December Market Update - Cycles Still Matter

The S&P 500 gained 3.4% in November. To further describe our current investment landscape Kathy Jones, Chief Fixed Income Strategist at Schwab Center for Financial Research, recently wrote, “Ever since the Federal Reserve reversed course and began easing policy, markets have enjoyed smooth sailing. It looks like it can last a while, since we don’t anticipate a shift in central bank policies any time soon. The problem is that market valuations become skewed in environments like this. Low interest rates and high liquidity encourage risk-taking and yield-seeking. Asset valuations become elevated and investors become complacent.” ECRI published an update November 19 titled Hard Data Still Decelerating. Lachman Achutan's news item is a must read for anyone studying the U.S. economy. Let's review price, sentiment and valuation as we start December.

Retirement Data: Fidelity Plan Balances Q3 2019

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Source: Fidelity

From Fidelity's press release on November 14, 2019:

• Average 401(k), IRA and 403(b) balances decreased slightly in Q3 2019. The average 401(k) balance dipped to $105,200, less than a 1% decrease from $106,000 in Q2 2019. The year-over-year average balance is down just over 1% from a record high balance of $106,500 in Q3 2018. The average IRA balance dropped slightly to $110,200, less than half a percentage point from last quarter and less than 1% lower than the $111,000 balance one year ago. The average 403(b)/tax exempt account balance dipped to $88,000, less than a 1% decrease from last quarter but up slightly from Q3 2018.

November Market Update - Always Data Dependent

The S&P 500 gained 2.04% in October, ending at 3,037.56. The trailing 1-year return for the S&P 500 as of October 31, 2019 improved to 12.02%. Every market cycle has it's seasons and we currently have four big investment themes influencing investors and thus, the markets: 1) indexation 2) momentum trend following 3) buybacks 4) Central Bank manipulated price discovery (as opposed to natural price discovery). As market observers, we can see all four of these factors impacting markets. To learn more about where we are as we enter November please watch Danielle DiMartino Booth's presentation at the Stansberry Investment Conference 2019 titled: Still Fed Up. If you want to learn more about her, you can read her bio. Now, let's review price, sentiment and valuation as we enter November 2019.

October Market Update - A Sluggish Economy Where We Trade for Free

The S&P 500 gained 1.72% in September, ending at 2,976.73. The sugar high from the world's two largest economies (USA and China) is over and unfortunately the sugar store is closed. What do I mean? China's stimulus to help pull the global economy out of a slowdown from the 2015-16 dip cannot be replicated. It looks probable the U.S. used up it's last bit of fiscal stimulus before election day with the Tax Cuts and Jobs Act of 2017. Our current economic landscape shows Europe learning about the downside of negative rates and a banking system that has not healed from the Great Recession, Japan's central bank left with no impactful stimulus, aging demographics, underfunded pensions, Brexit, a corporate debt fiasco-in-the-making, and a developed world running out of labor. With this backdrop, at best, the U.S. sees a choppy directionless market until the election. Let's jump right into the details and review price, sentiment and valuation.

September Market Update: Prudent Risk Management

The S&P 500 posted a -1.81% return for the month of August. The trailing 1-year return for the S&P 500 as of August 31, 2019 was a wee 0.86%. The concern in the market is that, a bit over a decade into the recovery from the financial crisis, a trade war between the U.S. and China could create a substantial drag on the global economy and push the U.S. into recession. When the 3-month T-Bill and 10-Year Treasury bond curve inverts for one quarter which it did at the end of June, it historically has been a warning signal to investors that they need to reduce risk exposures of their investments. To learn more about this phenomenon please listen to Men Faber's podcast episode #172 with Professor Cam Harvey. Campbell Harvey is Professor of Finance at the Fuqua School of Business, Duke University and a Research Associate of the National Bureau of Economic Research in Cambridge, Massachusetts and he wrote his 1986 dissertation on the topic of yield curve inversions preceding recessions. Let's review price, sentiment and valuation as we enter September 2019.

Retirement Data: Fidelity Plan Balances Q2 2019

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Source: Fidelity

On August 21, 2019 Fidelity released its quarterly analysis of retirement savings trends, including account balances, contributions and savings behaviors, across more than 30 million retirement accounts. Average account balances continued to increase in the second quarter, reaching near-record levels after experiencing a dip at the end of 2018. Here are some findings from their press release:

August Market Update: Growth and Inflation Cycles Declining

The S&P 500 gained 1.31% in July. The S&P 500 starts the month less than one hundred points from an all-time high. The real action over the last few months has been in the bond market. U.S. ten-year treasury bonds have dropped from 2.503% on May 1 to 1.89% on August 1. Looking at one-year trailing returns iShares 7-10 Year Treasury Bond ETF, symbol IEF, has outperformed SPDR® S&P 500 ETF, symbol SPY, 11.90% to 7.07%. Let's examine price, sentiment and valuation as we start August.