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Welcome to the May edition of The Wealth Chronicle.
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This month's talking points include a review of the current bull market, the Fed and interest rates, and a closer look at earnings.
Bull market moves into second place - The current bull market has logged over 1,800 trading days, making the current run in stocks the second longest since WWII (Figure 1 - below)
This leads to the next question - are the bull market's days numbered?
Bull markets do not die of old age. Recessions have traditionally brought out the demise of the bull. Leading economic indicators are not suggesting a recession is imminent.
5 Reasons Why the Market Won't Crash Yet
Payouts Remain Healthy - The dividend yield on more than 1,400 stocks that pay dividends is higher than in July 2007, even though interest rates are not much lower, indicating that equity prices are trading at more-conservative levels.
No Bubble in Housing Yet - The median house price in 2016 dollars is still noticeably below the peaks of 2006 and 2007.
No Oil-Price Spike - Recessions are generally preceded by a spike in oil prices. That isn't happening.
Yield Curve is in Normal Range - When the difference between the rate on the 10-year Treasury note minus the rate on the three-month Treasury bill goes zero or negative, the yield curve is flat or inverted, signaling a threat of recession.
New-Home Sales Rising - Sales in April of new homes hit a new peak for the current expansion.
The Fed shows some of its cards
The on-again, off-again approach by the Fed to raise interest rates appears to be on-again in June. Last week's release of the minutes from the Fed meeting signaled officials are seriously considering a June increase to interest rates. The increase would be minimal as it was last year, but how the markets would react to a rise is anyone's guess.
Q1 earnings season
With 97% of S&P 500 firms having reported, Thomson Reuters estimates earnings will fall 6.0% versus a year ago. Energy was the worst performing sector, estimated to drop 105.6%. Consumer discretionary led the way with earnings up an average 19.2%. Examples of consumer discretionary stocks are Amazon, Home Depot, Disney, Nike, Priceline.
As we've seen before, rate hike sentiment can change dramatically over a short period of time. Sentiment that is now favoring a rate increase does create volatility in stocks over the short term, but corporate profits and the fundamentals dictate the long term direction of equities.
If stock valuations looked way too exuberant; if the inflation-adjusted house price were far above its previous peak; if the yield curve were flat or inverted; and if the price of oil were surging to triple-digit peaks- then we might want to resort to defensive measures. But odds right now are that the bull market has not finished its run.
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How Well Do You Know The Markets?
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See how many of the questions below you can answer correctly. Question #4 sounds like it would be asked in a Microsoft or Google job interview.
- How many stocks were on the original Dow Jones Industrial Average?
- Where was the first U.S stock exchange located?
- What four companies are traded on the NASDAQ exchange but part of the Dow Jones Industrial Average?
- How much is a "ton of money" assuming your ton is measured in new $20 bills?
- What is the only original stock still listed in the Dow Jones Industrial Average?
- What year did the Dow Jones Industrial Average close above 1000 for the first time?
- What company has been listed the longest on the NYSE?
- Has the national debt ever been fully paid off?
- Who was the first America to make $100 million?
- Who was the first U.S. president in office to visit the NYSE?
Answers
- 12
- Philadelphia in 1790
- Apple, Cisco, Intel, and Microsoft
- $19.6 Million
- General Electric
- 1972
- Con Ed
- Only one, in 1835-1836 under President Andrew Jackson. This was the oly tme any modern nation has eliminated its national debt
- Al Capone
- Ronald Reagan 1985
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Tax season is over! And now that it's behind us, I wanted to make you aware of a "concierge" service I offer at certain times of the year.
We know that friends and family are a vital part of your life, and when we see loved ones facing perplexing financial issues, we want to help.
Now that taxes are filed, I have some time over the next 60 days to visit with anyone you care about who could use some help with a specific concern.
Think of me as a help desk! I can offer resources to help with nuts-&-bolts questions from some of your favorite people. It's also an opportunity for me to show that there is a lot more to managing finances than just recommending investments:
- The newly married -- How much mortgage is too much?
- Mom -- How much assisted living can we afford?
- Neighbor -- What are some options in selling a business?
- New exec - What is restricted stock?
- College grad - How to manage college loans?
- Fishing buddy - Is it time to claim Social Security?
- Co-worker - Should I take the lump sum?
- Retiree - Is my spending on track with my income?
It's not a service we advertise (and there are some limits involved), but I wanted to make you aware of it. We offer this assistance on a referral basis only. And there is never an obligation. This is just a resource I can provide for you if you see a need for it.
So, if any of your friends, family, or colleagues could use some professional guidance or just would like to ask a question or two, I'm happy to help. No question is too big or too small.
And, of course, I am always here for you if you need anything. |
Can you figure out these sayings represented as mathematical equations?
Answers: (1) Hell to the no (2) Dime a dozen (3) Enough is enough (4) Fair and Square (5) See eye to eye (6) Negative Nancy (7) With or without you (8) You are a product of your environment (9) The meaning of life the universe, and everything
Wal-Mart recently released their quarterly earnings, and while doing some research on the company I found some interest facts about them: - You might feel like there is a Starbucks at every corner, but 90% of all Americans live within 15 minutes of a Wal Mart
- Walmart has more employees worldwide - 2.2 million - than the population of Houston. The mega-retailer employs 1.4 million people in the U.S. alone.
- If Walmart were a country, it would be the 26th largest economy in the world.
- Bananas have been the best selling item at Walmart for several years. They sell nearly one billion pounds of bananas each year
- The equivalent of the entire population of Canada (2.35 million people) shops at Walmart every day
Royal Caribbean This month, Royal Caribbean took delivery of its newest cruise ship - Harmony of the Seas. At 1,188 feet-long and with a gross tonnage of 226,963, the billion-dollar Harmony of the Seas is the largest cruise ship ever built. Harmony is the third ship in the company's Oasis class - Oasis of the Seas and Allure of the Seas entered service in 2009 and 2010, respectively. To put the sheer magnitude of the ship into perspective, here's how Royal Caribbean's newest ship compares to some other significant objects and events.
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Please contact me regarding any of the articles above, or if you would like to discuss your personal or business finances
Sincerely,
Marc Bautis Bautis Financial 201-842-7655
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