Why Printing Money May Not Create Inflation
Is inflation coming? At some point, yes. We know what generates inflation, and we will be watching for it. Until then, we do not expect a wildfire in inflation land.
Market Thoughts for Feb 2021
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for January. Most developed markets were down slightly, including the Dow and S&P 500 in the U.S., as well as developed markets abroad. Despite the weak January numbers, markets remain near all-time highs. On the economic front, layoffs were high and retail spending dropped. But with federal stimulus payments, consumer confidence has begun to recover, boosting higher-frequency spending data. So, will the recovery remain resilient? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
5 Steps to an Effective Marketing Plan
Examining your marketing strategies and committing them to paper can transform your ideas into a powerful platform for success. 5 Steps to an Effective Marketing Plan will help you create an organized, thoughtful written plan to raise your competitive profile and enhance your ability to attract and retain valuable clients.
Is the Stock Market in a Bubble?
There has been a lot of talk about whether the stock market is in a bubble. As usual, there are distinguished professionals on both sides of the debate, armed with convincing statistics and arguments. So, what is the average investor to do?
The Biden Stimulus Plan
The economic news has continued to soften in recent days. December saw layoffs go up and the number of jobs decline, and, this morning, the retail sales numbers dropped. Consumer confidence has gone down. Clearly, the economic headwinds from the pandemic are getting worse.
Market Thoughts for Jan 2021
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for December. It was a great month for the markets, with gains across the board. Unfortunately, we saw rising economic damage. Job growth dropped, and layoffs rose. Consumer confidence and spending also declined as the medical risks drove governmental shutdowns. Still, business confidence and spending were solid, and December's federal stimulus bill should help revive consumer demand. So, could we be back on the road to normal in 2021? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Outlook 2021: A Return to Normal?
What’s the story for the economy and markets in 2021? According to Commonwealth CIO Brad McMillan, the recovery has been steady and much faster than expected. Even with ongoing uncertainties surrounding the coronavirus and some anticipated setbacks, McMillan outlines why we may still be on track to something approaching pre-pandemic normal by the end of 2021. Download his 2021 outlook.
Pandemic Economic Damage Gets Worse
The third wave of the pandemic may be showing signs of a peak. While new cases remain very high, the seven-day daily average was down for two days in the past week, suggesting we may be close to a peak.
Outlook 2021: Things Can Only Get Better
As we consider what may happen in 2021, it’s useful to reflect on how we ended 2020—both the good and the bad. For the good, the election is behind us. Vaccines look to be more effective than anyone expected. Jobs and confidence are holding up surprisingly well as the economy adapts. In many ways, things are much better than we thought.
Market Thoughts for December 2020
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for November. It was a very strong month for the stock markets, with most up by double digits. With good news on vaccines and the resolution of the presidential election, investors gained confidence. But medical risks remain, and the economic risks rose. Layoffs increased, and consumer confidence declined. Business confidence remained high but has pulled back. So, is there reason to believe that things will improve in the months ahead? Stay tuned to find out. Follow Brad at https:www.blog.commonwealth.com/independent-market-observer.
Weak Jobs Report Highlights Economic Risks
Total new jobs came in at 245,000. This result was well below the 460,000 expected and even further below the 638,000 we saw last month. Looking under the hood, the details were not great either.
Markets Rally on Vaccine News
As expected, the medical news continues to get worse. New infections hit all-time highs last week as the third wave of the pandemic has accelerated around the country. Case growth in many states remains at levels that threaten health care systems.
Looking Back at the Markets in October and Ahead Through November 2020
A lot has changed in the past week. I normally try and get this post up earlier in the month, but with everything that has happened—and which has demanded comment—this is the earliest I could fit it in. But that is a good thing...
First Thoughts About the Election
“It will take as long as it takes,” a reported quote from the Pennsylvania attorney general about the vote count, can also apply to the election itself. Indeed, from where we stand right now, the Pennsylvania vote count will determine the election. We don’t know what the final answer is, and we don’t know when we will know. So, are we any further along than yesterday?
Market Thoughts for November 2020
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for October. The markets started the month strong but rolled over on rising medical risks. Fortunately, the impact was cushioned by better economic news. Layoffs dropped, and consumer confidence held at higher levels. As a result, spending held up better than expected, and the housing market has boomed. Business confidence and investment have also been healthy. With the election just around the corner, could we face more risks ahead? Stay tuned to find out. Follow Brad at https:www.blog.commonwealth.com/independent-market-observer.
Help Clients Stay on Track with This 10-Point Year-End Financial Planning Checklist
Want to make the most of year-end planning conversations with clients? This checklist outlines 10 key points to get you started, including new tax and retirement changes in 2020 due to the pandemic. Use this easy reference guide to help your clients get a jump on planning.
An Estate Planning Blueprint for Financial Advisors
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Market Thoughts for October 2020
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for September. It was a tough month for the markets. They began September with a drop and ended the month with everything down, but by much less than feared. The economic news was better, with improved data from the labor market and consumer confidence bouncing back. Business confidence and investment were also healthy. Overall, the recovery looks to be on a solid foundation. But could the upcoming election pose a real risk? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
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Market Thoughts for September 2020
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for August. It was a very good month for the markets. The Nasdaq and S&P 500 reached new highs, and investors continued to move back into the markets. We also saw infection numbers decline, and the economic recovery started to regain strength. Consumer confidence looks to have bottomed, and wage growth has ticked up again, supporting spending growth. We’re in a much better place than we were a month ago, but are there risks ahead? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Financial Planning for Millennial Women: A Checklist for Financial Advisors
Although many millennial women’s needs will overlap with their more established counterparts, younger female clients face unique challenges and opportunities. Our complimentary checklist shows how you can guide these clients to become more knowledgeable, empowered, and confident about their financial outlook. Learn more about why millennial women are an emerging clientele, ways advisors can serve them better, and the right questions to ask to encourage independence.
Market Thoughts for August 2020
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for July. Overall, it was a good month for the markets. As July began, we saw strong job gains, declining layoff numbers, and rising consumer confidence and spending. Markets rose on this good news. But then infection counts went up, leading to state-level closures. This shift hit hiring and confidence, slowing the recovery. As a result, several market indices declined from their midmonth levels. Should we expect more volatility ahead? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Monthly Market Risk Update: July 2020
Markets continued to rise in June, as efforts to reopen state economies across the country continued throughout the month. Investors reacted to the continued reopening with optimism, driving the S&P 500 up 1.99 percent in June following a 4.76 percent increase in May.
2020 Midyear Outlook
Brad McMillan, Commonwealth’s CIO, gives his 2020 midyear outlook. The rest of 2020 will be about the virus. We’re seeing localized outbreaks, but the necessary countermeasures are in place. So, we can reasonably expect the virus to remain under control. Despite the medical setbacks, millions of jobs have returned, along with consumer confidence and spending. The recovery remains on track and is likely to continue. And that's exactly what the markets are expecting. But will there be volatility ahead? Watch this video to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Looking Back at the Markets in June and Ahead to July 2020
June was a mixed month. The national reopening in May and June led to new viral outbreaks and a spike in new infections in multiple states. Surprisingly, though, both the economic recovery and financial markets did very well. As we enter July, the question of many minds is whether the medical situation will improve—and whether the good economic and market news will continue.
Market Thoughts for July 2020
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for June. It was a great month for the markets. In part, markets were reacting to progress on the viral front, with drops in the daily case growth rate and increased testing. They were also responding to the continued economic recovery. Millions of jobs returned, and consumer confidence bounced back. Of course, there were setbacks, with some states seeing an uptick in virus cases. Will the recovery remain on track despite the risks? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Market Thoughts for June 2020
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for May. Last month, we saw real progress in the coronavirus, which allowed the economy to begin reopening. Hundreds of thousands returned to work, people began to shop again, and confidence started to stabilize. In turn, U.S. markets rose to just above their long-term trend line and are now fully expecting a V-shaped recovery. But how will markets react if a second wave of infections occurs or spending doesn’t return to normal levels? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Looking Back at the Markets in May and Ahead to June 2020
May was a good month, in terms of the virus, the economy, and the markets. But what does this positive news mean for the month ahead?
Monthly Market Risk Update: May 2020
April saw markets rebound from the recent lows set in March, as progress combating the spread of the coronavirus gave hope to investors. The S&P 500 gained 12.82 percent during the month, marking the best single month for the index since 1987.
5 Strategies for Communicating with Clients in Changing Times
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Looking Back at the Markets in April and Ahead to May 2020
It was the best of times, it was the worst of times. April was a Dickens of a month. But what lies ahead? Let’s take a closer look.
Market Thoughts for May 2020
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for April. In the U.S., markets were up by double digits. Still, the economic damage continued. Millions of jobs were lost, and businesses shut down. But we did see progress. The spread of the virus slowed, and testing increased. Plus, federal stimulus provided funds to individuals and businesses. The markets noted these improvements, bouncing back in April. In fact, the markets expect a full recovery in about a year. Are they right? Stay tuned to find out. Follow Brad at blog.commonwealth.com/
Markets Are Confident—But Are They Right?
As we did last week, I’d like to provide an update on where we are in the coronavirus crisis. This week, the news has generally been good. The virus continues to come under control, with the growth rate slowing (although the case count has not declined as much).
Is There an End in Sight for the Coronavirus Crisis?
Things have quieted a bit (but only a bit) in terms of the coronavirus crisis. As such, I thought it would be a good time to provide an update on this evolving situation. Let’s start with the trends in the spread of the virus to understand what they mean in the present for the markets, as well as in the future for the pandemic itself and the economy.
Looking Back at the Markets in March and Ahead to April 2020
March was a really tough month. After a terrible February, all major stock indices were down by double digits, leading to significant declines for the quarter as a whole. All of the major indices ended the month and quarter below their 200-day moving averages, often a sign of more trouble ahead.
Market Thoughts for April 2020
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for March. It was a terrible month for the financial markets, with the coronavirus driving the volatility. In the U.S., markets were down by double digits. Further, the economic damage began to emerge, with three million jobs lost in a week. In response, the government quickly stepped in with a $2 trillion stimulus package. The markets took comfort in these measures, showing a slight bounce at month-end. What should we expect in April? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Achieving Financial Fitness: A Checklist for Your Female Clients
Numerous surveys show that women often defer to their male partner regarding financial decisions. By doing so, they may be tragically unprepared to deal with their financial affairs in the event of divorce or death of a spouse. But there’s a solution: get women involved in financial planning by sharing your knowledge. Our free checklist details key steps toward helping female clients understand and gain control of their finances.
First Wave of Economic Damage: 3 Million New Unemployment Claims
As expected, the initial jobless claims report—the one that shows how many people have been laid off and are newly applying for unemployment assistance—was a shocker this morning. Three million people lost their jobs and applied for unemployment last week. This is by far the highest number ever, with the previous record at just under 700,000 in 1982.
How to Think About the Coronavirus Pandemic: The Big Picture
With everything that is happening in the world, now is a good time to step back and think about where we are and where we might be going. There is a tremendous amount of information available. But what’s missing is a framework for that information that would help clarify the big picture.
Where Bear? There Bear!
We have finally seen the end of the bull market, with the Dow dropping 20 percent from its highs and the S&P 500 following today. We are officially in a bear market, with all that implies. Stock markets around the world are down again today on the news.
Is the End of the Bull Market Nigh?
Monday, March 9, will be the 11th anniversary of the bull market that started back in 2009. With recent pullbacks and turbulence around the coronavirus, it is reasonable to worry that this anniversary will be the last and that a bear market will break the streak sometime in the next year. As such, now seems a good time to consider where we stand—and where the market might be headed.
Market Thoughts for March 2020
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for February. Both U.S. and international markets dropped sharply at month-end, as the coronavirus continued to spread across the globe. While the declines are worrisome, previous outbreaks, like Zika and SARS, have resulted in similar outcomes. As such, the markets’ response to the coronavirus can actually be considered normal. But what happens next? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Reassessing the Coronavirus Risk
In yesterday’s post, I pointed out that the markets were taking a break, stopping the sudden slide to think about whether the news surrounding the coronavirus is really as bad as all that. Today, they appear to have decided that, yes, things are that bad and may be even worse. Perhaps, then, it is time for me to reassess my conclusions.
How Should Investors React to the Coronavirus?
It is now clear that the coronavirus has escaped the attempted containment by Chinese authorities and has spread around the world. According to the World Health Organization, there are 79,331 confirmed cases, of which 77,262 are in China and 2,069 are outside of China (as of February 24, 2020).
Monthly Market Risk Update: February 2020
It’s time for our monthly look at market risk factors. We had a strong start to the year, with U.S. markets at all-time highs by mid-January. But a risk-off sentiment driven by the spread of the coronavirus from China spooked investors, leading to modest declines for equity markets at month-end.
Looking Back at the Markets in January and Ahead to February 2020
January was a tough month. We started with a U.S. attack on an Iranian general (creating thoughts of war) and ended with the possibility of a new global pandemic (with the Wuhan coronavirus spreading around the world). In between, of course, we had the impeachment spectacle here in the U.S., as well as the British exit from the European Union.
Jobs Report Preview: Good News Ahead?
Today, we get the big one, the most (in my opinion) significant economic report of all: the jobs report. So, what should we expect?
Market Thoughts for February 2020
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for January. The year started with a slight setback, with both U.S. and international markets down. Some of this poor performance was driven by fear over the coronavirus. Although the virus is something to watch, it's not likely to be a long-term risk. Indeed, economic growth in the U.S. has been steady, and business and consumer confidence have improved. Will the fundamentals continue to provide a cushion for any risks on the horizon? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Market Thoughts for January 2020
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for December. It was a great close to 2019, with U.S. markets up more than 20 percent and international markets showing double-digit gains. Job growth was strong, and, for the ninth month in a row, income and spending went up. New home sales were at their highest level since 2007, and home builder confidence was the strongest in 20 years. But risks exist, including politics and the trade war. How greatly will they rattle the markets? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Outlook 2020: How Real Is the Risk of Recession?
As we move into 2020, we find ourselves in an uncertain place. Economic trends have deteriorated, and growth levels have flatted. Plus, the impeachment process and election could have negative repercussions. Indeed, the risk of recession is real—although its impact may be much milder than many fear.
Brad McMillan, Commonwealth’s CIO, provides his 2020 market outlook. After a strong 2019, worries are starting to build for the year ahead—especially over a potential recession. But the data is actually improving. As such, 2020 may look much like 2019. Job growth might slow, but consumers are likely to keep spending. Plus, business investment is showing signs of a comeback, which would be a significant tailwind. The news for the markets may not be as positive, as we may see some volatility. But as long as the economy keeps growing? The markets should continue to move forward.
Market Thoughts for December 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for November. It was another great month for U.S. markets, although international markets didn’t fare as well. Still, the news was positive given the worrying headlines on the Hong Kong riots and the ongoing trade dispute. Here in the U.S., consumer confidence remained at a strong level, and business confidence bounced back. Plus, job growth beat expectations, and new home sales were up. What should we expect as we head into year-end? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Behavior Modification Guide: How to Motivate Clients to Execute Change
Do you have clients who are overspending, have lost sight of their goals, or are stuck in a state of inertia? This guide explains the steps you can take to help them regain control of their financial lives. Understanding the principles of behavior modification, including the five stages of change, is the key to leading clients to execute change and build true confidence. Plus, you won’t want to miss these tips on coaching best practices and keeping your empathy in check.
Market Thoughts for November 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for October. It was a great month, with U.S. markets doing well and international markets doing even better. This positive news was surprising, given the impeachment inquiry, weak job growth, and declining business confidence. Still, major sectors of the economy remain strong. Consumers continue to earn and spend more. Plus, the Fed has gotten behind the markets with rate cuts at its last two meetings. But is there volatility ahead? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Economic Risk Factor Update: October 2019
Overall, the economic data released last month came in worse than expected. There was a sharp decline in two of our metrics, consumer confidence and service sector business confidence. Job creation was more mixed, as the pace of new job growth remains below that of 2018 but is still at a level above the trouble zone on a year-to-year basis.
Market Thoughts for October 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for September. It was a pretty good month, with U.S., international, and emerging markets all up. These results were surprising given the month’s events, including a drone strike on a Saudi oil complex and the impeachment inquiry of President Trump. Still, the fundamentals remained solid. New and existing home sales went up. We also saw strong personal income growth, leading to strong retail sales growth. But are there headwinds ahead? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
What Does the Fed Rate Cut Tell Us?
Yesterday, the FOMC decided to reduce the target range for the federal funds rate from 2–2.25 percent to 1.75–2 percent. As the headlines put it, the Fed cut rates by one-quarter of a percent. The headline version is certainly pithier, but the first version is more accurate—and gives a better sense of what actually happened.
A Look Back at the Markets in August and Ahead to September 2019
August was a tough month pretty much across the board, with politics rocking markets around the world. So, what should we expect for September? Let’s take a closer look.
Market Thoughts for September 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for August. It was a tough month for markets, with fixed income the only bright spot. There was a lot of volatility, with markets down between 4 percent and 6 percent on three occasions. What drove the declines? Politics. The U.S.-China trade war heated up, and the Fed and the White House sparred over rates. Still, the economy remained solid—with consumer confidence high and strong job growth. So, will there be more volatility ahead? Stay tuned to learn more. Follow Brad at blog.commonwealth.com/independent-market-observer.
More Market Turbulence: No Surprise Here
We saw the largest stock market drop of the year. The Dow Jones Industrial Average was down more than 800 points (over 3 percent), an even bigger decline than we saw earlier this month. Plus, we are on track for the worst week of the year. It is a tough time for markets, and investors are worried. But should they be?
Markets Drop on Trade War Fears
The past week has been a tough one for stock investors. The S&P peaked on July 26, and it has dropped every day since then for a total decline of almost 6 percent (as of the close of August 3). This is a large and fast drop that has understandably rattled investors, who wonder why the sudden pullback—and whether it will continue.
A Look Back at the Markets in July and Ahead to August 2019
In July, U.S. markets were up overall, between 1 percent and 2 percent, and bonds also had gains as interest rates declined. Although international markets were down slightly, by about 1 percent or so, they remained above their long-term trend lines. From a financial perspective, July wasn’t a great month, but it was a pretty good one for investors.
Market Thoughts for August 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for July. It was a mixed month. U.S. markets rose and fixed income went up, but emerging markets pulled back. In the U.S., second-quarter growth beat expectations, buoyed by the consumer. People were willing and able to spend, a trend that is likely to continue. Earnings also went up, another positive surprise. Still, risks remain, including the threat of Brexit under Prime Minister Boris Johnson. What should we expect for August? Stay tuned to learn more. Follow Brad at blog.commonwealth.com/independent-market-observer.
Deal on Spending and Debt Ceiling Is Good News for Economy
This morning’s announcement of the deal between Congress and the White House to suspend the debt ceiling for the next two years is undiluted good news. With an agreement that the government can borrow to spend the money that it has already committed to spending, we can avoid a totally unnecessary, politically driven crisis that could have caused real economic damage.
Earnings Season: Here We Go Again
This morning, I spent some time speaking with a client who wanted to know why markets had slowed down recently. But I am not sure I agree with her. We hit all-time highs just the other day, although in recent days, the market has been taking a bit of a breather. Will that down time continue, or could we get another leg up?
Economic Risk Factor Update: July 2019
Although there was some good news last month—job growth bounced back to come in well above expectations—the overall trend remains negative. Confidence has continued to decline, while the yield curve hit an official inversion as of the end of June.
A Look Back at the Markets in Q2 and Ahead to Q3 2019
Q2 2019: it was the best of times, it was the worst of times. Okay, it wasn’t either, but last quarter we did see something that looked like both.
2019 Midyear Update
Commonwealth CIO Brad McMillan provides his 2019 midyear market outlook. Growth has been solid this year. Consumers remain confident, and business continues to hire and invest. Indeed, markets have responded to these positive conditions, as they are once again close to new highs. If the economy continues to grow and the fundamentals remain solid, which is likely, we should continue to see more progress in the markets. But will the risks, including the trade war and the debt ceiling, come into play? Stay tuned to find out. Follow Brad at http://blog.commonwealth.com/independent-market-observer.2019 Midyear Update
Market Thoughts for July 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for June. It was a great month for markets around the world, capping off a strong second quarter. With so many worries about slowing growth, earnings, geopolitics, and trade, why are we seeing such strength? The Fed’s more dovish comments at the June meeting had a lot to do with pushing markets up. Plus, the economic data—from retail sales to housing—is solid. Things are actually pretty good. What does this mean for the rest of 2019? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
The Inverted Yield Curve, the Fed, and Recession
One of the most reliable signals of a pending recession is when, in the jargon, the yield curve inverts. This sounds like a fancy phrase, but it simply means that investors demand to be paid more for a short-term loan than for a long-term one.
A Look Back at the Markets in May and Ahead to June 2019
“Sell in May and go away” was certainly on point last month. With U.S. and global markets down significantly, investors closed out the month with a level of worry we have not seen since the end of 2018. Let’s take a look back at this volatile month, as well as what we might expect going forward.
Market Thoughts for June 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for May. It was a tough month, with U.S. and international markets down. At the same time, May’s decline could be considered modest, and it was not based on fundamentals. Instead, it was all about confidence, which was rattled by a reignited trade war with China and proposed tariffs on Mexico. Still, there was some good news. Consumer spending picked back up, and job growth remained strong. Where does this leave us as we start June? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
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Is It 1998 All Over Again for the Markets?
Recently, I've fielded a few calls from advisors asking for my thoughts on media coverage declaring that current market conditions are similar to those of the late 1990s. Their clients are worried about what might happen. Could we see a replay of 2000?
Should We Ignore Recent Market Volatility?
After yesterday’s terrible performance—with U.S. stock markets down more than 2 percent—worries are starting to rise. Combined with last week’s declines, it looks like we may be seeing the end of the bull market. So, is it time to panic?
Two Cheers (Not Three) for the Jobs Report
On the face of it, this morning’s strong jobs number should elicit a full three cheers. Job growth came in at 263,000. This result was up from last month’s downwardly revised 189,000 and well above the expected 190,000. Looks like a home run, right?
Market Thoughts for May 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for April. It was another great month, as U.S., emerging, and developed markets were all in the green. Although there were concerns about a slowdown at the end of last month, first-quarter economic growth actually came in well above expectations. Plus, consumer spending picked up, consumer confidence bounced back, and business investment came in stronger than expected. So, should we expect more good times ahead? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Investors: Sell in May and Go Away?
Today we will take a look at an old investing adage: “sell in May and go away.” It is supposed to reflect the idea that market returns over the summer and fall are worse than those in the winter and spring. Under this theory, you should sell all your stocks in May and then buy them back in November.
Does Strong Q1 for Economy Forecast More Blue Skies Ahead?
We got the first estimate of economic growth for the start of the year. Despite quite a bit of concern about slowing growth, the figure came in at 3.2 percent. This result was well above the expected 2 percent and a substantial acceleration from the 2.2-percent gain in the last quarter of 2018.
Markets Back at New Highs: So What?
This morning’s news revealed that, as of yesterday, both the S&P 500 and Nasdaq stock indices had hit new highs for the first time in six months or so. Let’s cut right to the chase here. For me, the appropriate response to this news is, “So what?”
Politics Again: The Mueller Report and the Markets
With the Mueller report scheduled to be released later today (as of this writing), preceded by the press conference with the attorney general this morning, the newspapers are on high alert. This report is being billed as a potential constitutional crisis and, if it doesn’t approach that level (as it almost certainly will not), as the beginning of the next round of political wars.
Monthly Market Risk Update: April 2019
It’s time for our monthly look at market risk factors. Just as with the economy, there are several key factors that matter for the market in determining both the risk level and the immediacy of the risk. Although stocks have largely recovered from their recent pullback, given valuations and recent market behavior, it is useful to keep an eye on these factors.
Market Thoughts for April 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for March. It was another great month, with U.S., emerging, and developed markets all up. But this strength was a bit strange, considering the weakening seen in the fundamentals. Here in the U.S., both consumer and business confidence took a hit, the yield curve inversion caused many to worry about a pending recession, and analysts lowered their expectations regarding corporate earnings. Given all this, is growth likely to continue? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
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Yield Curve Inversion: Evaluating the Risk
If you think about it, the fact that you can borrow cheaper for 10 years than for 3 months is a signal that something is broken. It is simply riskier to lend for longer, so the imbalance shows that something is wrong. As such, the yield curve inversion makes sense as a risk indicator.
Monthly Market Risk Update: March 2019
Market risks come in three flavors: recession risk, economic shock risk, and risks within the market itself. So, what do these risks look like for March? Let’s take a closer look at the numbers.
10 Years After the Market Hit Bottom, Where Are We Now?
I am in Colorado this week at a Commonwealth conference, spending some time at high altitude when I normally live pretty much at sea level. The altitude seems somehow appropriate, though, when I look at where the markets are right now compared with where they were 10 years ago. We have climbed to astonishing heights since the bottom—heights almost no one expected back then.
A Look Back at the Markets in February and Ahead to March 2019
From a financial markets perspective, last month was a good one. U.S. markets were up between 3 percent and 4 percent, developed international markets were up 2 percent to 3 percent, and even emerging markets managed to notch a small gain. Overall, February was another step forward from the decline at the end of last year, suggesting markets have regained their footing.
Market Thoughts for March 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for February. It was another good month, with U.S. markets, developed markets, and fixed income showing gains. Still, the housing market continued its slowdown, and business investment softened. We also saw a terrible retail spending report. But the market was able to bounce back from the lows seen at the close of 2018, buoyed by the end of the government shutdown. So, will the markets continue to move higher, and what risks are ahead? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Earnings Recession Ahead? Not So Fast
We talked yesterday about the possibility of another government shutdown and the effect that could have on both business and consumer confidence. That shutdown looks to be something we will avoid. But now there is another potential confidence buster ahead being talked up in the media: an earnings recession.
A Look Back at the Markets in January and Ahead to February 2019
After a terrible fourth quarter in the financial markets, we had a sizable bounce in January. Markets were up significantly, both here in the U.S. and around the world, and sentiment seemed to change markedly from pessimism to a new optimism. The question going forward is whether things have really changed that much.
Market Thoughts for February 2019
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for January. It was a great month for the financial markets. Despite the government shutdown, signs of an economic slowdown, and dropping consumer and business confidence, U.S. and international markets were up. Plus, job and wage growth were strong, and companies made more money than expected. With the fundamentals solid, even the Federal Reserve hit pause on interest rate increases. So, what should we expect in the month ahead? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Did the Fed Back Down? Not Quite
Well, as expected, the Fed did not raise rates yesterday. Further, it came out with what was perceived as a much more dovish statement than anticipated, essentially declaring a pause in rate increases. In response, markets cheered.
Will News from the Fed Heat Up the Markets?
With the brutally cold weather locking down large parts of the country, the hope today is that the Fed will heat up the markets by both holding rates steady (as expected) and dialing back the liquidation of its balance sheet.
What Can Consumer Confidence Tell Us About the Markets?
Right now, the base case remains positive. With earnings expected to keep rising and with valuations low per recent history, continued appreciation seems reasonable. Add in the real possibility that many of the issues currently weighing on the market will be resolved, and the positive scenario looks even more likely.
The Short-Term Effects of the Government Shutdown
I wrote about the big-picture effects of the government shutdown the other day, which are likely to be longer term. As it continues, though, the shorter-term effects continue to pile up. As such, it is time to take a look at what the shutdown means now and over the next month or so.
Outlook 2019: Back to Slow Growth
As we approach year-end, we find ourselves in an unfamiliar place. Despite mounting worries over the past couple of years about politics and other issues, the market and economy continued to grow. Through the first half of 2018, the markets were moving higher, despite a few breakdowns, and economic growth was accelerating.
Concerns over China Grow amid Bad News from Apple
Yesterday morning, the major headline was the downward revision in Apple’s revenue projection—the first time this has happened in well over a decade—on lower sales in China. The reaction to this news was apocalyptic, with markets around the world selling off.
Market Thoughts for January 2019
Brad McMillan, Commonwealth’s CIO, recaps market and economic news for December. It was another bad month in a string of bad months, with U.S. markets down about 10 percent and international markets faring only a bit better, down 5 to 6 percent. A combination of bad news, from a government shutdown, to the ongoing trade war, to the Fed's decision to raise rates, was enough to shake investor confidence just in time for the holidays. Still, the fundamentals continue to look strong. Has the damage been done? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
2019 Market Outlook
Brad McMillan, Commonwealth’s CIO, provides his 2019 market outlook. As we approach the new year, hiring is strong and both business and consumer confidence remain high. With these solid fundamentals, the financial markets are likely to respond. Earnings should go up, so we should expect to see rising stock prices as well. Of course, there are always worries, including political concerns in the U.S. We may also see slowing growth. All in all, the year ahead looks to be much like earlier years in the cycle. But the name of the game in 2019? Solid fundamentals and, very likely, solid markets.
Fed to Markets: “Drop Dead”
Yesterday, there is no doubt that markets were expecting a bailout from the Fed—and threw a tantrum when they didn’t get it.
Outlook 2019: Back to Slow Growth
As we approach year-end, we find ourselves in an unfamiliar place. Despite mounting worries over the past couple of years about politics and other issues, the market and economy continued to grow. Through the first half of 2018, the markets were moving higher, despite a few breakdowns, and economic growth was accelerating.
The Inverted Yield Curve: Sign of Trouble Ahead?
Yesterday’s market drop reversed all of Monday’s gain and then some, reportedly on growing doubts regarding the exact terms of the trade war truce announced by President Trump. That might be the case, but I suspect the headlines pointing out that part of the yield curve had inverted played a bigger role in the decline.
Market Thoughts for December 2018
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for November. It was a rocky month. Concerns surrounding the midterm elections, the trade conflict between the U.S. and China, and the economic slowdown resulted in market turbulence. Still, the financial markets bounced back. Here in the U.S., the Dow, the S&P 500, and the Nasdaq all had some gains. Abroad, the emerging markets rebounded strongly. Even bonds made money, despite interest rate turmoil. But will this bounce continue? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
How to Command the Best Purchase Price for Your Business
Some advisors today are rushing to sell their practices after very little forethought, and they could be leaving money on the table. If you want to get what your practice is worth, focus on four key tenets—business, management, financial, and market—to demonstrate your value to potential buyers.
Monthly Market Risk Update: November 2018
Market risks come in three flavors: recession risk, economic shock risk, and risks within the market itself. So, what do these risks look like for November? Let’s take a closer look at the numbers.
Market Thoughts for November 2018
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for October. The month lived up to its scary reputation, with both U.S. and international markets down. Plus, housing started to roll over, and retail sales disappointed once again. That’s not to mention the political risks. In the U.S., the midterm elections have increased uncertainty. In Europe, there are concerns over Brexit and political turmoil in Germany. Still, is there reason to believe that things might improve in November? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Strategies for Targeting Organic Growth
Growing your business through practice acquisition is a good goal, but it's a long-term strategy that can take years to accomplish. How can you meet your growth objectives in the meantime? By focusing on these client-facing activities that are proven revenue drivers.
Monthly Market Risk Update: October 2018
Market risks come in three flavors: recession risk, economic shock risk, and risks within the market itself. So, what do these risks look like for October? Let’s take a closer look at the numbers.
A Bad Day in the Market: Is It a False Alarm?
Yesterday was a bad day in the market. The Dow was down more than 800 points (800 points!), and the S&P was down almost 100 points (100 points!). Surely, this is the beginning of the end.
Market Thoughts for October 2018
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for September. It was a mixed month: the S&P and Dow did well, while the Nasdaq pulled back on weakness in technology. But for the quarter as a whole, all three indices were up substantially. In the U.S., hiring remained strong, wage growth picked up, and consumer confidence reached an 18-year high. There is also a huge amount of confidence in the business world. Overall, we’re in a good place, but is the end of the cycle coming? Stay tuned to learn more. Follow Brad at blog.commonwealth.com/independent-market-observer.
Looking Forward to Q4 2018
The third quarter looks like another good one, at least here in the U.S. Despite ongoing turmoil—both political (with the Kavanaugh confirmation battle) and economic (with the rising trade conflict and tariffs)—markets rose steadily, reaching new highs. Markets abroad were not as positive, with emerging markets down and developed markets generally flat.
The Great Financial Crisis: 10 Years Ago This Week
There has been much discussion recently about how the great financial crisis kicked off 10 years ago this week. We have retrospective interviews with participants, updates on how people fared during and after the crisis, and all of the typical media storytelling.
Monthly Market Risk Update: September 2018
Market risks come in three flavors: recession risk, economic shock risk, and risks within the market itself. So, what do these risks look like for September? Let’s take a closer look at the numbers.
Market Thoughts for September 2018
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for August. It was another good month here in the U.S., with the stock market up across the board. The economy, consumer confidence, and hiring all continued to grow. This growth is translating into corporate profits as well, with 80 percent of companies beating expectations. Still, September is a historically volatile month, and the midterm elections may cause some turbulence. Will these strong fundamentals help carry us forward? Stay tuned to learn more. Follow Brad at blog.commonwealth.com/independent-market-observer.
The Real Lesson from Turkey’s Crisis
As Turkey’s crisis rumbles on, investors are on the watch for signs of contagion. Emerging markets in general are getting hit, so contagion remains a possibility. Still, there are reasons to believe the crisis will burn out in Turkey itself.
Quick Takes from the Financial News: Inflation and Turkey
To end the week, I have a couple of quick takes on some hot topics from the financial news. Let’s start with inflation.
Monthly Market Risk Update: August 2018
Market risks come in three flavors: recession risk, economic shock risk, and risks within the market itself. So, what do these risks look like for August? Let’s take a closer look at the numbers.
Market Thoughts for August 2018
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for July. It was a great month for U.S. markets, as the Dow, S&P 500, and Nasdaq were all up. And after a terrible June, both developed and emerging markets bounced back as well. This performance was supported by a strong economy. GDP growth for Q2 came in at the highest level since 2014, both employment and inflation are in healthy territory, and corporate earnings continue to beat expectations. Can this positive momentum continue? Stay tuned to learn more. Follow Brad at blog.commonwealth.com/independent-market-observer.
The Economy and Markets at Midyear: Is the Outlook Heating Up?
Coming off of a strong year for the economy and markets, we had high hopes for 2018, but the first half of the year didn’t play out as planned. Between the stock market pullback early in the year; the slowdown in economic growth; and rising risks, largely in trade, expectations softened. As we hit the midway point for 2018, though, it looks as if those initial hopes might be more realistic than they seemed even a month ago.
Monthly Market Risk Update: July 2018
Market risks come in three flavors: recession risk, economic shock risk, and risks within the market itself. So, what do these risks look like for July? Let’s take a closer look at the numbers.
Market Thoughts for July 2018
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for June. It was a mixed month, as U.S. markets went down with the Dow and up with the S&P 500 and the Nasdaq. Bond markets pulled back a bit on rising rates. There was also pullback abroad, in both developed and emerging markets. Still, the fundamentals are good, and a step-up in second-quarter growth is expected. Job growth is strong, consumer spending is accelerating, and business investment is solid. Are there headwinds ahead? Stay tuned to learn more. Follow Brad at blog.commonwealth.com/independent-market-observer.
2018 Midyear Outlook: Growth and Markets Picking Back Up
2017 was a great year for the economy and financial markets, and we started 2018 with high hopes for even faster growth and continued market gains. But between the stock market pullback early in the year; the slowdown in economic growth; and the rising political risks in Asia, with North Korea, and in Europe, with Britain and Italy, expectations softened. Perhaps 2017 was the end of the cycle after all.
RIP General Electric
One of the big pieces of news in the financial world today focuses on General Electric (GE). The iconic American conglomerate has been removed from the Dow Jones Industrial Average, and its stock will no longer be included when the index is calculated. It will be replaced by the drugstore chain Walgreens.
Market Thoughts for June 2018
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for May. It was a good month, continuing the recovery from the pullback we saw at the start of the year. In the U.S., markets were up almost across the board. Consumers continue to spend, and businesses remain confident—with manufacturing doing particularly well. Plus, the government is contributing to this growth by cutting taxes and spending more. When we look at emerging and developing markets, however, it's a different story. Stay tuned to learn more. Follow Brad at blog.commonwealth.com/independent-market-observer.
A Preview of the Jobs Report
Much of the economic data suggests that the slowdown in the first quarter is passing—this morning’s personal spending report is a good example. But, as always, what matters most for the economy is jobs.
Is “Italeave” Greece 2.0?
First, there was “Grexit,” which was the name given to the possibility that Greece would leave the eurozone. Then, there was “Brexit,” the plan for the U.K.’s exit from the European Union, which is actually happening (at least potentially). Now, we have “Italeave,” which I think sounds better than the other contender, “Italexit.” So what’s going on with Italy?
Where Can We Beat the Market?
We closed yesterday’s post on whether markets are efficient with the conclusion that it could be possible to beat the market. But, to do so, we would need either better information or to view things differently—specifically referencing time horizons as one way to do that. Let’s start with a couple of areas where better information is a real possibility. Then, we’ll take a deeper look at the second idea, which is both more subtle and more interesting.
The Price of Oil: Is It Time to Worry?
Oil has been in the news quite a bit recently. Prices have risen to multiyear highs, and the recent decision by the U.S. to reimpose sanctions on Iran has rattled markets even further. We know that oil prices are a key risk indicator for the economy, but is it time to start worrying? Plus, what do higher oil prices mean—if anything—for the financial markets?
A Look Back at the Markets in April and Ahead to May
As we start moving further into May, I think it’s a good time to take a look back at April’s economic news, plus what to expect in the month ahead.
Will Quantitative Tightening Sink the Market?
As we move away from the financial crisis and as policies normalize, it is a good time to take a look at what the removal of those policies might mean. After all, many of the actions taken in the aftermath of the crisis were explicitly designed to do certain things. If those actions were successful, then presumably their reversal would have the opposite effect.
Market Thoughts for May 2018
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for April. It was a good month, as both U.S. and developed markets were up. This news was encouraging, indicating that the economy seems to be bouncing back after two down months. In fact, the fundamentals are quite strong, with company earnings surprising to the upside to a degree we have never seen before. Plus, sales beat expectations, which is a positive reflection of the markets and the economy. But will these trends continue? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
More Market Turbulence: Risks Are Rising
Yesterday, we had another breakdown in the stock market. Major indices dropped for the third day out of four, and they were down this morning. Once again, we are getting close to the long-term trend line, the 200-day moving average, which is where I personally start to pay attention.
Monthly Market Risk Update: April 2018
Market risks come in three flavors: recession risk, economic shock risk, and risks within the market itself. So, what do these risks look like for April? Let’s take a closer look at the numbers.
A Look Back at Q1 2018 and Ahead to Q2
The first quarter of 2018 saw the end of the bull market. Not in stocks necessarily, as the upward trend remains intact, but certainly of the bull market in confidence. January was a strong month, but then the world changed. Markets dropped in early February, only to bounce and then drop again in March. Let’s review why things changed in Q1, plus what we might expect in Q2.
Market Thoughts for April 2018
Brad McMillan, Commonwealth’s CIO, recaps the market and economic news for March. Last month, both U.S. and international markets saw losses. It was the second down month in a row, something we haven't seen in a while. This was due, in part, to markets becoming uncertain on the news of tariffs on China—which rattled companies around the world. Plus, Fed Chair Powell was seen as more hawkish than expected, introducing uncertainty around interest rates. Despite all this, do the fundamentals remain solid? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Is the Housing Market Rolling Over?
I consider housing to be one of the key drivers of the economy. This is true from a fundamental basis—with housing driving construction and mortgage finance, which are significant parts of the economy, plus all sorts of indirect spending such as furniture.
Could the Great Financial Crisis Happen Again?
Today marks the 10th anniversary of the failure of the Wall Street firm Bear Stearns, widely considered the opening act of the great financial crisis of 2008. Bear was done in, so the story goes, by a mix of ill-considered bets on mortgage securities and excessive borrowing.
An Economic Forecast: The Jobs Report, Tariffs, and Bear Stearns
I woke up this morning to a surprise. It had snowed, which was expected. After all the fear-mongering coverage, in fact, I expected the house to be covered, but it wasn’t so bad. The real surprise was the fact that a combination of wind and heavy snow had taken down several trees—including an 18-footer right across most of my driveway. All of a sudden, I was cut off.
Gary Cohn Resigns: The Other Shoe Has Dropped
Yesterday, I wrote that the markets were likely to continue to trend upward, on the idea that the U.S. tariffs were not really going to happen. But then the news that Gary Cohn had resigned as head of the National Economic Council was announced—and this has changed that perception entirely.
Market Thoughts for March 2018
Brad McMillan, Commonwealth’s CIO, recaps the economic news for February. Last month, there was a 10-percent market drawdown in the U.S., something we haven’t seen for almost two years. Although many were worried that this was the “big one,” the markets recovered more than half of their losses by month-end, and the economic fundamentals remain sound. Job growth is strong, business confidence is high, and consumer confidence is at the highest level since 2000. Will this good news continue into March? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
What the Steel and Aluminum Tariffs Mean for Your Investments
Yesterday, President Trump announced that the U.S. will be imposing tariffs on steel and aluminum imports. This shocked markets here in the U.S. and around the world, driving them back down just as it looked like they were recovering from the downturn last month. What happened? And is this a more serious threat going forward? In a word, yes.
The Stock Market Stands Corrected - Time to Worry?
With the declines yesterday, U.S. markets are now in an official correction. Just to get the terminology straight, a “correction” means a 10-percent decline, while a "bear market" indicates a 20-percent decline. As of the close yesterday, the Dow was down 10.3 percent, and the S&P 500 was down 10.1 percent.
Jobs Report: Good, But Not Perfect
Today’s big news is the jobs report. It is the single most informative and important economic report there is. As such, it always gets a great deal of attention. In general, the news this month is quite good—but not perfect.
Market Thoughts for February 2018
Brad McMillan, Commonwealth’s CIO, recaps another great month for the markets. In January, all three U.S. indices were up by at least 5 percent, as were international markets. There was a bit of a pullback at the end of the month, as interest rates moved up to levels we haven’t seen in years. Indeed, fixed income took a bit of a hit on these higher rates. Still, consumers keep spending and businesses are investing. Will this “virtuous circle” lead to continued economic growth? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
A Look Back at the Markets and Economy in January
There is a market adage that states, “as goes January, so goes the year.” We certainly should hope this is the case for 2018, as January was another month of great stock market returns. The U.S. indices were up by 5 percent or more, while international markets—both developed and emerging—did the same.
An Economic State of the Union
With President Trump scheduled to give the annual State of the Union address tonight, I thought it would be a good time to consider the economic state of the union. As usual, of course, I am going to pass on the politics and instead take a big-picture look at the economy.
What Does the Decline of the Dollar Mean?
One of the dominating economic headlines of late has been the weakness of the dollar. These stories have been exacerbated by Treasury Secretary Steven Mnuchin’s comment that the “dollar is not a concern of mine.”
Corporate Earnings for the Close of 2017: Good Despite the Headlines?
With the market surging and expectations high, I want to look at the actual corporate earnings numbers for 2017. Of course, it is early in the season to do any definitive analysis. But we can certainly set some context, which will be particularly useful for this year.
Dow 26K: Is This One Different?
With the Dow opening above 26,000 yesterday morning, I was all set to continue down the same path of my Dow 24K and Dow 25K posts. Alas, it wasn’t to be. Although markets are up, the Dow is below the magic number as I write this, which is certainly okay.
What to Watch for in 2018: Housing and Auto Sales
Yesterday, I noted briefly that I would be “keeping an eye” on how long the good times last in the new year. It was one of those offhand comments that, once you think about it, really requires quite a bit more thought and analysis than at first glance.
What Do Higher Interest Rates Mean for Investments?
With interest rates rising recently, I have received a number of questions about what that means for our investments. It’s not as simple a question as you might think. As such, it is worth taking some time to think things through.
Dow 25K: A Look Beyond the Headlines
The Dow has hit yet another milestone: 25,000. By all means, cue the fireworks, cheering, champagne, and so forth. But since this is the sixth time since the start of 2017 that a 1,000-point milestone has been reached, let’s take a step back. After all, anything that happens six times in 12 months is hardly uncommon—and perhaps not worth getting too excited about.
Market Thoughts for January 2018
Brad McMillan, Commonwealth’s CIO, recaps another month of good news for the markets. In December, U.S. markets were up across the board, international markets did even better, and emerging markets hit it out of the park. As a result, we are entering the new year with a huge amount of momentum. Hiring continues to be strong, consumer confidence is very close to the highest level since the dot-com boom, and business confidence remains high. But will the recent tax reform bill have a major impact in 2018? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
2017: A Dickens of a Year
It was the best of times, it was the worst of times. Catchy beginning, yes? Dickens certainly used it to good effect. As I was thinking about 2017 in retrospect, it seemed almost unavoidably appropriate.
What Does the Alabama Election Mean for the Markets?
Yesterday’s news that the Democrats won the Alabama special Senate election, for the first time in 25 years, rattled U.S. politics. By taking the Republican majority in the Senate from 52 to 51, it reduces an already tight margin for difficult votes.
3 Current Economic Trends to Watch
I have been wrestling with what to write about today. There’s not much to add that is new. The economy is doing well, and the data is coming in strong. Although the stock market is reacting to events in Washington, it is still within 1 percent of its all-time highs. From my beat, there is not a lot worth commenting on at the moment.
Market Thoughts for December 2017
Brad McMillan, Commonwealth’s CIO, recaps a month of good news for the markets. In November, U.S. financial markets were up across the board, and developed markets rose substantially. Hiring continued to do well, personal income grew, and consumer confidence rose to the highest level in 17 years. Plus, business confidence improved more than expected, and business spending was up. Given all of these positives, do we need to worry about political uncertainty in Washington, including the debt ceiling? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Watch Out for the Risks in Washington
As I have been saying, things are pretty good, economically speaking, as we approach the end of the year. At the same time, there are some significant risks in the next couple of weeks that we need to keep an eye on.
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Is a New Crisis Brewing in Germany and Europe?
Many of us were under the assumption that we could go into the holiday season with Europe pretty much checked off the risk list. The economic news is good and getting better, and the major elections that have caused so much angst have passed. Not so fast, bub.
What the Tax Bills Could Mean for You
With the passage of the House’s tax reform bill, the Republicans have moved significantly closer to one of their key political goals. Of course, the Senate bill still needs to pass that chamber, and then the reconciled bill must pass both chambers. But the fact that the fractious Republican factions in the House have come together is a signal that passage is a real possibility.
What Will the Markets Do in 2018?
I am really coming to grips with my 2018 outlook, and I find myself wrestling with the implications of slowing growth on the economy and, in particular, the markets. The fundamentals have been strong, with good earnings growth driving the markets up.
Monthly Market Risk Update: November 2017
Market risks come in three flavors: recession risk, economic shock risk, and risks within the market itself. So, what do these risks look like for November? Let’s take a closer look at the numbers.
Saudi Arabia and the Republican Tax Plan: Will the Markets React?
It has been a busy couple of days in the news. So, while I don’t ordinarily quote Lenin, his statement that “there are decades where nothing happens; and there are weeks when decades happen” is just too applicable to ignore.
Market Thoughts for November 2017
Brad McMillan, Commonwealth’s CIO, recaps a terrific month for the markets. In October, U.S., developed, and emerging markets were all up. Companies are making money, and stock markets are positive. Plus, despite three of the worst storms in U.S. history, consumer and business confidence grew. This is a very positive sign. On the corporate earnings front, however, there is some worrisome headline data. Still, profit growth continues to beat expectations. So, with a solid economy, where do we go from here? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Black Monday Remembered
October 19, 1987, is a date that will live in stock market infamy. Known as Black Monday, it marks the largest one-day loss in history, with the Dow down exactly 508 points (22.61 percent).
Should We Be Worried About Earnings Growth?
One of the key points in my argument that things are actually pretty good—and likely to get better—has been that with a growing economy, companies are selling more and making more money. Rising profits, especially on a per-share basis, are the foundation for a rising market.
Market Thoughts for October 2017
Brad McMillan, Commonwealth’s CIO, reports on a great month for the financial markets. In September, all three U.S. indices and developed markets around the world were up. These results are surprising given recent events. The U.S. was hit by some of the worst storms in history. Plus, the North Korea crisis persists, with credible talk of a nuclear war. Still, the markets continue to respond to the fundamentals, like strong consumer confidence and business investment. Will the bad news catch up with us? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Improving Fundamentals Lead to a Strong Third Quarter
As we close out the third quarter of the year, here’s what we know. It has been a great year and a great quarter for stocks around the world. We’ve seen a really good month for all areas except emerging markets, which pulled back a bit but still posted the strongest quarterly gains overall.
Market Thoughts for September 2017
Brad McMillan, Commonwealth’s CIO, recaps a solid month for the economy and financial markets. International markets were mixed in August, but U.S. markets were up across the board, despite rising tensions with North Korea and the effects of Hurricane Harvey. Plus, retail sales came back, employment grew, and consumers seemed willing and able to spend. Should we expect growth to accelerate going forward, and what’s the potential effect of the debt ceiling? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
North Korea and the Markets: Should We Be Worried?
After a dip and recovery yesterday, the markets were down this morning. It is clear that the developing situation between the U.S. and North Korea is rattling financial markets. Should we be worried? If so, what should we do?
Market Thoughts for August 2017
Brad McMillan, Commonwealth’s CIO, recaps another great month for the markets and economy. In July, U.S. and developed markets were up, due to the simple fact that companies are making more money. Earnings came in much better than expected, U.S. job growth was strong, and wage growth picked up. Plus, both consumer and business confidence are on the rise. Clearly, there is positive momentum going forward. But with slow spending growth and a pullback in business investment, are there clouds on the horizon? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Dow 22K: Are We Seeing a Pattern?
It seems like just a couple of months ago that I was writing about record highs for the Dow. In fact, looking at the data, it was only a few months ago, on January 26, that I wrote about Dow 20K. Reviewing that post, it notes that I last discussed stock market records 58 days before that. Are we seeing a pattern here?
Here Comes Another Bus: The Debt Ceiling
There’s an important—and potentially very disruptive—issue that has been largely ignored during coverage of the health care debate. The U.S. government hit its borrowing limit on March 16, 2017. Yes, that’s right—the U.S. borrowed as much as it legally can four months ago.
Are Current Stock Prices Reasonable?
Valuations continue to reach new highs, and the market looks very expensive—by some measures, the third highest of all time after 1929 and 1999. Meanwhile, the economy is showing signs of slowing.
Q2 Earnings Outlook: Can Companies Continue to Beat Expectations?
When looking at the stock market, one of the key things we should focus on are earnings, as they represent the bedrock of a stock’s value. The best way to value stocks—the dividend growth model—analyzes earnings, growth rates, and required returns to determine what a stock is worth fundamentally.
Monthly Market Risk Update: July 2017
Market risks come in three flavors—recession risk, economic shock risk, and risks within the market itself. Using a red light/yellow light/green light system, this monthly post explores the risk level in the markets, based on a number of factors.
Market Thoughts for July 2017
Brad McMillan, Commonwealth’s CIO, discusses the markets and economy in June. It was a good month, with consumer confidence and business confidence remaining strong. The Federal Reserve raised rates and seems likely to keep doing so. Plus, growth is accelerating around the world, from Europe to China. But here’s the problem: Both consumer spending and business investment are not growing as much as expected. So, are we going into a typical summer slowdown or are we looking at slower growth going forward? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Not a Bad Place to Be: Market and Economic Forecast for the Second Half of 2017
Despite a weak first quarter, the second quarter has looked good, and signs are pointing to a solid remainder of the year. Recent data has shown an expanding economy, while companies have grown both their top and bottom lines. Markets around the world have reacted to this by rising substantially, and we’ve continued to hit new highs here in the U.S.
Market Thoughts for June 2017
Brad McMillan, Commonwealth’s CIO, discusses the markets and economy in May. It was a good month, with financial markets around the world rising and strong gains in the U.S. Still, we’ve had political and economic concerns, with the first quarter of the year being quite slow. But the data in May suggests this slowdown was temporary: Jobs came back, consumer spending was up, and consumer confidence remained high. We also saw growth in business investment. Are these positive trends likely to continue? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Washington Turmoil Creates Uncertainty for Investors
I am in California, which means that I woke up this morning to a market that was already open—and dropping. Washington, DC is the cause once again. Growing turmoil in the nation’s capital has called into question the ability of the Trump Administration and Congress to enact their policy goals.
Economic Risk Factor Update: May 2017
Economic data in April was mixed, with first-quarter weakness lingering in some risk indicators. Overall, though, the news was positive, and most forward-looking indicators we track bounced back from decreases in March.
Market Thoughts for May 2017
In his latest video update, Commonwealth CIO Brad McMillan reviews another strong month for world financial markets. Markets were down for most of April but rallied during the last week of the month as worries about the French election subsided. Political concerns aside, economics are pretty sound, despite lackluster U.S. growth in the first quarter. Looking at the global economy, the news remains good and is getting better. Although a bit more worry has crept into the picture lately, the overall situation remains positive. Follow Brad at blog.commonwealth.com/independent-market-observer.
Sell in May and Go Away?
As April draws to a close, the old adage “Sell in May and go away” may be on some investors’ minds. The saying refers to the tendency of markets to underperform during the period from May to October (as compared with better performance from November through April), advising us to sell and wait for brighter days ahead.
The Trump Tax Plan: What You Need to Know
The big news today is the White House's tax plan, which proposes to cut taxes across the board, relieve millions of people from the burden of paying income taxes, and make filing much simpler and easier—all while keeping the budget in balance (or at least not making the situation worse).
Political Risk Update: France and the U.S. Budget
With Emmanuel Macron through to the second round, the French election is (largely) off the table as a systemic risk. Polls show Macron well ahead of Marine Le Pen of the National Front, and the likelihood is that the next French president will be a pro-European centrist rather than an anti-European populist.
Moment of Truth: Will the Market Meet Expectations This Earnings Season?
First, there was hype and then improving sentiment in the real economy, along with a nice initial rush in the stock market. More recently, we’ve seen doubts and weak numbers creep in for the economy and worries and a small pullback for the stock market.
March Jobs Report Preview
The monthly employment report comes out tomorrow, and markets are watching closely to see whether the string of positive surprises continues. If it does, it could be the start of a new upward run in the stock market. If not, it will suggest that economic strength may be starting to moderate. Either way, it will be big news.
Market Thoughts for April 2017
It was a decent month and a great quarter for markets, both in the U.S. and around the world, says Commonwealth CIO Brad McMillan. Globally, economics are very positive, which supports financial markets. Fundamental factors are also improving, and that looks likely to continue. What do we need to worry about? One word: politics. Although markets have largely priced in U.S. political risk, Europe poses greater concerns. Overall, though, the picture is quite positive going forward. Follow Brad at blog.commonwealth.com/independent-market-observer.
Today's GDP Report (and What to Expect in Q2)
As we close out the first quarter of 2017, all I can say is that it’s been a great one, economically and financially. Despite all of the worry and turmoil—in Washington, DC, and elsewhere in the world—markets have risen substantially and the economy has continued to grow.
Brexit Begins: Should U.S. Investors Care?
The big news of the day is that the United Kingdom has finally pulled the trigger on its exit from the European Union. The letter initiating Brexit was delivered this morning, and the parties now begin the two-year process of negotiating the exit terms and subsequent relationship.
The Health Care Vote and the Stock Market
Today, the Republicans are set to make a high-stakes gamble on one of their signature issues, repealing the Affordable Care Act. They don’t know whether the bill will pass, but at President Trump’s behest, they are bringing it to the floor.
Monthly Market Risk Update: March 2017
Just as I do with the economy, I review the market each month for warning signs of trouble in the near future. Although valuations are now high—a noted risk factor in past bear markets—markets can stay expensive (or get much more expensive) for years and years, which doesn’t give us much to go on timing-wise.
Earnings Update: As Expected, Companies Beat Expectations
Will the stock market rally continue? That’s a big question right now, and the answer will depend on two things...
Market Thoughts for March 2017
As Commonwealth CIO Brad McMillan puts it, markets in February basically rocked. Here in the U.S., all three major indices rose substantially, and markets around the world also did quite well. Why is this happening? The economic news is good, with U.S. consumers and businesses feeling optimistic. What’s more, for the first time since the crisis, we’re seeing a synchronized global upturn, with most areas and regions starting to expand. Will the recovery continue (and possibly accelerate)? The prospects are encouraging. Follow Brad at blog.commonwealth.com/independent-market-observer.
How Far Can the Rally Run?
With the Dow cracking 21,000 this morning, just over a month after breaking 20,000—and with other indices setting records as well—there are a few questions we need to ask.
Trump’s Address to Congress: What to Watch For
The speech presents a chance for the president to clearly define what he wants Congress to accomplish.
What a Difference a Year Makes
Every so often, I like to look back. Not too often, because life is lived moving forward. Occasionally, though, we can learn a lot about where we are going from considering where we've been
Monthly Market Risk Update: February 2017
Just as I do with the economy, I review the market each month for warning signs of trouble in the near future. Although valuations are now high—a noted risk factor in past bear markets—markets can stay expensive (or get much more expensive) for years and years, which doesn’t give us much to go on timing-wise.
Market Thoughts for February 2017
Brad McMillan, Commonwealth’s CIO, discusses the markets and economy for January. Last month was a great month for stock markets, and from a financial market perspective, the world is in good shape. In fact, we’re seeing the first synchronized global expansion since the financial crisis. What’s the problem? Even as growth continues to do well, it’s not quite keeping pace with expectations. Is this a healthy normalization? What will be the economic effect of the current political conflict in Washington? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Political Turmoil Could Restrain Market in 2017
Since the election, the market has been driven up largely by a combination of economic improvements and a vast increase in hope. Although the fundamentals continue to improve, there are signs that may be slowing down. Even without the slowing, the gap between expectations and reality is large. A lot has to happen to close that gap and fulfill investors’ hopes.
How a Border Tax Could Backfire on the U.S. Economy
In the past couple of days, I’ve led a pretty optimistic quarterly call for investors, given a couple of pretty optimistic TV interviews, and written some fairly optimistic pieces here on the blog. Although I stand by all of my statements, it occurs to me that, for someone known as Eeyore, I’ve displayed an unusual amount of optimism lately. Time for a reality check.
Q4 Earnings: Expect to Beat Expectations?
The key driver of the stock market, over the long term, is earnings. In the short term as well, earnings can be the primary driver of market performance. So, each quarter, it makes sense to review whether earnings are doing well or poorly, and why.
Monthly Market Risk Update: January 2017
ust as I do with the economy, I review the market each month for warning signs of trouble in the near future. Although valuations are now high—a noted risk factor in past bear markets—markets can stay expensive (or get much more expensive) for years and years, which doesn’t give us much to go on timing-wise.
Symptoms, Diseases, and the Fed
This week, someone asked me about the excess reserves held by the banking system and what the Federal Reserve is likely to do about it. As it turned out, what he really wanted to know was whether inflation is likely to take off and which signals might alert us if the economy and markets are about to roll over.
Market Thoughts for January 2017
Brad McMillan, Commonwealth’s CIO, discusses the markets and economy for December. Last month was all about confidence: for the consumer, for business, and in the stock market. U.S. markets finished strong for the month, in large part due to the post-election rally. Consumer confidence moved to its highest level since 2001, employment grew, and business confidence reached a level we haven’t seen since before the financial crisis. Given such strong results, what should we keep an eye on as we start 2017? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
The Boston Tea Party and Democracy Today
It was 243 years ago today that a group of Massachusetts Bay colonists threw the Boston Tea Party, protesting a law they did not like by dumping tea from British ships into the harbor. This, of course, led to further British laws and colonial unrest—and eventually to where we sit today, in the United States of America instead of Greater Britain.
Dow 20,000 in Sight
I remember when the Dow Jones Industrial Average hit 10,000, both going up and going down. It was a lot more fun going up, especially the first time. The index is now approaching double that level—Dow 20,000. If we get there, it should be exciting.
Market Thoughts for December 2016
Brad McMillan, Commonwealth’s CIO, discusses the market reaction to November’s election upset. Everyone thought markets would sell off after a Trump victory, and they did for a few hours before rallying strongly. Although the reaction around the world has been less favorable, U.S. fundamentals are sound, and with the uncertainty of the election behind us, the economy and markets are free to do even better. Nothing’s guaranteed, but as headwinds turn to tailwinds, we may see even more acceleration. Follow Brad at blog.commonwealth.com/independent-market-observer.
Should I Invest Outside the U.S.?
With U.S. stocks surging to new highs and trouble brewing elsewhere in the world (the failed Italian referendum and resignation of Matteo Renzi, not to mention the continued decline in the Chinese currency), I’ve been getting questions about whether investors should just stay here in the USA.
The Stock Market's Rise: Will It Continue?
Over the past couple of weeks, everyone’s been wondering how long the stock market's “Trump bounce” will last.
Black Friday by the Numbers
With everyone out shopping today, we'll soon be seeing the usual slew of Black Friday data (and the instant economic analysis that goes along with it).
Post-Election Bond Yields and Fixed Income
Since the election, much of the financial commentary has centered on the stock market's surprising surge.
The Trump Bounce and the Monthly Market Risk Update: November 2016
Although many were predicting a significant pullback on Mr. Trump’s election, we, in fact, got a fairly significant advance. What’s up with that? I suspect there are several reasons.
Election Surprise: For the Economy, Maybe Just Another Bump in the Road
Throughout the campaign, much of the media coverage on both sides has verged on the apocalyptic, and, indeed, there may be substantial challenges as a new administration comes into power. But the reality is that the sun will continue to come up each day, and the country will move on.
Economic Risk Factor Update: November 2016
After significant bouncebacks in the major indicators over the past couple of months, we saw a bit of a pullback in several components of the data in October.
Market Thoughts for November 2016
Brad McMillan, Commonwealth’s CIO, discusses October tricks and treats for financial markets and the economy. As expected, it was a tough month for markets, as uncertainty surrounding the upcoming election and the future of interest rates continued to rattle investors. Still, fundamentals remain solid, and we were treated to rising business and consumer confidence, as well as strong economic growth. Is it possible that the trickiest part of the quarter is behind us? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Election Countdown: One Week to Go
A few weeks ago, I wrote a piece on what the election means for investors’ portfolios. Longer term, the answer was not much. Shorter term, there’s potential for market volatility...
Inflation and Everything Else
It’s been a while since I wrote about inflation, the general increase in prices that makes everything cost more. Inflation has been so low recently that it hasn’t really been a priority.
Remembering Black Monday
Amazingly enough, after the concern about another Black Monday, the 1987 drop's anniversary today hasn’t generated much media attention. It’s almost like it never happened.
The Market Today: Shades of 1987?
In the past couple of days, three different people have forwarded me an opinion piece that attempts to draw some parallels between the way the market acted in October 1987 and the way it’s acting now.
What Does the Election Mean for Your Portfolio?
There’s no escaping coverage of the presidential election—what it means, whom to vote for, whom not to vote for. Many of us are deeply engaged in the process and passionately committed to one of the candidates.
September Jobs Report Preview
Tomorrow, the Labor Department releases the jobs report—probably the most important economic report of them all. After all, jobs drive everything.
Market Thoughts for October 2016
Brad McMillan, Commonwealth’s CIO, discusses the markets and economy for September. It was a volatile month, with markets dropping only to bounce back at month-end. Large companies in the S&P 500 were down slightly, while smaller companies and those outside of the U.S. did well. There was also a larger-than-expected pullback in the service sector, yet consumer confidence reached a nine-year high. Given such mixed news, should we be concerned about where the economy is going? Stay tuned to find out. Follow Brad at blog.commonwealth.com/independent-market-observer.
Outlook for October and the Fourth Quarter
Looking Ahead: 4 Big-Picture Themes
Presidential Debate Preview
Fundamentals Vs. Policy: It’s All About Growth
Fed Holds but Hints at December Hike
What Will the Fed Do?
Bad Day on the Stock Market
September Market Preview
August Employment Report Preview
Market Thoughts for September 2016
Stocks: Partying Like It’s 1999
Economic Risk Factor Update: August 2016
Market Thoughts for August 2016
Looking at Future Stock Returns
U.S. Financial Markets: Strength Amid Global Turmoil
The Market’s New High Score
Market Thoughts for July 2016
Will Brexit Crash the Stock Market?
Brexit After All
I woke up early this morning to check the results of the British referendum on leaving the European Union. Against expectations, the Leave vote won a convincing victory, defying the polls and the prediction markets. There’s no doubt the world has changed, significantly. There is considerable doubt about what that actually means and—more immediately—what to do about it.