January 30, 2017

Weekly Market Commentary
January 30, 2017

The Markets

I thought I would take a moment to take this commentary to review the multiple events that took place in 2016. The year started off with two negative months back to back and at one point in February the market was down- 10.3%. Small rallies took place and later around mid June the market was again down- 2.09%. There was an uptick from July through October and we were in positive territory for the year. However, due to interest rate worries and the election the market at one point in early November was in negative territory once again at -2.09%. What was interesting about this time up until then the high dividend stocks and bonds were very popular and doing very well. When the selloff took place during this time what was perceived the safest and most conservative parts of the market got hit the worst. I read an article that at a point where the S&P was -2.5% the dividend producing stocks were -5%. At the same time the bond market was -3%. The irony of all this is when Trump won the election the market rallied strongly and yet pending one month later the Federal Reserve was going to raise interest rates which typically derails a market for a period of time. This did not happen this year and the market momentum kept going. I made a lot of adjustments in the practice by stripping out a lot of the income producing areas because they were not moving with the market even though none of the fundamentals were out of line with the positions. The adjustments were to place assets in the main market and minimize the dividend stocks impact and the strategy worked well as we adjusted the investments. In summary almost all the upward side of the market only took place in a very small window with a risk still lurking in December with the interest rate issue. The majority of the newsfeeds seem to indicate that we may have more interest rate increases this year so the current alignment will be continued unless some fundamental shift takes place. I hope that this was helpful in giving you some clarity on what actually happened during the year.

U.S. stocks upward move is also supported by earnings growth. At the end of each quarter, companies report their earnings (which indicate how much profit they made during the period). FactSet reported 34 percent of companies in the Standard & Poor’s 500 Index have reported fourth quarter earnings, so far. Altogether, earnings are 2.7 percent above the estimates, although they remain below the five-year average.

Markets could be in for some bumpy rides as investors weigh in on President Trump’s immigration ban and other announcements.

ARE YOUR CHILDREN SMART SHOPPERS? Science Daily reported a meta-analysis of 73 studies nationwide evaluated parenting styles and children’s buying habits. The findings suggest, “children raised by parents who set limits and explain the reason behind these limits are most likely to develop into wise consumers.”

Weekly Focus

“Americans of all ages, all conditions, all minds constantly unite. Not only do they have commercial and industrial associations in which all take part, but they also have a thousand other kinds: religious, moral, grave, futile, very general and very particular, immense and very small; Americans use associations to give fêtes, to found seminaries, to build inns, to raise churches, to distribute books, to send missionaries to the antipodes; in this manner they create hospitals, prisons, schools. Finally, if it is a question of bringing to light a truth or developing a sentiment with the support of a great example, they associate.”
–Alexis de Tocqueville, Author of ‘Democracy in America’

Recent comments