Market Watch January 2018

December 28, 2017

Dear Valued Investor:

I hope that you have enjoyed spending time with loved ones during this holiday season. This time of year often presents an opportunity for some additional rest and relaxation, but there is always the possibility for activity in the markets—or as was the case last week, the government. Last Friday, December 22, 2017, President Trump signed the 2017 Tax Cuts and Jobs Act into law. Although the depth of detail of this new law may be intimidating, on balance, its passage may provide firmer footing for investors as we begin a new year.

The $1.5 trillion tax cut is a complex, 1,000-page law intended to spur economic activity through a reduction in both individual and corporate tax rates, and simplify the tax code by eliminating or trimming a variety of deductions and exemptions. At a high-level overview:

· The Joint Committee on Taxation suggests the estimated total cost over 10 years will be just over $1 trillion, with the offset of $500 billion in added revenue from an estimated economic growth impact of +0.7% per year over the next 10 years.
· The estimated net tax cuts for individuals total approximately $1.15 trillion, or about 77% of the package, a greater focus on individual tax cuts than the original House bill.
· The estimated net tax cuts for U.S. corporations total around $330 billion, or 23% of the overall package.

The new tax law has important implications for major corporations, small businesses, and individual taxpayers, and is designed to shift the trajectory for economic growth, the federal budget, monetary policy, and perhaps most critically for investors—corporate profits.

There are legitimate concerns that the new law could increase the potential for higher inflation and weigh on the deficit. Yet U.S. consumers may be poised to reap approximately $100 billion in 2018 and $200 billion in 2019 thanks to the individual tax cuts. Meanwhile, U.S. corporations can potentially boost investment from a combination of lower taxes, repatriated profits, and immediate expensing, further supporting economic growth.

Perhaps the biggest immediate takeaway for investors is that the accelerated timeline to pass the law has decreased uncertainty. As a result, individuals and businesses have the opportunity to begin planning around the changes and pulling forward the new law’s impact.

With the new tax law in play, LPL Research is upgrading its projections for 2018 U.S. economic growth to a range of 2.75–3.0% from its original forecast of 2.5%, raising estimates for corporate profits, and consequently increasing its projection for the S&P 500 Index’s price target to a range of 2850–2900 by year-end.* This upgraded S&P 500 target keeps LPL Research’s broad return expectations for 2018 at approximately 10% including dividends, while the Research team maintains a cautious bond market view, due to the greater risk of rising interest rates.

The new tax law should help provide fiscal support for the economy as monetary support is withdrawn. And although it helps decrease the chance of a recession in 2018 and even in 2019, market volatility may increase from the extraordinarily low levels that persisted in 2017. Nevertheless, for markets and the economy, the new law appears to provide a firmer launching point as we enter the new year.

I wish you a healthy and happy 2018. And as always, I encourage you to contact me with any questions.

Sincerely,

Wayne Rigney

 

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Important Information

*Based on a trailing 12-month price-to-earnings ratio (PE) of 19–20. Forecasts are from our Outlook 2018: Return of the Business Cycle publication.

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.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

Economic forecasts set forth may not develop as predicted.

The PE ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher PE ratio means that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower PE ratio.

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.

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 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 LLC. Member FINRA/SIPC.

Tracking #1-681790 (Exp. 12/18)

December 2017 Market Watch

December 1, 2017

Dear Valued Investor:

The recently released LPL Research Outlook 2018: Return of the Business Cycle publication contains the investment insights and market guidance for the year ahead. Traditional business cycle drivers are expected to take a larger role in spurring further economic and market growth in 2018, as we have experienced a fundamental shift in the forces behind this continued economic expansion. LPL Research’s Outlook 2018 highlights some of the ways this economic expansion has been unusual thus far, and what we may expect moving forward.

The return of the business cycle is not about where the economy is in the cycle, but about what’s driving the cycle and what it might mean for investors. For the majority of this economic cycle, accommodative monetary policy has supported growth and the markets have relied on central bank intervention to keep the expansion going. There has already been directional change by the Federal Reserve (Fed), coupled with companies’ increased need to focus on growth, resulting in a new dynamic for business leaders and investors.

Given this shift, LPL Research believes the return of the business cycle will be characterized by:

· Fiscal coordination, with some combination of infrastructure spending, tax reform, and regulatory relief. Given recent progress on the policy front, corporate tax cuts could be a primary contributor to economic activity in 2018.
· Business investment in property, plants, and equipment. Companies are using cash differently now, focusing on increasing productivity and attaining greater market share.
· Earnings growth, supported by better global growth, a pickup in business spending, and potentially lower corporate taxes.
· Active management, which should see continued momentum thanks to a return to fundamental investing, where investors can determine winners and losers based on earnings, sales, cash flow, and so on.

Against this backdrop, the U.S. economy—as measured by gross domestic product (GDP)—is expected to grow at a rate of 2.5%, thanks to fiscal support, a pickup in business spending, and steady consumer spending. LPL Research forecasts returns of 8–10% for the broad stock market (as measured by the S&P 500 Index), with earnings growth the primary driver. And given expectations for a gradual increase in interest rates, bonds may see flat to low-single-digit returns, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index. However, bonds can play an important role in a well-diversified portfolio, particularly in the event of stock market pullbacks.

This return to the business cycle has the potential for success, where investors may be rewarded for their ability to focus on business fundamentals. However, an aging expansion and a leadership transition at the Fed may increase the likelihood that stock market volatility picks up in 2018. As always, we must strive to maintain a long-term perspective and well-balanced portfolios.

The LPL Research Outlook 2018: Return of the Business Cycle provides insightful commentary to help you navigate the year ahead. If you have any questions, I encourage you to contact me.

Sincerely,

Wayne Rigney

 


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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.

Active management involves risk as it attempts to outperform a benchmark index by predicting market activity, and assumes considerable risk should managers incorrectly anticipate changing conditions.

All market indexes discussed are unmanaged and are not illustrative of any particular investment.

Indexes do not incur management fees, costs and expenses, and cannot be invested into directly.

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 Bloomberg 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.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a nondiversified 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.

Additional descriptions and disclosures are available in the Outlook 2018: Return of the Business Cycle publication.

This research material has been prepared by LPL Financial LLC.

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

Tracking #1-670694 (Exp. 11/18)

October 2017 Market Watch

Dear Valued Investor:

This time of year can seem quiet, with summer vacations and back to school behind us, but the buzz of the holiday season still a few weeks away. Although this sense of calm may be a welcomed break, there is plenty of activity in the U.S. and around the globe that could impact markets through the end of the year.

Potential policy changes in the U.S. continue to garner attention, as Republicans in Congress work toward tax reform with an aggressive goal of getting a package on the president’s desk by New Year’s. Although success is far from assured, progress has been made toward securing a 2018 budget resolution in the House and Senate in order to pave the way for tax reform via the reconciliation process, which enables passage with only 50 votes in the Senate, rather than 60.

Should Congress pass a budget resolution, several factors increase the odds of a successful tax deal. Republicans are seeking a signature win after unsuccessful attempts at healthcare reform, and there is general agreement across the party that tax reform is needed. In addition, there are a large number of elements of the tax code that present negotiation opportunities to secure the toughest votes. Markets have exhibited sensitivity to tax reform’s prospects, so we will be watching progress closely.

Third quarter earnings season is also underway and we expect solid results relative to expectations, given the strong recent manufacturing data and resilience of analysts’ estimates over the past month. Although earnings growth for S&P 500 Index companies is expected to slow in the third quarter from the double-digit pace in the second quarter, mid-single-digit earnings growth would be a good outcome considering insurers’ losses from Hurricanes Harvey and Irma and disruptions to economic activity in Houston and the Florida coast. Expectations are for particularly strong results for the energy and technology sectors.

Global central banks remain a focus for investors as well, and the calendar from late October into early November is jam packed with central bank meetings. No significant changes are expected from the Federal Reserve (Fed); however, the next Fed chair is expected to be announced on November 3, prior to the anticipated rate hike in December. Some of the candidates are more hawkish than others, suggesting that the news could easily be market moving. Regardless, further rate increases—even if gradual—and tightening labor markets are likely to put some upward pressure on inflation and interest rates in coming months and perhaps provide support for the U.S. dollar.

Along with the Fed, the European Central Bank (ECB), the Bank of Japan, and the Bank of England (BOE) will all meet over that same one-week stretch (October 26 through November 2)—putting global monetary policy front and center. We may get more guidance on the ECB’s plans to taper its bond purchases, while the BOE will likely respond to the latest pickup in inflation in the U.K. There is some risk for markets as global monetary conditions tighten and the global economy increasingly stands on its own, so this will be a key development to watch over the next several months and throughout 2018.

While it has been a relatively quiet year for markets, with no major pullbacks in the broad stock market, it remains important to monitor events around the globe that could be catalysts for change. In the midst of the fourth quarter, and with the busy holiday season approaching, let’s remain mindful of these developments without letting them distract us from our long-term goals.

As always, please contact me with any questions you may have.

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.

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 #1-657693 (Exp. 10/18)

September 2017 Market Watch

Dear Valued Investor:

During the past several weeks, we’ve seen news headlines dominated by everything from extreme weather toheightened geopolitical risks, with speculation on policy changes in the U.S. an ongoing hot topic. With so many events competing for our attention, how do we know where to focus?

As investors, it’s important that as we acknowledge the impact of these worldwide events, we remember to separate our personal sentiment from our investment strategy. This can be easier said than done, which is why it’s important to rely on trusted economic and market indicators to guide us in the right direction. In other words, focus on fundamentals. The fundamental backdrop for the economy and markets continues to look solid, indicating that the market should be able to weather the ups and downs brought on by the dizzying news flow. Earnings estimates remain strong and economic indicators suggest that the potential for a recession this year or next remains low—both of which reduce the odds that a small correction turns into a big one.

The Federal Reserve (Fed) is another consistent source of guidance on the economy. Although the Fed chose not to raise rates for the third time in 2017 at its September policy meeting, the meeting was not without action. The Fed announced that it would begin gradually shrinking its balance sheet, as expected, withdrawing some of the trillions of dollars it invested in the aftermath of the financial crisis. Perhaps more importantly, however, the announcement reflects the Fed’s confidence that economic growth and low unemployment will continue. Further supporting this position, the Fed indicated that a December rate increase is still likely.

When assessing this positive economic and market data, it’s important to consider the U.S. political environment. LPL Research maintains its view that the potential for fiscal stimulus remains and that we may see a tax deal out of Washington, D.C. early next year. This view does seem to be in the minority, however, and political divisions in Washington could impede a reduction in tax rates—corporate or individual (or both). Because consensus expectations for a tax agreement have declined, it does lessen the chance that stocks would fall sharply if a deal is not passed.

Against this generally favorable backdrop, the stock market has continued its steady advance—going 10 months since the last 3% decline. While the market environment is positive, we should watch for a potential pullback. It’s healthy for a market to experience small declines, as a way to refresh and set up the next move higher. But be mindful that pullbacks can often be accompanied by potentially unnerving headlines, which is why it’s important to be prepared for them and remember the fundamentals. Based on the current environment, LPL Research notes that pullbacks can be viewed as opportunities to buy stocks at lower prices, especially for those who are underinvested relative to their long-term targets.

As is often the case in today’s world, we are faced with a myriad of concerns and headlines that could distract us from our long-term investment strategy. I will continue to monitor these key economic, market, and policy factors and assess how they may impact your portfolio and what, if any, changes should be made.

Our emotions naturally tend to influence our actions, but with a well-thought-out plan and the right guidance, we can ensure that we stay on course to reach our goals.

As always, please contact me with any questions you may have.

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.

The information in this letter has been prepared from data believed to be reliable, but no representation is being made as to its accuracy and completeness.

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.

This research material has been prepared by LPL Financial LLC.

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

Tracking #1-649279 (Exp. 09/18)

August 2017 Market Watch

August 17, 2017

Dear Valued Investor,

As summer winds down, vacations come to a close, and kids head back to school, the calendar is relatively quiet in terms of major market events. Earnings season for corporate America—which was a good one—is behind us. No rate hike is expected at the next Federal Reserve policy meeting in September, and global monetary policy officials are unlikely to change course at their annual symposium in Wyoming on August 24. Key economic data for August is still a few weeks away. And while expectations are high for a strong back-to-school shopping season, there has been little to get excited about as performance of retail stocks has lagged.

Although the calendar is fairly quiet, some of the most volatile markets have come in August and September, so we must remain watchful for risks. The volatility around escalating tensions with North Korea earlier this month provided an example of how geopolitics can weigh on markets. But historically, the business cycle has been a much more common cause of lasting downturns than geopolitics. LPL Research took a look back at some of the more notable events in recent decades which revealed that the stock market has generally shrugged off these events fairly quickly. In one of the more recent cases where geopolitical events coincided with a larger market decline, the 1990–1991 recession was underway when Iraq invaded Kuwait in 1990. Every event is different and no one knows which crises will escalate and which will be contained, though history provides a reassuring guide amidst some troubling headlines.

Turning to fundamentals, the backdrop for the markets looks good. Strong July retail sales data suggested consumer spending may have picked up some speed as the third quarter began. More than 200,000 jobs were created in July—as has been the case in three of the past four months. The official unemployment rate, at 4.3%, is at its lowest level since the financial crisis. The U.S. manufacturing sector continues to expand. Corporate America just delivered two consecutive quarters of double-digit year-over-year earnings gains for the first time since 2011. Credit market indicators remain healthy, with only some small pockets of weakness in the oil patch due to lower oil prices. And overseas, economic growth has picked up some in Europe and Japan, the outlook for China’s economy has firmed, and earnings growth has improved broadly across developed international and emerging markets.

The bottom line is the fundamental backdrop for the markets appears to remain solid. So while it may be prudent at this time to take a little risk off the table with the S&P 500 Index at all-time highs, geopolitical risks elevated, and potential near-term positive catalysts scarce, the economic expansion and the bull market for stocks may be poised to continue well into 2018 and likely beyond.

As always, please contact me with any questions you may have.

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.

The information in this letter has been prepared from data believed to be reliable, but no representation is being made as to its accuracy and completeness.

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.

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 #1-635109 (Exp.08/18)

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

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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.

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