-April 29th Market Weekly Roundup Update: Markets barely stayed afloat for the week after disappointing earnings results from high profile technology companies put downward pressure on the broader market. Apple (AAPL), the largest constituent of the S&P 500® Index (2.9% weighting), fell over -11% for the week after reporting its first quarterly sales decline in 13 years. About 60% of the S&P 500® Index has reported financial results with 74% exceeded earnings estimates and 55% exceeded sales
-April 22nd Market Weekly Roundup Update: Markets continued to edge higher on generally better-than-expected corporate earnings results and rising crude oil prices (more on this below). The S&P 500® Index and Dow Jones Industrial Average have each rallied about 15% from their February lows to reach new highs for the year. However, consensus analysts expect an 8.9% decline in earnings compared to the prior year; these results would mark four consecutive quarters of year-over-year earnings declines for the first time since 2008-2009. West Texas Intermediate crude, the North American benchmark, had gained 8.45% to reach new highs for the year.
-We hold individual bonds to limit interest duration price risk and this also avoids fund management expenses, making it more economic with lower costs for clients. We also only advise on investment grade municipals and corporates with sector/industry diversity within those groups. However, we also allocate to certain bond funds as well. Why? The first reason is diversification, as the large basket the bond fund provides is more balanced with greater exposure to many bond issues (e.g. less event risk). Second, institutional investors have better access to more bond issues, and at the par issuance value (of which, at times, retail investors can’t even get access). The third reason is tighter bid-ask spreads, as individual bond spreads can be quite wide (e.g. 1-2%), while bond funds (both ETFs and mutual) can trade with very narrow spreads. Fourthly, bond funds typically have more balanced interest rate risk since duration is not constantly decreasing. Finally, bond funds, unlike certain broker statements (but not Schwab), do not misrepresent coupon income, and are thus more transparent.
-Improving investor sentiment, helped by a rebound in crude oil prices and an easing global growth concerns, have spurred the strong rally in the second month of April ending 4/15/16. Markets rose for the week on a better-than-expected start to the corporate earnings season. In particular, upbeat results from banks buoyed the financial sector and the broader market. Major indices have now advanced seven out of the last nine weeks; the S&P 500® Index and Dow Jones Industrial Average are up 13.8% and 14.3%, respectively, from their mid-February lows.
-We custody and work within Charles Schwab Institutional and are not surprised that Charles Schwab received the highest score among 20 full-service investment firms rated by J.D. Power and Associates. The firm scored an 837 (out of 1,000). The 14th annual survey measured responses in January from more than 6,000 investors based on seven factors: financial advisor, account information, investment performance, product offerings, commissions and fees, website and problem resolution.
-Markets declined for the first week of April as questions about the effectiveness of central bank policies weighed on sentiment. As expected, while the bull market is aging and with that, more volatility persists, it is alive. . U.S. jobs and improved wages, among other factors, support our confidence. Additionally, a 7-week long rally from mid-Feb lows climbed the wall of worry. Nonetheless, market volumes remain somewhat subdued as investors await the start of earnings season; the daily trading volume of the S&P 500® Index is roughly 30% lower than at the start of the year. Expectations for the reporting period are relatively modest; overall, forecasts anticipate a 1.2% decline in revenues and a 9.1% decline in earnings. Continued pressure in commodity-related areas, including Energy, Materials, and Industrials, account for much of the anticipated earnings shortfall. Financials are also estimated to post earnings weakness due to the low interest rate environment.
-What’s helped drive the markets back up? The good old reliable “Don’t Fight the Fed.” Fed Chairman, Janet Yellen, essentially told Mr. Market that despite inflation being on the rise and employment below 5%, she is not going to raise the Fed Funds rate 4-times this year (which was the initial forecast), nor even two times this year (her later guidance), but rather most likely not at all in 2016.
-Gold Posts Biggest Gain in Thirty Years. The first quarter of 2016 saw a sharp drop in many financial assets, and then massive rally in most risk assets, including stocks. However, despite that rally, safe haven assets held on. Gold is one of those assets, and the commodity has just notched its best quarter in 30 years. Gold rose +16.5% this past quarter, the best three-month period since 1986.
-The more risk you take in your portfolio with traditional allocations like stocks is often compensated with higher returns in the long-run. The problem is that riskier, more volatile assets can also cause one to sell or buy at the worst possible time. This is why we recommend most non-retired investors have a portfolio with exposure to both riskier and safer assets.
-April 22nd Market Weekly Roundup Update: Markets continued to edge higher on generally better-than-expected corporate earnings results and rising crude oil prices (more on this below). The S&P 500® Index and Dow Jones Industrial Average have each rallied about 15% from their February lows to reach new highs for the year. However, consensus analysts expect an 8.9% decline in earnings compared to the prior year; these results would mark four consecutive quarters of year-over-year earnings declines for the first time since 2008-2009. West Texas Intermediate crude, the North American benchmark, had gained 8.45% to reach new highs for the year.
-We hold individual bonds to limit interest duration price risk and this also avoids fund management expenses, making it more economic with lower costs for clients. We also only advise on investment grade municipals and corporates with sector/industry diversity within those groups. However, we also allocate to certain bond funds as well. Why? The first reason is diversification, as the large basket the bond fund provides is more balanced with greater exposure to many bond issues (e.g. less event risk). Second, institutional investors have better access to more bond issues, and at the par issuance value (of which, at times, retail investors can’t even get access). The third reason is tighter bid-ask spreads, as individual bond spreads can be quite wide (e.g. 1-2%), while bond funds (both ETFs and mutual) can trade with very narrow spreads. Fourthly, bond funds typically have more balanced interest rate risk since duration is not constantly decreasing. Finally, bond funds, unlike certain broker statements (but not Schwab), do not misrepresent coupon income, and are thus more transparent.
-Improving investor sentiment, helped by a rebound in crude oil prices and an easing global growth concerns, have spurred the strong rally in the second month of April ending 4/15/16. Markets rose for the week on a better-than-expected start to the corporate earnings season. In particular, upbeat results from banks buoyed the financial sector and the broader market. Major indices have now advanced seven out of the last nine weeks; the S&P 500® Index and Dow Jones Industrial Average are up 13.8% and 14.3%, respectively, from their mid-February lows.
-We custody and work within Charles Schwab Institutional and are not surprised that Charles Schwab received the highest score among 20 full-service investment firms rated by J.D. Power and Associates. The firm scored an 837 (out of 1,000). The 14th annual survey measured responses in January from more than 6,000 investors based on seven factors: financial advisor, account information, investment performance, product offerings, commissions and fees, website and problem resolution.
-Markets declined for the first week of April as questions about the effectiveness of central bank policies weighed on sentiment. As expected, while the bull market is aging and with that, more volatility persists, it is alive. . U.S. jobs and improved wages, among other factors, support our confidence. Additionally, a 7-week long rally from mid-Feb lows climbed the wall of worry. Nonetheless, market volumes remain somewhat subdued as investors await the start of earnings season; the daily trading volume of the S&P 500® Index is roughly 30% lower than at the start of the year. Expectations for the reporting period are relatively modest; overall, forecasts anticipate a 1.2% decline in revenues and a 9.1% decline in earnings. Continued pressure in commodity-related areas, including Energy, Materials, and Industrials, account for much of the anticipated earnings shortfall. Financials are also estimated to post earnings weakness due to the low interest rate environment.
-What’s helped drive the markets back up? The good old reliable “Don’t Fight the Fed.” Fed Chairman, Janet Yellen, essentially told Mr. Market that despite inflation being on the rise and employment below 5%, she is not going to raise the Fed Funds rate 4-times this year (which was the initial forecast), nor even two times this year (her later guidance), but rather most likely not at all in 2016.
-Gold Posts Biggest Gain in Thirty Years. The first quarter of 2016 saw a sharp drop in many financial assets, and then massive rally in most risk assets, including stocks. However, despite that rally, safe haven assets held on. Gold is one of those assets, and the commodity has just notched its best quarter in 30 years. Gold rose +16.5% this past quarter, the best three-month period since 1986.
-The more risk you take in your portfolio with traditional allocations like stocks is often compensated with higher returns in the long-run. The problem is that riskier, more volatile assets can also cause one to sell or buy at the worst possible time. This is why we recommend most non-retired investors have a portfolio with exposure to both riskier and safer assets.