Schwartz Financial ­Weekly Commentary 7/17/17

The Markets

It was a good week for a lot of stocks but not bank stocks.

The Standard & Poor’s 500 (S&P 500) Index and the Dow Jones Industrial Average (DJIA) both finished at record highs last week. Barron’s indicated investors owe Federal Reserve Chair Janet Yellen a debt of gratitude:

“The main force behind the rally was the dovish performance by Federal Reserve Chair Janet Yellen in Congress on Wednesday and Thursday when she reiterated that rate hikes would most likely be gradual. On balance, her remarks were interpreted as evidence of continued accommodative monetary policy and, from there, stocks were off to the races. The ignition of the rally can almost be time-stamped to her appearance. Before her speech, the market was down for the week.”

Of course, some sectors of the stock market did better than others last week. In the S&P 500, Real Estate, Information Technology, and Consumer Staples stocks had the highest percentage gains at the close on Friday, while Financials, Telecommunications, and Consumer Discretionary stocks lagged, according to Fidelity.

In the Financials sector, banks were the weakest performers, finishing Friday almost a full percent lower. It was a bit of a mystery, wrote Financial Times (FT), since several banks beat earnings expectations. FT reported:

“Perhaps the most important factor that weighed on bank stock prices, however, had nothing to do with the comments from executives nor the quarterly financial results. Macroeconomic data published on Friday showed U.S. inflation at the consumer level cooled last month while retail sales fell short of estimates, pushing Treasury bond yields lower. Lower interest rates are bad news for banks, which make more money if they can charge borrowers more.”

Investors appear to believe there is smooth sailing ahead. The CBOE Volatility Index remained below 10.

Data as of 7/14/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 1.4% 9.9% 13.7% 7.6% 12.7% 4.7%
Dow Jones Global ex-U.S. 2.8 15.1 16.3 -0.4 5.9 -1.3
10-year Treasury Note (Yield Only) 2.3 NA 1.5 2.6 1.5 5.0
Gold (per ounce) 1.2 6.1 -7.8 -2.0 -5.0 6.3
Bloomberg Commodity Index 1.1 -5.5 -5.1 -14.0 -10.2 -7.0
DJ Equity All REIT Total Return Index 1.4 5.1 -1.3 8.6 9.5 6.0
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.

merriam webster defines ‘disrupt’ as ‘To break apart,’ and ‘to throw into disorder.’ While disruption doesn’t sound like something anyone would enjoy much, it has the potential to create investment opportunities for those who share a vision and are willing to take risks.

Morgan Stanley recently wrote, “It’s hard to think of an industry that won’t be touched in some way by technological disruption over the next decade.” Here are a few of the trends that may really stir things up during the next few decades:

  • Machine learning. “The transportation and medical industries are likely to be first in line for disruption,” Morgan Stanley A disruptive change researcher wrote, “If we think about what machine learning really is, it’s pattern recognition. We might see radiology and scans detecting cancers earlier than they’re detected today. And it’s possible that in the future we can also use machine learning to scan for genes that might predispose us to certain kinds of diseases.”


  • Autonomous vehicles. The auto industry, as we know it, is likely to change in some significant ways when self-driving vehicles become more prevalent. Other industries will be affected, too. For instance, insurance could change dramatically. After all, who do you insure when software is driving?

In addition, cities may lose a source of revenue if there is less need for parking. CNBC wrote, “Reports estimate self-driving vehicles have the potential to reduce parking space by about 61 billion square feet, which is about the size of Connecticut and Vermont combined.” This may be a boon for the real estate market.

The responsibilities of law enforcement may change, too, and crash test dummies may be out of work.

  • Augmented reality. Imagine a surgeon being able to practice a surgery, a rigger learning their craft without scaling heights to lift heavy objects, or a teacher making students’ textbooks come alive. Augmented reality has the potential to help professionals refine their skills, make dangerous training safer, and fascinate students at all levels of learning.

Morgan Stanley also pointed out that Blockchain, which enables electronic contracts and custody, may change the financial industry, and Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR) may help cure disease at the genetic level.

We live in interesting times!

Weekly Focus – Think About It

“Companies don’t have ideas. Only people do. And what motivates people are the bonds of loyalty and trust they develop around each other.”

–Margaret Heffernan, International businesswoman and author

Value vs. Growth Investing (7/14/17)

Name 1-Week YTD 4-Week 13-Week 1-Year 3-Year 5-Year
US Market 1.40 10.79 0.98 6.13 16.38 9.54 14.98
US Core 1.16 11.60 0.95 5.74 18.15 10.51 16.03
US Growth 2.24 17.73 1.60 9.64 18.35 10.43 15.10
US Large Cap 1.41 11.62 1.04 6.41 16.63 9.91 14.88
US Large Core 1.22 13.04 1.21 6.23 19.94 11.38 16.42
US Large Growth 2.51 18.95 1.63 10.00 19.11 11.11 15.53
US Large Val 0.41 3.55 0.19 3.00 11.00 7.21 12.77
US Mid Cap 1.44 9.66 0.85 5.40 15.22 8.78 15.69
US Mid Core 1.24 9.70 0.57 4.59 13.23 8.57 15.49
US Mid Growth 1.50 14.84 1.33 8.17 15.31 8.44 13.95
US Mid Val 1.62 4.61 0.65 3.55 17.19 9.30 17.70
US Small Cap 1.09 5.91 0.68 5.36 17.05 7.83 13.97
US Small Core 0.39 4.14 -0.48 4.52 16.04 7.77 14.14
US Small Growth 1.49 13.43 2.08 10.07 19.15 8.77 13.81
US Small Val 1.42 0.46 0.46 1.56 15.66 6.89 13.87
US Value 0.72 3.54 0.30 3.01 12.58 7.63 13.85
 ©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.

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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.

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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The W’s In Your Will

We can all remember our English teachers explaining the uses and benefits of the “W” questions when writing: Who, What, When, Where, Why and How. These questions still periodically come up at critical points in our lives. Who should I marry? What should I study at college? When can I retire? Where do babies come from? Why does my daughter need such an expensive wedding?  How did I get so old?
The “W” questions are particularly important when it comes to your will. Who will I leave my assets to? What will I leave for the people I love? When will it become available after my passing? Where will I store my will? Why am I making these decisions, and am I being fair to my heirs?
Then come the all-important “how” questions. When it comes to wills, these are the ones that don’t get asked frequently enough:
“How come?”
“How often?”
Sometimes we might ask these questions when creatinga will, but not when updating it.  But keeping your will up-to-date is as important as creating it in the first place—otherwise, it might not truly reflect your wishes.  So the next time you update your will, consider these “how” questions first:
“How come?” Legally the executor of your will is obligated to follow your written instructions. What might this mean? If your will states that your assets should go to your spouse; then that’s where they will go. Easy enough. But what if you’re divorced and you haven’t updated your will? Well, your assets will go to your ex. And what if you re-marry? Surely, you would think, the courts will recognize that you want your current spouse to receive your assets. They won’t; unless you’ve updated your will. Another common situation is when your spouse passes away. Many people would assume that their assets would immediately pass to their children. Not necessarily. You need it in writing. You don’t want your children, spouse, or grandchildren to not receive what you worked so hard to leave them. But there is a simple solution: updating your will.
“How often?” Anytime you’ve gone through a change-of-life event, you’ll want to make sure that those written instructions, i.e. your will, is up to date with your wishes. I’ve already addressed what a change in marital status might mean. But there are many other circumstances you’ll want to consider. You may have sold a house or some other asset that you would like to include or remove from your will.
I often talk with people who haven’t had a recent life altering event or transaction take place. If you fall into this category I would still encourage you to review and update your will. A general rule of thumb is that you should review your will with a professional at least once every five years. This is done because we change as people. What seemed important five years ago might seem very trivial today; your heirs and their needs may have changed as well.
Many people avoid this process because it can be uncomfortable to address end of life issues. However, doing so can save your loved ones untold amounts of grief. Far too often I hear or read about a family who is dealing with the probate process, or squabbling heirs. This is not only financially stressful, but more importantly it is emotionally stressful. They are forced into a situation where they are required to continually revisit the personal loss of a loved one, prolonging an already difficult healing process.
If you have not recently reviewed your will, please give me a call at 215-886-2122.  I can help you review your assets and make sure that your wishes will be carried out the way you want. I can also help you structure your estate to protect your assets and prevent unnecessary taxes. There is peace of mind in knowing that you have your affairs in order and that you can leave a legacy for your loved ones, not an unnecessary source of stress.