Groundhog Day

January 29, 2018

Before the opening bell on Friday, the US Gross Domestic Product (GDP) was reported at 2.6%, lower than the consensus estimate of 2.9%. The resilient market didn’t even flinch. Last week, the DJIA, Standard & Poor’s 500 and the tech heavy NASDAQ all climbed over2% to new record highs. International markets, benefitting from a weaker dollar, also performed well with EAFE up 1.5% and the MSCI Emerging Market climbing 3.3%.

The stock of the week was Intel (INTC), which was up over 9% on Friday after reporting fabulous 4th quarter earnings and guidance.

Rising interest rates remain a threat to future economic growth and stock market valuations. The yield on the 10 year US Treasury closed at 2.66% on Friday, a big jump from 2.40% where it ended last year. We continue to expect slightly higher rates as the Fed tactfully raises short-term rates and unwinds its colossal balance sheet.

This week is filled with economic news and earnings announcements. President Trump’s first State of the Union address is on Tuesday and he’ll be his supercilious self pushing his infrastructure plan and America first. On Wednesday, Janet Yellen, the Fed chairperson will bid farewell and probably hint that a March rate hike is on the way.

We continue to stress portfolio diversification with prudent asset allocation and quality holdings.

Happy Super Bowl week and GO PATS!

It’s the same thing your whole life: “Clean up your room. Stand up straight. Pick up your feet. Take it like a man. Be nice to your sister. Don’t mix beer and wine, ever.” Oh yeah: “Don’t drive on the railroad track.”

Phil Connors


Earnings Season Begins

January 24, 2018

Equity markets pushed higher last week in the face of a US government shutdown which stretched through the weekend. Fourth-quarter earnings began to pick up and so far have been mostly positive versus expectations. Expectations are for earnings to increase 12% against the same quarter a year ago while revenues are expected to increase 7%.

For the week, the S&P 500 climbed 0.88% while the DJIA closed higher by 1.08%. The Russell 2000 representing US small companies inched higher by 0.36%. International equities continued their advance with the MSCI EAFE and MSCI EM rising 1.25% and 2.02%, respectively. Yields moved higher as investors continue to move out of bonds in anticipation of higher inflation and continued global growth. The 10yr US Treasury closed at its highest yield since March 2017, closing the week at 2.64%. Oil markets saw little change last week closing at $63.38 a barrel.

Economic news for the week was mostly positive – industrial production came in at 0.9% month over month exceeding estimates of 0.4%; housing starts fell short of estimates (1.275mm) declining to a seasonally adjusted annual rate of 1.192 million; jobless claims were 220,000 as labor markets continue to show strength.

This week will continue with a deluge of company announcements with 44 S&P 500 companies scheduled to report. There will also be an advance estimate of 4q17 GDP and economic reports on durable goods and home sales.

Let’s make it a good week!

“It’s not what happens to you, but how you react to it that matters.” – Epictetus


Weekly Commentary (1/15/18) – Déjà Vu All Over Again

January 16, 2018

So what’s new? Markets finished higher last week. As Yogi Berra would say – “It’s déjà vu all over again.”

For the week, the DJIA gained 2.0% while the S&P 500 finished ahead by 1.6%. Developed international markets also moved higher as the MSCI EAFE index closed up 1.2% for the week. Emerging markets also gained as the MSCI EM index finished higher by 0.6%. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week lower by 0.2%. As a result, the 10 YR US Treasury closed at a yield of 2.55% (up 8 bp from the previous week’s closing yield of 2.47%). Gold advanced $18.05 to close at $1,337.64/oz. Oil prices advanced $2.86 to close the week at $64.30/bbl.

Investors continue to show confidence in the markets as economic news once again points to a global economic recovery. The December consumer price index (CPI) showed headline CPI up 2.1% year-over-year (y/y) with core CPI up 1.8% y/y … all generally in-line with expectations. Despite energy prices being up 6.9% y/y, inflation numbers continue to be fairly tame. Ultimately the Fed’s easy money policies will produce higher prices, but stock prices should fare well in this low inflation, reasonable growth environment. The advance in bond yields will most likely be muted until inflation and economic growth pick up materially from today’s levels.

The week ahead will see more earnings and economic releases. We expect earnings releases to continue to beat expectations (as did JP Morgan, BlackRock and several other S&P 500 companies last week). Economic news this week will include housing starts, industrial production, NY/Philly Fed manufacturing surveys and January preliminary consumer sentiment.

As always, we plan to look through the day-to-day news and focus on longer-term objectives. Investors should stay the course and stick close to their long-term asset allocation targets.

We hope that everyone had a happy and reflective Martin Luther King Jr. Day.

“Life’s most persistent and urgent question is, ‘What are you doing for others?’”- Martin Luther King Jr.


Equities Off to a Good Start

January 8, 2018

Equity markets started the year on a strong note last week. All major indexes crossed milestones with the S&P 500 passing 2700, the DJIA 25000 and the NASDAQ rising above 7000. The strongest sectors were technology, materials and energy as economic news continued to show strength. Global manufacturing PMI came in at 54.5 – the strongest reading since mid 2016. Crude oil and other commodity prices are being supported stronger global growth. International equities also started the year on a strong note as the EAFE was up 2.45% and emerging markets rose 3.69%.

Friday’s jobs number of 148,000 new jobs came in below estimates of 180,000 with the unemployment rate holding steady at 4.1%. In spite of the weaker number, interest rates rose for the week with rate on the 10 year U.S. Treasury rising from 2.40% to 2.47%. Expectations continue to be for three rate increases by the FOMC in 2018.

This week look for economic reports on retail sales and inflation. A reading on inflation above consensus would pressure the Fed to take a more hawkish stance. Corporate earnings reports start this Friday with major banks starting to report. The expectations for S&P 500 earnings growth for 2018 have risen to 11%.

“To succeed in your mission, you must have single-minded devotion to your goal.”A.P.J. Abdul Kalam


Many Happy Returns

January 2, 2018

What a fabulous year for the equity and fixed income markets!

Before we pat ourselves on the back for making money for our clients, let’s look at the markets and economies for last week.

The US equity markets gave back some performance during Christmas week. The DJIA slipped 0.14%, S&P500 (0.33%), and NASDAQ (0.80%). Real estate and utilities were the best performing equity sectors and were up 1.5% and 0.4%, respectively. International markets were strong with the MSCI EAFE up 0.95% and emerging markets (MSCI EM) climbing 1.71%. Interest rates took a breather with the 10 Year Treasury closing at a yield of 2.40%, down 0.08% from the previous week.

For the year, the bullish markets were sustained by broad economic growth, strong corporate earnings, consistently strong investor inflows and corporate stock buybacks. The S&P 500 returned 21.83% while international markets soared with the MSCI EAFE up 25.62% and MSCI EM climbing 37.75%.

This short week will deliver several key economic reports: ISM manufacturing and non-manufacturing indexes; minutes from the December FOMC meeting; and reports on auto sales and employment.

For 2018, we expect an increase in the subdued market volatility, slightly higher interest rates and a little more time for the markets to digest, and the economy to feel, the benefits of the sweeping tax reform. Nevertheless, with improved global economic growth and continued inflows, investors should continue favoring equities within a well diversified and balanced portfolio.

Our team at ND&S would like to wish you and your loved ones all the very best for a healthy, happy and prosperous New Year!

“Write it on your heart that every day is the best day in the year.”Ralph Waldo Emerson


2017 – A Year to Cheer

December 26, 2017

Last week, equity markets finished in the green as the S&P 500 was up 0.3% and the DJIA increased 0.42% largely driven by a 4.5% increase in energy stocks. For the week, value stocks outperformed growth stocks on the strength of the energy and material sectors. International markets were also positive with the MSCI EAFE and MSCI EM up 1.25% and 2.08% respectively. Bonds prices were under pressure closing last week in the red as interest rates rose across the board. The 10yr US Treasury closed at a yield of 2.48% which is up from 2.35% the week prior.

The GOP-sponsored tax bill officially crossed the finish-line as it was passed by both houses of Congress and was signed into law by the President. The key provisions being touted by its supporters include a lower corporate tax rate, lower rates on individuals, and a doubling of the standard deduction. Its passage set off a wave of corporate announcements touting wage hikes, investments, and employee bonuses.

For equity investors, the holiday season came early and often as there was plenty to cheer and be merry  about in 2017. This year was one for the record books as major indexes continuously notched record closes throughout the year(DJIA – 70 record closes; Nasdaq – 72; S&P 500 – 62). Barring a disastrous close to the year, 2017 will be the first on record that the S&P 500 finished the year without a negative month. We can only hope that 2018 will be as prosperous for equities as 2017.

Our team at Newman Dignan & Sheerar would like to wish to everyone a happy and healthy New Year!

“No act of kindness, no matter how small, is ever wasted.” – Aesop

Trending Higher…again

December 18, 2017

December 18, 2017

Markets trended higher last week as the Fed raised rates, as expected, for the third time this year. Markets were bolstered by the apparent willingness of Congress to move forward on tax reform … a vote is expected this week.

For the week, the DJIA gained 1.3% while the S&P 500 finished ahead by 0.92% . Developed international markets also moved higher as the MSCI EAFE index closed up 0.14% for the week. Emerging markets also gained as the MSCI EM index finished higher by 0.71%. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week up 0.29%. As a result, the 10 YR US Treasury closed at a yield of 2.35% (down 3 bp from the previous week’s closing yield of 2.38%). Gold advanced $9.10 to close at $1,254.30/oz. Oil prices were essentially flat (down 6 cents) as they closed the week at $57.30/bbl.

Economic news released last week reinforced investors’ beliefs that the economy remains solid. The Bureau of Labor Statistics (BLS) reported that the November Producer Price Index rose 0.4%, exceeding expectations of 0.3%. Core PPI advanced 0.4%, twice the expected increase of 0.2%. The BLS also reported that the November Consumer Price Index rose 0.4%, in-line with expectations. Food service sales jumped 0.8% in November, far exceeding expectations of a 0.3% advance. The Department of Labor reported initial jobless claims for the week ending December 9 of 225,000, below expectations of 239,000 … yet another sign of a healthy job market. Industrial production numbers released on Friday pointed to a gain of 0.2% in November … just short of expectations of a monthly increase of 0.3%. Offsetting November’s slight miss was an upward revision to October’s increase from 0.9% to 1.2%. Lastly, capacity utilization moved slightly higher by 0.1% to 77.1% – the highest reading since April 2015.

The week ahead will see more economic releases – housing starts, current account balance, existing home sales, final GDP, new home sales, durable goods orders and PCE. We expect more good news from economic releases as the current synchronized global recovery marches on.

As always, we plan to look through the day-to-day news and focus on longer-term objectives.  Investors should stay the course and stick close to their long-term asset allocation targets. But most importantly, please enjoy the holiday season and reflect on the many blessings in our lives.

Best wishes for a Happy Holiday season!

Good Jobs Numbers

December 11, 2017

Last week the monthly jobs report helped lift large cap stocks to weekly gains. Both the S&P 500 and the DJIA rose after the November jobs report confirmed that economic growth remains strong. Nonfarm payrolls rose 228,000 and the unemployment rate remained at 4.1% a 17 year low, putting GDP growth on track for a 3rd straight quarter of 3% growth. Small cap and emerging market equities fell for the week while developed international equities were flat. Bonds were essentially flat last week as the yield on the 10 year U.S. Treasury went from a 2.37% to 2.38%. One of the largest decliners last week was gold which fell 2.64%. Higher interest rates and a stronger dollar are not good for the precious metal as it increases the opportunity cost of holding gold.

This week the FOMC meets and is widely expected to raise short term rates another .25% especially after last week’s strong jobs report. Observers will closely watch the Fed’s “dot plot” to gauge the number of rate hikes next year. Additionally, look for reports on CPI, retail sales and industrial production.

The annual Army-Navy football game is a celebration well beyond the playing of the game. The annual Army-Navy game held this weekend did not disappoint. Army beat Navy for the second year in a row, and, for the first time in 21years, was able to capture the Commander-in-Chief’s Trophy.

“There is nothing new in the world except the history you do not know.”Harry S. Truman


Tax Plan Pushing Through

December 4, 2017

Equities pushed higher last week amid optimism that a US tax reform bill will make its way through Congress. Last week was certainly not without fireworks both literally and figuratively; “Rocket Man” fired off his most powerful missile yet, while former national security advisor Michael Flynn pleaded guilty for lying to the FBI. Flynn’s willingness to provide testimony sent markets into a tailspin early in trading on Friday but mostly recovered by market close.

For the week, the DJIA finished higher by 3.00%, while the broader-based S&P 500 closed up 1.60%. Smaller US companies representing the Russell 2000 also closed the week in the green up 1.22%. International equities were disappointing last week with the MSCI EAFE finishing down 0.94% and MSCI EM off 3.30%. Yields closed slightly higher last week with the 10 Treasury closing at 2.37%. Oil prices were little changed last week as OPEC extended production caps through 2018.

Equity investors are certainly cheering the prospects of tax reform … as they should. At this point, tax reform is just a bill and will still have to work its way through the reconciliation process in Congress. It’s estimated that cutting the corporate tax rate to 20% would likely bump earnings for S&P 500 companies close to $10 per share. Earnings per share (EPS) estimates for 2018 earnings on the S&P 500 are $140 without tax reform.

“Thinking is one thing no one has ever been able to tax.” – Charles Kettering

Post-Thanksgiving Market Recap

November 27, 2017

We hope everyone had a happy Thanksgiving! Global equities were modestly higher during the holiday-shortened week.

For the week, the DJIA closed higher by 0.89% while the broader-based S&P 500 moved up 0.93% to close above 2600 for the first time. Small Cap US equities were higher as well with the Russell 2000 up 1.77%. International equities also continued their advance with both the MSCI EAFE and MSCI EM finishing higher by 1.88% and 1.57% respectively. International equities were helped last week from better-than-expected November PMIs for the Eurozone with both the manufacturing & services sectors posting their highest readings since 2011. Treasury yields closed slightly lower for the week with the 10yr Treasury closing a yield of 2.34%, down from 2.35% the week prior. Oil (WTI) finished the week at its highest level in over two years closing the week at $58.97/barrel.

Economic news released last week included: existing home sales rose 2% in October to an annual rate of 5.48M, beating expectations; manufactured durable goods came in below expectations as it fell 1.2% in October; jobless claims for the week ending November 18 came in at 239k. Jobless claims have remained below 300k for 142 consecutive weeks, the longest streak since 1970 underscoring the strength of the US labor market.

Earnings season is nearly complete and has been mostly positive with over 70% of companies reporting positive EPS surprises. Earnings growth for the broader market has increased roughly 7.5% y/y with revenues up 5.5%. Technology, financials, and consumer staples surprised positively while utilities and telecom posted weaker results.

In the week ahead, look for reports on home sales, 3Q17 GDP, Personal Income and PCE, and ISM & Markit PMIs. Let’s make it a good week!

“In three words I can sum up everything I’ve learned about life: it goes on.” Robert Frost