News

Weekly Market Commentary February 10, 2020

Fast Facts

Well Deserved Retirement- At age 102, Bob Vollmer is finally ready to put his feet up. After 57 years working as a land surveyor, Indiana’s oldest state employee will start his much-delayed retirement next week. A World War II veteran, Vollmer joined Indiana’s Department of Natural Resources in 1963 and has spent the past six decades traversing the state collecting technical field data. He says he plans to spend his retirement working on “some projects” for his great-grandchildren, and possibly one for himself too: “Might build me a new swimming pool or something like that.”

Plan that Extra Vacation- Better life expectancy for Americans increased by about a month to 78.7 years in 2018—the first increase since 2014. Declining rates of heart disease and cancer, along with a 4 percent drop in overdose deaths, contributed to the slight improvement.

In-N-Out Fans Rejoice- Shoes with their iconic cup design have arrived! Fans of the popular fast-food restaurant chain with locations across California and other western states can now sport their love by purchasing their classic “Drink Cup” shoes. In-N-Out released their collection of adult and kid-sized “Drink Cup” slip-on shoes on Tuesday. They’re a perfect gift for the In-N-Out fan in your life (or as a gift to yourself).

Weekly Focus – Think About It

“It is better to be hated for what you are than to be loved for what you are not.”
–Andre Gide, Author and Nobel Prize winner

The Markets

Last week, major U.S. indices posted strong gains. That’s welcome news, but the drivers behind share price appreciation appear to have little to do with company fundamentals.

Fourth quarter earnings season is underway. During earnings season, companies let investors know how profitable they were during the previous quarter. With 45 percent of companies in the Standard & Poor’s 500 (S&P 500) Index reporting, earnings are slightly down. If the trend continues, this will be the fourth consecutive quarter of year-over-year earnings declines, according to FactSet.

Falling company profits, in tandem with rising share prices, have made U.S. stocks relatively expensive. The price-to-earnings ratio of the S&P 500 Index was 25.04 on Friday. That’s significantly higher than its long-term average of 15.78.

Expectations for economic growth may have been behind last week’s gains. Axios reported, “U.S. economic data had been strengthening ahead of the [coronavirus] outbreak – last month the all-important services sector notched its best reading since September, a private payrolls survey showed the highest job growth in five years, and consumer confidence held at historically high levels.”

The Economist Intelligence Unit (EIU) estimates U.S. economic growth will be 1.7 percent in 2020, although the coronavirus could create issues that slow growth.

Economic growth also could be inhibited by the national debt. The Federal Reserve Bank of St. Louis showed U.S. debt at about 105 percent of gross domestic product (GDP) at the end of the third quarter of 2019 (GDP is the value of all goods and services produced by the United States). According to the Council on Foreign Relations, high levels of debt can slow economic growth and divert investment from infrastructure, education, and research.

Ben Levisohn of Barron’s suggested last week’s gains might have been the result of limited supply and high demand for U.S. stocks, “…because the world’s problems might actually make U.S. markets more attractive.” Stock market gains may also owe something to supportive central bank policies.

During the next few weeks, stay calm and expect some volatility.

DO YOU KNOW A FINANCIAL TWO-TIMER? In an online poll conducted by YouGov, CreditCards.com asked people how open and honest they are with their spouses and partners about money. The survey discovered financial infidelity is not uncommon. Respondents cheat financially in a variety of ways, including:

*34 percent have spent more than their spouse/partner would approve
*12 percent have secret debt
*10 percent have secret credit card accounts
*9 percent have secret savings accounts
*8 percent have secret checking accounts

Respondents had a variety of reasons for secretive financial dealings:

*36 percent said privacy and control were important
*27 percent said they never felt the need to share
*26 percent were embarrassed by the way they handle money (frequently cited by wealthiest respondents.)

Janice Wood of PsychCentral wrote, “Financial infidelity can take as big a toll on relationships as sexual infidelity and emotional dishonesty…A few things that couples can do to prevent financial infidelity is to talk more, get on the same page regarding both joint and individual goals they might have, and also budget for some occasional indulgences along the way of achieving their long-term financial goals…”

If you’re looking for a great Valentine’s Day gift, talking with your spouse or partner about money is a choice that could deliver long-term rewards.

Best regards,

John Klevens, CFP®

 

P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

This material is intended to provide general financial education and is not written or intended as tax or legal advice and may not be relied upon for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. This material is for informational purposes only and is not an offer to sell or a solicitation to buy any securities.

Securities and Advisory Services offered by John Klevens through KMS Financial Services, Inc. Member FINRA/SIPC and an SEC Registered Investment Adviser. Klevens Capital Management and KMS are separate and unaffiliated.

Portions of this newsletter have been prepared by Peak Advisor

* These views are those of Carson Coaching, and not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in 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.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.

Sources:
The Week Magazine
https://www.nbcsandiego.com/
https://www.barrons.com/articles/dow-jones-industrial-average-gains-846-points-in-comeback-week-51581124626?mod=hp_DAY_3 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/02-10-20_Barrons-Coronavirus-Slower_Growth-The_Dow_Just_Had_A_Spectacular_Week-Footnote_1.pdf)
https://www.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_013120.pdf
https://www.investopedia.com/terms/e/earnings.asp
https://www.multpl.com/s-p-500-pe-ratio
https://www.axios.com/newsletters/axios-markets
https://country.eiu.com/united-states
https://country.eiu.com/article.aspx?articleid=148994798&Country=United%20States&topic=Economy (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/02-10-20_TheEconomist-Fed_Continues_Delicate_Balancing_Act-Footnote_7.pdf)
https://fred.stlouisfed.org/series/GFDEGDQ188S
https://www.cfr.org/backgrounder/national-debt-dilemma
https://www.cfr.org/global/global-monetary-policy-tracker/p37726
https://www.creditcards.com/credit-card-news/financial-infidelity-cheating-poll.php
https://psychcentral.com/news/2019/12/31/financial-infidelity-can-take-a-toll-on-relationships/152583.html
https://www.goodreads.com/quotes/tag/love