THE FED BELIEVES IN THE ECONOMY & THAT’S GOOD ENOUGH FOR INVESTORS! A rate hike in December means that the economy is showing enough strength to justify monetary tightening. After weeks (maybe months?) of flip-flopping, investors welcomed the news of a Fed Fund rate hike with a banner week for stocks that ended Friday November 20th. Looking into the crystal ball Raymond James chief investment strategist Jeffrey Saut said the market will be spurred on during the rest of 2015 by ‘performance anxiety’, that is, underperforming money managers trying to catch up and boost their annual return by buying during a traditional bullish season for equities. History shows, ‘It’s tough to put the equity market down in December.’ Source Barrons.com Vital Signs, The Trader, Vito Rancanelli, 11/21/2015 A hike will put to bed the concern that if the Fed doesn’t raise rates it must know something that investors do not know.
THE FED MINUTES GOT LESS ATTENTION THAN THE MARKET REACTION.
‘The minutes discuss the ‘real rate’-adjusting for inflation-equilibrium interest rate. The Target a ‘O’ percent equilibrium real fed funds rate conforms to what has been dubbed the New Neutral by Pimco to describe the big asset manager’s expectation that interest rates will remain lower for longer. That’s good news for financial assets, especially stocks. If bond yields remain historically low, equities allure is enhanced while corporations can continue to borrow cheaply to finance the return of cash to shareholders via stock repurchases and dividends’ Source Barrons.com Up & Down Wall Street, Randall W. Forsyth. 11/21/2015
ODDS & ENDS
Rebalancing a Portfolio Simply Means to Keep What You Currently Own in the Original Allocation. Financial professionals suggest that you rebalance your investments at least once a year. There are ‘automatic’ programs, through some fee-only or insurance plans, that do this quarterly or semi-annually. A good many ‘old’ financial experts don’t give much thought to rebalancing. Some of the more modern financial resource firms ,such as Morningstar, think rebalancing is essential. The easiest way to rebalance is to sell winners and buy more of the losers.If you started with 60% in equities and 40% in bonds and at the end of the year you have 62% in equities you’ll sell the 2% and buy more bonds. That doesn’t sound like you’re moving much around but ‘experts’ contend that by doing this you’re preventing a catastrophic event somewhere down the road. Old Value Investors say no and that you should sell losers and keep your winners. What works for you? Most all of us would be comfortable keeping our portfolio in the same relative Risk range than worrying about rebalancing. You do this by simply checking the Beta numbers of your investments and making sure they stay within your comfort level. Beta can be found in all investment material or call me for questions.
The Difference Between Growth Funds Versus Value Funds. The Value model looks for large companies with above average cash flows and high dividend yields. Growth stocks look for companies that have increased earnings per share in each year for the past 5 years, and which have a 12- month relative strengths above 70. Most all mutual funds have a combination of both in their mix. It is not unusual to see a Growth stock become a Value stock. There are also companies that ‘confuse’ investors and have characteristics of both Growth & Value. source The Globe and Mail the globeandmail.com 11/20/2015
7 Things You Should Know Before The Fed Hikes Interest Rates:
- Check out mortgages. Now is the time to act.
- Watch for rising Home Equity Lines of Credit that have Variable rates linked to the prime.
- Refinance credit cards before the hike
- Savings accounts and other guaranteed accounts move in lock step with Fed Funds rate.
- Consider a car loan before rates increase.
- Student loans are not affected.
- Stocks and bonds could take a hit.
Source Bankrate.com Michael Giusti. 11/20/2015
The average man in 1960 weighed 166.3 pounds and today weighs 195.5 pounds. The average turkey has also gotten larger.
Robert C. Doll, CFA, Nuveen Asset Management Weekly Commentary November 25, 2015.
- Lower energy prices have historically led to periods of improved economic growth.
- Rising inflation may become an important story in 2016.
- The Paris attack could act as a drag to European growth- specifically trade, travel and consumption.
FLAT IS THE NEW UP!
GOLDMAN SACHS ANALYST PREDICTS 2016 AS A FLAT MARKET.A sobering economic forecast of 2.4% growth versus a previous estimate of 2.8%. On the business side corporate earnings are expected to rise in 2016, says RBC Wealth Management analyst Kelly Bogdanov. ‘We’re not seeing any significant recession risks cropping up now. Employment is solid, the service sector continues to be quite strong, personal income is growing and consumer spending looks good.’ source CBS News. cbsnews.com 11/24/2015
Dividend Investors May Want to Start Investigating Higher Yield Stocks especially those with a consistent track record and long-term strong overall management and shareholder returns. Look for companies that have a history of raising their dividends. The sectors that these higher yielding stocks fit are in the REIT and Oil & Gas Pipeline sectors, for the most part.Call me at 586 295 0430.
WHAT’S IT TAKE FOR THE MARKETS TO REACH NEW HIGHS? BlackRocks’s Russ Koesterich told CNBC’s Future’s Now panel that the S&P 500 Index will continue to trade in sideways and choppy pattern until there is ‘significant evidence of growth; in both the economy and earnings picture. In other words, using the words of Jim Carville, ‘It’s the economy, stupid.’ source CNBC 11/25/2015
Questions call Paul @ 586 295 0430 or write him @ pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.
Securities offered through Westminster Financial Securities, Inc. Member FINRA/SIPC.
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