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Weekly Vantage Point | Week of 8.22.2016

 
Equity Momentum Falters on Earnings Concern

August 22, 2016 – U.S. stocks mostly stalled near record highs last week amid signs that investors are losing patience awaiting a rebound in corporate profits. After digesting second quarter results, Wall Street analysts now forecast that S&P 500 companies’ earnings may decline by 0.9% in the third quarter. That stands in contrast with a consensus estimate of a 0.8% increase a week ago. Stocks are still up around 9% from their steep two-day selloff following the British vote to leave the European Union. Equities have been buoyed by earnings coming in better than expected and a still dovish outlook on interest rates.

In key domestic economic data, retail sales disappointed with an unchanged reading for July, missing forecasts for a 0.4% increase. Housing starts recovered markedly in July, rebounding 2.1%, following a 0.8% June decline. Also positive, the Conference Board’s Index of Leading Economic Indicators rose 0.4%, exceeding economists’ consensus forecast. Producer prices declined last month, down 0.4%, while consumer prices were flat.

For the week, the S&P 500 rose 0.06%, the Dow Industrials slipped 0.13%, while the NASDAQ Composite gained 0.16%. Five of the ten major sectors posted gains, led by Energy (+2.16%), Materials (+1.28%), and Industrials (+0.78%). Telecom (-3.84%), Utilities (-1.26%), and Consumer Discretionary (-0.67%) fell the most. The US Dollar Index weakened last week, slipping to 94.511. U.S. oil futures surged over 9% last week on continued speculation that OPEC oil talks may slow future production. Treasury prices fell last week, pushing the yield higher on benchmark 10-year Treasury notes to 1.579%.

 
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Week’s Economic Calendar
 

Monday, August 22: Chicago Fed National Activity Index;

Tuesday, August 23: New Home Sales, Richmond Fed Mfg Index;

Wednesday, August 24: Mortgage Applications Activity, PMI Mfg Index, Existing Home Sales;

Thursday, August 25: Durable Goods Orders, Jobless Claims;

Friday, August 26: 2Q GDP Revision, Intl Trade Goods, Corporate Profits, Consumer Sentiment.

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Market Watch
Stocks 1-Wk MTD 3-Month YTD 1-Year
Dow Jones -0.13% 0.65% 6.41% 6.47% 6.92%
S&P 500 0.06% 0.67% 7.65% 8.39% 7.36%
NASDAQ 0.16% 1.62% 11.50% 5.50% 5.67%
Russell 3000 0.10% 0.67% 8.19% 8.46% 6.34%
MSCI EAFE -0.58% 0.86% 5.59% 1.29% -3.40%
MSCI Emerging Markets 0.08% 4.35% 17.81% 16.63% 10.95%
Bonds 1-Week MTD 3-Month YTD 1-Year
Barclays Agg Bond -0.18% -0.29% 2.34% 5.68% 5.36%
Barclays Municipal -0.03% 0.03% 1.57% 4.42% 6.88%
Barclays US Corp High Yield 0.53% 1.77% 6.74% 13.99% 8.61%
Commodities 1-Week MTD 3-Month YTD 1-Year
Bloomberg Commodity 2.60% 2.34% 1.91% 9.97% -2.36%
S&P GSCI Crude Oil 8.70% 18.05% 0.90% 32.59% 18.95%
S&P GSCI Gold 0.22% -0.83% 7.05% 26.98% 19.31%
Source: Morningstar
Chart of the Week: Keeping an Eye on Manufacturing;
Brexit Fears Over-Hyped
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The prevailing smaller-than-expected fallout from Brexit has bolstered the global growth outlook, which according to JPMorgan, calls for a return to trend-like 2.6% growth during the second half of the year. This represents expansion about a half a percentage-point above the pace reported in the first half of 2016. As we see in the chart above, improved industrial production (IP) data in June supports this call, and so far the indications are positive for July. Impending reports from tech-heavy Taiwan and Singapore should also help.

The June/July gain in the global Purchasing Manager’s Index (PMI) also sent a positive signal. The global PMI, which already was positioned for 2.25% IP growth in July, is due on September 1. Investors will also watch the U.S. August durable goods report for signs that business equipment spending may start to improve. Lastly, the firming in oil and metals prices this year should spell relief, reducing the pressure on commodity producers while boosting pricing power and corporate earnings more broadly.

Weekly Vantage Point | Week of 8.15.2016

 
Equities Edge Higher, Sixth Gain in Seven Weeks

August 15, 2016 – U.S. stocks edged lower on Friday after an unexpected stall-out on last month’s retail sales, but the S&P 500 eked out its sixth weekly gain in the past seven weeks. The NASDAQ Composite finished at a new all-time high for a second week. Energy shares led the advance as crude oil posted its strongest weekly gain since April, while earnings results from the leading department stores boosted optimism. Notably, the MSCI EAFE Index of developed markets (excluding the U.S. and Canada) and the MSCI Emerging Markets Index each advanced 2.8% last week.

In key domestic economic data, Commerce officials said retail sales were unchanged last month, unable to sustain an upwardly revised 0.8% June increase. Excluding autos, retail sales fell 0.3%. The Producer Price Index (PPI) fell 0.4%, the largest pullback since last September, widely below economists’ outlook for a 0.1% increase. On the bright side, the reports lowered expectations that Fed may hike rates in September. Other data last week showed wholesale inventories and trade sales expanded in June, while the University of Michigan’s early August consumer sentiment index climbed slightly from a three-month low in July, but trailed Wall Street’s consensus forecast.

For the week, the S&P 500 rose 0.12%, the Dow Industrials gained 0.18%, and the NASDAQ Composite gained 0.24%. Seven of the ten major sectors posed gains, led by Energy (+1.54%), Consumer Staples (+0.77%), and Consumer Discretionary (+0.57%). Materials (-0.68%), Healthcare (-0.61%) and Financials (-0.60%) lagged. Total trading volumes were soft last week, nearly 12% below the 20-day average. The US Dollar Index weakened last week, slipping 0.491% to end at 95.722. U.S. oil futures gained +6.43% last week to end at $44.49/barrel on speculation OPEC oil talks may help stabilize the market. Treasuries rose, pulling the yield lower on benchmark 10-year Treasury notes to 1.514%.

 
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Week’s Economic Calendar
 

Monday, August 8: Fed Labor Market Conditions Index;

Tuesday, August 9: Small Business Optimism Index, Worker Productivity & Costs, Wholesale Trade;

Wednesday, August 10: Mortgage Activity, JOLTS;

Thursday, August 11: Jobless Claims, Import/Export Prices;

Friday, August 12: Retail Sales, Producer Prices, Business Inventories, Consumer Sentiment.

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Market Watch
Stocks 1-Wk MTD 3-Month YTD 1-Year
Dow Jones 0.18% 0.78% 4.83% 6.61% 6.73%
S&P 500 0.12% 0.61% 6.39% 8.32% 7.02%
NASDAQ 0.24% 1.46% 10.81% 5.33% 5.03%
Russell 3000 0.11% 0.58% 6.88% 8.36% 5.98%
MSCI EAFE 2.85% 1.45% 4.72% 1.88% -4.35%
MSCI Emerging Markets 2.80% 4.27% 14.12% 16.54% 8.19%
Bonds 1-Week MTD 3-Month YTD 1-Year
Barclays Agg Bond 0.42% -0.11% 2.13% 5.87% 5.57%
Barclays Municipal 0.18% 0.05% 1.46% 4.45% 6.82%
Barclays US Corp High Yield 0.88% 1.24% 6.02% 13.39% 7.96%
Commodities 1-Week MTD 3-Month YTD 1-Year
Bloomberg Commodity 0.25% -0.26% -0.75% 7.19% -7.24%
S&P GSCI Crude Oil 7.69% 8.61% -4.78% 21.98% 2.98%
S&P GSCI Gold -0.09% -1.05% 5.47% 26.69% 19.50%
Source: Morningstar
Chart of the Week: Global 3Q Outlook Improves, Although U.S. & China Retail Sales Disappoint
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J.P. Morgan’s bottom-up forecast for third quarter 2016 global GDP growth is unchanged at a 2.5% annualized rate this week. This forecast projects a 1.6% gain in the Developed Markets and 4.0% growth in Emerging Markets. If realized, both regions will have accelerated quarter-over-quarter. We received a number of 2Q GDP reports this week with offsetting country results, keeping the global aggregate unchanged from last week. Second-quarter GDP results surprised to the upside in Hong Kong, Russia, and Romania but disappointed in Hungary, Malaysia, and Singapore. The Eurozone’s revised 2Q GDP release was a touch weaker at 1.1% (vs. 1.2% in the preliminary release), though this is stronger than the soft national production data suggested.

Turning to the current quarter, as the above chart indicates, the GDP Global Nowcast for third quarter global growth rose notably this week, to a solid 2.7% annualized pace from 2.5% last week. While this is encouraging, we note that most nowcast model projections are unavailable at the start of the tracking quarter. The data for 3Q are now in hand for the July global PMIs and auto sales. Both are moving in the right direction with the July manufacturing PMI up a solid 1.7 percentage points and auto sales up 1.4% month-over-month (MoM).

At the country level, the latest July activity reports from the U.S. and China suggest caution. U.S. July retail sales disappointed, though this follows a quarter in which total goods consumption surged nearly 10%. Similarly, China’s retail sales decelerated to a 0.8% month–over ̶ month pace from a 1.5% clip in June. Industrial production also decelerated in China with a weak 0.2% month–over ̶ month increase in July.

Weekly Vantage Point | Week of 8.8.2016

 
Stocks End Week at All-Time High

August 8, 2016 – U.S. stocks surged Friday as strong July jobs data, the second consecutive payrolls report that widely exceeded economists’ forecasts, eased concerns that economic growth is slowing. Employers added 255,000 jobs last month, surpassing projections for 180,000, while revisions for the prior two months added a further 18,000 jobs. Separate data showed the unemployment rate held steady at 4.9% as the nation’s work force rate crept higher to 62.8%. Also positive, wages increased 0.3%, the most since April.

July’s jobs gains, which are likely to underpin consumer spending into the second half of the year, turned the tide positive for equities last week. The S&P 500 gained over 0.86% on Friday, handing the benchmark index its fifth weekly advance in the past six, finishing the week at a fresh all-time high. Favorable earnings in technology shares helped push the NASDAQ Composite to its first new record close in a year. Equities stumbled on Tuesday, with the S&P 500 suffering its largest one-day decline in a month, as investors worried about the strength of European banks’ balance sheets and erosion in oil.

For the week, the S&P 500 rose 0.49%, the Dow Industrials gained 0.60%, and the NASDAQ Composite gained 1.21%. Sector performance was mixed with five of the ten major sectors posting gains, led by Technology (1.74%), Financials (+1.53%), and Industrials (+0.43%). Utilities (-2.64%) and Telecom (-1.82%) declined the most. The US Dollar Index strengthened last week, gaining 0.695% to end at 96.194. U.S. oil futures inched $0.20 higher last week, but black gold slumped nearly 16% since the July 4th holiday. Treasuries fell, boosting the yield on benchmark 10-year Treasury notes by 13.5 basis points last week to 1.589%.

 
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Week’s Economic Calendar
 

Monday, August 8: Fed Labor Market Conditions Index;

Tuesday, August 9: Small Business Optimism Index, Worker Productivity & Costs, Wholesale Trade;

Wednesday, August 10: Mortgage Activity, JOLTS;

Thursday, August 11: Jobless Claims, Import/Export Prices;

Friday, August 12: Retail Sales, Producer Prices, Business Inventories, Consumer Sentiment.

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Market Watch
Stocks 1-Wk MTD 3-Month YTD 1-Year
Dow Jones 0.60% 0.60% 5.00% 6.42% 5.71%
S&P 500 0.49% 0.49% 7.05% 8.19% 6.27%
NASDAQ 1.21% 1.21% 11.04% 5.07% 2.89%
Russell 3000 0.47% 0.47% 7.47% 8.24% 5.11%
MSCI EAFE -1.35% -1.35% 2.23% -0.94% -8.71%
MSCI Emerging Markets 1.43% 1.43% 10.66% 13.37% 1.75%
Bonds 1-Week MTD 3-Month YTD 1-Year
Barclays Agg Bond -0.52% -0.52% 1.65% 5.43% 5.71%
Barclays Municipal -0.13% -0.13% 1.87% 4.26% 6.91%
Barclays US Corp High Yield 0.35% 0.35% 5.30% 12.40% 5.50%
Commodities 1-Week MTD 3-Month YTD 1-Year
Bloomberg Commodity -0.50% -0.50% 1.46% 6.92% -7.46%
S&P GSCI Crude Oil 0.85% 0.85% -5.34% 13.27% -7.06%
S&P GSCI Gold -0.97% -0.97% 5.67% 26.81% 23.79%
Source: Morningstar
Chart of the Week: S&P 500 Foreign Sales Erode to 2006 Low
Reflects Strong Dollar/Widening Trade Deficit
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As the above chart from S&P Dow Jones illustrates, the percentage of products and services produced or sold by S&P 500 companies outside the U.S. equated to 44.3% in 2015, down from 47.8% in 2014 and the 46% average from 2009-2013. In 2006, it was 43.6%.

From a geographical standpoint, European sales continued to increase in 2015, with Europe emerging as the dominant region and accounting for 7.79% of all S&P 500 sales, up from 7.46% in 2014 and 6.80% in 2013. After declining four years in a row, U.K. sales increased to 1.86% from 0.89% in 2014. Asian sales decreased, representing 6.77% of S&P 500 sales, down from 7.80% in 2014 and 7.71% in 2013. Canadian sales decreased to 1.17% from 3.51% in 2014 partially because of oil and commodity price declines and less demand for the industry's related services and equipment. African sales also decreased to 3.16% from 4.09% in 2014 and 3.55% in 2013.

Lastly, something for the U.S. presidential candidates to ponder: In 2015, S&P 500 companies continued paying more for income taxes in the U.S. than overseas. Approximately two-thirds of tax payments went to the U.S., up from 61.8% in 2014 and 54.9% in 2013. Meanwhile, 33.2% of taxes were sent to foreign governments in 2015, down from 38.2% in 2014 and 45.1% in 2013. Actual payments to Washington decreased 0.4% in 2015 to $184.4 billion, down from $185.2 billion in 2014.

Weekly Vantage Point | Week of 8.1.2016


Equities Post Fifth Monthly Gain

August 1, 2016 — Despite ending Friday within two points of its 2,175.03 historical high, the S&P 500 posted a small loss last week, snapping four consecutive weekly gains. The benchmark equity index advanced 3.69% in July, its fifth monthly gain, and has rallied 8.82% from its June 27th post-Brexit low. Technology shares led the advance, surging 13.11% since the late-June low. Last week’s focus was on second quarter earnings and a disappointing reading of second quarter growth. With more than half of S&P 500 companies having reported quarterly results, overall earnings are now expected to decline 3.8% from a year earlier, according to Fact Set. A week earlier, when 126 S&P 500 firms had reported, analysts had projected a 4.4% earnings decline and before the earnings season start, analysts originally forecast a 5.3% pullback in profits.

Key among economic data last week was Friday’s lackluster preliminary growth report for the second quarter. In the first of three Commerce Department estimates, GDP expanded at a 1.2% annualized rate last quarter, well below economists’ projections for 2.5% growth. The disappointment was largely due to falling business inventories, subtracting 1.16 percentage points from growth. Within the report, the lone bright spot was a 4.2% jump in personal spending, up from a revised 1.6% pickup during the first quarter. Overall first quarter growth was revised lower to 0.8% from 1.1%.

For the week, the S&P 500 slipped 0.05%, the Dow Industrials fell 0.75%, and the NASDAQ Composite gained 1.23%. Seven of the ten major sectors ended negative, with Energy (-2.05%) and Consumer Staples (-1.44%) falling the most. Technology (+1.56%) led among gainers, boosted by street-beating earnings from internet and software companies. The US Dollar Index weakened all five days, falling nearly 2% to end at 95.530. U.S. oil futures retreated 5.86% last week, ending at a three-month low of $41.60/bbl. Hurt by rising global oil production, crude oil is now down 20.5% from its $52.31 June 8th peak, meeting the definition of entering a bear market. Treasuries climbed higher, pulling the yield on benchmark 10-year Treasury notes down 11.3 basis points to 1.454%.


What We’re Reading 
European Stocks Down After Stress Test

Early 2Q GDP Reading Misses Forecast

NY Fed Head Urges Caution About Rate Hikes


Week’s Economic Calendar
Monday, Aug 1:
PMI Manufacturing Index, ISM Mfg Index, Construction Spending;

Tuesday, Aug 2: Personal Income and Outlays;

Wednesday, Aug 3: ADP Private Employment, PMI Services Index, ISM Non-Manufacturing Index;

Thursday, Aug 4: Challenger Job Cuts, Weekly Jobless Claims, Factory Orders;

Friday, Aug 5: Non-farm Payrolls Report, International Trade, Consumer Credit.

 


Chart of the Week: S&P’s Sign Post: August, September May Challenge Investors’ Emotions

August and September have traditionally been the worst months for stock-price returns. Maybe it’s because of reduced capital inflows, vacations, upcoming earnings reality, and Mutual Funds’ fiscal year-end window dressing. Whatever the reasons, the results are unmistakable. August and September have recorded the worst two average price performances since 1945. According to S&P Global Market Intelligence U.S. Equity Strategist Sam Stovall, “while the S&P 500 rose in price in nearly 60% of all months, it advanced only 54% of the time in August and fell more times than it rose in September.”

In the S&P/Dow Jones’ chart above, Stovall alerts that August and September are ranked 11 and 12 in terms of monthly price increases since WWII. They recorded the 2nd and 3rd deepest single-month declines and are in the top 1/3rd of monthly volatility. Also, the S&P 500 recorded one-third of all monthly declines of 5% or more in August and September. Only October 1987’s drop of 21.8% and October 2008’s slump of 16.9% were worse.

This review is historical and actual results are not always gospel. However, S&P’s Sam Stovall’s admonition is that investors who are aware that the market traditionally stumbles during these two months are less likely to become their portfolios’ worst enemies by reacting emotionally. Rather, as Stovall observes, investors are more often than not better off buying than bailing.


This report is created by Tower Square Investment Management LLC

About Tower Square Investment Management
Tower Square Investment Management LLC is an SEC registered investment adviser owned by Cetera Financial Group®. It provides investment research, portfolio and model management, and investment advice to its affiliated broker-dealers, dually-registered broker-dealers and registered investment advisers.

Weekly Vantage Point | Week of 7.18.2016

 
A Week for the Record Books

July 18, 2016 – Equity averages finished higher for the third consecutive week, as investors welcomed a positive start to the second quarter earnings season, calmed nerves over the Brexit vote and signals from the central banks of England and Japan that more stimulus is likely. Follow-through momentum from the July 8th blowout jobs report was affirmed by a flurry of generally improved economic data last week. As evidence, Citigroup's U.S. Economic Surprise Index has risen 14 of the past 15 trading days, reaching its highest level since January 2015. Despite a Friday interruption, due in part by the deplorable terrorist attack in Nice, France, the S&P 500 closed at record highs on four consecutive days last week, a streak not seen since November 2014.

In key economic data last week, survey results showed small business optimism expanded to the highest level since late last year, wholesale inventories edged higher in May, while sales rose in line with forecasts. Jobless claims were unchanged at 254,000, holding near the lowest level since mid-April. Retail sales increased 0.6% in June, registering its third monthly gain, with 11 of the 13 major categories showing improved demand. Also positive, a Federal Reserve report revealed that June manufacturing expanded at the fastest pace since January, while total industrial production, including mining and utility output, also topped forecasts with the biggest gain in 10 months.

For the week, the S&P 500 gained 1.51%, the Dow Industrials rose 2.04%, and the NASDAQ Composite advanced 1.47%. After falling to a three-month low after the Brexit vote, the S&P 500 has surged 8.1% since June 27th. Nine of the ten major sectors posted gains last week, led by Materials (+3.91%), Financials (+2.59%), and Industrials (+2.55%). Utilities (-1.05%) lagged. The US Dollar Index strengthened during the week, ending at 96.580, while gold retreated 2.11%, ending a six week winning streak. Oil was little changed, rising just $0.54 over the five days to end at $45.95/bbl. Treasuries fell last week, lifting the yield on benchmark 10-year Treasury notes by 19.3 basis points to 1.552%.

 
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Week’s Economic Calendar
 

Monday, July 18: NAHB Housing Market Index;

Tuesday, July 19: Housing Starts;

Wednesday, July 20: MBA Mortgage Applications;

Thursday, July 21: Jobless Claims, Philly Fed Survey, Chicago Fed National Activity, Existing Home Sales, Leading Indicators;

Friday, July 22: PMI Manufacturing Index.

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Market Watch
Stocks 1-Wk MTD 3-Month YTD 1-Year
Dow Jones 2.04% 3.27% 3.46% 6.26% 2.58%
S&P 500 1.51% 3.08% 4.45% 7.04% 4.86%
NASDAQ 1.47% 3.89% 2.18% 1.13% 2.23%
Russell 3000 1.55% 3.21% 4.66% 6.95% 3.36%
MSCI EAFE 3.66% 2.62% -0.88% -1.92% -9.58%
MSCI Emerging Markets 4.83% 4.25% 3.63% 10.93% -5.19%
Bonds 1-Week MTD 3-Month YTD 1-Year
Barclays Agg Bond -0.78% 0.03% 1.82% 5.34% 5.96%
Barclays Municipal -0.43% -0.17% 1.78% 4.16% 7.30%
Barclays US Corp High Yield 1.37% 2.77% 6.31% 12.08% 4.20%
Commodities 1-Week MTD 3-Month YTD 1-Year
Bloomberg Commodity 0.35% -2.40% 7.92% 10.53% -11.77%
S&P GSCI Crude Oil 2.41% -3.48% 11.84% 25.94% -9.91%
S&P GSCI Gold -1.84% 1.08% 8.12% 25.94% 16.08%
Source: Morningstar
Chart of the Week: GDP Forecasts Improve; Fed Likely Still Cautious
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Solid economic data has prompted JPMorgan to lift their second quarter GDP forecast from 2% to 2.2%. After the Brexit low, the firm also changed their outlook for the next Federal Reserve rate hike to December 2016, but they recognize the possibility of a September move if forthcoming economic data proves stellar. This past week's Fedspeak confirms the view and the data was solid, but may already be starting to slip behind the pace necessary for a September hike.

Retail sales capped a very strong second quarter by increasing a stronger-than-expected 0.6% in June, and sales in the important control group rose a solid 0.5%. As the Figure 1 chart above shows, including modest upward government revisions to April and May, control group sales increased at a 7.4% annual rate last quarter. However, the earlier reported decline in June auto sales implies that real consumer spending increased a more modest 0.2% for the month. Nonetheless, JPMorgan now estimates that real consumer spending increased at a 4.5% pace in the three months to end the second quarter, the best quarterly showing for the expansion.

Weekly Vantage Point | Week of 6.27.2016

 
Britain Stuns Markets with Brexit Vote

June 27, 2016 – Equities sold off globally last Friday, giving back most of the gains of the prior week, on news that the U.K. referendum on European Union (E.U.) membership ended with a vote to leave the union. The Dow Jones Industrial Average retreated by over 600 points (-3.39%) from Thursday's highs and the S&P 500 lost 75 points (-3.59%), erasing most of the year's gains for the U.S. equity gauges. European and Japanese stocks fared worse, falling by over 7% on the day, while Hong-Kong equities lost 2.92%. We should note that much of the losses appear oversized because of the rally that had occurred in the early part of the week, and on a week-to-date basis, declines were in the 1.5% to 2% range with international stocks lagging slightly. There is still much that is not known on how Britain's situation will resolve itself, and while we may see some additional volatility, on Friday the markets were largely back to levels of about a week ago, suggesting this is a reaction to a localized negative event rather than a global crisis.

Turning our attention domestically, key economic data on housing showed continuing improvement, with 5.53 million existing home sales on a seasonally adjusted annual basis, the highest since February 2007, and with the highest median home price on record. New home sales weakened by 9,000 from the pace of April to a 551,000 annual rate, but the level of activity remains higher than in 2015. Weekly Jobless claims declined to an 8-week low of 259,000, and manufacturing sentiment, as measured by the Markit PMI, rose to a three month high of 51.7 suggesting that more purchasing managers are planning to increase output. This positive news continues to suggest that the U.S. economy is improving and outweighed, to a large extent, the slightly lower readings in leading indicators, which were -0.2% lower, and consumer sentiment, which declined from 94.7 to 93.5.

For the week, the S&P 500 declined by -1.62%; the Dow Jones Industrial Average fell -1.55% and the NASDAQ Composite lost -1.92%. Nine of the ten major sectors posted declines last week, led by Materials (-2.55%), Financials (-2.43%), Industrials (-2.39%), and Consumer Discretionary (-2.23%), while Utilities (+1.36%) outperformed. The U.S. Dollar Index strengthened by 2.24%% to 96.32, and gold rallied by 2.13%. Crude oil spot prices declined by -1.89%. Treasuries prices extended gains, dropping the yield on 10-year Treasury notes by another 5 basis points to 1.55%.

 
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Week’s Economic Calendar
 

Monday, June 27: U.S. Trade Deficit; Markit Flash PMI Services; Dallas Fed Manufacturing Survey;

Tuesday, June 28: Final 1Q gross domestic product (GDP), S&P/Case-Shiller Home Prices, Consumer Confidence;

Wednesday, June 29: Personal Income and Outlays, Pending Home Sales;

Thursday, June 30: Weekly Jobless Claims, Chicago PMI;

Friday, July 1: Markit PMI Manufacturing, ISM Manufacturing, Construction Spending.

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Market Watch
Stocks 1-Wk MTD 3-Month YTD 1-Year
Dow Jones -1.55% -2.17% -0.66% -0.14% -3.14%
S&P 500 -1.62 -2.71% 0.62% 0.76% -1.22%
NASDAQ -1.92% -4.80% -1.05% -5.38% -6.92%
Russell 3000 -1.62% -2.67% 1.14% 0.65% -2.89%
MSCI EAFE -1.73% -5.89% -1.91% -6.93% -15.70%
MSCI Emerging Markets 0.11% 0.19% -0.24% 2.52% -16.83%
Bonds 1-Week MTD 3-Month YTD 1-Year
Barclays Agg Bond 0.19% 1.24% 2.29% 4.74% 5.56%
Barclays Municipal 0.35% 1.48% 2.95% 4.21% 7.70%
Barclays US Corp High Yield 0.53% 0.75% 5.70% 8.87% 0.76%
Commodities 1-Week MTD 3-Month YTD 1-Year
Bloomberg Commodity -1.98% 1.91% 9.80% 10.84% -13.26%
S&P GSCI Crude Oil -1.89% -2.97% 20.73% 28.62% -20.92%
S&P GSCI Gold 2.13% 8.62% 8.08% 24.73% 12.72%
Source: Morningstar
Chart of the Week: You Picked a Fine Time to Leave, U.K. - Global GDP and Corporate Profits are Under Stress
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While the global economy has delivered disappointing growth in recent years, it has remained bounded close to its trend pace, highlighting its resiliency in the face of a number of global shocks. However, JPMorgan has forecast that global growth could decline by roughly 0.2% as a result of Brexit, and it should be viewed as a continuation of this disappointing but resilient performance. That said, financial market and sentiment spillovers from this policy-induced drag on European growth comes at a time in which there are important vulnerabilities. As seen in the chart above, global corporate profits are contracting.

In developed markets, the U.S. corporate sector is under particular pressure, as external drags from an elevated dollar and low oil prices combine with weak productivity gains. This drag has produced a contraction in investment and slowing in job growth. Our forecast assumes the profit drag will fade, due to a stable dollar and higher commodity price, and that solid gains in consumer spending will buoy corporate confidence. The risk is that Brexit magnifies the pullback through a stronger U.S. dollar and rising global uncertainty. In response, JPMorgan lowered its second half 2016 U.S. GDP growth forecast from 2.3% to 2%.

Weekly Vantage Point | Week of 6.20.2016

 
Brexit Fears Pull Stocks Lower

June 20, 2016 – Stocks finished lower last Friday, with the S&P 500 in retreat for a fourth day in the past five sessions. The S&P 500 ended with its worst weekly performance since April. Investors grew increasingly concerned about global growth ahead of the U.K.'s June 23 "Brexit" vote-a referendum vote to leave or stay within the European Union (E.U.). The debate turned violent when a gunman murdered Jo Cox, a British Member of Parliament and supporter of staying in the E.U. On Wednesday, U.S. Federal Reserve policy makers voted to keep interest rates unchanged and slightly reduced their gross domestic product (GDP) forecasts for this year and next. Fed Chair Janet Yellen acknowledged that the upcoming Brexit vote played a role in the Fed's decision to delay a rate hike. Also notable during the week, German 10-year sovereign debt yields turned negative for the first time in history.

In key economic data, import and export prices increased more than forecast in May. Retail sales rose 0.5% last month, and the New York Fed's Empire manufacturing survey index rebounded back into positive territory. May wholesale prices climbed 0.4%, exceeding economists' consensus forecast, while consumer prices rose 0.3%, missing projections. After surging 6.6% in April, housing starts declined by 0.3% in May, a sign that residential housing will add little to second quarter GDP.

For the week, the S&P 500 declined 1.12%; the Dow Jones Industrial Average fell 1.06%; and the NASDAQ Composite lost 1.90%. Eight of the ten major sectors posted declines last week, led by Healthcare (-1.98%), Technology (-1.93%), and Financials (-1.89%). Telecom (+1.42%) and Utilities (+0.72%) outperformed. The U.S. Dollar Index weakened by 0.38% to 94.206. Gold futures gained 1.97% last week, extending a four-week rally to 7.1%. West Texas Intermediate (WTI) crude oil futures declined by $1.09/barrel to end the week at $47.98. Treasuries prices extended gains, dropping the yield on 10-year Treasury notes by 3.2 basis points to 1.609%.

 
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Week’s Economic Calendar
 

Monday, June 20: No major releases scheduled;

Tuesday, June 21: Fed Chair Janet Yellen Testifies to Congress;

Wednesday, June 22: MBA Weekly Mortgage Applications, Existing Home Sales;

Thursday, June 23: Jobless Claims, Chicago Fed National Activity, PMI Mfg., New Home Sales, Leading Economic Indicators;

Friday, June 24: Durable Goods Orders, Consumer Sentiment Index.

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Market Watch
Stocks 1-Wk MTD 3-Month YTD 1-Year
Dow Jones -1.06% -0.63% 1.11% 1.44% -1.45%
S&P 500 -1.12% -1.11% 2.06% 2.42% 0.81%
NASDAQ -1.90% -2.94%% 0.86% -3.53% -4.03%
Russell 3000 -1.14% -1.07% 2.50% 2.31% -0.85%
MSCI EAFE -2.76% -4.23% -2.77%% -5.29% -11.76%
MSCI Emerging Markets -2.06% 0.07% -0.70% 2.40% -14.75%
Bonds 1-Week MTD 3-Month YTD 1-Year
Barclays Agg Bond 0.05% 1.04% 2.23% 4.53% 5.13%
Barclays Municipal 0.40% 1.12% 2.68% 3.85% 7.30%
Barclays US Corp High Yield -0.79% 0.21% 5.00% 8.29% 0.52%
Commodities 1-Week MTD 3-Month YTD 1-Year
Bloomberg Commodity -0.24% 3.98% 9.22% 13.09% -11.56%
S&P GSCI Crude Oil -2.08% -1.10% 16.56% 31.10% -19.47%
S&P GSCI Gold 1.48% 6.35% 2.25% 22.13% 10.01%
Source: Morningstar
Chart of the Week: Retail Sales are Improving; Shopping Trends are Changing
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After two soft quarters in monthly retail sales, the U.S. Department of Commerce's survey of retail sales surged 1.3% in April followed by a better than expected 0.5% gain in May. According to Argus Research, April and May retail sales are consistent with 5% or better current dollar growth in Personal Consumer Expenditures (PCE). Argus expects stronger sales growth in the second and third quarters, driven in part by a resurgence in internet spending, which has reached 4 ½ year highs. Specifically, the resurgence in core and control retail sales indicates that total consumer spending and GDP will be stronger in the second and third quarters. These factors could even play an important part in the Federal Open Market Committee (FOMC) policy deliberations regarding the timing of raising interest rates.

Traditional chain and department stores continue to lose market share, if not outright sales. Very few have been able to buck the trend. On the other side, however, non-store (Internet-based) retailers continue to amass sales and market share. As the chart above illustrates, Internet annual sales growth has doubled in the past 6 months, rising at a 17% rate in the past quarter. Core retail sales have bounced back to 5.4% in the 3 months ending in May, up from just 2.3% and 3.3% growth in Q4 2015 and Q1 2016. Core sales exclude auto, gas and building related. Control retail sales, which are Core sales less food services, also rebounded to 5.3% in the May quarter, up from just 1.3% and 2.8% reported growth in the fourth and first quarters, respectively.

June is Alzheimer's & Brain Awareness Month

Alzheimer’s is not an inevitability in older age. It's a disease that can be defeated with awareness, funding, and research. June is Alzheimer's & Brain Awareness Month! Please enjoy this video produced by Alzheimer’s Research UK. ‪#‎sharetheorange‬

Weekly Vantage Point | Week of 6.13.2016

 
Record Low Bond Prices Weaken Stocks

June 13, 2016 – Stocks closed lower on Friday, sending the S&P 500 down the most in three weeks after sharp declines in global bond yields triggered renewed concerns over sustained world growth. Friday's declines more than erased an earlier weekly gain that brought the benchmark index to within 12 points of its 2,130 all-time high reached just over a year ago. The German 10-year bund yield fell to a fresh all-time low of 0.01%, down sharply from Monday's levels of 0.07%; while the Japanese 10-year government debt yield dropped to a record low of minus 0.13%. Wall Street essentially succumbed to caution ahead of key upcoming events, including central bank policy meetings by the U.S. Federal Reserve and Bank of Japan this week, the U.K. Brexit vote on June 23 and in mid- and late July, the two political party conventions.

In key economic data, a final reading of worker productivity declined by 0.6% during the first quarter, in line with estimates. Meanwhile, labor costs rose 4.5%. A U.S. Department of Labor report showed job openings increased to 5.79 million in April, which matched the highest level since records began in 2000. The increase signals that employers are having problems finding the right candidates for open positions. Lastly, the University of Michigan's preliminary June reading of consumer confidence declined from an almost one-year high.

For the week, the S&P 500 declined 0.11%, the Dow Jones Industrial Average rose 0.33% and the NASDAQ Composite fell 0.95%. Six of the ten major sectors ended higher last week, led by Telecom (+2.78%), Energy (+1.43%), and Consumer Staples (+1.05%). Financials (-1.5%) and Consumer Discretionary (-0.84%) lagged the most. The U.S. Dollar Index strengthened 0.58% to 94.571, while gold futures rallied 2.39% last week after jumping 2.58% the week prior. After rebounding to above $51/barrel on Wednesday, U.S. crude oil prices retreated to end at $49.07. Treasuries prices rallied, pulling the yield on 10-year Treasury notes down six basis points to 1.641%.

 
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Week’s Economic Calendar
 

Monday, June 13: No major releases scheduled;

Tuesday, June 14: FOMC meeting begins; Retail Sales, Import/Export Prices, Business Inventories;

Wednesday, June 15: Producer Prices, Empire State Mfg., Industrial Production, FOMC Decisions and Yellen Press Conference;

Thursday, June 16: Consumer Prices, Jobless Claims, Philly Fed Outlook, Housing Market Index;

Friday, June 17: Quadruple Options Witching, Housing Starts.

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Market Watch
Stocks 1-Wk MTD 3-Month YTD 1-Year
Dow Jones 0.33% 0.44% 5.12% 2.53% -0.75%
S&P 500 -0.11% 0.02% 5.91% 3.59% 1.77%
NASDAQ -0.95% -1.06%% 5.33% -1.66% -2.38%
Russell 3000 -0.17% 0.07% 6.43% 3.49% 0.18%
MSCI EAFE -1.73% -1.51% 3.24%% -2.60% -10.78%
MSCI Emerging Markets 1.04% 2.18% 4.79% 4.55% -13.66%
Bonds 1-Week MTD 3-Month YTD 1-Year
Barclays Agg Bond 0.38% 0.99% 2.69% 4.48% 5.82%
Barclays Municipal 0.53% 0.72% 2.43% 3.44% 7.31%
Barclays US Corp High Yield 0.98% 1.01% 7.13% 9.15% 1.21%
Commodities 1-Week MTD 3-Month YTD 1-Year
Bloomberg Commodity 2.07% 4.23% 12.13% 13.36% -13.23%
S&P GSCI Crude Oil 2.00% 1.00% 26.87% 33.88% -19.65%
S&P GSCI Gold 2.66% 4.80% 0.17% 20.35% 7.51%
Source: MorningStar
Chart of the Week: Keeping an Eye on Inflation; CPI Data Due Out Thursday
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The key upcoming economic reports this week will be the May retail sales data on Tuesday and the consumer price index (CPI) on Thursday. JPMorgan expects retail sales to take a breather following the large increase in April. They predict a seasonally adjusted 0.4% total retail sales growth and 0.2% core retail sales growth. If realized, absent revisions, these results would be consistent with our forecast of a 3.6% seasonally adjusted annual rate spending growth this quarter. JPMorgan's outlook, along with the economists' consensus forecast, projects the May CPI will increase by 0.3% over the month on higher oil prices and the core CPI will increase 0.18% or 2.2% year-over-year average (up from 2.1% in April and 1.7% in May 2015). Core consumer prices exclude volatile elements, including food and energy prices.

Get all of your documents in one place

If you were to pass away or become incapacitated, your loved ones may be responsible for making decisions about your health or estate. During a time of emotional distress or grieving, it is difficult to think about money and how to find critical documents to move forward with plans. That’s why it’s important to get your documents into one centralized place. By doing so, you are not only ensuring your wishes are understood, but also are planning to help loved ones make financial arrangements in your absence.

How to get started with organizing your documents today
First, find a secure location, such as a password-protected online vault, fireproof home safe or bank safe deposit box. Decide which documents should go into this centralized place. If you want to minimize clutter, you may consider printing out the links to online statements with their corresponding passwords. Include any documents containing crucial financial information. Here's a list of suggested documents:

  • Quarterly and Annual Statements: IRAs, 401(k)s, funds, brokerage accounts, statements from last quarter and statements from the end of the previous calendar year (that is, the last Q4 statement you received).
  • Healthcare Benefit Information: Medicare or Medicare Advantage Plan, group health plan, individual health policies, LTC policies and contact information for insurers, HMOs, your doctor(s) and your insurance agent.
  • Life Insurance Information: document when level premiums on straight term policies end, the death benefit and present cash value on any whole life policies and the required premiums on any policy.
  • Beneficiary Designation Forms: beneficiary designations often take priority over requests made in a will when it comes to 401(k)s, 403(b)s and IRAs. Also, retain copies and review them with a retirement planner or attorney so they can help you gauge the tax efficiency of the eventual transfer of assets.
  • Social Security Basics: if you have not claimed benefits yet, include your Social Security card, W-2 form from last year (or Schedule SE and Schedule C plus 1040 form), and certified copies of your birth certificate, marriage license, divorce papers, military discharge paperwork or proof of citizenship, if applicable.
  • Social Security Statements: take a screenshot or print a copy of the statement that tracks your accrued benefits.
  • Pension Matters: collect special letters or bulletins from your employer, your Individual Benefit Statement, your Summary Plan Description and contact information for someone at the employee benefits department where you work.
  • Real Estate Documents: deeds, mortgage documents, property tax statements, homeowner insurance policy and a list of the contents in your home and their estimated value.
  • Estate Planning Paperwork: your estate plan, any trust paperwork, a will and a durable power of attorney or health care directive.
  • Tax Returns: at least have a copy of your 1040 and state returns from the prior year.
  • List of Digital Assets: contents of a cloud, a photo library, social media pages and all corresponding passwords.

Once you are ready, be sure to tell your loved ones where to find your documents and provide them with password information or permission to access to your safe deposit box, if necessary.

Planning for the unexpected now is a lasting way to show your loved ones you care. Please contact PlanningWorks at 512 498-7526 or info@planningworks.biz if you would like further direction on estate planning or other financial matters.

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