Schwartz Financial Weekly Commentary 3/26/18

The Markets

Why am I saving and investing?

After a week like last week, it’s an important question. There are many reasons people save and invest, including to:

  • Live the life they want today and in the future
  • Accumulate resources so they’re prepared for any bumps in the road
  • Provide an education for their children
  • Offer assistance to parents
  • Support a young person with a disability
  • Do good in the world
  • Live comfortably in retirement without anxiety

However, none of these reasons have anything to do with short-term market fluctuations.

Last week, major U.S. stock indices experienced a selloff, and we saw a dramatic downturn in stock markets. The Dow Jones Industrial Average was down 5.7 percent, the Standard & Poor’s 500 index lost 6 percent, and the NASDAQ fell 6.5 percent, reported Barron’s.

Those are big moves for a single week. The kind of moves that light up the emotion centers of investors’ brains and make them want to sell.

It’s not a new phenomenon. In 2002, in an article for CNN Money, Jason Zweig explained the brain’s potentially negative influence on investment decisions, “But in the world of investing, a panicky response to a false alarm – dumping all your stocks just because the Dow is dropping – can be as costly as ignoring real danger. For one thing, it can cause you to flee the market at a low point and miss out when the market bounces back. A moment of panic can also disrupt your long-term investing strategy.”

So, what happened last week? In short:

  • The Fed raised rates, as expected. The Federal Reserve raised the Fed funds rate by a quarter of a percent, which may benefit savers and investors, but will make borrowing more expensive.
  • Tariffs triggered trade war worries. The Trump administration levied tariffs on China, raising concerns of a global trade war.
  • You’re fired! There was additional turnover among senior advisers to President Trump.
  • Can they do that? British news reported a data analytics firm has been influencing elections around the world in some unsavory ways.
  • Don’t share my data! There was news a social media firm had shared the personal data of thousands with a researcher who shared it with a third-party firm without permission.
  • Another data breach. An online travel company experienced a data breach that may have exposed the personal information of 880,000 users.
  • The economy is chugging along. Last week’s U.S. economic releases were overshadowed by everything else, but many indicated a strengthening economy, reported Barron’s.

That’s a lot to take in over the span of five days. The critical thing is to recognize these short-term events are unlikely to change your long-term financial goals. Financial decisions, including buying and selling investments, are important and can be life shaping. They should be grounded by long-term financial goals and foundational principles of investing. They should not be based on the brain’s instinctive fear and flight response.

Data as of 3/23/18 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -6.0% -3.2% 10.3% 7.1% 10.8% 6.7%
Dow Jones Global ex-U.S. -2.7 -2.1 13.4 3.3 3.8 0.9
10-year Treasury Note (Yield Only) 2.8 NA 2.4 1.9 1.9 3.5
Gold (per ounce) 2.8 3.9 7.9 4.3 -3.4 3.8
Bloomberg Commodity Index 0.1 -0.8 3.4 -4.4 -8.7 -7.9
DJ Equity All REIT Total Return Index -4.0 -10.0 -3.7 0.9 6.3 6.1
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, djindexes.com, 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.

let’s take a good news break. After last week, we could all use some good news. Here are 10 intriguing headlines from the Good News Network:

  1. Scientists Believe They Found a Way to Stop Future Hurricanes in Their Tracks
  2. Strangers Rally Around 13-Year-old Whose Rock Museum was Robbed
  3. Dog that Shoplifted a Book on ‘Abandonment’ is Given the Love It was Asking For
  4. Stranger Becomes Honorary Grandma After She Opens Home to Stranded Father in Distress
  5. We’re Not Spinning a Yarn Here: Knitting May Boost Health and Happiness
  6. Robot Becomes Part of the Community After Easing Daily Burden of Water Collection in Remote Village
  7. Instead of Using Trees, Scientists are Making Sustainable Paper Out of Manure
  8. World’s First Mass-Produced, 3D-Printed Car is Electric and Costs Under $10K
  9. This Pollution-Gobbling City Bench Can Absorb as Many Toxins as 275 Trees
  10. Free Clothing Hung on Streets to Help the Homeless Stay Warm

There is a lot of good news in the world. Unfortunately, it doesn’t pack a wallop like bad news does, so we hear less about it.

Weekly Focus – Think About It

“When the weather changes, nobody believes the laws of physics have changed. Similarly, I don’t believe that when the stock market goes into terrible gyrations its rules have changed.”

–Benoit Mandelbrot, Mathematician and polymath

Value vs. Growth Investing (3/16/18)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market -5.77 -2.53 -5.20 -2.82 12.81 9.05 12.85
US Core -5.78 -4.94 -5.84 -5.36 8.52 8.42 12.58
US Growth -5.97 2.70 -4.17 2.58 23.93 10.42 15.19
US Large Cap -6.13 -2.62 -5.85 -2.99 13.16 9.64 13.11
US Large Core -5.83 -4.98 -6.22 -5.52 8.65 9.27 13.08
US Large Growth -6.01 3.36 -4.61 3.22 25.47 11.42 16.16
US Large Val -5.89 -5.63 -6.16 -6.04 6.48 8.46 10.20
US Mid Cap -4.72 -1.98 -3.49 -1.99 12.37 7.82 12.56
US Mid Core -5.15 -4.33 -4.47 -4.38 9.06 6.58 11.82
US Mid Growth -4.56 2.39 -1.82 2.43 21.14 7.97 12.84
US Mid Val -4.52 -4.13 -4.32 -4.16 6.96 8.79 12.93
US Small Cap -5.06 -3.31 -3.28 -3.52 10.32 6.49 10.79
US Small Core -5.50 -4.80 -4.25 -4.90 7.67 6.14 10.58
US Small Growth -4.52 2.20 -0.98 1.83 22.38 8.69 12.67
US Small Val -5.17 -7.19 -4.66 -7.35 1.46 4.51 9.05
US Value -5.55 -5.42 -5.68 -5.74 6.27 8.27 10.70
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:

The stock market just sneezed.

Has your investment portfolio had a flu shot?

 Give our office a call at 215-886-2122 to see if your investment portfolio including your 401k or 403b could benefit from a no-obligation stress test.

Regards,

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 “mike@schwartzfinancial.com”.

Filing a new W4 at work

If you are among the still working please file a new W4 now that the new withholding tables have been released by the IRS. I have read more than one article that the new tables have been rigged to have most taxpayers owing a balance on returns filed in 2019 for this tax year. Again you should file a new W4 at work.  Do not forget after the filing of your tax return this year, most deductions you knew are no longer valid.

Schwartz Financial ­Weekly Commentary 1/8/18

The Markets

Whoosh! Bang! Flash! Fizz! Whistle!

U.S. stock markets delivered their own version of fireworks to celebrate the New Year. During the first week of 2018, the Dow Jones Industrial Average hit a new all-time high, moving above 25,000 for the first time ever. The NASDAQ Composite and Standard & Poor’s 500 Indices also rose to new highs.

2018 is off to an impressive start, but let’s pause for a moment and take a look back at 2017. It was a memorable year for global markets, but there are other reasons it was interesting, too. Here are the highlights of a few of The Economist’s most popular articles during the year:

  • The world’s most valuable resource is no longer oil, but data (May 6). One-half of the most valuable companies in the world are American technology firms. Some, including The Economist, are concerned about tech companies’ market power and dominance of consumer data.
  • The world’s most dangerous cities (March 31). Despite a declining murder rate, San Salvador remained the world’s most dangerous city, as measured by homicides per 100,000 during 2016 (the latest figure available). Acapulco ranked second. Several cities in the United States made the list including St. Louis, Baltimore, Detroit, and New Orleans.
  • Governments may be big backers of the blockchain (June 1). Blockchain may seem complicated and difficult to understand, but it may become a part of everyday life. “…a blockchain expert at the Massachusetts Institute of Technology argues that governments will drive its adoption – an ironic twist for something that began as a libertarian counter model to centralized authority. Backers say it can be used for land registries, identity-management systems, health-care records, and even elections.”
  • The death of the internal combustion engine (August 12). Rapidly changing battery technology and electric motors, in tandem with self-driving systems and ride sharing, may mark the beginning of the end for the internal combustion engine. It’s a change that is likely to disrupt markets and industries. The silver lining may prove to be less traffic and improved air quality.
  • How to keep cool without costing the earth (February 11). Scientists at the University of Colorado in Boulder have “…invented a film that can cool buildings without the use of refrigerants and, remarkably, without drawing any power to do so. Better yet, this film can be made using standard roll-to-roll manufacturing methods at a cost of around 50 cents a square meter.”

There is a theme that appears to run through many of these articles. They explore new ways of doing things, such as cooling buildings and transporting people. The articles discuss the growing value of consumer data, which many people provide to companies for free, as well as technologies that may allow people to protect and monetize their data in the future (blockchain).

These new developments may be part of a process called creative destruction, which is a process of innovation that includes the introduction of new products and services that may eclipse existing ones. You don’t have to look far to find examples. Just think about the evolution of movie rentals, photography, or phones during the past couple decades.

Creative destruction was introduced in 1942 in Joseph Schumpeter’s book, Capitalism, Socialism and Democracy. He believed it was the essential fact about capitalism. More recently, MIT Professor Ricardo Caballero wrote, “Over the long run, the process of creative destruction accounts for over 50 percent of productivity growth.”

It seems, as Schumpeter suggested, we live in a gale of creative destruction.

Data as of 1/5/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 2.6% 2.6% 20.9% 10.7% 13.4% 6.8%
Dow Jones Global ex-U.S. 2.8 2.8 25.4 7.8 5.0 0.4
10-year Treasury Note (Yield Only) 2.5 NA 2.4 2.0 1.9 3.8
Gold (per ounce) 1.6 1.6 11.9 3.2 -4.4 4.4
Bloomberg Commodity Index -0.3 -0.3 0.5 -5.4 -8.6 -7.3
DJ Equity All REIT Total Return Index -2.1 -2.1 4.2 5.4 9.0 8.3
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, djindexes.com, 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.

cryptocurrency may be expensive in unexpected ways. If you’re like many investors, you have probably spent some time thinking about the latest innovation in money: cryptocurrency. Cryptocurrencies, or digital tokens, are ‘mined’ using computer networks to solve complex puzzles. The Economist provided an example:

“A huge aircraft hangar in Boden, in northern Sweden, big enough to hold a dozen helicopters, is now packed with computers – 45,000 of them, each with a whirring fan to stop it overheating. The machines work ceaselessly, trying to solve fiendishly difficult mathematical puzzles. The solutions are, in themselves, unimportant. Yet by solving the puzzles, the computers earn their owners a reward in bitcoin, a digital ‘crypto-currency.’”

A hangar of computers is a lot of overhead expense, and it’s not all that’s needed to mine digital tokens, either. Experts in the field told The Washington Post mining a popular cryptocurrency, “…probably uses as much as 1 to 4 gigawatts, or billion watts, of electricity, roughly the output of one to three nuclear reactors.”

Weekly Focus – Think About It

“I offered a definition of bubble that I thought represents the term’s best use: A situation in which news of price increases spurs investor enthusiasm which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increase and bringing in a larger and larger class of investors, who, despite doubts about the real value of the investment, are drawn to it partly through envy of others’ successes and partly through a gambler’s excitement.”

–Robert Shiller, American Nobel Laureate and Professor of Economics

Value vs. Growth Investing (1/5/18)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 2.49 2.49 4.34 7.66 22.73 12.81 15.52
US Core 2.17 2.17 3.37 6.97 22.34 12.30 16.13
US Growth 3.57 3.57 6.13 9.28 31.41 14.19 16.42
US Large Cap 2.71 2.71 4.50 8.02 24.35 13.26 15.74
US Large Core 2.38 2.38 3.35 7.14 24.09 12.80 16.70
US Large Growth 3.94 3.94 6.65 10.01 33.46 15.08 17.18
US Large Val 1.79 1.79 3.39 6.82 16.09 11.86 13.37
US Mid Cap 2.08 2.08 4.13 7.35 19.90 11.86 15.31
US Mid Core 1.79 1.79 3.66 7.17 20.04 11.26 15.09
US Mid Growth 2.92 2.92 4.98 8.08 26.84 11.65 14.36
US Mid Val 1.52 1.52 3.69 6.73 12.96 12.58 16.46
US Small Cap 1.31 1.31 3.25 4.78 14.75 10.81 13.68
US Small Core 1.10 1.10 2.97 4.94 13.28 10.86 13.80
US Small Growth 1.50 1.50 3.85 5.13 23.40 11.99 14.16
US Small Val 1.35 1.35 2.79 4.13 7.78 9.47 12.98
US Value 1.70 1.70 3.42 6.63 14.90 11.87 13.99
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.

We are now accepting appointments for tax season.  Please give our office a call to schedule your appointment.

mls-tax-pc-front-2016-print

Office Happenings:

Budget checklist for the 1st Quarter

January

  • Reset Your Budget: If you have a tally of your financial spending from last year, consider how you might tweak your budget for the coming year. Remember to include less-frequent maintenance costs, like a new roof, furnace or set of tires. If you don’t have a 12-month spending tally, then review your past three months spending history. Once you’ve categorized your spending into the basic food, clothing and shelter, you’re ready to create a starter budget. We recommend that you use our “personal financial website” that we provide to clients and prospects or request our budget spreadsheet.
  • Review your Employer Retirement Plan: Are you are contributing enough to get your full employer match? If you’re 50 years old (or will be by December 31st) consider making additional Catch-up contributions. Depositing 1/12 of your IRA’s annual contribution each month provides dollar cost averaging benefits and it’s less painful than writing one big check.
  • Save For Fun: In addition to saving for retirement, we suggest saving some of your income for the fun category (after you pay off consumer debts and have an emergency fund). What you save for is up to you; maybe it’s a ski trip, a renovated kitchen or a mountain bike. Regardless of the goal, figure out exactly how much you need to save, and then create a separate savings account for each goal so you can easily track your progress and gauge if you need to ramp up your efforts throughout the year.
  • How to Use Your End of Year Bonus: If you received a year-end bonus, pat yourself on the back and enjoy it by spending 10% on something fun—and then allocate the remainder toward a financial priority. (You have until April 15 to max out your IRA.)
  • Pay Your Tax Bill If You’re Self-Employed, Own a Small Business or Freelance: You have until January 15th to pay your fourth quarter estimated tax payments. And be sure to put reminders on your calendar to pay quarterly estimated payments on time for the coming year.
  • FSA and HSA’s: Make contributions to your HSA account (which in some circumstances can be a better move than getting your employer match). Also be sure to empty your FSA account before January 1, unless you have a 2.5 month extension or a $500 annual rollover available.

February

  • Prep for Tax Time: By the beginning of February, you should have received your tax forms, such as a W-2 from your employer, 1099’s for supplementary income, etc. Keep them in a safe place and start collecting any other information that you’ll need to do your taxes, receipts for business expenses and charitable donations. If paying for college then check out the American Opportunity Credit and Lifetime Learning Credit.
  • Get Your Credit Score: Go to www.annualcreditreport.com, read the report carefully and report any discrepancies to the appropriate agencies.
  • Have the Money Talk with Your Significant Other: No matter what stage in your relationship—be it dating or happily married—significant others can either be great partners to help you stay on track with your finances or weights around your ankles. Meeting your financial goals will be more likely when two persons share identical priorities.

March

  • Wrap Up Your Taxes: One of the best ways to avoid tax identity theft is to file as early as possible. Your goal should be to finish your taxes in March—well in advance of the April 15 deadline. If you get a tax refund from the government, treat it the same way as your year-end bonus: Put 10% toward something fun, and funnel the rest toward financial priorities.
  • RMD: If you turned 70.5 years old last year and haven’t taken your first required minimum distribution (RMD) you have until April 1 to do so.
  • Pin Down Your Child’s Summer Plans: If you have kids in the home, you know that their attention spans last only so long. In order to keep them busy when school’s out, research options like summer camp, help them start a business or encourage them to start one, find free employment with internships (plumbing, electrician, etc), enrichment programs and other activities—and start budgeting for them now. It’s worth having a money week during the summer to teach kids how to use their money. You could review opportunity cost, investing, time value of money. (Need ideas for this OR a teacher? We’re happy to hold a financial literacy week for clients’ children)

April

  • Review Your First Quarter: Review the last three months of spending and see if it lines up with your family goals. Do your biggest spending categories line up with what is most important to you? If you’re spending more than you anticipated on things you don’t enjoy consider adjusting your budget accordingly.
  • Put Those Taxes to Bed: The deadline for filing your taxes is April 15th. If you’re filing for a six month extension you still need to pay any taxes due by April 15. Also, be certain to make any prior year IRA or Coverdell Education Savings account contributions by then.
  • Finalize Summer Travel: If a vacation is in the cards, now is the time to hammer out the details. It’s a good idea to book airfare three to five months in advance—before prices start inching up.
  • Review Insurance: Make sure you are adequately covered for your current standard of living, health, disability, property and casualty.

Why?

Why should you stay on track and have a checklist in the first place? The answer is so that you can be prepared. So you aren’t frantic to get things done, so the random one time expenses don’t cripple you, so you can be confident in your financial future and retirement goals. This checklist takes me back to Jocko Willink’s quote “Discipline equals freedom”. If you have the discipline today to save and accomplish what needs to get done, then you will have the freedom later to not worry about the problems most others will.

Regards,

 

 

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 “mike@schwartzfinancial.com”.

Schwartz Financial Weekly Commentary 1/2/18

The Markets

How good was 2017?

It was so good, the Standard & Poor’s (S&P) 500 Index finished in positive territory every month for the first time ever (on a total return basis), reported Barron’s. All major U.S. indices finished the year with double-digit gains.

As we enter 2018, keep an eye on investor sentiment. “History has shown us that the crowd can be right during trends, but it also tends to be wrong at extremes. This is why sentiment can be an important contrarian indicator, because if everyone who might become bearish has already sold, only buyers are left. The reverse also applies,” reported ValueWalk.

Toward the end of 2017, sentiment shifted, but not everyone shared the same outlook. Surveys and indices that track market indicators and institutional advice became less bullish, while newsletter writers and investors became more bullish.

  • The CNN Fear & Greed Index dropped from Greedy territory into the Neutral range. The Index measures seven indicators including stock price strength and breadth, market momentum, high-yield bond demand, and market volatility to determine the emotion that may be driving markets.
  • The TIM Group Market Sentiment fell from 47.3 percent to 43 percent, becoming more bearish. TIM tracks actionable ideas sent from the sell-side (e.g., investment and commercial banks; stock brokers; market makers) to buy-side clients (e.g., asset managers; institutional and retail investors). A score of zero is the most bearish and 100 is the most bullish.
  • The AAII Investor Sentiment Survey indicated individual investors are becoming more bullish and less bearish. Some believe the survey is a contrarian indicator:
  • Bullish sentiment was up 2.1 percent to 52.6 percent. The long-term average is 38.5 percent.
  • Neutral sentiment was up 2.8 percent to 26.7 percent. The long-term average is 31.0 percent.
  • Bearish sentiment was down 5 percent to 20.6 percent. The long-term average is 30.5 percent.

During 2017, U.S. markets appeared to be Teflon-coated. Geopolitical events, natural disasters, and other shocks had little impact on investor optimism or share prices, and expectations for volatility remained historically low. That may continue during 2018, or it may not.

Data as of 12/29/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -0.4% 19.4% 18.8% 8.6% 13.4% 6.2%
Dow Jones Global ex-U.S. 1.1 24.6 24.8 5.7 4.9 -0.2
10-year Treasury Note (Yield Only) 2.4 NA 2.5 2.2 1.8 4.0
Gold (per ounce) 2.2 13.1 9.4 2.8 -4.9 4.5
Bloomberg Commodity Index 2.8 0.8 0.6 -6.0 -8.7 -7.1
DJ Equity All REIT Total Return Index 1.5 8.7 9.7 6.2 9.9 7.7
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, djindexes.com, 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.

some of the best and worst of 2017. It may have seemed longer but 2017 had 365 days, just like every other year. It was a year of firsts, worsts, and bests, although not everyone agrees about which were which. Here are a few memorable pop culture moments from 2017:

  • Making a mistake. “At February’s Oscars, some [person] hands presenters Warren Beatty and Faye Dunaway the wrong envelope, leading to an incorrect announcement of Best Picture. The actual winner turns out to be whatever other accounting companies are vying for the academy’s business,” reported New York Post.
  • Seeing and hearing the children. An interview with South Korea expert, Professor Robert Kelly, was interrupted by his toddlers and became a viral sensation. One Twitter post read, “Live your life like you just burst through the door of your dad’s super important live broadcast Skype call,” reported The Independent.

 Empowering women. “Wonder Woman became the best-reviewed DC Universe film and a box-office hero when it hit theaters in May…[It] had the biggest opening ever for a movie directed by a woman with a $100.5 million debut and presented a turning point for female representation on the big screen,” wrote USA Today.

  • Selling stuff. Arguably the world’s most eligible royal bachelor, Prince Harry announced he’s engaged to Meghan Markle. Prepare for the glut of commemorative items. About £222 million was spent on memorabilia related to the 2011 royal wedding of the Duke and Duchess of Cambridge, reported The Telegraph.
  • Beknighting another Beatle. That’s right. The Beatles’ former drummer Ringo Starr is on the list to receive knighthood during Queen Elizabeth’s annual New Year’s Honours ceremony, announced Rolling Stone.

 What were the best and worst moments of 2017 in your opinion?

Weekly Focus – Think About It

“Your success and happiness lies in you. Resolve to keep happy, and your joy and you shall form an invincible host against difficulties.”

–Helen Keller, American author, lecturer, and activist

Value vs. Growth Investing (12/31/17)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market -0.30 21.47 1.04 6.46 21.47 11.21 15.62
US Core -0.43 21.12 0.58 6.01 21.12 10.89 16.29
US Growth -0.12 29.52 0.77 6.98 29.52 12.14 16.20
US Large Cap -0.38 22.69 1.08 6.61 22.69 11.58 15.77
US Large Core -0.57 22.43 0.44 5.95 22.43 11.32 16.79
US Large Growth -0.14 31.15 0.97 7.25 31.15 12.87 16.85
US Large Val -0.44 15.09 1.82 6.55 15.09 10.49 13.69
US Mid Cap -0.01 19.50 1.08 6.52 19.50 10.41 15.55
US Mid Core -0.05 19.88 1.11 6.68 19.88 9.93 15.39
US Mid Growth 0.04 25.67 0.33 6.61 25.67 9.93 14.35
US Mid Val -0.03 13.02 1.84 6.18 13.02 11.30 16.92
US Small Cap -0.21 15.03 0.45 4.78 15.03 9.58 14.17
US Small Core -0.11 13.17 0.74 4.95 13.17 9.77 14.30
US Small Growth -0.36 23.77 -0.21 5.19 23.77 10.63 14.50
US Small Val -0.17 8.40 0.78 4.02 8.40 8.21 13.60
US Value -0.34 14.23 1.77 6.33 14.23 10.52 14.37
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Michael L. Schwartz, RFC®, CWS®, CFS

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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.

 

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Charitable Giving

Mike's Market Commentary

Everyone has their own reason for gifting their assets or a portion of their income to charitable organizations.  Some find comfort in helping others who are less fortunate, while others simply want to share their good fortune.  Many of the institutions of art, sciences and education are supported in large part by those who want to give something back in appreciation for their contributions to the community or the individuals themselves.

Presently, the tax code offers incentives for gifting of one’s assets or incomes. Tax deductions are given for current contributions and, for estate owners, charitable gifts can reduce the size of the estate to help minimize estate taxes.

Often times, an individual will designate a charitable beneficiary in their will to benefit the organization after the individual dies.  By using charitable gifting techniques, a donor may be able to benefit the charity while living without having to sacrifice the…

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