Archive for ND&S Updates

“Happy Thanksgiving”

November 24, 2014 

Last week U.S. equity markets continued their advance. On Friday, China announced a surprise cut in interest rates and European officials suggested that they would expand their bond buying program. This contributed to a stock rally on Friday that resulted in the DJIA and the S&P 500 ending up 1% and 1.2% respectively for the week.

This week economic news is fairly light with reports on new home sales, durable goods orders and the second revision to 3rd quarter GDP due to be reported.

Early forecasts by strategists for 2015 equity returns are modest averaging about 5%. Most strategists are not looking for P/Es to expand as U.S. stocks are already at the upper end of fair value and the Fed could start to raise interest rates at some point next year. Many international markets are now selling at half the valuation of U.S. stocks and could react positively next year to any good news either economically or Geo-politically.


“The only thing we know about the future is that it will be different.”Peter Drucker

Onward and Upward

November 17, 2014 

The year-end rally continued for a fourth week, with the S&P 500 climbing 0.4% while the NASDAQ jumped 1.2%. This latest advance has produced double digit Year-to-Date returns of 10.4% for the 500 and 12.3% by the NASDAQ. Note that the small cap Russell 2000 has not participated this year, with a paltry 0.9% YTD return. Also of note, international markets have not fared so well as the Dow Jones Global Ex US is -3.2% YTD.

The week encompassed several significant developments: oil prices continue to decline, prompting HAL/BHI to merge; consumer confidence and retail stocks are both stronger; another multibillion mega-bank fine was announced [$3bil+ for forex “manipulation”] while a regional bank merger was announced [BBT/SUSQ]; strenuous monetary “stimulus” has driven the Japanese yen down to a seven year low [their equity markets are up, but any durable economic response is yet-to-be-determined]. Finally, Russian troops have reentered eastern Ukraine.

Meanwhile, the Obama administration has launched a concerted effort to regulate the internet service providers [ISPs] as common carriers [ie: treat them like an electric utility]. The bureaucrats call this “net neutrality”. The industry response has been prompt and pointed. Randall Stephenson, AT&T’s CEO has announced a halt in high-speed internet spending until web rules are resolved.

These many developments netted out positive last week, but future volatility will no doubt be in both directions.

“… keep your head when all about are … losing theirs” Rudyard Kipling

Not so “Blue” Chips Advance Again…

November 10, 2014 

Markets finished higher last week with the third weekly gain in a row. Stocks moved lower earlier in the week on a slump in oil prices, but the results of mid-term elections pushed stocks to record levels by the end of the week. Investors were encouraged by solid earnings reports, positive economic news and dovish comments from the Fed. Of course, mid-term election results seemed to excite investors, but history shows that it really doesn’t matter who gets elected (although a Republican congress along with a Democrat President seems to be a good combination… more gridlock?).

For the week, the Dow Jones Industrial Average finished at 17,573 to close up by 1.1%. The broader-based S&P 500 closed at 2,032 for a gain of 0.69% for the week. The Nasdaq Composite closed the week at 4,633 to inch ahead by 0.04%. International markets did not fare as well, and the Dow Jones Global (ex US) Index dropped 1.4% for the week. The 10-year Treasury closed at a yield of 2.31% as bonds were relatively flat for the week.

Despite the volatility, we see the U.S. economy plodding along and doing reasonably well. If history is any guide, U.S. stocks ought to do reasonably well over the next six months or so. The average rally in the S&P 500 for the six month period following the last 13 mid-term elections was 16.5% (according to global trading firm BTIG). Perhaps the market’s move higher going into the mid-term elections had already discounted the results. Nonetheless, we like the odds that the markets stand a good chance of being higher six months from now. Just think what would happen if the children in Washington could actually get something done…

As always, we urge investors not to get caught up in the day-to-day noise of the markets. Instead, focus on long-term goals, and enjoy the relative calm in the markets while it lasts.

“If you can dream it, you can do it.”  –  Walt Disney



November 4, 2014 

So how have you been doing you ask? Well the results are in and the scoreboard should tell you most of what you want to know (thru nine months). By far the best performing group was the REITs, or real estate investment trusts up 13.4%. Yet they were down in the 3rd quarter 2.5% indicating a possible reversal. The index most quoted about equities, the S&P 500, a good reflection of large U.S. companies, is up 8.3%. After that came the bond index, a steadying influence up 4.1%. Emerging stock markets were up a modest 2.7%. Moving into indices that were negative through nine months, EFA, the broadest international index was down 1.0%. The Russell 2000 which adds in the smaller US companies was down 4.4% (which led the charge in 2013) and commodities were down 5.6% due the deflationary environment most recently.

We can easily see the advantage of diversification illustrated in the periodic chart below. Last year’s winners does not equate to 2014 and so on. Our conclusion, stick to an investment mix that you and your advisor are comfortable using. You can fine tune it based on fundamentals that are clear and as always avoid dramatic changes based on the most recent headlines.

Here again is the year to date performance best to worst:

REITs +13.4%
S&P 500 +8.3%
Bond Agg. +4.1%
Emerging +2.7%
EFA -1.0%
Russell 2000 -4.4%
Commodities -5.6%

This data should help you understand better what your portfolio has done this year. Here’s to a good fourth quarter!!