Stocks Close Mixed on GDP Disappointment

WEEKLY UPDATE – August 1, 2016

Stocks broke their four-week winning streak, closing mixed after the release of a surprisingly low estimate of second-quarter economic growth. For the week, the S&P 500 lost 0.07%, the Dow fell 0.75%, the NASDAQ grew 1.22%, and the MSCI EAFE added 2.36%.[1]

The preliminary estimate of Q2 Gross Domestic Product (GDP) growth showed that the economy grew a paltry 1.2% last quarter versus the 2.6% growth expected.[2] Investors were understandably disappointed as they had hoped for a resurgence after a slow first quarter. Professional economists were also surprised. The New York Fed had forecasted GDP growth of 2.1% and the Atlanta Fed had predicted 2.3% growth.[3] Why the surprise?

Digging deeper into the data, we find that the disappointment came from an unexpected fall in business inventories. On the positive side, the drop may boost future economic growth as businesses rebuild their stockpiles. Consumer spending was strong, growing 4.2% over the previous 12 months, and accounting for nearly all the GDP growth we saw.[4]

So, though the headline number was a letdown, the underlying trends in consumer spending, labor market growth, and higher savings rates could set up a banner third and fourth quarter.

During last week’s Federal Open Market Committee meeting, the Federal Reserve’s monetary policy makers voted to hold rates steady, surprising no one. Citing recent economic data, the central bank said that “near-term risks to the economic outlook have diminished,” setting the stage for the next rate hike.[5]

Will rates increase in September? December? Or will the Fed wait until 2017? We don’t know. Wall Street bets on future rate hikes suggest that most traders don’t think the Fed will move until December if they don’t wait until 2017.[6]

On the positive side, the Fed seems confident enough in economic growth to cut back on stimulus. On the negative side, speculation around the timing of future rate hikes will continue to be a major market theme this year and may stoke additional volatility.

This week, investors will be watching Friday’s July labor market release and digesting more corporate earnings reports. We’ll keep you informed.

ECONOMIC CALENDAR: 
Monday: PMI Manufacturing Index, ISM Manufacturing Index, Construction Spending
Tuesday: Motor Vehicle Sales, Personal Income and Outlays
Wednesday: ADP Employment Report, ISM Non-Manufacturing Index, EIA Petroleum Status Report
Thursday: Jobless Claims, Factory Orders
Friday: Employment Situation, International Trade
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices, and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the SPUSCIG. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
HEADLINES:
 
Weekly jobless claims rise. The number of Americans filing claims for new unemployment benefits rose by 14,000, but the underlying trend still shows strength in the labor market.[7]
Consumer sentiment drops in July. A measure of how consumers feel about the U.S. economy slipped as worries about the Brexit and the presidential election weighed on Americans.[8]
June new home sales surge. Sales of new single-family homes rose to the highest levels in nearly 8-1/2 years. Sales were up 25.4% over June 2015, indicating that the housing market may be gaining momentum.[9]
Durable goods plunge in June. Orders for long-lasting manufactured goods dropped, indicating weak overseas demand is affecting U.S. factories. Economists had predicted a 1.4% decline over June, but orders for goods like aircraft, appliances, and machinery actually fell 4.0%.[10]
Disclosures
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.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
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 indices from Europe, Australia and Southeast Asia.
The S&P U.S. Investment Grade Corporate Bond Index contains U.S.- and foreign-issued investment-grade corporate bonds denominated in U.S. dollars.
The SPUSCIG launched on April 09, 2013. All information for an index prior to its Launch Date is back-tested, based on the methodology that was in effect on the Launch Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.
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.
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.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no reresentation 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.
http://finance.yahoo.com/quote/%5EGSPC/historyperiod1=1469160000&period2=1469764800&interval=1d&filter=history&frequency=1d
http://finance.yahoo.com/quote/%5EDJI/history?period1=1469160000&period2=1469764800&interval=1d&filter=history&frequency=1d
http://finance.yahoo.com/quote/%5EIXIC/history?period1=1469160000&period2=1469764800&interval=1d&filter=history&frequency=1d
https://www.msci.com/end-of-day-data-search
http://www.cnbc.com/2016/07/29/us-advance-q2-2016-gross-domestic-product.html
https://www.newyorkfed.org/medialibrary/media/research/policy/nowcast/nowcast_2016_0729.pdf?la=en
 https://www.frbatlanta.org/-/media/Documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf
4 http://www.cnbc.com/2016/07/29/us-advance-q2-2016-gross-domestic-product.html
http://www.bloomberg.com/news/articles/2016-07-27/fed-begins-crawl-toward-rate-hike-as-near-term-risks-diminish
http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html [Accessed July 31, 2016]
http://www.foxbusiness.com/markets/2016/07/28/weekly-jobless-claims-rise-by-14000.html
http://www.foxbusiness.com/markets/2016/07/29/consumer-sentiment-slips-in-july.html
http://www.foxbusiness.com/markets/2016/07/26/june-new-home-sales-jump-3-5.html
10 http://www.foxbusiness.com/markets/2016/07/27/june-durable-goods-orders-plunge.html

S&P Tests New High on Jobs Surge

WEEKLY UPDATE – JULY 14, 2016

Markets surged last week after a surprising June jobs report buoyed investor sentiment. The S&P 500 came within a hair of a new record close on the news. For the week, the S&P 500 grew 1.28%, the Dow gained 1.10%, the NASDAQ added 1.94%, and the MSCI EAFE fell 1.76%.[1]

Stocks surged after Friday’s better-than-expected June jobs report. The S&P 500 closed Friday at 2,129.90, less than a point from its record closing high of 2,130.82 reached in May 2015.[2]  The rally was broad-based, and we’re happy to see that investors are shaking off global worries by responding to success stories at home.
After disappointing April and May jobs reports introduced worries of a labor market slowdown, the June report showed that the economy added 287,000 new jobs last month. Since expectations called for around 165,000 jobs, investors counted the report as a solid win for the economy.[3]
How many jobs does the economy need to support sustainable growth?According to a survey of Wall Street Journal economists, the break-even number for sustainable labor growth could be an average of 145,000 new jobs per month. Fewer new jobs, and the economy won’t be able to keep up with population changes as older workers retire and young adults join the workforce.[4]
As with all things economic, there are other opinions. In 2013, the Federal Reserve Bank of Chicago estimated that the economy could get by with just 80,000 new jobs each month; Federal Reserve Chair Janet Yellen stated in December that under 100,000 new jobs per month are needed.[5] You can see in the chart below that the labor market has produced above those estimates in most months since the beginning of 2014.
Figure 1 Monthly Increase in Total Nonfarm Payrolls, Seasonally Adjusted Source: BLS, Federal Reserve, Wall Street Journal
Digging a little deeper into the June numbers gives us more positive news. The unemployment rate rose to 4.9%, which is actually a good thing because it rose as a result of more job seekers entering the labor pool. The Federal Reserve estimates that long-run unemployment in a healthy economy should average between 4.7% and 5.0%.[6]
Even better, average hourly earnings rose 2.6% over June 2015, indicating that the labor market is tightening and employers are raising wages to compensate.[7] Since economists had been worrying about the stagnant pace of wage growth, the June data is encouraging.
Our View
After June’s strong job report, investors are feeling pretty good about the U.S. economy; however, it’s important not to let your perspective be swayed too much by a single data point. While a healthy labor market supports continued economic growth and market upside, we expect additional volatility in the weeks to come. We still face a turbulent presidential election, corporate earnings season, Britain’s EU exit, and other market headwinds. Enjoy the rally, but stay focused on your long-term goals and don’t be surprised if markets pull back again.
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices, and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the SPUSCIG. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

HEADLINES:

Factory orders shrink. New orders for manufactured goods fell in May, but unfilled orders and falling business inventories hold promise for future demand.[8]
China’s inflation drops. Last month, a measure of consumer inflation in China grew at its slowest pace since January on persistently weak demand. More government stimulus is likely to prop up the ailing economy.[9]
Weekly jobless claims fall. The number of Americans claiming new unemployment benefits fell by 16,000 last week, adding more evidence that the labor market is on solid ground after May’s miss.[10]
Service sector expands to seven-month high. An indicator measuring service sector activity, a component of the economy that accounts for 80% of economic growth, rose in June, suggesting continued strength.[11]
 If you would like to hear more about what is included in this column, feel free to reach out to us to learn more at 937.498.1128, online at www.EikenberryRetirement.com or at info@EikenberryRetirement.com.
 ______________________________________________________________
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 S&P U.S. Investment Grade Corporate Bond Index contains U.S.- and foreign-issued investment-grade corporate bonds denominated in U.S. dollars.

The SPUSCIG launched on April 09, 2013. All information for an index prior to its Launch Date is back-tested, based on the methodology that was in effect on the Launch Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.

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.

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.

These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. 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.

http://finance.yahoo.com/q/hp?s=%5EGSPC&a=06&b=1&c=2016&d=06&e=8&f=2016&g=d
http://finance.yahoo.com/q/hp?a=06&b=1&c=2016&d=06&e=8&f=2016&g=d&s=%5EIXIC%2C+&ql=1
http://www.bls.gov/news.release/empsit.nr0.htm
http://www.wsj.com/articles/global-stocks-steady-ahead-of-jobs-report-1467964140
http://blogs.wsj.com/economics/2016/04/07/the-new-magic-number-for-monthly-job-growth-145000/
http://blogs.wsj.com/economics/2016/04/07/the-new-magic-number-for-monthly-job-growth-145000/
http://blogs.wsj.com/briefly/2016/07/08/june-jobs-report-the-numbers-2/
http://www.bls.gov/news.release/empsit.nr0.htm
http://www.foxbusiness.com/markets/2016/07/05/factory-orders-fall-but-unfilled-orders-increase.html
http://www.cnbc.com/2016/07/10/china-june-inflation-eases-further-more-policy-stimulus-anticipated.html
10 http://www.foxbusiness.com/markets/2016/07/07/weekly-jobless-claims-fell-by-16000.html
11 http://www.foxbusiness.com/markets/2016/07/06/u-s-service-sector-growth-expanded-in-june.html

Question of the Month

“I am a father and I try to pass down much of the advice my father gave to me, which is what he received from his father.  Both of these fine gentlemen were very conservative and did not believe in taking much risk on investing their money.  One of their main pieces of advice was to save as much as possible, and invest a good amount in FDIC insured bank CDs.  However, as you know, bank CDs are not paying much anymore; I wish my father was still around to see what he would do in this situation.  What options do I have to invest conservatively so I can help myself as well as provide good advice for my children?  Thank you.”  Leonard.

Great question Leonard.  we can sense the tremendous genuine care and concern in your question, which is very timely with Father’s Day being recent. As you are well aware, interest rates are at historical lows, and based on many national and world economic factors, interest rates may remain very low for a long time.  Even if the Federal Reserve succeeds in their attempt and goal of raising interest rates, it will happen slowly and incrementally. Obviously this is great for borrowing money, but not for those trying to save money in fixed interest savings vehicles.

So, in low interest rate environments like these, you need to explore and learn about all of the available options that may meet your objectives for paying you some interest without taking market risk.  Fortunately, and contrary to popular belief, there are several solutions.  Since we don’t have room in this column to list and explain all these options, feel free to reach out to us to learn of them.  Feel free to reach out to us at 937.498.1128, online at www.EikenberryRetirement.com or at info@EikenberryRetirement.com.

Investment Advisory Services offered through Brookstone Capital Management LLC, a SEC Registered Investment Advisor. Investments and/or investment strategies involve risk including the possible loss of principal. There is no assurance that any investment strategy will achieve its objectives. This information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Content is provided by third parties for informational purposes only and is not a solicitation to buy or sell any products mentioned.

To Roll Over Or Not?

The employer sponsored retirement plan is one of the most popular types of retirement savings plans.  In fact, most people at some point in their lives have contributed to some type of employer savings plan like a 401k or 403b.  However, the popularity of this type of plan brings many questions and options.  One common question that we get on a regular basis is the rollover question; what should one do with the plan once they change employers, separate from service or retire.

When one separates from service for any reason, the option to take the money out of the retirement plan and do something else with it comes available.  The decision you make here is very important and can have many consequences.  Participants generally have five options when leaving their employer-sponsored plan, consisting of:

  • Leaving the money in the former employer’s plan, if permitted
  • Rolling the assets to a new employer’s plan, if one is available and rollovers are permitted
  • Rolling the assets into a self directed IRA or a managed account IRA
  • Converting the money to a Roth IRA
  • Cashing out the plan

There are advantages and disadvantages to each of these options.  Deciding what to do is not easy as many factors must be considered for your unique and specific situation. To learn more on all of these options, including the advantages and disadvantages of each and what specifically you can do to make sure you get the proper advice, feel free to reach out to us at 937.498.1128, online at www.EikenberryRetirement.com or at info@EikenberryRetirement.com.

Investment Advisory Services offered through Brookstone Capital Management LLC, a SEC Registered Investment Advisor. Investments and/or investment strategies involve risk including the possible loss of principal. There is no assurance that any investment strategy will achieve its objectives. This information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Content is provided by third parties for informational purposes only and is not a solicitation to buy or sell any products mentioned.

Is This Market Bullish or Bearish?

We are well into 2016 now and the markets have certainly been on a roller coaster ride since the beginning of the year.  So, obviously market conditions have changed from the low volatile condition of the past seven years, and the change started in August of 2015 when volatility spiked.  Ever since that point, risk has been elevated causing the markets to swing wildly up and down, just like a roller coaster.  So, where are we now and where are the markets going in the near future?  Are we bullish or bearish?

The first two months of 2016 saw the worst start in history to a year in the markets.  This caused many people to feel like the markets were getting ready to fall apart, just like what happened in 2008.  Then, the markets recovered much of those losses in March and April, calming the fears of many people and suggesting that it was just a minor correction in a bull market.  Then in May we had big swings in both directions, causing more confusion.  So, what is going on?  Are these indicators bearish and a sign that the markets could drop sharply in the near future?  Or are the indicators bullish and these wild swings are just temporary before the markets head higher?

Well obviously no one knows for sure, but there are certainly many opinions from market experts for both directions.  To learn of these many different indicators and how to position your money properly in this confusing market, feel free to reach out to us at 937.498.1128, online at www.EikenberryRetirement.com or at info@EikenberryRetirement.com.

Investment Advisory Services offered through Brookstone Capital Management LLC, a SEC Registered Investment Advisor. Investments and/or investment strategies involve risk including the possible loss of principal. There is no assurance that any investment strategy will achieve its objectives. This information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Content is provided by third parties for informational purposes only and is not a solicitation to buy or sell any products mentioned.

Are You Clueless?

You work and save over many years to build a nest egg for retirement, and basically for one simple reason.  Do you know what that is?  Well, the ultimate objective of retirement is to provide yourself a sufficient or desired income stream throughout your retirement years.  Unfortunately, most people, financial advisors included, are simply clueless as to how to setup their retirement plan properly for providing this lifetime income.

Taking income from your nest egg the proper way comes down to many factors and considerations.  Of course, each is based on your unique set of goals, objectives and desires, but here are some main provisions to consider.

What should you do with your money once you retire? Specifically, which accounts should you tap first and why?

 

How old are you? Different plans have different age rules and requirements for tapping into your nest egg.

 

Are you still going to work after retirement? If so, you need to be aware of and understand the rules and provisions that will affect taxes, Social Security and RMDs.

 

Beware of the taxman.

Tax planning is critical in retirement.  You want to setup your income plan and distributions to minimize the taxes that you pay.  Remember, tax evasion is illegal, but tax avoidance using the right tools and strategies is not.

There are many more factors to consider, including one distribution strategy that should be done even if you don’t need income right away.  To learn more about all of these factors and strategies and make sure you have the proper income plan and distribution strategy in place, feel free to reach out to us at 937.498.1128, online at www.EikenberryRetirement.com or at info@EikenberryRetirement.com.

Investment Advisory Services offered through Brookstone Capital Management LLC, a SEC Registered Investment Advisor. Investments and/or investment strategies involve risk including the possible loss of principal. There is no assurance that any investment strategy will achieve its objectives. This information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Content is provided by third parties for informational purposes only and is not a solicitation to buy or sell any products mentioned. (Advisor Name) and (DBA) are not endorsed by or affiliated with the Social Security Administration or any government agency.

Question of the Month

“Hi Nick & John, in some of your previous columns you have talked about how to pass on and inherit money properly.  My sister and I recently inherited an IRA from our mother, and we each established our own inherited IRA. We believe that we will not use all of the inherited IRA money during our lifetime.  When it passes to our beneficiaries, can they also do an inherited IRA to avoid the big tax hit all at once?  Thank you, Pamela.”

Hello Pamela and thank you for your question.  Congratulations to you and your sister for doing some proper planning and establishing inherited IRAs to meet your goals and objectives.  The tax liability on inherited retirement dollars can be absolutely huge, and many people have lost over half of their inherited amount to taxes because of the lack of proper planning.

The Multi-generational IRA, or commonly referred to as the Stretch IRA, is a tremendous benefit in the tax code for allowing people to control and limit taxes on inherited taxable money.  Unfortunately though, there are some limitations to the Stretch IRA, and one of them is that it is not designed to last for multiple generations.

If a person who inherits an IRA should pass away before all of the money has been withdrawn from their inherited IRA, then the money will pass on to their beneficiary(s).  However, that person cannot establish a new inherited IRA and take distributions over their own life expectancy.  The distribution payout period over which funds must be taken from that IRA is determined by your life expectancy as the original “designated beneficiary,” and at least the fixed required minimum distribution schedule based on your own life expectancy must continue to be followed by the new beneficiary.

Passing on money and inheriting money properly is vital in maximizing the value and minimizing the tax burden.  To learn more detailed information on how to properly do this, feel free to reach out to us at 937.498.1128, online at www.EikenberryRetirement.com or at info@EikenberryRetirement.com.

Investment Advisory Services offered through Brookstone Capital Management LLC, a Registered Investment Advisor. Investments and/or investment strategies involve risk including the possible loss of principal. There is no assurance that any investment strategy will achieve its objectives. This information is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. Content is provided by third parties for informational purposes only and is not a solicitation to buy or sell any products mentioned.