MARKET WATCH
Sitting here at my desk on the first day of July putting the finishing touches on my account of the first half of the year and attempting to make sense of the various conundrums we face going forward, is an exercise I find quite interesting. Trying to identify the important points on which to focus our attention to achieve the best results for our portfolios and avoiding behaviors based on fear, complacency and euphoria are my highest priorities. Reviewing where we’ve been can help shed some light on where we are heading, insofar as the future growth of our investments is concerned.
As you may remember, the Dow Jones Industrial Average (DJIA*) sprinted to a new record of 26,616.17 on January 26th, experienced a correction and has been in a trading range for most of the year. It concluded the first half of the year at 24,271.41 down 1.81% year to date (YTD). It is also just 8.8% lower than its record close. The S&P 500* also set a new record on January 26th when it closed at 2,872.87 then consequently corrected and has also been range bound for most of the year. It finished the first half of the year at 2,718.37 just 5.4% from its record and up 1.67% YTD. The NASDAQ* has exhibited quite a different pattern as it set a new record on June 20th of 7,781.52 and closed on June 29th at 7,510.30 for an 8.79% YTD return.
Real gross domestic product (GDP) increased at an annual rate of 2.0% in the first quarter of 2018, according to the "third" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.9%. The GDP estimate released June 28th is based on more complete source data than was available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 2.2%. With this third estimate for the first quarter, the general picture of economic growth remains the same, which can be considered a positive for the markets.
At its June meeting, the Federal Open Market Committee (FOMC) voted to raise the target range for the federal funds rate to 1.75% to 2%. After assessing current conditions, the outlook for economic activity, the labor market, and inflation, members indicated that the stance of monetary policy remained accommodative, thereby supporting strong labor market conditions and a sustained return to 2% inflation. Treasury yields finished the first half of the year at 2.73% on the 5 year note, 2.85% on the 10 year note, 2.91% on the 20 year bond and 2.98% on the 30 year bond.
A healthy yield curve has a positive slope and currently, at the close of the first half of the year, the yield curve is dangerously flat. This is one of those conundrums we face. If the yield curve inverts, meaning long term rates are lower than short term rates, this is not a good situation. It usually is a harbinger of recession, however, it is not infallible and there are variations in the length of time between the inversion and an economic downturn. Interest rates are historically low, so increases in the short term rates controlled by the Fed to more “normalized” rates should be a good thing, provided the economy is strong enough to absorb those increased rates. US economic growth seems to be strong, but talk of tariffs and other trade issues could be disruptive. The Chinese stock and cur-rency markets have suffered over the last two weeks as trade tensions have escalated.
The national unemployment rate dipped from 3.9% to 3.8% through May 2018. Unemployment figures for June 2018 will be released on Friday, July 6, 2018. The Labor Force Participation Rate for May 2018 was 62.7%, according to the Bureau of Labor Statistics.
The Labor Force Participation Rate in the United States averaged 62.99% from 1950 until 2018, reaching an all time high of 67.30% in Jan-uary of 2000 and a record low of 58.10% in December of 1954. This seems to indicate there may still be some slack in the overall labor market, even though one of the conundrums we face is a shortage of the highly trained workers needed in certain professions.
While “bull markets don’t die of old age”, and depending on which definition (cyclical v secular) is utilized, this market could continue climbing the proverbial “wall of worry” for quite some time. Meanwhile, caution should be exercised.
OUR PRIVACY POLICY AT JERSEY BENEFITS
At Jersey Benefits Group, Inc. and Jersey Benefits Advisors, we collect and use information from you on applications and other forms as well as information about financial transactions with us and from non-affiliated third parties. This “nonpublic personal information” is obtained in connection with providing a financial product or service to you.
We do not disclose any nonpublic personal information about you without your express consent, except as permitted by law and only to provide services to you. We may disclose the nonpublic personal information we collect to persons or companies that perform services on our behalf for your benefit.
We restrict access to your non-public personal information and only allow disclosures to persons and companies as permitted by law to assist in providing products or services to you. We also maintain physical, electronic and procedural safeguards to protect your nonpublic personal information at all times. If you have any questions or concerns, please feel free to contact me to discuss the them.
Five Do’s & Don’ts that Can Help You Achieve Greater Financial Security
Drawing on the findings of the FINRA Investor Education Foundation's National Financial Capability Study of more than 25,000 American adults, the FINRA Foundation has developed five tips to help consumers both manage their day-to-day financial challenges and build a brighter financial future.
Do Take Advantage of Tax Breaks When Saving for College and Retirement. Try to save for college using tax-advantaged savings accounts such as a 529 plan or Coverdell Education Savings Account. The FINRA Foundation's Study revealed that 41 percent of respondents are setting aside money for their children's college education. Workers should use tax advantaged savings accounts like 401ks to save money on taxes and boost their retirement security. Contributions to a traditional 401k are not subject to income tax withholding and are not included in your taxable wages—and earnings on Roth 401k contributions are tax-free.
Do Your Best to Bust Your Debt. Two out of five Americans (40 percent) we surveyed felt that they have too much debt—regardless of their income. The best way to avoid an endless cycle of credit card debt is to try to pay your credit cards in full and on time. If you have racked up credit card debt, pay it off as quickly as possible. Even if you are unable to pay your whole monthly bill, always pay more than the minimum due, which will reduce the amount of interest you will pay.
Don't Chase Yield. Investors face a difficult investing environment, with low yields on fixed-income investments and an economy on the mend. Some investors may opt to "chase return," meaning they put their assets into riskier and sometimes esoteric products that promise higher yields and returns than they can obtain in more traditional investments. Investors should realize that they could be taking on more risk if they invest in products with higher returns.
Don't be Part of the 34%. We asked Americans if they would be able to come up with $2,000 if an unexpected need arose in the next month, and nearly two in five respondents (34 percent) said they probably or certainly could not. If your finances are unable to withstand an unexpected challenge you are financially fragile. The best way to avoid being financially fragile is to build up rainy day savings in a federally insured savings account.
Do Check Your Credit Report and Score. You need to do both. To obtain credit when needed and avoid identity theft, it is critical to verify whether your credit history is accurate and correct any discrepancies immediately. For your free credit report, call (877) 322-8228 or visit www.AnnualCreditReport.com. While a majority of FINRA Foundation study respondents (60 percent) believe they have above average credit, it’s important to see whether self-assessment is in line with credit scores kept by credit bureaus and other sources. For more information or other investor education articles, go to FINRA’s website at www.FINRA.org.
Company Information
John H. Kaighn offers various products and services under the trade name of Jersey Benefits Advisors.
PO Box 1406
Ocean City, NJ 08270
Phone: (609) 827-0194
Fax: (856) 637-2479
Email: kaighn@jerseybenefits.com
http://jerseybenefits.com
John H. Kaighn is an Investment Advisor Representative and Registered Representative with Signator Investors, Inc. Securities and investment advisory services are offered through Signator Investors, Inc., Member FINRA, SIPC, and a Registered Investment Adviser with the SEC.199-20180409-445706
200 Berkeley Street
Boston, MA 02116
Signator Investors, Inc. is not affiliated with Jersey Benefits Advisors or Jersey Benefits Group, Inc.
Insurance Services and Third Party Administration offered through Jersey Benefits Group, Inc., a licensed Insurance Agency in the State of New Jersey.
PO Box 1406
Ocean City, NJ 08226
Phone: (609) 827-0194
Fax: (856) 637-2479
Email: kaighn@jerseybenefits.com
http://jerseybenefits.com
All opinions expressed in this newsletter are independent of Signator Investors, Inc. and solely those of John H. Kaighn and Jersey Benefits Advisors.
*The S&P 500, the DJIA, the NASDAQ and others referenced are unmanaged indices that are widely used as indicators of market trends. Past performance does not guarantee future results and the performance of these indices does not reflect the fees and charges associated with investing. It is not possible to invest directly in an index.
*Dollar Cost Averaging through a systematic savings plan is an excellent way to build an account without a sizeable initial investment. Saving a portion of our pay each month is very important. Company sponsored pension plans are one method to save and should be used for retirement. Other systematic investment accounts, such as ROTH IRA’s, Traditional IRA’s, Coverdell Accounts, 529 Plans, Brokerage Accounts and Annuities can also be opened, and debited directly from checking or savings accounts. For more information, just call to set up an appointment. Referrals are always welcome.
John H. Kaighn
