July Market Watch

May 2017

May 17, 2017

Dear Valued Investor,

Another earnings season is in the books and it was a good one. With more than 90% of S&P 500 companies having reported first quarter 2017 results, S&P 500 earnings are tracking to a solid year-over-year increase of more than 14% (Thomson Reuters data). That mark, should it stand throughout the remainder of reporting season, would represent the best pace of earnings growth since the third quarter of 2011. Further, outlooks from corporate management teams have generally been upbeat. Corporate America’s ability to produce strong profits despite sub-par economic growth has been impressive, providing a solid backdrop for stocks and economically sensitive bonds.

The story is similar overseas, where improving earnings have provided support for solid gains in international developed and emerging market equities, ahead of the major U.S. equity benchmarks. Overseas markets have also garnered support from the market-friendly outcome of the recent election in France, although political risks in Europe remain with the Brexit process ongoing and German and Italian elections on the calendar for later this year and early 2018.

Like stocks, bonds have generally rewarded investors so far in 2017. The bond market has garnered support from several factors, including the latest soft patch of U.S. economic data, tempered policy optimism in Washington, D.C., global central bank actions, and related low interest rates overseas. A move higher in rates is still very much on the table for this year, as economic growth is expected to improve, though any increase may be gradual depending on what fiscal stimulus is enacted. Though further gains in the bond market in 2017 may be muted, high-quality fixed income can still play an important role in portfolios as a diversifier and to help manage risk.

Policy developments remain important to watch as they can impact spending and investment decisions by consumers and businesses as well as corporate profits. During late April, the Trump administration put out a high-level tax proposal, setting the stage for the corporate tax reform debate to begin in earnest early this summer (timing depends on what the Senate does with healthcare reform); meanwhile, Congress averted a shutdown and came to an agreement to fund the government through September. TheFederal Reserve’s June 14 meeting is the next major event on the domestic policy calendar.

Looking ahead, stocks will have their ups and downs, as they always do, but improved corporate profits provide a solid foundation for potential further gains despite the U.S. economy’s slow start to the year. The global economic picture has improved. Although bond returns may be muted over the balance of theyear, high-quality fixed income remains an important part of diversified portfolios. Of course, policy andgeopolitical risks should be monitored, but at this point have had only marginal impact on the market’s fundamentals. I encourage you to stick to your long-term plan.As always, if you have any questions please contact me.

Sincerely,

Wayne Rigney

____________________________

IMPORTANT INFORMATION

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly.

Economic forecasts set forth may not develop as predicted.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Investing in specialty market and sectors carries additional risks such as economic, political, or regulatory developments that may affect many or all issuers in that sector.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This research material has been prepared by LPL Financial LLC.

Securities offered through LPL Financial LLC. Member FINRA/SIPC.

Tracking # 1-609171 (Exp. 05/18)

April 2017

April 17,2017

Dear Valued Investor,

The world’s oldest annual marathon was run on April 17 as amateur athletes from around the world descended on Boston, Massachusetts for the 121st running of the Boston Marathon. While elite athletes grab the headlines, over 25,000 entrants finished the marathon. Training for and running a marathon takes fortitude and patience, and many casual marathon runners aim simply to reassure themselves that they possess those qualities. No less of a test, investing to meet long-term goals can certainly try one’s fortitude and patience, but like a marathon, is achievable with the help of a good plan.

After an extended period of low volatility, markets have been in a bit more challenging environment over the last several weeks. The S&P 500 has retreated modestly since its last high on March 1, and long-term interest rates have declined over the same period, pushing bond prices higher. These kinds of consolidations can be reassuring and healthy for markets from a longer-term perspective, as what may have initially been overly optimistic expectations of the timing and impact of pro-growth policies in Washington, D.C. adjust to a still likely positive outlook but with a more realistic timeline.

Policy will continue to dominate the headlines, but prospects of better economic and earnings growth will be the foundation of any potential market advances. With improving business and consumer confidence, a more stable U.S. dollar, and a rebounding manufacturing sector, real economic growth in 2017 has the potential to come in near 2.5%, after averaging 2.1% during the current expansion. Earnings for S&P 500 companies could grow in the high-single digits in 2017, helped by steady economic growth, stable profit margins, and rebounding energy sector profits. Policy hopes could be dashed, but we continue to believe corporate American will get a tax cut within the next 9 to 12 months.

In some respects, some policy risks have declined as President Trump has become more focused on his primary legislative agenda. While the president retains his emphasis on fair trade, trade tensions with China have abated some after the president shifted his emphasis from currency manipulation to enlisting China’s cooperation on the North Korean threat. The president’s tone on renegotiating NAFTA has also moderated. A more balanced approach to trade policy may have reduced one potential market concern.

Despite a steady economic and earnings backdrop supporting markets, there are still several risks that need to be carefully monitored. A policy mistake by a major government or central bank, geopolitical threats in the Korean Peninsula and Middle East, and elevated stock valuations are among the challenges markets face that may contribute to bouts of increased volatility. Don’t forget that opportunities can come from volatility. I encourage you to stick to your long-term plan and stay invested. Investing is a marathon, not a sprint.

As always if you have any questions, please contact me.

Sincerely,

Wayne Rigney

_________________________

IMPORTANT INFORMATION

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly.

Economic forecasts set forth may not develop as predicted. 

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Investing in specialty market and sectors carries additional risks such as economic, political, or regulatory developments that may affect many or all issuers in that sector. 

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. 

This research material has been prepared by LPL Financial LLC.

Securities offered through LPL Financial LLC.

Member FINRA/SIPC.

 

 

March 2017

March 17, 2017

Dear Valued Investor,

It’s March, and that means one thing: March Madness. All across the country, people are filling out their brackets, studying the teams, and trying to pick that upset that will impress their friends and coworkers with their basketball acumen.

The anticipation of the NCAA college basketball tournament reflects the buzz of the markets thus far in 2017. The stock market has continued to march higher with impressive consistency. The S&P 500 followed January’s gain with another positive month in February, extending its monthly winning streak to four.  Not to be outdone, the Dow had an impressive 12-day win streak that ended on February 28, the longest streak since 13 in January 1987. The major indexes have also gone more than 100 days without a 1% decline, something that hasn’t been done in more than 20 years.

Against this backdrop, the Federal Reserve (Fed) has remained a focus for market participants. In a widely expected move that was fully priced into the bond market for several weeks, the Fed’s policymaking arm, the Federal Open Market Committee (FOMC), raised rates 0.25% (25 basis points). With this move, the FOMC affirmed its strength in the U.S. economy and upgraded its views on business capital spending. The Fed continued to indicate that any future rate hikes would be data dependent and gradual, good news for those concerned that the recent strength in the economy and markets would lead the Fed to take a more aggressive tightening stance. LPL Research continues to expect the Fed to raise rates twice more in 2017, consistent with the Fed’s guidance, and expect Fed policy to be more of a steadying hand than a disruption.

I am encouraged that the Fed recognizes the continued improvement in the U.S. economy that is evident in recent economic data. Importantly, about 60% of February 2017 economic reports exceeded consensus expectations. The improvement has been largely driven by two factors: anticipation of pro-growth policies out of Washington, D.C. (tax reform, deregulation, infrastructure spending, etc.), and the continued rebound from the period of slow growth in late 2015/early 2016 due to oil-related capital spending declines, tightening credit standards, a strong U.S. dollar, and slower growth in China.

Despite the Fed’s recent vote of confidence in the economy, the encouraging economic data, and strong start to 2017 for the stock market, I am still mindful of the risks that could introduce periods of “market madness” as periods of volatility are to be expected. A policy mistake by a government or central bank, uncertainty surrounding the new presidential administration, Brexit, China’s debt problem, and elevated stock valuations all present challenges. That said, I continue to encourage you to stick to your long-term plan and stay invested.

As always if you have any questions, please contact me.

Sincerely,

Wayne Rigney

________________________

IMPORTANT INFORMATION

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly.

Economic forecasts set forth may not develop as predicted.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Investing in specialty market and sectors carries additional risks such as economic, political, or regulatory developments that may affect many or all issuers in that sector.

The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve Board that determines the direction of monetary policy.

The Dow Jones Industrial Average Index is comprised of U.S.-listed stocks of companies that produce other (non-transportation and non-utility) goods and services. The Dow Jones Industrial Averages are maintained by editors of The Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors and accurately represents the market sectors covered by the average. The Dow Jones averages are unique in that they are price weighted; therefore their component weightings are affected only by changes in the stocks’ prices.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This research material has been prepared by LPL Financial LLC.

Securities offered through LPL Financial LLC.

Member FINRA/SIPC.

February 2017

February 17, 2017

Dear Valued Investor,

It’s still early in the year, but a lot has been happening both in markets and the economy. The stock market has gotten off to a strong start in 2017. The Dow’s first close ever above the 20,000 level drew a lot of attention to the granddaddy of the three major indexes, but the real winner so far in early 2017 has been baby of the three, the Nasdaq, which, as of February 15, made new all-time highs on seven consecutive days for the first time since December 1999.

Looking at some of the key drivers of recent index performance, I remain optimistic but am closely monitoring a variety of data and important events that could impact your portfolio. Starting with fourth quarter earnings season, which is quickly winding down, I am encouraged that S&P 500 earnings estimates are now tracking to an 8.4% year-over-year increase, about 2.3% above initial estimates on January 1. Technology and financials earnings have contributed to the strong performance in the fourth quarter; energy earnings have had a recent bounce as well.

I am also encouraged by recent U.S. economic data that are pointing to improving growth. In fact, two-thirds of economic reports received in January 2017, which mostly reflect economic activity from December 2016 and early January 2017, met or exceeded consensus expectations. Looking deeper, sentiment reports on the services and manufacturing sectors, new orders for durable goods, vehicle sales, and employment were all notably better than expected.

One noteworthy data point that failed to meet expectations was the initial estimate of 2016 fourth quarter gross domestic product growth (GDP), which was released in late January. It showed the economy grew 1.9% over the quarter, slower than the solid 3.5% growth rate in the third quarter. However, GDP is backward looking and economic activity has picked up more recently.

Turning to the Federal Reserve (Fed), its first policy meeting of 2017 took place on January 31- February 1, 2017. As expected, the Fed made no change to its interest rate policy but struck a positive tone in its assessment of the economy. The Fed continues to indicate that any future rate hikes would be data dependent and gradual. LPL Research continues to expect the Fed to raise rates two to three times in 2017.

With all of the momentum in equity markets and the improving economic data, I am still mindful of policy risks that remain. A policy mistake by a government or central bank, uncertainty associated with the new presidential administration, Brexit, China’s debt problems, and above-average stock valuations may present challenges to the relatively smooth ride we’ve seen so far in 2017 and periods of volatility over the course of the year are expected. That said, I continue to encourage you to stick to your plan and stay invested.

As always if you have any questions, please contact me.

Sincerely,

Wayne Rigney

___________________________

IMPORTANT INFORMATION

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly.

Economic forecasts set forth may not develop as predicted.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Investing in specialty market and sectors carries additional risks such as economic, political, or regulatory developments that may affect many or all issuers in that sector.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S.-based common stocks listed on the NASDAQ stock market. The index is market-value weighted. This means that each company’s security affects the index in proportion to its market value. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. It is not possible to invest directly in an index.

The Dow Jones Industrial Average Index is comprised of U.S.-listed stocks of companies that produce other (non-transportation and non-utility) goods and services. The Dow Jones Industrial Averages are maintained by editors of The Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors and accurately represents the market sectors covered by the average. The Dow Jones averages are unique in that they are price weighted; therefore their component weightings are affected only by changes in the stocks’ prices.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This research material has been prepared by LPL Financial LLC.

Securities offered through LPL Financial LLC.

Member FINRA/SIPC.

January 2017

January 19, 2017

Dear Valued Investor,

Markets are off to a much better start in early 2017 than in 2016. After 10 trading days, the S&P 500 is up 1.3% year to date, compared to an 8% decline during the same period in 2016. You may recall that a year ago, in early 2016, markets faced a number of significant challenges. Numerous market indicators were signaling a high probability of recession. The so-called earnings recession was at its nadir. Oil was plummeting, causing worries about the health of the banking system and the high-yield bond market. And the market and the Federal Reserve (Fed) had very different expectations for the path of monetary policy.

Today, many of these and other challenges during 2016 have been resolved. Most widely-followed indicators suggest a low probability of recession in the U.S. over the next year. Policy risk has ebbed after markets got through the Brexit vote in June 2016 and the U.S. presidential election in November 2016 mostly unscathed. The earnings recession has ended and global corporate profits are poised for an upswing. China’s economy and markets have stabilized. Oil prices have rebounded. And markets and the Fed are much better aligned with regard to the path of monetary policy over the next few years, which has helped alleviate many of the global imbalances that impacted the market in early 2016.

Still, some issues have not been resolved, and new challenges have emerged. While we know who the new president will be and what the new Congress looks like, it is not yet clear what the impact may be to U.S. trade policy, healthcare reform, and tax reform. Important elements of these policies need to be ironed out and addressing these issues will go a long way toward shaping 2017 for markets:

  • Will the president-elect use the threat of tariffs, or actual tariffs, to get better trade deals with our key trading partners?
  • Will the 20 million or so people that receive health insurance through the Affordable Care Act remain insured after the law is overhauled?
  • Will tax reform include a border adjustment tax to stimulate exports and curb imports?
  • Will bank regulation be eased despite the political backlash against the big Wall Street firms during the election?

Despite the continued political and policy uncertainty, the stock market finished 2016 on a high note. Markets have gotten a lift from improving economic expectations, partly due to optimism surrounding potential pro-growth policies under a Trump presidency, although the U.S. economy had already begun to pick up some steam even prior to the election. Third quarter gross domestic product (GDP), reported on December 23, 2016, surprised to the upside and accelerated, purchasing manager surveys have indicated manufacturing was accelerating in late 2016 after a nearly two year slump, and consumer spending has remained firm, supported by strong consumer sentiment readings. Fundamentally, the U.S. economy and markets remained on solid footing as 2017 got underway.

All in all, the start of 2017 has been a lot smoother than the start of 2016, but we are mindful that risks remain. A policy mistake by a government or central bank, issues with the Trump transition, Brexit, China’s bad debt problem, and above-average stock valuations may present challenges to the relatively smooth ride we’ve seen for financial markets so far in 2017. No matter what emotions the election results and the inauguration might stir up, I continue to encourage you to stick to your plan and stay invested.

As always if you have any questions, please contact me.

Sincerely,

Wayne Rigney

_______________________________________

IMPORTANT INFORMATION

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly.

Economic forecasts set forth may not develop as predicted.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values and yields will decline as interest rates rise, and bonds are subject to availability and change in price.

Investing in specialty market and sectors carries additional risks such as economic, political, or regulatory developments that may affect many or all issuers in that sector.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, geopolitical events, and regulatory developments.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This research material has been prepared by LPL Financial LLC.

Securities offered through LPL Financial LLC.

Member FINRA/SIPC.

2017 Outlook

December 31, 2016

Dear Valued Investor,

Heading into the New Year, we are mindful of market milestones that have come together to influence the investment landscape: a new president and administration, the stabilization of oil prices, and the end of an earnings recession. Being prepared for 2017 is about gauging these and other milestones, understanding their significance, and responding without overreacting. In the year ahead, we will be reading the gauges and making adjustments, while staying strategic and maintaining a long-term view. As we tackle the investment environment together, we are excited to introduce our LPL Research Outlook 2017: Gauging Market Milestones, with financial market forecasts, economic insights, and investment guidance for the year ahead. Some of LPL Research’s expectations for the upcoming year include:

  • Accelerating U.S. economic growth*. We expect the U.S. economy—as measured by real gross domestic product—may grow modestly to near 2.5% in 2017, after spending most of the seven-plus years of the expansion averaging just over 2.1%. The potential growth lift is based upon expectations that rising business investment and fiscal stimulus may complement steady consumer spending. The details and timing of the passage of President-elect Donald Trump’s proposals on taxes and infrastructure, and the speed of implementation will be important growth impact factors in 2017.
  • Mid-single-digit returns for the S&P 500**. We forecast mid-single-digit returns for the S&P 500 in 2017, consistent with historical mid-to-late economic cycle performance. Gains will likely be driven by mid- to high-single-digit earnings growth and stable valuations (a stable price-to-earnings ratio of 18 – 19). We also expect the current bull market to reach its eighth year. However, we expect gains will likely come with increased volatility as the economic cycle ages further and interest rates may rise (bond prices fall), increasing borrowing costs and making bonds a more competitive alternative to stocks.
  • Limited bond return environment. We expect the 10-year Treasury yield to end 2017 in its current range of 2.25–2.75%, with a potential for 3%. Scenario analysis based on this potential interest rate range and the duration of the index indicates low- to-mid-single-digit returns for the Barclays Aggregate Bond Index. The recent rate hike shows the Federal Reserve may start gradually normalizing interest rates in earnest. Importantly, rising interest rates, along with a pickup in the pace of economic growth and inflation, will limit return potential.

Looking ahead, I can help you read the gauges on a possible mid-to-late cycle growth rebound, a new presidential cycle, and the efforts of corporate America to continue delivering profit growth. With conflict-free advice in hand from LPL Research’s Outlook 2017: Gauging Market Milestones, you’ll be able to calibrate your long-term financial plan to keep on course for reaching the milestones that are important to you.

As always, if you have questions, I encourage you to contact me.

Sincerely,

Wayne Rigney

__________________________________

Important Information

*Our forecast for GDP growth of 2.5+% is based on the historical mid-cycle growth rate of the last 50 years. Economic growth is affected by changes to inputs such as business and consumer spending, housing, net exports, capital investments, and government spending.

**Historically since WWII, the average annual gain on stocks has been 7–9%. Thus, our forecast is in-line with average stock market growth. We forecast a mid-single-digit gain, including dividends, for U.S. stocks in 2017 as measured by the S&P 500. This gain is derived from earnings per share (EPS) for S&P 500 companies assuming mid- to high-single-digit earnings gains, and a largely stable price-to-earnings ratio (PE). Earnings gains are supported by our expectation of improved global economic growth and stable profit margins in 2017.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. Indexes are unmanaged and cannot be invested into directly.

Economic forecasts set forth may not develop as predicted.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS (agency and non-agency).

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

Because of its narrow focus, specialty sector investing, such as healthcare, financials, or energy, will be subject to greater volatility than investing more broadly across many sectors and companies.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond and bond mutual fund values and yields will decline as interest rates rise and bonds are subject to availability and change in price.

This research material has been prepared by LPL Financial LLC.

Securities offered through LPL Financial. Member FINRA/SIPC

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value

Not Guaranteed by Any Government Agency | Not a Bank/Credit Union Deposit

Member FINRA/SIPC