market Alert – “The Politics That Stole Christmas”

Uncle Sam stole the year-end Santa rally.  The worst December since 1931 and the worst Christmas Eve stock market performance of all time occurred this year.  From my perspective, it is all politics this December.  Yes, our great Uncle Sam “Scrooge” stole Christmas and a small positive investment performance for 2018.  It traces to bad politics coming together in a “perfect storm.”  A “perfect political storm” is the coming together of at least 2 bad events at the same time.  We count at least 3 negative political charges right now: the Fed, Tariffs, and government shutdown (budget).

Continue reading

Government and Markets Woefully Out of Sync; Santa Nowhere to be Found – Week Ended 12/21/18

With just 5 trading days remaining in 2018, Santa is missing, failing to deliver any holiday cheer more familiar to investors at this time of year.  Even a lump of coal might feel better at this point.  Instead, the ill-behavior of financial markets would suggest that something very bad is happening to the global economy.  On the heels of a -1.2% slide during the week ended December 14, the selloff intensified with the S&P tumbling another –7.0% for the week.  It was the worst week for US equities in 10 years, and stocks are now off more than -12% for the month.  Smaller-size US companies are generally faring even worse with the Russell 2000 small-cap index down -15% for the month and crossed the bear market threshold of -20% from its peak.  The tech-heavy Nasdaq is also officially closed in bear territory on Friday (12/21) from its peak after leading the charge throughout most of the last two years.  But regardless of size, US stocks are decidedly negative for 2018 to varying degrees.

Continue reading