Price Financial Group Wealth Management
WEEKLY UPDATE – MAY 2, 2016
In This Issue
Quote Of The Week | Recipe Of The Week | Tax Tips | Golf Tip | Healthy Lifestyle | Green Living
As of Friday, the S&P 500 is on the second-longest bull market run in history, surpassing the 1949-1956 bull market that lasted 2,607 days. The longest bull market in history ran between 1987 and 2000, lasting nearly 4,500 days.
After months of volatility and challenges on the horizon, can the bulls keep running?
In the pro-bull column, we have a few major points to consider:
Bull markets don’t just die of old age. History shows us that bull markets ended because of a variety of shocks like oil price spikes, recessions, bursting asset bubbles, geopolitical issues, and extreme leveraging. While the past doesn’t predict the future, we should evaluate threats to market performance instead of worrying about birthdays.
Economic indicators support growth. Recessions have accompanied or presaged many previous bear markets. Even when recession risks are higher this year, most economists don’t see an economic downturn in the short-term future.
We have experienced healthy pullbacks. One of the markers of a bull market top is elevated investor optimism and unsustainably high stock valuations. Since the last S&P 500 market high in May of 2015, markets have retrenched several times as investors have taken stock of global risks to growth. We haven’t seen the irrational exuberance that often foreshadows a bear market turn.
In the pro-bear column, we also have some points to weigh in our thinking:
Threats to economic growth from China and Europe may prove too much for markets. We don’t know that we have seen the worst out of China, and a hard landing of the world’s second-largest economy would send ripples throughout the global economy that could threaten markets. Europe is grappling with political, economic, and security issues that could threaten the EU.
The Federal Reserve may bungle monetary policy. The Fed is performing a very delicate dance to bring interest rates closer to historic levels. Raise rates too fast and the economy could stumble; raise them too slowly and the Fed could leave itself unable to fight off another economic slowdown. A monetary policy misstep could trigger a market downturn.
Corporate profits may continue to fall. U.S. companies are struggling to find growth amid challenging global conditions; earnings declined year-over-year for the fifth quarter in a row last quarter, and continued weakness could cause investors to become bearish about U.S. stocks.
The simple truth is that no one can predict market tops or bottoms; plenty of people say they can, but it’s all a matter of educated (or uneducated) guesswork. Instead of trying to call markets, what we do is take a look at overall domestic and international fundamentals and create portfolio strategies that align with our clients’ overall goals. We can assume that the current bull market will come to an end someday; to reach the #1 spot it would have to continue through 2021, and that’s a pretty big stretch. Rather than worrying about when the end might come, we’ll adjust portfolio strategies as needed and prudently position our clients for risk.
If you have any questions about market strategies for volatile times, please give our office a call. We’d be happy to speak to you.
Monday: PMI Manufacturing Index, ISM Mfg. Index, Construction Spending
Tuesday: Motor Vehicle Sales
Wednesday: ADP Employment Report, International Trade, Productivity and Costs, Factory Orders, ISM Non-Mfg. Index, EIA Petroleum Status Report
Thursday: Jobless Claims
Friday: Employment Situation
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.
Durable goods orders rise. March orders for long-lasting factory goods like airplanes, appliances, and electronics rebounded but grew less than expected, indicating the manufacturing slump isn’t over.
Economy grew 0.5% in first quarter. Gross Domestic Product (GDP), the primary measure of overall economic growth, grew just 0.5% on an inflation-adjusted basis, showing that the economy slowed after the fourth quarter of 2015. GDP growth estimates will be adjusted as new data arrives.
Consumer sentiment falls in April. One measure of consumer sentiment shows that Americans were less optimistic about their financial prospects last month. Falling sentiment could mean less consumer spending this quarter.
Federal Reserve holds interest rates steady. The Fed’s Open Market Committee voted to keep rates where they are out of concern about slowing economic growth. Though rates could increase this summer, some think that the Fed will wait until December to hike.
Now here is a quick market update as of 4/29/16
Let’s give them something to talk about!
First heard on “Investing Simplified Radio Show” 2/6/16
You are NOT hearing this from anyone, NOT your evening news, NOT your radio business News and NOT you Advisor and NOT even your cousin Eddie!
Friday April 22, 2016,
But on May 21st. 2015 S & P closed at 2130.82
S&P 500 closed 4/29/16 @ 2,065.30 and it isdown – 317%
But on May 19th 2015 closed at 18,312.39
Dow Closed 4/29/16 @ 17,773.64and it isdown – 3.03%
But on July 20th. 2015 closed @ 5218.86
Nasdaq closed 4/29/16 @ 4,775.36and it isdown – 9.29 %
2016 Year In Review:
12-31-15 Dow closed @ 17,425.03
348.51 = + 2.00%
12/31/15 S & P Closed @ 2,058.90
04/29/16 @ 2,065.30
+ 6.4 = + .003 %
The Dow clsd. 4/29/16@ 17,773.64 / – 52.12 / – 0.32%
Where do we stand VS DOW clos 10-9-07: 14,164.53
So since the Market Collapse and Recovery
We are up 25.48% in 8 yrs. 6.75 Mo. = 2.98 % per yr.
*The Dow closed 12-31-1999 @ 11,497.12
* Is up 54.59 %for 15 yrs. 5 mo. = 3.54 % per yr.
The NASDAQ closed 12/31/99 @ 4,069.31
Closed 4/29/16 @ 4,775.36
27.35 % for 15 Years & 5 mo. = 1.13 %
S&P > 4/29/16@ 2,065.30 / – 10.51 / – 0.51%
Where do we stand VS S&P close 10-09-07:1565.15 ?
+ 31.96 %in 8 years 6.75 Mo. = 3.73 % per Year
*The S & P closed 12-31-1999 @ 1,469.25
*Is up 40.57 %for15 yrs. 5 mo. 2.63 % per Yr.
Oil Clsd. @ $ 45.95 Last Report 4/22/16 $ 43.75
Gold @ $ 1,294.90Last Report 4/22/16 $ 1,233.70
10 Yr. Bond rate: 1.82 % Last Report 4/22/16 1.89 %
This “market on crack” is like a Pavlovian dog trained to just go up on any news. The Fed and central banks around the world have left no other place for investors to put their money.
The market has really, really tried to rally to new highs, with total faith that the Fed will never let them down. Whether they make it remains to be seen, but I have my doubts, which is why I’m sending you this update today.
I have been using a rounded top pattern since late 2014. It has been the clearest pattern over the last two years.
As this chart shows, the markets have gone as far as they should, unless they do actually get those new highs they’re after:
Markets have actually gone a little higher than they should have but that’s not surprising as they will do everything possible to pull in the last suckers. But the fundamental news keeps working against them:
- Slowing retail and luxury sales and manufacturing;
- Slowing earnings over the last year and disappointing earnings recently for the top tech and growth companies (Apple, Microsoft and Starbucks);
- Continued terrorist attacks in Europe;
- And now first-quarter GDP has come in at just 0.5%.
Let’s Talk Targets
On the rounded top pattern, the top-end target was around 2,095 on the S&P 500. The market got up to 2,111 on April 20. It tried to top that but started to fail yesterday.
A more serious crash is likely ahead into the summer, around early July by the best cycles I monitor.
If we do break down, as I expect, then the line in the sand will come around 1,800-1,810… near the early February lows. This proved to be a support level way back to October 2014.
That also forms a large head-and-shoulders pattern that, if broken ahead, would project the next crash low around 1,485.
That would be a 30% correction from the all-time high in May 2015 and the final sign that this bubble is over and done!
There is likely to be an initial bounce off of 1,800-1,820 if that level is hit. The most likely scenario would be a break back below there and a continued crash towards 1,485.
It is still possible that the markets could instead make one more rally to a slight new high by July after correcting as low as 1,800, as I allowed for in the updated paperback version of The Demographic Cliff.
If that were the case, it would be the final top.
Divergences in many indices and small caps versus large caps strongly suggest that the bubble already peaked in May of 2015.
Gold and Bonds
Gold is bouncing as I expected it would in a bear market rally that could take it as high as $1,400, but that could only happen if the dollar doesn’t rally from the low side of its $93 to $100 range, or if the dollar breaks down out of that range temporarily.
Charles commented on why shorting gold could be a major trade into next year as gold’s next downside target is the late 2008 lows around $700. I think we’ll see that price per ounce likely by mid-2017 or a bit later. That’s a powerful play and could present itself in the next few months. Be ready.
The dollar will look attractive again if the dollar index holds at 93 in the weeks ahead, and more so if it breaks down to lower lows.
Long-term Treasury bonds may be tilting towards higher yields. We’re still hoping for a spike in sovereign bond yields when Europe starts to see sovereign debt defaults again in Greece and Italy, and possibly if we get a final burst of late-stage inflation. But that may or may not happen.
If 10-year yields get to 3% or a bit higher, that would be a great buy for years to come, but the 30-year would be the best play for deflation and falling yields.
In short, buckle up. It’s likely to get rough.
We’ll keep you updated.
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Quote Of The Week
“Success is not final, failure is not fatal: it is the courage to continue that counts.”
– Winston Churchill
Recipe Of The Week
Easy Lemon Cupcakes
These simple cupcakes have a bright citrus flavor.
Makes 12 cupcakes
1 1/2 cups all-purpose flour, spooned and leveled
1 tablespoon finely grated lemon zest from an organic lemon
1 1/2 teaspoons baking powder
1/4 teaspoon kosher salt
1/2 cup (1 stick) unsalted butter, at room temperature
3/4 cup granulated white sugar
2 large eggs
1 teaspoon pure vanilla extract
1/2 cup whole milk
1/2 cup (1 stick) unsalted butter, at room temperature
1 1/2 cups confectioners’ sugar
2 teaspoons finely grated lemon zest plus 2 teaspoons fresh lemon juice
1/4 teaspoon kosher salt
Chef’s Tip: Reserve some lemon zest to sprinkle on top of each cupcake for a garnish. Like coconut? Add 1/4 teaspoon of coconut extract to the frosting and garnish with coconut flakes.
Preheat your oven to 350° F. Line a 12-muffin tin with cupcake liners.
Sift the flour into a bowl and then add the lemon zest, baking powder, and salt. Whisk to combine.
In another bowl, beat the butter and sugar until fluffy-it should take about two minutes on medium-high. Add the vanilla and then the eggs one by one, scraping the sides of the bowl as needed.
On a slow mixer setting, add the flour mixture to the batter by the cup, alternating with 1/4 cups of milk to keep the batter from getting lumpy. Mix until just combined and don’t overmix.
Pour the batter into the muffin cups, shaking the tin to even the tops. Bake for about 15-20 minutes at 350°F until a toothpick comes out clean. Cool the cupcakes in the tin.
While the cupcakes are baking, make the frosting by beating the butter and sugar on medium until it’s fluffy. Add the lemon zest, juice, and salt on a lower setting. Once the cupcakes are cool, frost them.
Recipe adapted from Kristin Evans Dittami | RealSimple.com
Get Ready for Next Year’s Taxes
Now that tax season is officially over for most people, you might be tempted to push it to the back of your mind. However, now is a good time to set up a system so you can keep your tax records safe and easy to find. Here’s how to make next year’s taxes easier:
Speak to a professional about tax minimization strategies you can employ now
Worried about next year’s tax burden? Adjust your withholding to avoid getting a big bill at tax time
Take action when your life changes. Getting married or divorced, having a child, incorporating a business- these are all life changes that may affect your taxes. Speak to a professional about updating your tax information
Keep all of your tax documents organized in once place. Add files, documents, and receipts as they arrive
Find a tax specialist. If you’re not currently working with a tax professional, now is a good time to interview one
Tip courtesy of IRS.gov
Do You Really Need That Driver?
Many amateur golfers automatically assume that they have to reach for the driver for the tee box on every Par-4 and Par-5. However, the real priority is putting your tee shot into play. So, take a step back and assess the situation. Ask yourself:
- What are the risks?
- What are my strengths and weaknesses as a player?
- If I blow the shot, what’s the likely outcome?
- Is there a better club for this situation?
Tip courtesy of Randy Chang, PGA | Golf Tips Mag
Reduce Acid Reflux Through Lifestyle Changes
Acid reflux, commonly known as heartburn affects millions of Americans. Though smokers and the overweight are more prone to heartburn, it can strike anyone-including the President. While serious or frequent heartburn requires a physician’s care, there are some simple lifestyle fixes you can make to help prevent the issue:
Gastroenterologists say that sleeping on a wedge pillow can help prevent night-time attacks by elevating your upper body.
Avoiding acidic foods and drinks like soda, alcohol, coffee, tomatoes, and citrus can help reduce pain.
Cutting down on fatty and fried foods often helps.
Not eating for two or three hours before bed is also recommended to give your stomach time to digest.
Tip courtesy of AARP
Keep Your Houseplants Watered When You’re Away
If you’re going on vacation your houseplants may suffer if you don’t have someone checking in on them. Here’s how to keep them watered:
For trips of a week or less, start by watering each plant well, then fill a tub with 1-2 inches of water. Set the pots inside the tub and the plants will soak up the water as needed.
Leave an index card with watering instructions by each plant so a caretaker doesn’t accidentally over-water or under-water your plants.
Tip courtesy of Barbara Pleasant | Real Simple
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