Roses Are Red Violets Are Blue, We Give Financial Advice to You

Inflation Surprises to the Upside

The potential for rising inflation has been on the collective mind of market participants in recent weeks, following a larger than expected uptick in wage inflation in the January employment report, which is widely reported as one of the key factors behind the recent pullback in stocks. The latest Consumer Price Index (CPI) report seems to play into the narrative of an upside surprise in inflation, so it is no surprise that markets initially reacted by selling off, with both stock and bond prices moving lower (and bond yields moving higher), though stocks have since recovered and moved off their lows.

 

Consumer prices increased at a faster pace than expected in January, with the CPI rising 0.5% month over month (versus a 0.3% consensus forecast), and core CPI, which excludes food and energy, rising 0.3% (versus 0.2% consensus). Year-over-year CPI and core CPI rose 2.1% and 1.8%, respectively, compared to consensus expectations of 1.9% and 1.7%. Apparel, motor vehicle insurance, and hospital services saw the largest month-over-month gains, though these items are each a relatively small part of the overall CPI calculation (making up just 7.7% of the index combined). Shelter, which makes up approximately 32% of the index, saw less severe but still solid gains as well.

Major U.S. equity indexes showed resilience as they quickly recouped initial losses; perhaps as investors recognized that one inflation reading doesn’t constitute a trend, and the latest core Personal Consumption Expenditures (PCE) report, which is the Federal Reserve’s (Fed) preferred inflation measure, its well below the Fed’s 2% target at 1.5% year over year for December (the January report will come out on March 1, 2018). Chief Investment Strategist John Lynch commented, “This morning’s CPI report may on the margin increase the odds of a more aggressive Fed in 2018, but investors should remember that the Fed is looking for a trend of rising inflation, not a single data point. Our base case continues to be that the Fed will raise rates three times in 2018, with the first likely at its March meeting, though we will monitor inflation developments closely in the coming months.”

We would also remind investors that may have been caught up in the mania surrounding today’s inflation report that today is Valentine’s Day. If you’re still searching for a gift, or just looking for a lighter-hearted look at inflation and its impact on everyday life, take a look at LPL Research’s recently released Valentine’s Day Index. The key takeaways are summarized in the chart below:

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

The economic forecasts set forth in the presentation 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 Standard & Poor’s 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.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor Member FINRA/SIPC

For Client Use — Tracking # 1-700073 (Exp. 01/19)

Outlook 2018: Return of the Business Cycle

Presenting the LPL Research Outlook 2018: Return of the Business Cycle, packed with investment insights and market analysis to guide you through all the action we may see in the year ahead. “Return of the business cycle” refers to a return to the traditional forces that have historically propelled the economic cycle forward. Instead of relying on central bank intervention and accommodative monetary policy, we’re turning to some new lead characters to take charge: fiscal policy and better
business fundamentals. Fiscal policy means increased government spending, tax cuts, and some regulatory relief. We need Congress to enact some policies to help keep this expansion going. As far as business fundamentals, we expect to see improvement in revenue, earnings, and future growth prospects.

Increased business spending is also expected to play an important supporting role for the U.S. economy and could see a faster growth trajectory in 2018. For stocks to potentially reach attractive gains, earnings growth will be a key driver. Better global growth is supportive of earnings, and tax reform has the potential to provide an additional boost. All of these factors and more will be important to watch in 2018.

We have experienced a fundamental shift in what’s driving the economic cycle. Businesses and investors may be well positioned to benefit from this new dynamic. The LPL Research Outlook 2018: Return of the Business Cycle highlights the opportunities and potential challenges that may lie ahead for market participants. This guidance and investment insight can benefit investors in their search for long-term
success. Download your copy today!

Contact GWM if you would like to discuss further!

Fall is Here: Seasonal Analysis

Seasonal Analysis: Thanksgiving and Equities Tend to be Well Received in November

The Thanksgiving Day holiday can be an enjoyable experience for many as friends and family are celebrated while eating a delicious meal. November also can be enjoyable for those who follow the seasonal statistics for the equity markets; looking back over the past 20 years, stocks tend to move higher during the month.

Our latest analysis identified four sectors that have shown a seasonal tendency to outperform the S&P 500 Index during November over the last 20 years—a month when the index has on average moved higher by 1.5%, generating positive returns 75% of the time. As we review the data, it’s important to note that non-seasonal factors still influence performance and should not be ignored.

The table below highlights sectors’ average over- and under-performance versus the S&P 500 during November since 1997, as well as the top-performing industry groups over the same time period:

Looking at the table above, the materials sector has tended to exhibit the highest relative strength versus the index in November, on average. This increases the likelihood that the upward trajectory may continue. But, if you are looking for a more targeted strategy this month, out of the top 10 industry groups, the industrials sector has the most breadth, represented by four seasonally strong components.

As many of us enjoy the Thanksgiving Day holiday this year, maybe we can focus more of our attention on our friends and family and less on the equity markets; historical data suggests stocks are more likely than not to move higher in November.  However, seasonal statistics could help to identify sectors and industries that could better compliment your Thanksgiving meal than a broad-based equity investment.

 

Contact the GWM with any questions!

-Kyle

Source: LPL Research

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

The economic forecasts set forth in the presentation 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.

Stock investing involves risk including loss of principal.

The Standard & Poor’s 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.

Because of their 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.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor Member FINRA/SIPC

Tracking # 1-663249 (Exp. 11/18)

Today, was the Day….of Days

October 19, 1987, will always be a day investors remember with despair.  Yes, today is the 30th anniversary of Black Monday where the stock market dropped 22% in one day.  Things like this are unforeseen and are very scary, which reinforces the principle of diversification and a long time horizon.  If you would have invested October 18, 1987 (the day before the crash) you would have felt devastated, a natural emotion to this type of situation.  It’s important to remember though, on Black Monday the Dow Jones dropped to 1,738.74…today the Dow stands just North of 23,000!  A pretty healthy return, even after the darkest of days.

Read More about the history of Black Monday, and the differences between October 19th, 1987 and October 19th, 2017.

Everything You Wanted To Know About September, But Were Afraid To Ask

Football, Fall, and Volatility?

Well, here it comes—September. It’s widely considered the worst month of the year for equities for good reason since it has historically seen the worst performance. Per Ryan Detrick, Senior Market Strategist, “September is the banana peel month, as some of the largest dips tend to take place during this month. Although the economy is still quite strong, this doesn’t mean some usual September volatility is out of the question—in fact, we’d be surprised it volatility didn’t pick up given how calm things have been this year.”

With the Federal Reserve, Bank of Japan, and the European Central Bank all set to announce interest rate decisions this month, and the S&P 500 Index up on a total return basis nine consecutive months as of the end of July, the stage is set for some fireworks in September.

Here’s some data to consider as September approaches:

• Since 1928, no month sports a lower average return than September, with the S&P 500 down 1.0% on average. February and May are the only other months that are generally in the negative, while July surprisingly tends to be the strongest month of the year.

• Since 1928, the S&P 500 has been higher in September only 43.8% of the time, which is by far the lowest amount—as no other month is less than 50%. December is up most often at 73.0%.

• Since 1950, September has been the worst month of the year down 0.5%, while the past 20 years it has been the second weakest month, with August faring worse.

• The worst September ever for the S&P 500 resulted in a 30% drop in 1931. In fact, no other month has had more 10% drops than September at seven. Interestingly, January is the only month that has never been down 10% or more.

• Over the past 10 years, September has been positive on average, with the S&P 500 up 0.1%. But it is worth noting that September has been lower each of the past three years.

• Since 1950, if the S&P 500 starts the month of September above its 200-day moving average (like 2017 will), it tends to do much better, as it is up 0.4% on average versus down 2.7% if it starts the month below the 200-day moving average.

• Last, August is historically a weak month as well. Generally, when the S&P 500 is lower in August what we tend to see in September is that the month is down as well. On average it’s been down 0.4%, right in line with the average monthly return.

IMPORTANT DISCLOSURES
*Please note: The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of predecessor index, the S&P 90.
The economic forecasts set forth in the presentation 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 200-day moving average (MA) is a popular technical indicator which investors use to analyze price trends. It is the security or index’s average closing price over the last 200 days.
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 opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.
Past performance is no guarantee of future results.
This research material has been prepared by LPL Financial LLC.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.
Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit
Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor
Member FINRA/SIPC

Tracking # 1-639523 (Exp. 08/18)

Source:LPL Research

Back to School: College Fund 101

529 College Savings Plan Basics

College for many people is one of the greatest times of their lives.  It is a time where one begins to mature into an adult and find out who they truly are.  Not to mention a greater earning potential (generally speaking.)  However, it is no secret that college is EXPENSIVE and unfortunately it doesn’t seem it will become any cheaper.  Not everyone will be able to pay for their kids complete higher education and THAT’S OKAY!  A little something can go a long way, especially if you start early.

This article today will be discussing one of the most common ways to save for college, a 529 plan.

WHAT IS A 529 PLAN?:  A 529 plan is a college savings account named after the section of the IRS code that created them.

WHAT  ARE THE BENEFITS?:  Although I believe the biggest benefit of a 529 plan is the fact that it identifies a specific account that keeps people accountable to saving…..there are many other great benefits.

A 529 plan allows for tax deferred investment.  This means that as the investments in the account are growing, you don’t have to pay taxes on the growth along the way.  This means more money that can compound over the years.

Here is the kicker, as long as you use the money for QUALIFIED EDUCATIONAL EXPENSES, you do not have to pay taxes when you take the money out. Awesome!

Another great benefit is flexibility.  ANYONE can contribute to the account on behalf of the beneficiary.


WHAT If THE BENEFICIARY DOESN’T GO TO COLLEGE?:  If the beneficiary doesn’t attend a qualified higher education establishment,  you can switch the beneficiary.  You are able to transfer the benefit to a qualified family member (i.e. brother, sister, Mother, Father, First Cousin.)  The worst case is if the beneficiary does not go to college and there is no eligible beneficiary to transfer to, you can take the money out of the account.  You will have to pay taxes on the growth and a 10% penalty.  Hey, at least you had several years of tax deferred growth, not the end of the world.

WHAT  CAN I SPEND IT ON?:  Anything related to qualified educational expenses.  Common expenses are room and board and tuition.  However, you can also use it to purchase a computer, software, textbooks, supplies…. basically anything related to school.

HOW DO I ESTABLISH ONE?:  My advice would be to work with an advisor.  They can help you budget, estimate costs, set expectations, and help you choose your investments.

SUMMARY:  A 529 plan is one of the best ways to save for college.  The flexibility and tax benefits make it one of the most popular options.

If you would like more information on how you can get started with a 529 plan, please do not hesitate to call Granite Wealth Management at 1-888-612-5391 or email at info@granitewealthllc.com and we would be glad to help you.

Seasonal Analysis: The Dog Days of Summer

Dog Days of summer

One way to reduce the negative effects of potential equity headwinds is to incorporate seasonal analysis into your portfolio management process. This allows you to identify sectors and industries that may outperform the broad market during this historically volatile month.

We are encouraged by three sectors’ seasonal tendency to outperform the S&P 500 Index during August over the last 20 years—a month when the index has on average been lower by 1.2% for equity investors, generating positive returns 50% of the time. As we review the data, note that nonseasonal factors still influence performance and should not be ignored.

The table below highlights sectors’ average over- and under-performance versus the S&P 500 during August since 1997, as well as the top-performing industry groups over the same period:

Looking at the table above, the utilities, information technology, and consumer staples sectors on average tended to exhibit relative strength versus the index in August over the past 20 years. But, if you’re looking for a more targeted strategy, the table also shows the industries underlying the relative strength at the sector level (i.e. “What to Watch in August”).

Drilling down, the information technology and consumer staples sectors experienced broader participation in August among their underlying industries versus utilities, comprising 5 of the top 10 industry categories (50%) listed within the chart. This was due in part to their market cap and overall weighting within the S&P 500.  On the other hand, though a laggard at the sector level, consumer discretionary has shown pockets of seasonal strength in select industries.

Although the index has tended to post negative returns in August, seasonal analysis can help to identify which sectors and industries may fare relatively well, particularly if volatility increases due to potential seasonal headwinds that historically have been more prone to occur toward the end of the summer. Stay tuned to the LPL Research blog for continued analysis of S&P 500 seasonal patterns.

 

Source:LPL Research

 

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.

The economic forecasts set forth in the presentation 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.

Stock investing involves risk including loss of principal.

The Standard & Poor’s 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.

Because of their 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.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor Member FINRA/SIPC

Tracking # 1-630655  (Exp. 8/18)