Ethical financial planning and wealth management advice - Market Commentary November 2017 · 2019....
Transcript of Ethical financial planning and wealth management advice - Market Commentary November 2017 · 2019....
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2017NovemberFinancialMarketUpdate—Dec1,2017
AroundtheWorldLastmonth’scommentaryopenedwithasummaryofthenumberofdailyall-timehighsrecordedbytheS&P500Index3–50closingall-timehighsthisyear(LPLResearch,St.LouisFederalReserve)throughOctober31.WecanaddsevenmorenowthatNovemberhascometoaclose.Shorterterm,improvedoddstheGOPtaxbillwillsqueakthroughtheSenatefueledgainsatmonthend.Butletmequicklyaddthebillstillhashurdlesthatmustbeclearedbeforebecominglaw.Longerterm,it’sstillallabouttheeconomicfundamentals. November’scommentaryalsohighlightedmoreupbeatprospectsfortheU.S.economy.Butthatisonlypartofthenarrative.ToparaphrasethelatePaulHarvey,“Nowit’stimefortherestofthestory.”Andonethathasaninternationalflair.
Index NovemberReturn* 2017YTDReturn%DJIA1 +3.83 +22.82NASDAQComposite2 +2.17 +27.69S&P500Index3 +2.81 +18.26FTSEDevelopedexNorthAmericaIndex4
+0.99 +21.95
BondYields Yield-%a/oNov30&Change* Yield-%a/oDec30,20163-monthT-bill 1.29 +0.14 0.51 2-yearTreasury 1.78 +0.18 1.20 10-yearTreasury 2.37 -0.01 2.45 30-yearTreasury 2.81 -0.07 3.06 Commodities Nov30Price,MonthlyChange* Yearend2016Oilperbarrel5 $57.40
+3.02 $53.89
Goldperounce6 $1,280.20 +10.05
$1,159.10
CharlesSherryDirector,InstitutionalEducationGroupBlueOceanGlobalWealth9841WashingtonianBlvd.,#200 Gaithersburg,MD 20878 Tel:720.308.4560 [email protected]
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Sources:U.S.Treasury,MarketWatch,St.LouisFederalReserve,CNBC,LondonBullionMarketAssoc*Monthly:October31,2017–November30,2017
“GrowthinGlobalEconomyisRobust,”saidaNovember29thstoryintheWallStreetJournal.TheJournalreferencedthelatesteconomicoutlookprovidedbytheOrganizationforEconomicCooperationandDevelopment(OECD)–aninternationalgroupmadeupof35countries,includingtheU.S.Thisyearwe’reseeinggrowthaccelerate in theU.S.,Europe,Chinaand Japan,according toOECDdata.Whilechallengesremain,“Globalgrowthisprojectedtoimproveslightlyin2018,butremainbelowthepaceofpreviousrecoveries,”theOECDsaid.TheOctober2017WorldEconomicOutlookfromtheInternationalMonetaryFund(IMF)concurs,addingthatemerginganddevelopingeconomiesshouldseeeconomicgrowthacceleratefrom4.6%thisyearto4.9%in2018.Emerginganddevelopingeconomiesexpandedby4.3%lastyear.It’sanencouragingtrend.Butlet’stakeamomenttodivealittlebitdeeper.Yes,it’sabriefdiveintotheweeds,butitillustratesanimportantpoint.Figure1offersagreatsummaryofwhat’stranspiringglobally.Figure1illustrateswhetherfixedinvestmentis rising or falling in 45 countries. A quick side note is in order: Fixed investment is awonky term thatprimarilyreferstospendingbybusinessesonbuildingsandequipment.Theexpansionorcontractioninspendingbybusinessesissignificantbecauseit isanimportantdriverofeconomicgrowth.Weseethatspendingplummetedduringthe2009recession.That’snotasurprise. Wealsoseeareboundastheglobaleconomyexitedtherecession.Butheighteneduncertaintyfollowingthefinancialcrisislimitedtheeconomicupside,thatis,untillatelastyear(IMFdata).
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Figure1:Synchronizedglobalupturn
DataSource:OECDEconomicOutlook--StatisticsandProjectionsasof11.28.17
2017/18areforecasts.Allareforecastssubjecttochange.Currently,allbutonecountryisexpectedtoexhibitgrowthin2017and2018.That’simpressive.PutitintermsIunderstandOkay,Igetit.Thatwasawonkywayofsayingthatprospectsaroundtheworldareimproving,butIfeltitwasimportanttouseanobscurepieceofeconomicdatatographicallydemonstratethebigpicture.Fromamorepracticalstandpoint,fasterglobalgrowthistranslatingintofasterrevenueandprofitgrowthforU.S.companiesthathavemoreworldwideexposure–seeFigure2.
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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Real(inflation-adjusted)TotalFixedInvestment- ExpandingvsContractingversustheprioryear
Expanding ContractingCountries
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Figure2:Globaltopsdomestic
Dataincludesover90%ofS&P500firmshavingreportedQ3results
Note:DowJonesIndicesestimatesthatS&P500companiesobtained43.2%oftheirsalesfromoverseasin2016Figure2alsooffersustwotakeaways.First,athrivingglobaleconomycreatesatailwindforearnings,whichsupportsstocks.Second,thesynchronizedaccelerationinactivityaroundtheworldisamajorfactorintheupbeatperformanceofinternationalstocksthisyear.Whileweshouldneverforgetthatunforeseeneventshavethepotentialtoinjectvolatilityintothemarket,includingfailureoftaxreform,theeconomicfundamentals,bothathomeandabroad,havelentsupporttoshares.1TheDowJonesIndustrialsAverageisanunmanagedindexof30majorcompanieswhichcannotbeinvestedintodirectly. Pastperformancedoesnotguarantee
futureresults.
2TheNASDAQCompositeisanunmanagedindexofcompanieswhichcannotbeinvestedintodirectly. Pastperformancedoesnotguaranteefutureresults.
3TheS&P500Indexisanunmanagedindexof500largercompanieswhichcannotbeinvestedintodirectly. Pastperformancedoesnotguaranteefutureresults.
4TheFTSEDevelopedexNorthAmericaIndexisanunmanagedindexoflargeandmid-capstocksprovidingcoverageofdevelopedmarkets,excludingtheUSand
Canada.Itcannotbeinvestedintodirectly.Pastperformancedoesnotguaranteefutureresults.
5NewYorkMercantileExchangefront-monthcontract;Pricescananddovary;pastperformancedoesnotguaranteefutureresults.
6LondonBullionMarketAssociation;goldfixingpricing;Pricescananddovary;pastperformancedoesnotguaranteefutureresults.
Itisimportantthatyoudonotusethispublicationtorequestorauthorizethepurchaseorsaleofanysecurity
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DATASOURCE:FACTSETASOF11.10.2017
Q3S&P500RevenueandEarningsGrowthbyGeography(vsoneyearago)
RevenueGrowth EarningsGrowth
Fig. 2
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or commodity, or to requestanyother transactions.Any such request, ordersor instructionswill notbeacceptedandwillnotbeprocessed.Allitemsdiscussedinthisreportareforinformationalpurposesonly,arenotadviceofanykind,andarenotintendedasasolicitationtobuy,hold,orsellanysecurities.Nothingcontainedhereinconstitutestax,legal,insurance,orinvestmentadvice.DISCLOSURE:Investinginvolvesriskincludingthepotentiallossofprincipal.Nostrategycanassuresuccessorprotectsagainstloss.Pastperformanceisnoguaranteeoffutureresults.Assetallocationdoesnotensureaprofitorprotectagainstloss.Thereisnoguaranteethatadiversifiedportfoliowillenhanceoverallreturnsoroutperformanon-diversifiedportfolio.Diversificationdoesnotprotectagainstmarketrisk.Pleasenotethatrebalancinginvestmentsmaycauseinvestorstoincurtransactioncostsand,whenrebalancinganon-retirement account, taxable events will be created that may increase your tax liability. Rebalancing aportfoliocannotassureaprofitorprotectagainsta loss inanygivenmarketenvironment.Fixed incomeinvestments are subject to various risks including changes in interest rates, credit quality, inflation risk,marketvaluations,prepayments,corporateevents,taxramificationsandotherfactors.Non-U.S.securitiesmarketsinvolvepossiblygreaterriskofpoliticalinstabilityandgreatercurrencyriskinadditiontohavingbeenmore volatile. These risks can be accentuated in emergingmarkets. Commodities investments arespeculative and involve special risks related to weather and international political and economicdevelopments.Equity investments tend tobevolatileanddonot involve theguaranteesassociatedwithholdingabond tomaturity.Alternative investmentsmaynotbe suitable forall investorsand shouldbeconsideredasaninvestmentfortheriskcapitalportionoftheportfolio.Tacticalallocationmayinvolvemorefrequent buying and selling of assets andwill tend to general higher transaction cost. Investors shouldconsiderthetaxconsequencesofmovingpositionsmorefrequently.Betameasuresaportfolio’svolatilityrelativetoitsbenchmark.ABetagreaterthan1suggeststheportfoliohashistoricallybeenmorevolatilethan its benchmark. A Beta less than 1 suggests the portfolio has historically been less volatile than itsbenchmark.Pastperformanceisnotaguaranteeoffutureperformance.Differentinvestmentsinvolvedifferentdegreesofrisk,andtherecanbenoassurancethatthefutureperformanceofanyinvestment,security,commodityorinvestmentstrategythatisreferencedwillbeprofitableorbesuitableforyourportfolio.Theinformationhasbeenobtainedfromsourcesconsideredtobereliable,butwedonotguaranteethattheforegoingmaterialisaccurateorcomplete.Theinformationcontainedinthisreportdoesnotpurporttobea complete description of the securities, markets, or developments referred to in this material. Anyinformation is not a complete summary or statement of all available data necessary for making aninvestmentdecisionanddoesnotconstitutearecommendation.Beforemakinganyinvestmentsormakinganytypeofinvestmentdecision,pleaseconsultwithyourfinancialadvisoranddeterminehowasecuritymayfitintoyourinvestmentportfolio,howadecisionmayaffectyourfinancialpositionandhowitmayimpactyourfinancialgoals. Allopinionsaresubjecttochangewithoutnoticeinresponsetochangingmarketand/oreconomicconditions.
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