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Gene Todd, Executive Vice President/Managing Director of First Bank's Wealth Management Group

From category archives: Wealth Management Newsletter

Capital Markets Update

Market Month: October 2017

Market Month: October 2017 The Markets (as of market close October 31, 2017) Despite continuing drama in the White House and the fury of Mother Nature, stock growth remained steady for much of October. Favorable corporate earnings reports, a strong jobs sector, and growing consumer income overcame any trepidations investors may have had. Each of the benchmark indexes listed here posted monthly gains, led by the large caps of the Dow, which gained over 4% for the month and is up over 18% year-to-date. The tech-heavy Nasdaq has remained steady throughout the year, reaching new highs in October. The small caps of the Russell 2000 gained less than 1.0% for the month, but is up over 10.0% since the end of 2016. By the close of trading on October 31, the price of crude oil (WTI) was $54.54 per barrel, up from the September 29 price of $47.07 per barrel. The national average retail regular gasoline price was $2.488 per gallon on October 30, down from the September 25 selling price of $2.583 and $0.258 more ...

Quarterly Market Review: July-September 2017

The Markets (as of market close September 29, 2017) Trading during the summer months is customarily slow, and the summer of 2017 proved no different. July kicked off the third quarter with equity markets enjoying noteworthy gains over their June closing values. Both the Dow (2.54%) and S&P 500 (1.93%) posted significant gains, as did the Global Dow (3.13%). The Nasdaq posted a very favorable 3.38% monthly increase. The yield on long-term bonds changed very little from June as investors seemed to focus on surging equities. Crude oil prices reached $50 per barrel by the end of July after closing June at $46 per barrel. The national average retail regular gasoline price was $2.269 per gallon on July 31, down from the June 26 selling price of $2.288. Equities held their own in August, despite hurricanes that devastated several southern states and Puerto Rico, causing extraordinary economic loss. Conflicts both at home and abroad certainly influenced investor sentime ...

Market Month: August 2017

The Markets (as of market close August 31, 2017) Equities in August saw many peaks and valleys throughout the month, finally rallying at the end of the month. Strong second-quarter gross domestic product (GDP) figures, steady job gains, and increased consumer spending sent stocks higher, despite stagnant inflation and heavy personal and financial losses caused by Hurricane Harvey. The large caps of the S&P 500 and Dow posted marginal monthly gains with the tech-heavy Nasdaq leading the way closing August up 1.27%. The small caps of the Russell 2000 continued to lag, falling 1.39% from its July closing value. The Global Dow inched down 0.32% for the month, but is still strong year-to-date, up over 12.50%. The prices of 10-year Treasuries climbed, sending yields lower. By the close of trading on August 31, the price of crude oil (WTI) was $47.07 per barrel, down from the July 31 price of $50.18 per barrel. The national average retail regular gasoline price was $ ...

Capital Markets Update - June 2017

May turned out to be an interesting month for the stock market. In mid-May, we had the biggest one-day drop in 8 months following headlines of potential obstruction of justice by President Trump as the S&P 500 fell by 1.7%. Yet despite this “mini-correction, the S&P 500 was still up 1.4% for the month and is now up 8.7% through the end of May. Towards the end of May, the S&P 500 finished with three consecutive all-time highs. So far this year, the S&P 500 has set 20 new all-time closing highs, which is already above the average number of new highs per year (16) since 1954. At the same time, volatility this year has been extremely low with only 4 days of movements more than 1% up or down. The average daily moves of more than 1% in any year since the 1950’s has been 50. For instance, last year there were 48 days of moves greater than 1% and in calendar year 2015 there were 72 such days. Yet despite the good gains domestically, returns outside the U.S. have been even better. Fo ...

Family Business: Protecting Your Life’s Work

This year National Small Business week was April 30th to May 6th. The week celebrates over 28 million small businesses across the United States1 highlighting the hardworking local business owner. These individuals are passionate about their business and often pour their heart, sweat, and tears into it. Typically the business is the largest source of wealth and income for family business owners. It takes years to build a business; however, it can take only a moment to put that in jeopardy. We passionately feel everyone should have a strategy around managing risk and protection. Protect Your Earning Power In a recent study conducted of business owners2, it was discovered that many business owners are not adequately protecting their largest asset—the business—and earning power. On average, at least 60% of annual household income is generated from the business. In our experience, this percentage is much higher. Managing risk becomes even more critical for an owner who has their personal and busine ...

Capital Markets Update - May 2017

Much like the weather patterns in the Midwest, March came in like lion with the S&P 500 hitting an all-time high in early March, but returns were then flattish through most of the rest of March and  through early April, before a late month rally again pushed stocks to new highs. For the month of April, the S&P 500 was up 1.03% with most of that gain coming in the last week of the month. For  the year, the S&P 500 is now up 7.2%. Internationally, the news is even better. For the year, the MSCI EAFE Developed Market Index up 10.2%, the MSCI Emerging Market Index up 13.9% and the MSCI EAFE Developed Small Cap Index up 12.8%. International returns have trailed the U.S. stock market for the past four years leading to lower valuations, so part of the international stock market rally is the rest of the world playing “catch-up” this year vs. the U.S. stock market. Investors are reaping the benefits this year of higher internation ...

Retirement Plans Business Owners

A surprising number of successful small to mid-size business owners have minimal retirement savings or do not offer a plan to their employees. When it comes to saving for retirement business owners face two main challenges, getting a late start and the responsibility of establishing a plan. The Impact of Starting Later Traditional advice suggests start saving for retirement early and let compounding magic happen. However, in the early stages of building a business most owners focus on growth and operations. Any extra capital is poured back into the business rather than saved in account with limited access until 59 1⁄2. Those who are starting to save for retirement later in life will need to aggressively put away money to catch up. For example, a 55 year old couple has $300,000 invested in a taxable account, no debt but nothing saved in retirement accounts. They want $9,000 a month for living expenses during retirement. How much would they need to save over the next 12 years to have at least an 80 ...

Economic Growth and Stock Market Returns

Should our view of near term economic growth impact how we invest? Opinions about future economic growth often differ across market participants. For example, in a survey of more than 60 economists conducted by the Wall Street Journal in June 2016, estimates of US GDP growth for 2017 ranged from 0.2% to 3.7%.1 So how should we use this data to invest in the stock market? In this regard, investors may be surprised to find that the historical link between annual GDP growth and equity returns has been quite weak. Exhibit 1 shows annual GDP growth vs. annual returns for developed and emerging markets. These plots indicate that there has not been a strong relation between GDP growth and equity returns in the same year. For example, in developed markets country/year combinations2 when GDP growth was positive, the spread in returns was substantial: 323 country/year combinations had returns above 10% while 192 country/year combinations had returns below −10%. We see a similar pattern in realized returns for ...

Capital Markets Update - April 2017

The S&P 500 closed the first quarter with a gain of 6.1%, the best quarterly performance since the fourth quarter of 2015, though the last month of the quarter was basically flat. This marked the sixth straight quarter of positive returns for the U.S. stock market and 16 out of the past 17 quarters have been positive. Also in the first quarter the stock market saw very little volatility. At one point near the end of the quarter, the S&P 500 had gone over 100 trading days without a daily drop of more than 1%. The VIX, which is a measure of volatility recorded its lowest level of volatility since 2006. Internationally, stock prices did even better with the MSCI EAFE Developed Market Index up 7.4% for the quarter, the MSCI Emerging Market Index up 11.5% and the MSCI EAFE Developed Small Cap Index up 8.1%. International returns have trailed the U.S. stock market for the past four years and valuations outside the U.S. are lower. Thus international stock markets could be playing “catch-up&rdquo ...

Capital Markets Update - March 2017

February was another strong month for the U.S. stock market continuing its recent momentum as the S&P 500 increased nearly 4% for the month and is up approximately 6% for the year. The gains so far this year have been almost straight up as during the month of February, the Dow Jones came close to setting a new record of consecutive up days, but stopped at 12, just short of the record, which is 13 days. In addition, the Dow Jones hit 21,000 during the month taking only 24 trading days to move up from Dow 20,000 tying the shortest time period to move up to the next 1,000 level interval. Internationally, stock prices also did well, with the MSCI EAFE Developed Market Index up 4.4% for the year, the MSCI Emerging Market Index up 8.7% and the MSCI EAFE Developed Small Cap Index up 5.9%. Fueling the global stock market rally has been a combination of good corporate earnings reports and optimism that the various initiatives from the Trump administration will help stimulate economic growth. These initia ...

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All First Bank blog information and content is strictly informational. It is not intended to be specific investment, tax, or legal advice. If you need detailed financial, investment, or tax advice, please contact a First Bank qualified professional. Please note, First Bank occasionally shares third-party content we find to be relevant and helpful to our audiences.