Joel’s Weekly Talking Points – 1/23/20

  1. Geopolitics: The US-Iran standoff seems to have dissipated to the point that markets are ready to move on. I do not believe we have heard and seen the last of this Iranian-based volatility but it’s something that markets have dealt with since the 1979 Islamic revolution and will likely continue to do so.
  2. ISM: The ISM Non-Manufacturing Index came in at 55.0 for December, signaling continued expansion in that space (Levels above 50 signal expansion; levels below 50 signal contraction.)  This beat consensus which was 54.5.  Interestingly the Manufacturing ISM is still in contraction (below 50) and has been for some time.
  3. Unemployment: The unemployment rate held steady at 3.5% in December.  This is a number worth watching in an election year.  As I noted in the quarterly commentary, if this rate creeps up in an election year that’s generally not good for the incumbent.
  4. FED: Much has been written about the FED intervention in the repo market. To recap, the FED started injecting liquidity into the repo market back in September.  This market is essentially the overnight loan market for large banks.  While I could write a 20-page paper on what that is and the theories around it happening, investment houses are starting to call it “QE” (quantitative easing).  Interestingly, on a recent conference call a fixed income manager with John Hancock stated that the total FED action since September essentially amounted to another 50 basis points in rate cuts.
  5. Fun fact of the week: MISSING THE BEST: The total return for the S&P 500 over the last 10 years (2010-2019) was a gain of +13.6% per year (total return). If you missed the 10 best percentage gain days over the last 10 years (i.e., 10 days in total, not10 days per year), the +13.6% annual gain falls to a +9.2% annual gain (source: BTN Research).

Weekly index performance: The S&P was up 0.98% last week, the Russell 1000 Growth index was up 1.86% and the Russell 1000 Value was up 0.07%. Small caps were down slightly with the Russell 2000 off 0.18%. International markets were mixed with the EAFE off 0.08%, and Emerging markets up 0.88%. Turning to fixed income, the broad market US Aggregate was down 0.09%, and the High Yield index was up 0.23% last week.  The US 10 year is at 1.80% this morning.

Bottom line:  So far so good for markets entering 2020.  We have seen our first major test (Iran) and the markets, for now at least, have pressed on.  Earnings season begins in earnest over the next two weeks so we’ll get to see how the holiday season treated retailers – in my opinion those numbers should look good.  Given low unemployment and accommodative central banks all signs are pointing positive – which makes me nervous.  We are keeping an eye on this repo issue I mentioned above but so far everyone I have talked to, from multiple investment houses seem to think it’s a non-issue – that also makes me a bit nervous.  Stay tuned…

 

 

Any opinions are those of Joel Faircloth and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation.
International investing involves special risks, including currency fluctuations, differing financial accounting standards, and possible political and economic volatility.
Individual investor’s results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.
Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.
The Russell 1000 Value Index measures the performance of those Russell 1000 companies with higher
price-to-book ratios and lower forecasted growth values.
The Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index.
The MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States & Canada. The EAFE consists of the country indices of 22 developed nations.
The MSCI Emerging Markets is designed to measure equity market performance in 25 emerging market indices. The index’s three largest industries are materials, energy, and banks.
The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market.
The Bloomberg Barclays U.S. Corporate High Yield Bond Index is composed of fixed-rate, publicly issued, non-investment grade debt, is unmanaged, with dividends reinvested, and is not available for purchase. The index includes both corporate and non-corporate sectors. The corporate sectors are Industrial, Utility and Finance, which include both U.S. and non-U.S. corporations.
There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise.
See All

Are You On Track
For Retirement?


Here at Aspen, we utilize cutting-edge financial planning software to analyze your plan’s probability of success. Whether you’re at the beginning of your career, still working, or have already retired, we want to help make sure that you’re on track to meet all of your goals–whatever they may be. The first step in doing so is establishing a financial plan.

See If You’re On Track For Retirement

External Link Notice

The following website is being provided for informational purposes only. Raymond James is not affiliated with and does not endorse, authorize, or sponsor the following website or their respective sponsors. Raymond James is not responsible for the content of the websites or the collection or use of information regarding the websites’ users and/or members.

Continue Cancel