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Provided by Mike Fassi
|QUOTE OF THE QUARTER
“Self-confidence is the first requisite to great undertakings.”
Winterizing your home (caulking in the right places, checking the efficiency of your furnace, installing new insulation) could cost you a little more this fall, but the payoff could be many years of savings on your heating bills.
A review of 3Q 2016
THE QUARTER IN BRIEF
DOMESTIC ECONOMIC HEALTH
The pace of hiring also moderated in August, though July’s number was revised upward in September. Employers added 275,000 new jobs in July, 151,000 for August. The headline jobless rate (4.9%), the U-6 rate counting the underemployed and the unemployed (9.7%), and the labor force participation rate (62.8%) were exactly the same in both months.4
Other indicators were less dismal. As September ended, the federal government said the economy grew at a 1.4% pace in Q2 – not very good, but better than the 1.1% growth previously estimated. Additionally, ISM’s service sector PMI remained above 50 in August at 51.4 (though that number was decidedly lower than the 55.5 mark from July).3,5
Accentuating the positive, consumers grew more upbeat as the quarter went on. In July, the Conference Board announced a reading of 97.3 for its consumer confidence index; in August, the CB said the gauge was at 101.1, and in September it reached 104.1. Across the quarter, the University of Michigan’s monthly measure of household sentiment rose slightly from 90.0 in July to 91.2 for September (including a dip to 89.8 for August).6,7
Consumer inflation picked up, but wholesale inflation did not. By August, the Consumer Price Index had advanced 1.1% in a year, as opposed to 0.8% in the 12 months ending in July. Core consumer prices were up 2.3% year-over-year by August. In annualized terms, the Producer Price Index showed no change from a year earlier in August; in monthly terms, the PPI fell 0.4% in July and was flat a month later. Core inflation, as measured by the Federal Reserve, increased 0.1% in July, 0.2% in August.2,3
Speaking of the Federal Reserve, it left interest rates alone during Q3. It did, however, clue Wall Street in on the probability of a Q4 rate hike: its latest dot-plot forecast showed consensus for one, and the vote against raising the federal funds rate at its September policy meeting was close (7-3). After the vote was announced, Fed chair Janet Yellen remarked that FOMC members were “generally pleased with how the U.S. economy is doing” – a notably sunny viewpoint. On September 29, she made further headlines by commenting how useful it would be if the Fed could buy securities and corporate bonds to stimulate the economy in a recession (something it is currently prohibited from doing).8,9
Wells Fargo certainly made headlines in Q3. In September, its CEO was brought before Congress after news broke that employees had opened as many as 2 million fake accounts in pursuit of sales goals. The bank was contending with $190 million in fines and severe damage to its reputation when the quarter ended.10
GLOBAL ECONOMIC HEALTH
Economic indicators pointed at a less stagnant E.U. economy during the summer after the Brexit. Eurostat projected 0.4% consumer inflation in September, rising from 0.2% in August; the euro area jobless rate stayed at 10.1% in both July and August, the lowest level observed since July 2011.12
In September, OPEC nations agreed to reduce oil production for the first time since 2008. The agreement, to be finalized in fall, would essentially restore the production limits that were in place back in 2015. Previously, Saudi Arabia had held out on such an agreement, saying it would cut production only if all other OPEC and non-OPEC oil-producing nations vowed to do so.13
The past four quarters had not been so kind to some other indices. As the third quarter ended, Italy’s FTSE All-Share had lost 21.06% in a year; Spain’s IBEX 35, 8.16%; France’s CAC-40, just 0.16%; China’s Shanghai Composite, 1.55%; and Japan’s Nikkei 225, 5.40%.14
Looking at the Bloomberg Commodity Index, the best Q3 performers were two base metals – zinc rose 12.6% in the quarter; nickel, 11.5%. Sugar advanced 9.8%; cotton, 5.3%; and soybean oil, 4.6%. The worst performers? Lean hogs lost 31.6%; soy meal, 25.1%; soybeans, 17.1%; and wheat, 14.0%. The U.S. Dollar Index retreated but 0.57% for the quarter, finishing Q3 at 95.42.17,18
Like gold, WTI crude was nearly flat for the quarter. Futures lost just 0.2% in Q3, finishing September at a NYMEX price of $48.24. Heating oil rose 2.9% in Q3, while unleaded gasoline retreated 0.9%.1,19
Home loans, broadly speaking, grew slightly less expensive across Q3. The September 29 Freddie Mac Primary Mortgage Market Survey specified the following average interest on the three common mortgage types: 30-year FRM, 3.42%; 15-year FRM, 2.72%; 5/1-year ARM, 2.81%. Compare those numbers with these from the June 30 PMMS: 30-year FRM, 3.48%; 15-year FRM, 2.78%; 5/1-year ARM, 2.70%.20
LOOKING BACK…LOOKING FORWARD
The Dow ended the quarter at 18,308.15; the NASDAQ, at 5,312.00; the S&P 500, at 2,168.27; and the RUT, at 1,251.64. The RUT’s YTD mark at the end of Q3 (+10.19%) surpassed the YTD performances of the big three.22
Concluding the quarter at 13.29, the CBOE VIX retreated swiftly this summer. Its Q3 loss was 10.02%, leaving the “fear index” down 27.02% YTD.23
Sources: wsj.com, cnbc.com, bigcharts.com, treasury.gov – 9/30/161,22,24,25
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.
These returns do not include dividends.
This is the time of year when bulls yearn for an extended rally. Will they get it? Will S&P 500 earnings surpass (low) expectations? Will the market confidently ride through the election, whatever the outcome? Will it simply and calmly price in a rate hike, assuming that happens? Will investors shrug off any unsettling headlines, whether from home or from overseas? If the market can answer “yes” to those last four questions, the quarter could see impressive gains for the major indices. According to S&P Global Market Intelligence research, the S&P 500 has risen an average of 5% in the fourth quarter since 1990, and advanced in the fourth quarter more than 70% of the time since 1945. The past has little or no influence upon future market behaviors, but even with continued slow economic growth, the overall market mood is still bullish – so perhaps investors will look at earnings first this quarter, then other factors. It is sure to be an eventful and possibly turbulent three months.26
Mike Fassi may be reached at email@example.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. MarketingPro, Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The FTSE 100 Index is a share index of the 100 most highly capitalized companies listed on the London Stock Exchange. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The MICEX Index is a cap-weighted composite index calculated based on prices of the 50 most liquid Russian stocks of the largest and dynamically developing Russian issuers presented on the Moscow Exchange. The Hang Seng Index is a freefloat-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The Bovespa Index is a gross total return index weighted by traded volume & is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The MSCI World Index is a free-float weighted equity index that includes developed world markets, and does not include emerging markets. BSE Sensex or Bombay Stock Exchange Sensitivity Index is a value-weighted index composed of 30 stocks that started January 1, 1986. The FTSE Italia All-Share Index is a free float capitalization weighted index that comprises all of the constituents in the FTSE MIB, FTSE Italia Mid Cap and FTSE Italia Small Cap indices. The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain’s principal stock exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The SSE Composite Index is an index of all stocks (A and B shares) that are traded at the Shanghai Stock Exchange. Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
1 – cnbc.com/2016/09/30/us-markets.html [9/30/16]
2 – investing.com/economic-calendar/ [9/30/16]
3 – marketwatch.com/economy-politics/calendars/economic [9/30/16]
4 – foxbusiness.com/markets/2016/09/02/tepid-august-jobs-report-lack-wage-growth-muddies-rate-hike-picture.html [9/2/16]
5 – tinyurl.com/zho9nnp [9/6/16]
6 – investing.com/economic-calendar/cb-consumer-confidence-48 [10/3/16]
7 – tradingeconomics.com/united-states/consumer-confidence [10/3/16]
8 – latimes.com/business/la-fi-federal-reserve-meeting-20160921-snap-story.html [9/21/16]
9 – reuters.com/article/us-usa-fed-yellen-purchases-idUSKCN11Z2WI [9/29/16]
10 – reuters.com/article/us-wells-fargo-accounts-idUSKCN11X2NW [9/28/16]
11 – cnbc.com/2016/09/28/deutsche-bank-crisis-explained.html [9/28/16]
12 – ec.europa.eu/eurostat# [10/4/16]
13 – reuters.com/article/us-opec-meeting-idUSKCN11Y18K [9/29/16]
14 – markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp [9/30/16]
15 – msci.com/end-of-day-data-search [9/30/16]
16 – coinnews.net/2016/10/01/gold-silver-mixed-in-3rd-quarter-us-mint-coin-sales-strengthen/ [10/1/16]
17 – bloomberg.com/news/articles/2016-10-02/too-many-fat-pigs-are-making-hogs-the-biggest-commodities-loser [10/2/16]
18 – marketwatch.com/investing/index/dxy/historical [10/3/16]
19 – marketwatch.com/story/oil-prices-continue-to-fall-as-doubts-over-opec-agreement-build-2016-09-30/ [9/30/16]
20 – freddiemac.com/pmms/archive.html?year=2016 [10/3/16]
21 – money.cnn.com/data/markets/russell/ [9/30/16]
22 – markets.wsj.com/us [9/30/16]
23 – money.cnn.com/quote/quote.html?symb=VIX [9/30/16]
24 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F30%2F15&x=0&y=0 [9/30/16]
24 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F30%2F15&x=0&y=0 [9/30/16]
24 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F30%2F15&x=0&y=0 [9/30/16]
24 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F29%2F06&x=0&y=0 [9/30/16]
24 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F29%2F06&x=0&y=0 [9/30/16]
24 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F29%2F06&x=0&y=0 [9/30/16]
25 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [10/3/16]
26 – cbsnews.com/news/time-to-make-some-fourth-quarter-investing-bets/ [9/30/16]
October Is National Financial Planning Month
Saving is a great start, but planning to reach your financial goals is even better.
Provided by Mike Fassi
Are you saving for retirement? Great. Are you planning for retirement? That is even better. Planning for your retirement and other long-range financial goals is an essential step – one that could make achieving those goals easier.
Saving without investing isn’t enough. Since interest rates are so low today, money in a typical savings account barely grows. It may not even grow enough to keep up with inflation, leaving the saver at a long-term financial disadvantage.
Very few Americans retire on savings alone. Rather, they invest some of their savings and retire mostly on the accumulated earnings those invested dollars generate over time.
Investing without planning usually isn’t enough. Most people invest with a general idea of building wealth, particularly for retirement. The problem is that too many of them invest without a plan. They are guessing how much money they will need once they leave work, and that guess may be way off. Some have no idea at all.
Growing and retaining wealth takes more than just investing. Along the way, you must plan to manage risk and defer or reduce taxes. A good financial plan – created with the assistance of an experienced financial professional – addresses those priorities while defining your investment approach. It changes over time, to reflect changes in your life and your financial objectives.
With a plan, you can set short-term and long-term goals and benchmarks. You can estimate the amount of money you will likely need to meet retirement, college, and health care expenses. You can plot a way to wind down your business or exit your career with confidence. You can also get a good look at your present financial situation – where you stand in terms of your assets and liabilities, the distance between where you are financially and where you would like to be.
Last year, a Gallup poll found that just 38% of investors had a written financial plan. Gallup asked those with no written financial strategy why they lacked one. The top two reasons? They just hadn’t taken the time (29%) or they simply hadn’t thought about it (27%).1
October is National Financial Planning Month – an ideal time to plan your financial future. The end of the year is approaching and a new one will soon begin, so this is the right time to think about what you have done in 2016 and what you could do in 2017. You might want to do something new; you may want to do some things differently. Your financial future is in your hands, so be proactive and plan.
Mike Fassi may be reached at firstname.lastname@example.org
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 – gallup.com/poll/184421/nonretired-investors-written-financial-plan.aspx [7/31/15]
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WHAT IS RISK TOLERANCE?
Your investment style matters, and so does your investment horizon.
Provided by Mike Fassi
When you meet with a financial advisor, at some point the talk will turn to your “risk tolerance” or “risk profile” … and you may receive a questionnaire intended to gauge it. Well, it seems simple enough: the financial advisor is learning how conservatively or aggressively you would like to invest. But actually, a risk profile signifies more than that.
Styles for profiles. Financial advisors often use a few model portfolios which they adapt for the unique needs of each client. Your risk profile indicates which of these model portfolios might become a good basis for your own, custom portfolio.
Investors are usually categorized as “conservative”, “moderate” or “aggressive”, with in-between categories of “moderately aggressive” and “moderately conservative” also applicable based on questionnaire responses.
How conservative are you? If you absolutely do not want to risk losing money, and if your first priority is consistent income to live on, you are a conservative investor. If these are your concerns and you are retired or about to retire, you should not be offered high-risk investments. If you retire with an aggressive portfolio and your investments tank, it could take (many) years to rebuild your savings, years you might not have. However, many pre-retirees and new retirees are moderately conservative: they are cautious with money in their lives and don’t want to take on a risky portfolio, but they still have a need to accumulate assets because they have either started saving for the future too late or lost assets as a result of market downturns or poor or unfortunate financial decisions.
How aggressive are you? Aggressive and moderately aggressive investors commonly want to match or beat the stock markets, or save for retirement at a highly accelerated rate. Some are “market junkies” who watch Wall Street on a daily basis. Most of them expect to build substantial wealth someday; most of them are young or in the middle stage of life; most of them have NOT been hit hard financially as a result of investing, and many of them have substantial income or savings. The moderately aggressive investor is willing to wait a bit longer to reach his or her goals, while the aggressive investor tends to be in a hurry by comparison.
Who is the moderate investor? Typically, the moderate investor starts investing roughly about the time of major life events – that first stable job with a corresponding 401(k), a marriage, the start of a family. Often, the moderate investor is a younger investor saving or investing for long-term goals (usually their child’s college education and retirement). These midlife investors frequently have a “balanced” portfolio, with a mix of conservative and riskier investments across varied investment classes. The portfolios of moderate investors are often fine-tuned or revised to become more conservative as they age. These investors are willing to accept some losses and risks and are pragmatic and usually educated about the realities of investing and their investment options. Some moderate investors are retired or nearly retired, having either retained their investment stance out of necessity (they need to continue accumulating assets in retirement) or out of preference (they do not want to “miss out” when the bulls run on Wall Street).
Why risk tolerance is so important. Decades ago, you used to hear “horror stories” about seniors losing their life savings as a result of inappropriate investments. Things have changed for the better: we now have questionnaires and in-depth discussions about risk tolerance. It is a very important factor not only in terms of investing, but in terms of the client-advisor relationship. If you’d like to learn more about different investment styles or you feel you might be taking on too much risk as you invest, I would urge you to speak with a qualified financial advisor.
Mike Fassi may be reached at email@example.com
These are the views of Peter Montoya, Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative or Broker/Dealer give 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.