Weekly Talking Points

  1. The S&P 500 ground out a positive 0.66% last week while the Dow Jones Industrial Average shot up 1.48% on a softening of the “trade war” talk between the US and China.   International markets continued sell off with political tensions (mainly Turkey) as both developed (MSCI EAFE) and emerging (MSCI EM) declined 1.10% and 3.68% respectively.
  2. Retail sales in the US continue to impress, as they increased 0.5% month over month in July. As long as the consumer, well, consumes, this is a good indicator of future growth.  Particularly encouraging were sales at restaurants and gas stations as these are considered discretionary (generally the first to slow or decline in times of economic stress).
  3. The selloff in emerging markets is somewhat disappointing. Coming into the year our investment committee was constructive on EM in general and we got this one wrong.  The strengthening dollar has been the main culprit up until last week, when Turkey and concerns over their currency (the Lira) took the lead.
  4. While the strengthening dollar and trade talks certainly have been headwinds for EM, there have been plenty of other currencies that have had issues this year as well. According to Legg Mason: …the fall in the Lira “masks the focused nature of the problems, which, for the most part, have been due to issues in five of the 22 main EM currencies: Argentina, Turkey, Brazil, South Africa and Russia, whose currencies have fallen, year to date, about (38%), (37%), (16%), (15%) and (14%), respectively.”
  5. We will be doing a large rebalance of accounts this week and next week as we may be starting to see a change in leadership in markets. Dividend payers have lagged growth-oriented stocks in general for 5+ years, and especially for the past 12 months.  We have taken advantage of this for the most part, however valuations and momentum are have made us reconsider that position.  We will begin to even out (i.e. no longer have a growth overweight) and add to dividend payers as appropriate for the individual client in the coming weeks.

Bottom Line

As I noted in the 8/6 “bottom line”, dividend payers time may finally have come.  The tide may be shifting for these stocks.  The good news if we are “wrong” I don’t believe we’ll be wrong by much.  The valuations for the most part speak for themselves in my opinion and while we still do not see immediate signs of a recession, there may be little sense in buying “yesterdays news”.

Joel P. Faircloth, MBA
Chief Executive Officer, Aspen Wealth Strategies
Wealth Advisor, RJFS

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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. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Joel P.Faircloth and Aspen Wealth Strategies and not necessarily those of RJFS or Raymond James. Investments mentioned may not be suitable for all investors. Past performance may not be indicative of future results. There is no assurance any of the trends mentioned will continue or forecasts will occur. Investing involves risk including the possible loss of capital. Investing in certain sectors may involve additional risks and may not be appropriate for all investors. The S&P 500 is an unmanaged index of 500 widely held stocks. International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. These risks are greater in emerging markets. 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 21 developed nations. MSCI Emerging Markets Index is designed to measure equity market performance in 23 emerging market countries. The index’s three largest industries are materials, energy, and banks. Dividends are not guaranteed and must be authorized by the company’s board of directors. This is not a replacement for the official customer account statement and trade confirmation from Raymond James or other custodians.

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