Special Update: Quarterly Report
Weekly Update – October 1, 2018
Friday, September 28, was the last trading day in 2018’s 3rd quarter, and the S&P 500 posted its strongest quarterly return in nearly 5 years. [1] The Dow also showed impressive returns by beating expectations for the quarter, while the NASDAQ notched record highs against 2017 numbers. For the quarter, the S&P jumped 7.2%, the Dow increased 9.3%, and the NASDAQ moved up 7.1%. [2]
Weekly numbers, however, revealed mixed performances: the S&P 500 slipped 0.54%, the Dow fell 1.07%, and the NASDAQ gained 0.74%.[3] Internationally, the MSCI EAFE dropped 1.07%.[4]
As we learn more about the 3 rd quarter, some details from last week offer perspectives on where we stand today.
What We Learned About the 3rd Quarter Last Week
1. Consumer outlook suggests positive trends continue.
A few early reports have given us a sense of positive trends in consumer activity during the 3 rd quarter:
- Consumer sentiment rose in September to finish at healthy levels that beat August’s performance, marking the 3rd time the index has moved above 100.[5] With personal income optimism hitting a 14-year high, the positive trend suggests that nearly every population group now benefits from the 3rd quarter expansion.[6]
- Consumer confidence neared its highest reading since 2000, beating analyst predictions and inching closer to the dotcom’s record highs.[7] This rise came after a surge in August, prompting predictions that spending strength will carry us through 2018.[8] From sentiment boosts in the stock market to positive home-buying trends, consumers remain optimistic.[9]
These numbers suggest healthy consumer outlooks, positive economic attitudes, and possible trends in increased spending.[10]
2. Companies anticipate softer profits.
Although corporate earnings in the 1 st and 2 nd quarters rose roughly 25%, 3rd quarter corporate earnings may miss that mark. Of the 98 companies in the S&P 500 that have released earnings outlooks, 74 predicted that earnings will fall below expectations from Wall Street. This ratio is the worst since the earnings recession of 1 st quarter 2016.[11] Even with the softer outlook, analysts still expect the S&P 500 to post numbers that indicate a growing economy.[12]
3. Gross Domestic Product (GDP) growth shows signs of slowing.
Core capital goods (not including aircrafts) dropped 0.5% in August after July’s negative performance – as demand for computers, electronic products, and motor vehicles waned. The shift prompted some analysts to revise their 3 rd quarter GDP predictions downward. Yet, with a bump in wholesale and retail inventories, overall 3 rd quarter growth remains in positive territory.[13] The Atlanta Federal Reserve now predicts growth to be 3.8%, revised from an earlier prediction of 4.4%.[14]
4. Tariffs start to drag 3rd quarter growth estimates.
The early effects of tariffs seem to have surfaced, as exports are now trending negatively. On September 27, the International Trade in Goods report posted numbers that may predict slower 3 rd quarter growth:
- Exports dropped 1.6% in August, continuing July’s downward trend.
- Imports rose 0.7% yet have so far posted a trade negative for the quarter.
- The trade deficit hit $75.8 billion, yet analysts believe this gap will narrow slightly once more 3rd quarter data emerges.[15]
If this trend involving exports and imports continues, the U.S. dollar may take a hit.[16] Meanwhile, on September 24, President Trump added tariffs on $200 billion worth of Chinese goods, and China responded with its own tariffs on $60 billion of U.S. products. Though negotiations between the two countries have stalled, we will monitor the situation.[17]
What’s Ahead
The Federal Reserve remained optimistic last week about the economy, raising the interest rate from 2% to 2.25%. The 3 rd increase this year is no surprise but does suggest confidence in a growing economy and low unemployment numbers, and that a 4 th quarter hike is highly probable.[18]
With new data coming in, we’ll deepen our understanding of the economy’s performance in the 3 rd quarter. If you have questions about how this may affect you or your financial life, contact us today; we’re ready and happy to help.
ECONOMIC CALENDAR
Monday: PMI Manufacturing Index, Construction Spending
Wednesday: PMI Services Index
Thursday: Jobless Claims, Factory Orders
Friday: Employment Situation, International Trade
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5-year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
“Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.”
– Franklin D. Roosevelt
Tomato Panzanella
Serves 6
Ingredients:
- ½ loaf sourdough bread, preferably stale (about 1 pound)
- 2 large cloves garlic
- 6 anchovy fillets
- 3 cups basil
- ½ cup olive oil, plus more for serving
- 2 tablespoons sherry vinegar
- Kosher salt
- Pepper
- 2 pounds heirloom tomatoes (in various colors and sizes)
- 4 tablespoons unsalted butter
Directions:
- Preheat oven to 400°F.
- Remove crust from bread and tear bread into large pieces.
- Put garlic, anchovies, 1½ cups basil, and ¼ cup olive oil in food processor; finely chop.
- Add vinegar and ¼ teaspoon salt; press pulse to create a thick dressing.
- Slice tomatoes into wedges and chunks. Mix lightly with dressing. Let set for 30 minutes at room temperature.
- At the same time, melt butter with the remaining ¼ cup oil in a small saucepan.
- Gently shake bread and butter mixture together to coat.
- Arrange in single layers on a baking sheet for roasting.
- Turn the bread regularly until it is light brown, crispy, and slightly chewy on the inside, 15-20 minutes.
- Gently add and mix in croutons with tomatoes. Carefully incorporate the rest of the basil into the mix by tearing leaves into smaller pieces.
- Drizzle with additional oil and add fresh cracked pepper.
Recipe adapted from Good Housekeeping [19]
How to Fix the Biggest Putting Mistake
First of all, stop listening to the advice of the friends or golf experts who tell you to put topspin on your ball to increase accuracy. It doesn’t work.
Here’s how to make the ball plop into the hole as planned, says professional golfer Dave Stockton.
Concentrate on keeping the putterhead low through impact. The putterhead will naturally rise anyway. So, focusing on a low strike will produce a solid impact on the ball.
The center of the putter carries the most impact for a good putt. By connecting the center of the putterhead with the ball, you have more control of the movement and produce more distance.
Tip adapted from GolfDigest [21]
No More Stretching the Truth About Stretching
You hear the rumors: You must stretch; never stretch; hold stretches; don’t bounce; do bounce; twist yourself into a pretzel.
So, what’s the scoop on stretching?
First off, the traditional view:
- You have to hold your stretch to get the benefit.
- Don’t bounce. You’ll pull something.
- If you don’t stretch before a workout, you’re going to hurt yourself.
Not quite.
Now that we’ve thrown conventional wisdom out the window, what’s the real deal?
According to the American College of Sports Medicine, stretching is good, but not mandatory. Stretching helps to keep older joints and muscles – particularly the hips and hamstrings – healthy and strong.
ACSM experts say you should stretch each of your major muscle groups for 60 seconds per exercise and do the stretches twice a week.
What about holding a stretch?
Stretching and holding for 15 seconds or so is called a static stretch, which if done correctly can be helpful.
Dynamic stretches, however, are just as helpful. With these types of stretches, you move your various muscle groups through the complete ranges of motion.
What about stretching before exercise? Studies show that it might not be such a good idea for peak performance. Static stretching, in fact, may weaken muscles before a routine. A gentle warm up may provide the best benefit.
How about after-exercise stretching? Static stretches might fit well at the end of your workouts when you have better circulation and your limbs and muscles are limber.
Stretching has benefits, but it would be stretching the truth to suggest they are absolutely necessary.
Tips adapted from WebMD [22]
Cooking Up Energy Efficiency
Getting motivated to save money and become energy efficient in your kitchen is easy, once you know the facts.
Let’s talk electricity. An hour’s worth of cooking in a standard electric oven creates 2.7 pounds of CO 2 . A toaster oven creates 1.3 pounds in 50 minutes. A microwave oven creates 0.5 pounds in about 15 minutes of cooking.
Using microwave ovens to cook also saves energy. Microwaves use half the energy of conventional ovens.
Dishwashers are modern marvels for two reasons: They save human time and energy and conserve water. The average dishwater uses 8.7 gallons of water per load while the average dish washing by hand, with water running, uses 20 gallons.
Tip adapted from WWF [23]
Zack Alkhamis, CRPC, CFS
Matthew Jarrell, CFS, AIF
Timothy A. McAfee, CPA, CFP, PPC, MST
The Retirement Wealth Management Group
7900 Kirkland Court
Portage, MI 49024
269-978-0238
zack.alkhamis@lpl.com
http://www.retirementwealthmanagementgroup.com
Copyright © 2018. All Rights Reserved.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.
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 Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia.
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.
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[1] www.marketwatch.com/story/stock-futures-fall-dow-set-for-worst-week-in-three-months-2018-09-28
[2] www.cnbc.com/2018/09/28/us-markets-political-turmoil-and-data-take-center-stage.html
