Examining Earnings & Yields

WEEKLY UPDATE – April 23, 2018

Stocks posted moderate gains last week, as the S&P 500 added 0.52%, the Dow increased 0.42%, and the NASDAQ rose 0.56%.[1] International stocks in the MSCI EAFE followed suit, gaining 0.41%.[2]

We received numerous new data updates last week, and most provided positive news for the economy. Retail sales, housing starts, and industrial production all beat expectations and increased in March. [3]

Amid last week’s primarily positive data updates, two key occurrences also affected markets:

1. Corporate earnings
2. Treasury yields
A Closer Look
1. Earnings Season Continued
As of April 20, about 16% of S&P 500 companies shared their results for the 1st quarter, and over 80% of them beat earnings expectations. [4] However, this solid performance has yet to impress investors. While most companies have exceeded earnings projections, their stocks haven’t reflected the growth.
On the other hand, companies that have beaten their sales projections – but missed on earnings-per-share – have dropped an average of 4.4% on their release days. [5]
Takeaway:  So far, corporate earnings are on the rise, but any companies that don’t beat estimates are experiencing considerable stock declines. [6]
2. Treasury Yields Rose
The yield on 10-year Treasuries hit 2.96% – the highest point since 2014. At the same time, the 2-year yield climbed to its highest since 2008. [7] When interest rates rise, companies have higher borrowing costs, and bonds become a more enticing alternative to stocks.
Some investors are also concerned that the difference between the two Treasuries’ yields is too close. This occurrence, known as a flattening yield curve, can imply that investors are not confident in the long-term economic outlook. [8]  
Takeaway: Rising Treasury rates are worth paying attention to. If they are a symptom of a growing economy, the markets should be able to handle them. However, if questions about economic growth accompany the increases, investors may worry.

What Is Ahead

We are now in earnings season’s busiest week, when more than a third of S&P companies will release their reports. [9] Additionally, on Friday, April 27, the initial estimate of the 1 st quarter Gross Domestic Product will come out.  [10]
All this information will help deepen our understanding of where the economy stands – and what may lie ahead. If you have any questions about current data or future projections, we are available to talk.
Tuesday: New Home Sales, Consumer Confidence
Thursday: Durable Goods Orders, Jobless Claims
Friday: GDP, Employment Cost Index, Consumer Sentiment
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.
Quote Of The Week
“People who are crazy enough to think they
can change the world are the ones who do.”
-Rob Siltanen
Recipe Of The Week
Pork Ragu Rigatoni
Serves 6
  • 1 batch classic pasta dough
  • Kosher salt
  • Pepper
  • 2 tablespoons olive oil
  • 1 large clove garlic, finely chopped
  • 1½ pounds ground pork
  • 1 (6-ounce) can tomato paste
  • 1 cup dry white wine
  • ½ cup flat-leaf parsley, roughly chopped
  • Shaved ricotta salata, for serving


  1. Use a rigatoni dial from a pasta press as directed to prepare pasta dough and tubular shapes.
  2. Boil water in a large pot. Add 1 tablespoon of salt.
  3. At the same time, heat oil and garlic on medium heat for 30 seconds in a large skillet.
  4. Add pork into the skillet. Season with ¼ teaspoon each of salt and pepper.
  5. Cook while breaking up pork into pieces until it is no longer pink, 5-6 minutes.
  6. Mix in tomato paste and stir, 2 minutes.
  7. Add wine. Simmer until the smell of wine disappears, 5 minutes.
  8. Add parsley.
  9. As pork continues to cook, cook pasta until it is firm, 4-6 minutes.
  10. Drain pasta. Toss together with ragu. Top with ricotta salata if desired.

Recipe adapted from Good Housekeeping [11]

Healthy Lifestyle

Strengthen Weak or Injured Knees

Taking a knee is more than a political statement. Strong, functional knees make walking, running, and moving around easier. You can incorporate knee-strengthening exercises into your routine. If your doctor gives you the green light, here are 6 exercises to help put the hop and the skip back in your step:

1. Warm Up: Ride a stationary bike, take a walk, or do some wall push-ups.
2. Straight Leg Raises: Lie on your back on the floor. Bend one leg and raise the other leg to the height of the raised knee. Do 3 sets of 10-15 repetitions.
3. Hamstring Curls: Lie on your stomach. Raise your heels slowly as close to your butt as possible. Do 3 sets of 10-15 repetitions.
4. Prone Leg Raises: Lie on your stomach. Keep your legs straight. Lift one leg upward. Hold 3-5 seconds. Do 10-15 repetitions. Then do the other leg.
5. Wall Squats: Keep your feet on the floor, shoulder length apart. Lean your back against the wall. Bend your knees slowly while keeping your back and pelvis against the wall. Hold for 5-10 seconds. Try to hold the seat position a few seconds longer each time. Repeat.
6. Calf Raises: While standing, face the back of a chair or other sturdy support. Slowly raise your heels. You can also do this with your heels hanging off a step or a raised platform. Do 3 sets of 10-15 repetitions.
Exercise should never cause you pain. But sore muscles after a good workout is a good sign.
Tips adapted from WebMD [14]
Green Living
Skip Meat Once a Week
You don’t have to become a vegetarian to help save the planet. But going without meat once a week can have an impact.
Here are some meaty facts about what it takes to get that big, juicy burger to your plate:
  • It takes 1,850 gallons of water to produce a burger. Most of that water is used to grow grain to feed cattle.
  • Cattle ranchers frequently clear large swaths of tropical forests for pastures.
  • Ranching has led to 60% of the Amazon’s deforestation.
  • Two football fields of rainforest are destroyed to produce one head of cattle.

At least 100 billion gallons of water would be saved if every American refrained from meat for 1 day.

Tip adapted from Conservation International [15]

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 

Copyright © 2018. All Rights Reserved. 

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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.
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[1] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX&region=usa&culture=en-US

[2] www.msci.com/end-of-day-data-search


[4] www.cnbc.com/2018/04/20/us-stock-futures-dow-data-earnings-tech-and-politics-on-the-agenda.html

[5] www.marketwatch.com/story/the-stock-market-is-freaking-out-up-about-the-bond-marketbut-should-it-be-2018-04-21

[6] www.bloomberg.com/news/articles/2018-04-19/asian-stocks-set-to-slip-bond-sell-off-deepens-markets-wrap

[7] www.cnbc.com/2018/04/20/us-stock-futures-dow-data-earnings-tech-and-politics-on-the-agenda.html

[8]  www.marketwatch.com/story/the-stock-market-is-freaking-out-up-about-the-bond-marketbut-should-it-be-2018-04-21

[9]  www.cnbc.com/2018/04/20/us-stock-futures-dow-data-earnings-tech-and-politics-on-the-agenda.html

[11] www.goodhousekeeping.com/food-recipes/a47964/pork-ragu-rigatoni-recipe/

[12] www.irs.gov/newsroom/check-status-of-a-tax-refund-in-minutes-using-wheres-my-refund

[13] www.golfdigest.com/story/4-ways-to-reboot-your-putting

[14] www.webmd.com/pain-management/knee-pain/injury-knee-pain-16/slideshow-knee-exercises

[15] www.conservation.org/pages/tips-to-live-green.aspx