January 2018 Monthly Summary

January took a page from 2017 and continued the momentum with another strong month for stocks. The Dow Jones rose 5.79% and the Nasdaq Composite gained 7.36%, making January the best stock month since March 20161. Meanwhile, interest rates were climbing, which caused the Barclays Aggregate Bond Index to begin 2018 down 1.22%. The precipitous rise in stocks was soon met with panic at the end of January that continued into the first full week of February. At the time of this writing, almost all of these January gains have been given back.

In our newsletter that we published last month, we highlighted that 2017 was an abnormal year. It was strong month after month with very little volatility. I noted that the largest drawdown was a very docile 3%. Unfortunately, 2018’s late January-early February antics have already given us a 7% drawdown with a 4% loss on February 5th alone.2 2018 will not be for the faint of heart investors.

These big swings in the market have been absent for long enough that we might have forgotten that stocks can (and often will) behave erratically. The chart [to the left] is a chart I revisit every once in a while. It shows the milestones that the Dow Jones has hit since we emerged from the Great Recession. The first thing to realize is that as we continue to follow the Dow’s climb upward, the milestones become less relevant in terms of percentage increase. The seven trading days it took for the Dow to climb 1,000 points doesn’t seem so incredible when you see that the percentage change from 25,000 to 26,000 is only 4%. As painful as it is, we shouldn’t be too panicked to see the Dow drop 1,000 points at these levels either.

Another important detail to take from the chart is that the market often moves in stages, not necessarily in a predictive pattern, but rarely in a straight line. You can see that the trek from Dow 14,000 to 18,000 took less time (98 weeks) than the 1,000 point trek from Dow 18,000 to 19,000 (100 weeks). I am not suggesting we are going to take another 100 week pause in stock growth. However, when the market has been up for 15 consecutive months, a pull back was bound to happen eventually.

Here we are today, contemplating if a new correction is upon us. Volatility surrounds us, so we resort to taking note of the fundamentals. GDP for the fourth quarter is estimated to be a healthy 2.6%.1 Corporate earnings are still reporting strong and the tax reform passed in December should help strengthen earnings going forward. Although the Fed won’t admit to “listening” to the stock market, they seem to hear what Wall Street is telling them. The market is nervous about interest rates rising too quickly and the Fed won’t want to rock an already shaky boat.

We encourage our clients to be patient and diligent with their personal stock maximums. We believe higher returns are around the bend.

 

1PMC Weekly Market Review, February 2nd, 2018

2Thomson Financial

 

IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Securities and investment advice offered through Investment Planners, Inc. (Member FINRA/SIPC) and IPI Wealth Management, Inc., 226 W. Eldorado Street, Decatur, IL 62522. 217-425-6340.

Team of Mercy

At our recent Client Appreciation Banquet, we announced Team of Mercy would be this year’s recipient of a donation made by The Volkers Group on behalf of our clients. Team of Mercy (T.O.M.) is a nonprofit organization that aims to assist survivors of suicide, in the critical 24 hours and the days following an attempted/completed suicide, with any necessary help the loved ones left behind may have. They want to bring awareness to the community and help remove the stigmas associated with suicide and mental health.

Our guest speaker was Matt Iseman, winner of Celebrity Apprentice and host of American Ninja Warrior.

 

 

 

FOURTH QUARTER 2017 – The Year Ahead

Another year is behind us and a new year begins. We are a nation in transition with a multitude of promised changes ahead. A lot of disconcerting things are happening in the world, yet there are so many great things to be happy about. To look on the positive side, last year was generally a great year to be invested.

As I was perusing through the 2017 collection of monthly summaries and newsletters, I noticed that there was a lot of good news for the markets and economy over the past twelve months. Employment and earnings are both strong and the economy is picking up as a result. In fact, I had to go all the way back to October 2016 to find a month when the S&P was down (after factoring dividends). To say this again, the S&P 500 was up every single month in the year 2017. I have gone through the archives of Thomson Financial all the way back to 1969 and confirmed there has never been a complete calendar year with every month having positive returns for the S&P until now. In fact, there has never been a period of twelve consecutive positive months for the S&P 500 of any kind until now. The closest we came was a ten month period in 1995 and here we are in 2017 looking at our 14th consecutive month of stock gains.

Before we get too excited, I can already hear the market say, “but what have you done for me lately?” While the Trump tax reform that was just passed should be a great catalyst for stronger corporate earnings, we fully expect volatility to creep back into the markets. It will be a rude awakening after being spoiled with the rising tide of returns across sectors and asset classes.

To illustrate just how little volatility we have seen over the past year, study the chart below. In 2017, the S&P finished up 19% with the largest drawdown amounting to only 3%. In other words, the worst drop the S&P 500 experienced over any span of time during 2017 was only 3%. In my twenty-one years of being a financial advisor, I’ve witnessed dozens of times when we have seen a 3% drop in a single day! 2017 was a boring year in that respect, but a year we would love to repeat over and over again for the sake of our clients’ portfolios.

You can see from the chart that such low volatility hasn’t been seen since 1995. This was followed by the Dot Com era of euphoric gains until the bubble popped in 2000.

History may not repeat itself, but it could rhyme. With the changes to the tax code, our economic model now shows another 20% increase in stocks possible before considering the market overvalued. As always, this is a moving target based on several factors including interest rates and inflation.

Although we would love to see another 2017 to take us to the tip of being overvalued, more volatility is on its way. This isn’t a bad thing! Market ebbs lead to market flows and we would anticipate any corrections this year to be short lived. 2018 has a lot of promise, but it will require a little more discipline than what we have become accustomed to. We welcome the challenges the New Year brings.

November 2017 Monthly Summary

We have said it many times this year, 2017 has been a very good year for investors. The year has had its drawbacks politically and socially, but most investors should be happy seeing their account statements through November. With the latest GDP data showing a growth rate of 3.3%1 and unemployment at full employment levels, it is not surprising that stocks have responded. For November, the S&P 500 was up another 3.1% while the NASDAQ was up 2.3%. With investors taking on more risk, the traditionally safer bonds were slightly down for the month. The Barclays Aggregate Bond Index is up a very unimpressive 3.23% so far in 2017.2

Although stocks are up across the board, there are stark differences in performance again between growth and value. This is the third such year in a row where growth and value have traded significant performance variations. Looking back over the past fifteen years, this kind of phenomenon happens more often than you might think. Even though 2010 through 2014 large cap growth and value tracked each other very closely, the chart below shows 2004 through 2009 had four years with variations of 10% or more. If your portfolio has an emphasis on value this year, your performance might be lagging behind a little. It isn’t necessarily anything to be concerned with and is par for the course with stock investing.

In regards to interest rates, we fully expect short term rates to rise when the FOMC meets in mid-December. This shouldn’t affect too much, but will help nudge CD rates up a little bit. The Fed has been pretty transparent about its intentions with rate changes and the market appreciates not having any surprises. Tax reform success or failure will be the main potential catalyst that could significantly impact the profits investors have garnered this year. We have two versions of tax reform developed and the market is expecting some morphed combination of the legislation to actually be signed by the President before year end.

There are two main goals of the tax changes: 1) Cut taxes for corporations to encourage companies to come back to the US and 2) Simplify the tax code. Although campaign promises might have implied this would be a tax cut for all mankind, it doesn’t appear to be the case. Tax reform is not the same as a tax cut, but hopefully we will see an end product that accomplishes the goals and helps put a little bit of extra money in our bank accounts when it’s all over.

In other news, we just held our client appreciation banquet and had our biggest event ever! We will have more on this in the newsletter. We are truly honored to work with all of our wonderful clients and value the trust you place with us. May we all have a very blessed Christmas and Happy New Year to come!

 

1Bureau of Economic Analysis

2Thomson Financial

 

IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Securities and investment advice offered through Investment Planners, Inc. (Member FINRA/SIPC) and IPI Wealth Management, Inc., 226 W. Eldorado Street, Decatur, IL 62522. 217-425-6340.

Ohio Building

2017 Client Appreciation Event

On November 14th, we had another successful client banquet.  The food was delicious, the meetings were informative and the entertainer, Matt Iseman, was terrific!  He shared stories of his time on Celebrity Apprentice and working on American Ninja Warrior.  It was a great evening of fun and entertainment.

Click on the video to see the news story on Matt and this year’s charity, Team of Mercy.

October 2017 Monthly Summary

The S&P finished up over 2.3% for the month of October as we continue to break stock market records on almost a weekly basis.1 Those who would have heeded the theory of “Sell in May” would have missed out on 7.5% market gains over the last five months. Corporate earnings have been strong for the most part, but probably most of the optimism in the equity markets had to do with more specifics coming to light on how tax reform legislation will be taking shape. In particular, the tax legislation is geared to reduce the corporate tax rate and allow corporations to repatriate cash sitting in foreign banks.

Investors continue to be blessed with a great 2017. Our economy is never perfect, but we have much to be thankful for. Unemployment dipped down to 4.1%, a level not seen since 2000 and GDP estimates are coming in pretty strong.2 Fittingly, we find ourselves in November, a time to count our blessings and give thanks.

I just returned from my family’s routine trip to Phoenix, where we act like kids for a weekend playing baseball on the Major League spring training fields. Our team played great, I’m sure we will have details in a newsletter article soon. The real news is that I’ve finally wised up and realized the true purpose and meaning of it all. What a ruse I have been a part of! Until now, Phoenix has always been about playing baseball and trying to get that championship ring. It has also been a great time to reconnect with my Minnesota brother and his family, and now that my son has been out of the house at college, it has become a great opportunity to catch up with him as well.

This year the light went on. We all work hard and play hard, but families often don’t take the necessary time to just be together. During one of our ball games I was playing third base and thought to myself, “I have a 73 year old father playing first base right now and my son is pitching on the mound. How lucky am I?” Definitely a memorable moment, but the special times come afterwards while talking over dinner, eating pizza by the hot tub of our hotel, or having long talks while waiting on our plane at the airport.

Make no mistake, I want that championship ring next year, but the family time is what I will truly cherish. Enjoy this month of Thanksgiving. May it be full of blessings and good cheer with your loved ones.

 

1 Thomson Financial

Bureau of Labor Statistics

 

IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Securities and investment advice offered through Investment Planners, Inc. (Member FINRA/SIPC) and IPI Wealth Management, Inc., 226 W. Eldorado Street, Decatur, IL 62522. 217-425-6340.

Ohio Building

2017 Client Appreciation Banquet

Client Appreciation Event

Tuesday, November 14, 2017

Market Review 4:00-5:15

Mary Holland, Fidelity Advisor Funds

With Volkers Group Advisors

Meet and Greet 5:30-6:00

Dinner 6:00-7:00

7:00-8:00 Matt Iseman

Comedian and Host of American Ninja Warrior

Matt’s first love and the thing that convinced him to give up a career in medicine to move out to LA is stand up. He’s been a national headliner for over a decade… it’s also taken him around the globe performing forthe troops. He rode the ramp on a Chinook helicopter and sat in Saddam’s throne while giving his unique insight on the world, molded largely from 80s movies and a reluctance to become a fully responsible adult. His enthusiasm always shines through, whether he is talking about the geopolitical threat of nuclear war being resolved by Rocky Balboa or being dumped by a girlfriend for pursuing his dreams . . . and giving up being a doctor.

RSVP to Ashley Orndorff, ashley@volkersgroup.com or call our office, (812) 232-5822 or (888) 655-3774.

 

IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Securities and investment advice offered through Investment Planners, Inc. (Member FINRA/SIPC) and IPI Wealth Management, Inc., 226 W. Eldorado Street, Decatur, IL 62522. 217-425-6340.

 

THIRD QUARTER 2017 – What Inning is It?

Fall is one of my favorite times of the year. The temperatures are mild, the leaves are changing colors and America’s favorite sports are in full swing. This is the only time of year you will see baseball, football, and basketball all playing at the same time. Tis the season of a sports fanatic.

Yogi Berra was quoted as saying “It ain’t over ‘til it’s over”. He was talking about baseball, but that quote has translated into a powerful statement pertaining to many aspects of life. Looking at the stock market, many are wondering when will the current bull market be over. Although it is impossible to guess when this 8 + year bull run will ultimately end, can we at least know what inning we are in?

Although we pride ourselves on our advisory skills, we don’t claim to have any prognostication abilities. With that said, we believe we are somewhere in the 7th or 8th inning of this bull run. This doesn’t mean too much, because in the stock market, innings can last for years and declaring something “over” can simply mean the start of a brand new game.

Here is what we do know. This past quarter, the S&P 500 was up 4.5%, putting us on pace for the ninth consecutive calendar year of positive growth when reinvesting dividends1, a feat not achieved since 1999. We also know that unemployment is staying low (currently at 4.2%) and inflation is creeping up (currently at 1.9%)2. This will most likely lead the Fed to increase interest rates again in December.

The Fed3 has also laid out its plan on unwinding the QE-laden balance sheet that totals $4.5 trillion of Treasury bonds and mortgage-backed securities (MBS). When you have a portfolio this large, you can’t sell ANY substantial part of it without flooding the market and driving up interest rates. According to the September 20th Fed announcement, they plan on slowly letting billions of dollars simply mature into the ether each month. The gradual dissolving of billions of dollars will eventually run down the balance sheet without too much market turmoil for bond prices. It will be a delicate operation and will probably have many revisions along the way. At least there is a plan, which by itself, helps keep investors calm.

Lastly, in our July monthly summary we mentioned that stocks are approaching an overvalued level compared to bonds. 

We aren’t at that point yet, but as interest rates increase, the target gets closer. However, it is important to realize that markets are driven by greed and fear, so stocks can be overvalued (by our measures) for several months or years before 

retreating.

When should we expect the next stock market correction? With all these moving parts, I lean toward Yogi’s perspective, “When it’s over”. Until then, enjoy all that fall has to offer.

 

 

1 Thomson Financial

2 www.bls.gov

https://www.wsj.com/articles/how-the-feds-balance-sheet-unwind-will-ripple-through-banks-1505934565

 

IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Securities and investment advice offered through Investment Planners, Inc. (Member FINRA/SIPC) and IPI Wealth Management, Inc., 226 W. Eldorado Street, Decatur, IL 62522. 217-425-6340.

August 2017 Monthly Summary

 

August gave us hurricanes and missile launches, but the streak of positive returns for the S&P 500 index continued. This large cap index was up a meager 0.31% while most small, mid, and international equities were actually negative for the month.1 Euphoria in the markets was absent, so the nervous money went into treasuries. The 10 Year Treasury rate dropped from 2.30% down to 2.12% as a result2, helping the Barclays Aggregate Bond Index jump 0.93% in August.

We had second quarter GDP revised to 3%, up from 2.6% and unemployment still hovers near decade lows at 4.4%.3 However, inflation has been coming in below the Fed target. Some wonder if the Fed will have enough reason to make a third rate increase this year with all the conflicting evidence regarding the economy’s health.

This will all be figured out in time. What is really weighing on our hearts and minds right now is the onslaught of hurricanes hitting the southern states. Gas prices have risen particularly since roughly one third of the US refineries are located in Texas and Louisiana. The cleanup of Hurricane Harvey in Houston and adjoining areas are still ongoing, but is expected to be one of the most expensive hurricanes in history. The total costs haven’t been quantified yet and we already have Hurricane Irma anticipated to hit southern Florida in just a few days with potentially even stronger forces.

From an investing perspective, these types of events can affect stocks in a variety of ways. Some insurance company stocks will suffer from the high flood related claims coming down the chute. Some oil stocks will drop if their production capability is hindered, while others will cash in on the higher energy prices. Home improvement stocks have already seen a jump in anticipation of increased revenue.

Our primary concern right now is for the people in the path of these hurricanes. This is obviously a stressful time for those living, or who have friends and family living, in the Texas, Louisiana, and Florida areas. We hope everyone remains safe and out of harm’s way.

1 Thomson Financial

2 www.treasury.gov

3 PMC Weekly Market Review, September 1, 2017

 

IMPORTANT DISCLOSURES
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Securities and investment advice offered through Investment Planners, Inc. (Member FINRA/SIPC) and IPI Wealth Management, Inc., 226 W. Eldorado Street, Decatur, IL 62522. 217-425-6340.