Schwartz Financial Weekly Commentary 10/30/17

The Markets

The last full week of October was a box full of surprises.

First, U.S. economic growth exceeded expectations. The devastation wrought by Hurricanes Harvey, Irma, and Maria was widely expected to stifle U.S. quarterly growth, according to NPR. The Atlanta Federal Reserve predicted 2.5 percent gross domestic product (GDP)* growth for third quarter, down from 3.1 percent the previous quarter. Instead, U.S. GDP grew by 3.0 percent.

In fact, productivity has been flourishing around the globe. The Financial Times reported:


“…activity has again broken upwards in recent weeks, with growth in the advanced economies close to the highest rates seen since before the Great Financial Crash (GFC), apart from in the immediate recovery phase in 2010. Furthermore, world trade volume has now joined the recovery, and corporate expenditure on jobs and machinery is picking up. Overall, it seems that some of the symptoms of “secular stagnation” are beginning to fade…”


Tech companies were a sensation last week, too. Several of the biggest firms beat earnings estimates by wide margins, pushing share values higher, reported CNBC. Despite tech’s strong performance, the Standard & Poor’s 500 Index (S&P 500) has delivered third quarter earnings growth of 4.7 percent with more than half of companies reporting.


Earnings are lower than they would have been without the hurricanes, according to FactSet. With insurance industry earnings excluded, the S&P 500’s earnings growth pops from 4.7 percent to 7.4 percent.


The final surprise for the week was the doldrums. October is supposed to be the most volatile month of the year, according to Barron’s. Instead, we’ve experienced the calmest October since 1928.


The S&P 500 and the NASDAQ both finished last week at new all-time highs.


*GDP is the value of all goods and services produced in a region.


Data as of 10/27/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.2% 15.3% 21.0% 9.6% 12.8% 5.3%
Dow Jones Global ex-U.S. -0.2 20.5 20.2 4.4 5.2 -1.2
10-year Treasury Note (Yield Only) 2.4 NA 1.8 2.3 1.7 4.4
Gold (per ounce) -1.2 9.3 0.0 1.0 -5.8 4.9
Bloomberg Commodity Index 0.7 -1.9 -0.4 -9.8 -9.6 -7.2
DJ Equity All REIT Total Return Index -1.4 5.8 9.8 7.5 10.0 6.2

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s,, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.


And the leader in biometric identification is India! Remembering passwords, especially if you follow best practices and have unique 12- to15-character passwords for each account, can be challenging.


Even when you follow best practices, which many people do not, passwords are vulnerable to data breaches. The Harvard Business Review recently reported password insecurity is one reason businesses have been opting for biometric technology such as:


  • Fingerprint readers
  • Eye scanners
  • Voice recognition systems
  • Hand geometry


For instance, in Hangzhou, China, a “health-food concept restaurant” belonging to an American fast food chain, relies on facial recognition software to allow diners to pay with a smile, according to c| It’s a lot to digest.


India is a leader in the new technology. Ninety-nine percent of adults in the country have been enrolled in Aadhaar, a biometric identification program that has collected the fingerprints and iris scans of more than a billion people since 2010, according to The Economist.


When given permission, Indian government bodies and private businesses can match the fingerprints or irises of individuals to their unique 12-digit numbers, facilitating purchases, payments, and other processes. The system has some glitches, though:


“Unlike reading an ID card, checking someone’s identity through Aadhaar requires an internet connection and, often, electricity. Ration-shop owners in out-of-the-way places are known to march their customers to the top of a hill, roof, or tree – wherever a phone signal can be found – to check their identity. Even then, samples seem to show that roughly a third of authentications come back negative, an extraordinarily high failure rate for a technology that people rely on for necessities.”


Regardless, Morgan Stanley believes “digitizing its predominantly cash-based economy and reforming its archaic tax system” will help put India on the economic fast track. “The country was already on a strong trajectory, but digitization puts India’s nominal GDP growth on track to compound annually by more than 10 percent in U.S. dollar terms over the coming decade.”


Weekly Focus – Think About It


“There is probably no pleasure equal to the pleasure of climbing a dangerous Alp; but it is a pleasure which is confined strictly to people who can find pleasure in it.”

Mark Twain, American novelist


Value vs. Growth Investing (10/27/17)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 0.19 16.89 2.97 4.81 23.91 11.75 15.20
US Core -0.33 16.65 2.53 4.62 23.49 11.93 16.07
US Growth 1.08 25.13 4.16 5.16 28.41 12.57 15.89
US Large Cap 0.38 18.25 3.28 5.15 24.19 12.12 15.19
US Large Core -0.27 18.22 2.67 4.79 23.89 12.49 16.44
US Large Growth 1.39 26.70 4.51 5.20 28.55 13.22 16.37
US Large Val -0.10 10.44 2.52 5.42 20.24 10.58 12.77
US Mid Cap -0.34 14.15 2.27 3.73 22.58 10.75 15.49
US Mid Core -0.44 14.51 2.56 4.33 22.69 10.62 15.45
US Mid Growth 0.16 20.99 3.19 4.79 26.88 10.28 14.41
US Mid Val -0.80 7.07 0.89 1.85 17.89 11.24 16.59
US Small Cap -0.18 11.28 1.80 4.39 24.69 10.79 14.48
US Small Core -0.53 8.54 1.07 3.71 22.66 10.53 14.61
US Small Growth 0.47 20.87 3.34 5.76 31.00 12.10 14.94
US Small Val -0.51 4.84 0.87 3.63 20.22 9.65 13.77
US Value -0.26 9.38 2.09 4.59 19.82 10.67 13.64



©2004 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) is not warranted to be accurate, complete or timely. Morningstar is not responsible for any damages or losses arising from any use of this information and has not granted its consent to be considered or deemed an “expert” under the Securities Act of 1933. Past performance is no guarantee of future results.  Indices are unmanaged and while these indices can be invested in directly, this is neither a recommendation nor an offer to purchase.  This can only be done by prospectus and should be on the recommendation of a licensed professional.



Office Happenings:

Tax Reform First Look


I spent 36 hours in Las Vegas last week studying the new tax proposal to be opened in Congress next week.  While nothing is etched in stone there are some very definite things that need to be addressed by year’s end for some.


  1. 529 plans will probably go away next year so you will want to fund any current 529 plans fully by years end.  For some that means making a large gift of over $100,000 for couples to children, grandchildren, etc. by December 31st.
  2. If you are contemplating retirement and own company stock in your pension plan and NUA (net unrealized appreciation) makes sense for you and you were thinking about retiring early next year you might want to think about giving notice in the next couple of weeks.  This would mean that you would need to complete the rollout of any pension by years end.  NUA usually takes a month so this is something you should consider in the next few days.
  3. If you have stock options at work, you might want to exercise them this calendar year.
  4. If you make too much money to contribute to a ROTH IRA but want to anyway this may be the final year for a Back Door Roth.  You need to open a non-deductible IRA in the next few weeks.


If you are contributing to a 401k at work, the tax deductibility of those contributions are very much at risk.  I would push your elected representatives to not let this go through.


These are but a few things that may affect yourself or relatives.  Before doing anything drastic we should have a discussion.


Have an enjoyable week.




Michael L. Schwartz, RFC®, CWS®, CFS


P.S.  Please feel free to forward this commentary to family, friends, or colleagues.  If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.


Michael L. Schwartz, RFC, CWS, CFS, a registered principal offering securities and advisory services through Independent Financial Group, LLC., a registered broker-dealer and investment advisor.  Member FINRA-SIPC. Schwartz Financial and Independent Financial Group are unaffiliated entities.


This information is provided for informational purposes only and is not a solicitation or recommendation that any particular investor should purchase or sell any security. The information contained herein is obtained from sources believed to be reliable but its accuracy or completeness is not guaranteed.  Any opinions expressed herein are subject to change without notice.  An Index is a composite of securities that provides a performance benchmark.  Returns are presented for illustrative purposes only and are not intended to project the performance of any specific investment.  Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly.  Past performance is not a guarantee of future results.


* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.


* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. 


* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.


* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.


* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.


* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.


* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.


* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.


* Past performance does not guarantee future results.


* You cannot invest directly in an index.


* Consult your financial professional before making any investment decision.


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