Schwartz Financial Weekly Commentary 2/19/18

The Markets

As New York Fashion Week ended, inflation strutted its stuff.

Ever since the Federal Reserve began raising the Fed funds rate in 2015, analysts have been anticipating higher inflation. The fact that price increases remained relatively small was a perplexing mystery. Then, last week, inflation increased faster than expected.

The Bureau of Labor Statistics reported the Consumer Price Index (CPI), one measure of inflation, rose 0.5 percent in January. As you might expect, the cost of some items rose faster than others. For example, energy costs rose by 3.0 percent, while the cost of food was up 0.2 percent. In total, during the last 12 months, the all-items index rose 2.1 percent. When food and energy are excluded, the increase was 1.8 percent.

Barron’s reported, “Leaving aside the month-to-month squiggles, the real story is that inflation is closing in on the Fed’s 2 percent target…And even if January’s rise in the CPI was overstated, a real cyclical uptrend is under way…Deflation in the prices of consumer goods we like to buy is ending; the rate of increase in the cost of things we have to buy either is rising, as for food and energy, or remains high, as for services or rent.”

Higher prices are one side of the inflation coin; the other side is higher interest rates. Inflation is one of the data points the Federal Reserve considers when determining how well the economy is performing. Rising inflation signals a robust economy. That may encourage the Fed to raise rates more aggressively during 2018 to prevent the economy from overheating. The possibility of more concerted Fed tightening helped bump U.S. treasury rates higher last week.

Higher interest rates could become a boon for income-oriented investors. For years, persistently low rates have caused some investors to accept higher risk than they might have otherwise. As interest rates move higher, there may be opportunities to reduce portfolio risk and still generate attractive levels of income.

Despite inflation-inspired volatility mid-week, stock markets around the world moved higher. In the United States, major indices once again moved into positive territory for 2018.

Data as of 2/16/18 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 4.3% 2.2% 16.4% 9.2% 12.3% 7.3%
Dow Jones Global ex-U.S. 4.2 1.4 19.4 5.3 4.5 0.9
10-year Treasury Note (Yield Only) 2.9 NA 2.5 2.1 2.0 3.9
Gold (per ounce) 2.9 4.3 9.0 3.2 -3.4 4.1
Bloomberg Commodity Index 3.0 0.0 -0.3 -5.3 -8.7 -6.3
DJ Equity All REIT Total Return Index 2.0 -7.8 -1.6 2.4 6.9 7.4
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.

ridiculous? silly? strange? some ideas may seem that way. Albert Einstein is famous for having said, “If at first the idea is not absurd, then there is no hope for it.” In recent weeks, Fast Company has reported on some “world-changing ideas,” including:

  • Teaching happiness in school. The mandate of a school being built in India will be teaching children how to be happy. One of the co-founders said, “It’s our view that happiness – or emotional intelligence, or balance, or confidence, or self-esteem, or any other word for feeling good about ourselves and our place in the world – is the foundation on which great lives and great achievements are built.”
  • Cancelling student debt. “Collectively, [Americans] owe nearly $1.4 trillion on outstanding student loan debt. Research shows that this level of debt hurts the U.S. economy in a variety of ways, holding back everything from small business formation to new home buying, and even marriage and reproduction,” according to a February report from the Levy Economics Institute at Bard College.

 The research estimates if the U.S. government purchased and cancelled student loan debt the U.S. economy would increase real gross domestic product – the value of all goods and services produced – by $861 billion to $1,083 billion over 10 years. Also, the step could lead to the creation of more than a million new jobs every year.

  • Revitalizing Haiti with blockchain. The details are still being hammered out, but the Blockchain Cotton Project hopes to use distributed digital ledgers (blockchain) to manage supply chains, making it easier and less expensive to source organic cotton. One member of the project said, “We’re still figuring out how the farmers do the live reporting. But we hope it will replace the normal organic or fair trade certification through a radical transparency approach.”

What do you think? Do they pass the absurdity test? Or are these ideas too tame?

Weekly Focus – Think About It

“The function of education is to teach one to think intensively and to think critically. Intelligence plus character – that is the goal of true education.”

–Martin Luther King, Jr., American Baptist minister and activist

Value vs. Growth Investing (2/16/18)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 4.42 2.28 -1.38 6.00 18.10 11.16 14.54
US Core 4.21 0.83 -2.40 4.46 15.90 10.86 14.62
US Growth 4.90 5.70 0.85 8.13 28.10 12.41 16.25
US Large Cap 4.42 2.78 -1.24 6.36 19.87 11.83 14.96
US Large Core 4.35 1.12 -2.48 4.47 17.37 11.72 15.26
US Large Growth 4.71 6.58 1.16 8.98 30.61 13.41 17.30
US Large Val 4.18 0.58 -2.49 5.65 12.05 10.30 12.30
US Mid Cap 4.46 1.40 -1.46 5.43 14.82 9.65 13.85
US Mid Core 3.94 0.30 -1.89 4.48 13.70 8.76 13.38
US Mid Growth 5.31 3.62 -0.05 6.17 22.01 9.52 13.40
US Mid Val 4.08 0.23 -2.46 5.72 8.80 10.60 14.72
US Small Cap 4.31 -0.34 -2.61 3.84 9.89 8.63 12.04
US Small Core 3.48 -0.63 -3.00 4.40 8.78 8.79 12.17
US Small Growth 5.75 2.51 0.11 4.84 19.78 10.13 13.18
US Small Val 3.74 -2.81 -4.89 2.39 1.56 6.85 10.67
US Value 4.13 0.27 -2.65 5.46 10.68 10.14 12.70
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:

Random Acts of Kindness

Mahatma Gandhi once said,

“If we could change ourselves, the tendencies in the world would also change.

As a man changes his own nature, so does the attitude of the world change towards him.  We need not wait to see what others do.”

In recent years, it’s common to see his wisdom written in a slightly simpler way: “Be the change you want to see in the world.”

It’s an inspiring notion – that all human progress starts with us. Fortunately, February is the perfect month to “be the change we want to see.” That’s because February 11-17 is Random Acts of Kindness Week!

The definition of a random act of kindness is “a non-premeditated action designed to offer kindness towards the outside world”1 without any expectation of reward. It’s a simple, easy way to brighten someone’s day – and sometimes, it starts a chain reaction. A person who receives an act of kindness often feels inspired to pay that act forward to another person, and so on.

No one act can change the world on its own, of course. But when you pile one act on top of another, on and on and on, there’s no limit to what can be accomplished.

Here are some ideas on how to perform random acts of kindness:

  • Pay for the person behind you in the drive-thru
  • Let someone go ahead of you in line
  • Buy extra at the grocery store and donate it to a food pantry
  • Buy flowers for someone (postal worker, grocery store clerk, bus driver, )
  • Help someone change a flat tire
  1. Post anonymous sticky notes with validating or uplifting messages around for people to find
  2. Compliment a colleague on their work
  3. Send an encouraging text to someone
  4. Take muffins to work
  5. Let a car into traffic ahead of you
  6. Wash someone else’s car
  7. Take a gift to new neighbors and introduce yourself
  8. Pay the bus fare for the passenger behind you

Of course, there are hundreds, perhaps thousands of ways to show kindness to someone. The beautiful thing about this list is that each item is just so eminently doable. Most only take a few seconds or a few dollars.

This year, I’ve decided to participate in Random Acts of Kindness Week. My hope is that by doing so, I can begin to change my personal nature – and by extension, the nature of the world around me.

Have a great month!


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.

* To unsubscribe from our “market commentary” please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at “”.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s