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.
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.
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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.
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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.
Outlook 2020: Slower Growth, with a Chance of Recession
This expansion cycle has lasted much longer than usual, and major market indicators have moved closer to recessionary levels. Does this mean there’s a downturn on the horizon? Brad McMillan, Commonwealth’s chief investment officer, looks at several factors that should determine where we’re headed and explains why a recession—if there is one—won’t be as bad as many fear.
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.
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.
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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.
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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.
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.
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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