Jamin 'Jay' Kirkwood, CFP™, MBA, NSSA Presents:

MONTHLY QUOTE

“The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather a lack of will.”
    

- Vince Lombardi

MONTHLY TIP

Simplify things for your tax preparer or CPA by organizing your financial records into three categories: income statements, expenses and deductions, and investments.

MONTHLY RIDDLE

The world measures them using units of temperature and time, but they have no clocks or heat. What are these two things?

Last month’s riddle:
It cries with no voice,

it bites with no teeth,

it rages with no anger, and it is never seen. What is it?

Last month’s answer:

The wind.

March 2017

THE MONTH IN BRIEF
February was a great month for stocks and a historic month for the Dow Jones Industrial Average. The blue chips closed at record highs for 12 straight trading sessions, a feat unmatched for 30 years. The S&P 500 gained 3.72% for the month. Readings on consumer confidence and purchasing manager indices remained impressive, and a key home price index hit a 30-month high. The latest Consumer Price Index showed mounting inflation pressure, and the Federal Reserve hinted at an oncoming rate move.1,2

DOMESTIC ECONOMIC HEALTH
In January, inflation spiked to a degree unseen in nearly five years as the Consumer and Producer Price Indexes both rose 0.6%. The CPI’s monthly gain was its largest since March 2012, and the PPI’s advance was its greatest since September 2012. Yearly consumer inflation reached 2.5%, a 4-year peak; annualized wholesale inflation rose to 1.6%.3,4

It was little wonder, then, that the Federal Reserve considered the possibility of another rate hike. Minutes from its January 31-February 1 meeting revealed that “many participants” in the Federal Open Market Committee felt a quarter-point move might be warranted “fairly soon” if the labor market showed further strength and inflation pressure held. Would March be too early for an interest rate adjustment? After the minutes were released, market expectations put the chance of a March move at less than 25%, but that jumped to 50% by the end of the month.1,5

Both purchasing manager indices maintained by the Institute for Supply Management were above the 55 level in January: ISM’s factory gauge improved 1.5 points to 56.0, and its services index ticked down but a tenth of a point to 56.5. Factory orders were up 1.3% for January, partly countering December’s 2.3% fall. The first month of 2017 also saw a 1.8% gain in hard goods orders. Industrial output tapered off by 0.3% in January after a (revised) increase of 0.6% in December.6,7

Hiring picked up in January as firms added 227,000 net new workers, compared with (a revised) 157,000 in December. Both the U-3 and U-6 jobless rates went north, however: the former ticked up 0.1% to 4.8%; the latter increased 0.2% to 9.4%. The average wage rose 0.1%.6

Consumers remained upbeat. Analysts polled by MarketWatch projected the Conference Board’s consumer confidence index to rise to 112.0 in February, but it hit 114.8 instead (a gain of 3.2 points). As for the University of Michigan’s consumer sentiment index, it went from 98.5 at the end of January to an initial February mark of 95.7, then a final February reading of 96.3.6,7

Households were spending freely, at least according to two critical indicators. Retail sales advanced 0.4% in January, with core retail purchases up 0.8%. Personal spending had risen 0.5% in December; personal incomes, 0.3%. January figures had yet to be released as February ended. Meanwhile, the Bureau of Economic Analysis made its second estimate of Q4 growth, and the number stayed the same: 1.9%.6,7

By executive order, President Donald Trump scheduled a review of the Dodd-Frank Act, calling for significant alterations to the financial regulations it imposed. The Trump administration seeks to improve borrowing conditions for businesses by overhauling large portions of the legislation.8

GLOBAL ECONOMIC HEALTH
With the Trans-Pacific Partnership collapsing, representatives from 16 Asia-Pacific countries – including China – met in late February to discuss an alternative. The Regional Comprehensive Economic Partnership could forge an eventual trade accord between Australia, Brunei, Cambodia, China, India, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. Prior to last month’s RCEP talks in Kobe, Japan, Japanese Prime Minister Shinzo Abe had stated that he hoped President Trump would reconsider the U.S. withdrawal from the TPP.9

New European Commission data showed that the economies of all 28 European Union member nations grew in 2016. Growth across the E.U. had not happened since 2007. The Commission forecasts inflation-adjusted economic expansion of 1.8% for the E.U. in both 2017 and 2018, and it also believes the region’s jobless rate will hit an 8-year low before 2017 ends. Euro area annualized inflation jumped 0.7% in January to 1.8%. A year earlier, yearly inflation was at just 0.3%.10,11

WORLD MARKETS
With exceptions, February was a good month for stock benchmarks. The major exception was the Russian Micex, which sank 10.16%. Japan’s Nikkei 225 gave back 1.79%; Canada’s TSX Composite, 1.13%; and Mexico’s Bolsa, 1.19%.12

Now, the gains. Brazil’s Bovespa rose 1.25%; the United Kingdom’s FTSE 100, 1.10%; the FTSE Eurofirst 300, 0.82%; France’s CAC 40, 0.38%; Spain’s IBEX 35, 0.54%; and Germany’s DAX, 0.17%. Hong Kong’s Hang Seng gained 1.63%; China’s Shanghai Composite, 2.64%; The South Korean KOSPI added 0.39%; the Indian Sensex, 3.09%. MSCI’s World Index went north 2.58% for the month, while its Emerging Markets index climbed 2.99%.12,13

COMMODITIES MARKETS

Oil ended February at precisely $54.00 on the NYMEX, rising 2.27% during the month. Gold gained 3.15%, concluding February at a COMEX price of $1,248.80. Beyond oil and gold, some other marquee commodities advanced nicely.14

Finishing February at $18.30, silver improved 4.21%. The price of platinum rose 3.22%; although, the value of copper slipped 0.48%. Heating oil futures added 1.60%; unleaded gasoline, a striking 12.52%. Natural gas futures plummeted 11.59%. Corn futures rose 1.60%, but soybeans (-0.83%), wheat (-0.77%), coffee (-6.65%), sugar (-6.41%), and cocoa (-3.59%) were among the ag losers.14

REAL ESTATE
Prices were rising. Supply was tight. Who expected the pace of home buying to pick up in January? It did, though. The National Association of Realtors said that existing home sales rose 3.3%, while Census Bureau data pointed out a 3.7% advance for new home sales. The 12-month numbers were also strong: new home sales, +5.5%; resales, +3.8%. Demand simply overcame other factors. The latest S&P/Case-Shiller home price index (December) affirmed that this winter was a good time to sell: home values had risen 5.8% across the country’s 20 largest cities during 2016, taking the index to a two-and-a-half-year peak.15,16

In contrast, pending home sales fell off in the first month of the year – the NAR reported a 2.8% drop. Mortgage rates descended a bit during February: the average interest on a conventional home loan declined 0.03% to 4.16% between January 26 and February 23, according to Freddie Mac. Freddie’s Primary Mortgage Market Survey showed similar small retreats for average interest rates on 15-year FRMs (down 0.03% to 3.37%) and 5/1-year ARMs (down 0.04% to 3.16%).7,17 

As for construction activity, the Census Bureau said that housing starts slipped 2.6% for January after December’s 11.3% gain; building permits rose 4.6%, complementing their 1.3% advance a month earlier.6

LOOKING BACK…LOOKING FORWARD
As the S&P 500 advanced 3.72% last month, the Dow Industrials gained 4.77%, and the Nasdaq Composite, 3.75%. Their respective February 28 closes: S&P, 2,363.64; Dow, 20,812.24; Nasdaq, 5,825.44. February was also a solid month for the small caps – the Russell 2000 added 1.83% to go up 2.18% on the year, finishing out the month at 1,386.68. The CBOE VIX rose 7.76% on the month to a February 28 settlement of 12.92; that still left it down 7.98% YTD.1,2

Sources: wsj.com, bigcharts.com, treasury.gov – 2/28/171,2,18,19,20

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

Some analysts look at the current rally in terms of irrational exuberance, while others wonder if the next phase of a historic mega-bull might be unfolding. The market will cool off at some point, that we know. Will we see that point in March? Wall Street’s confidence is such that it could probably take a quarter-point rate hike in stride this month, should one happen. So far in 2017, investors haven’t been ruffled by much – not the disconnect between a stock market at record highs and 2% economic growth, not the P/E ratio of 21 on the Dow as February ended. Will their confidence send the blue chips even higher this month? March promises to be interesting and, perhaps, historic.21

UPCOMING ECONOMIC RELEASES: The roll call of major scheduled items for the rest of March starts with February factory orders (3/6) and then includes February’s ADP payrolls report (3/8), the February jobs report from the Department of Labor (3/10), the February PPI (3/14), a Federal Reserve policy decision, the February CPI and February retail sales figures (3/15), the Census Bureau’s latest data on groundbreaking and building permits (3/16), the initial March University of Michigan consumer sentiment index and February industrial output (3/17), February existing home sales (3/22), February new home sales (3/23), February hard goods orders (3/24), the March Conference Board consumer confidence index (3/28), February pending home sales (3/29), the third estimate of Q4 GDP (3/30), and the final March University of Michigan consumer sentiment index, the February PCE price index, and data on February personal income and personal spending (3/31).

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<<RepresentativeDisclosure>>

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The MICEX 10 Index (Russian: Индекс ММВБ10) is an unweighted price index that tracks the ten most liquid Russian stocks listed on MICEX-RTS in Moscow. Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE).  The Nikkei average is the most watched index of Asian stocks. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Mexican Stock Exchange, commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The Bovespa Index is a gross total return index weighted by traded volume & is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The FTSE Eurofirst 300 measures the performance of Europe's largest 300 companies by market capitalization and covers 70% of Europe's market cap. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain's principal stock exchange. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The MSCI World Index is a free-float weighted equity index that includes developed world markets, and does not include emerging markets. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 - marketwatch.com/story/us-stocks-struggle-to-resume-record-run-as-traders-wait-for-trumps-speech-2017-02-28/ [2/28/17]

2 - markets.wsj.com/ [2/28/17]

3 - reuters.com/article/us-usa-economy-idUSKBN15U1NB [2/15/17]

4 - tradingeconomics.com/united-states/producer-prices [2/17/17]

5 - cnbc.com/2017/02/22/fed-minutes-trump-policies-could-lead-to-rate-hike-fairly-soon.html [2/22/17]

6 - investing.com/economic-calendar/ [2/28/17]

7 - marketwatch.com/economy-politics/calendars/economic [2/28/17]

8 - nytimes.com/2017/02/03/business/dealbook/trump-congress-financial-regulations.html [2/3/17]

9 - seattletimes.com/business/asia-economies-hold-trade-pact-talks-after-trump-dumps-tpp/ [2/26/17]

10 - qz.com/909088/for-the-first-time-in-a-long-time-every-eu-economy-is-growing-at-the-same-time/ [2/14/17]

11 - ec.europa.eu/eurostat [2/28/17]

12 - markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp [2/28/17]

13 - msci.com/end-of-day-data-search [2/28/17]

14 - money.cnn.com/data/commodities/ [2/28/17]

15 - constructiondive.com/news/new-home-sales-rebound-in-january-as-demand-solidifies/436867/ [2/24/17]

16 - cnbc.com/2017/02/28/us-home-prices-rise-56-in-december-sp-corelogic-case-shiller.html [2/28/17]

17 - freddiemac.com/pmms/archive.html?year=2017 [2/28/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F29%2F16&x=0&y=0 [2/28/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F29%2F16&x=0&y=0 [2/28/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F29%2F16&x=0&y=0 [2/28/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F28%2F12&x=0&y=0 [2/28/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F28%2F12&x=0&y=0 [2/28/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F28%2F12&x=0&y=0 [2/28/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F28%2F07&x=0&y=0 [2/28/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F28%2F07&x=0&y=0 [2/28/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F28%2F07&x=0&y=0 [2/28/17]

19 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [2/28/17]

20 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [2/28/17]

21 - thehill.com/blogs/pundits-blog/finance/321267-the-bull-market-is-still-riding-high-on-optimism-how-long-will-it [2/27/17]

Jamin 'Jay' Kirkwood, CFP™, MBA, NSSA Presents:

MONTHLY QUOTE

“But in this world nothing can be said to be certain, except death and taxes.”
    

- Ben Franklin

MONTHLY TIP

If you are a high earner, living below your means can free up money you can use for investing or an emergency fund. Try tracking your spending this year; see where you could cut back and find money to save or invest toward your goals.

MONTHLY RIDDLE

It cries with no voice,

it bites with no teeth,

it rages with no anger, and it is never seen. What is it?

Last month’s riddle:
When Mae was 2 years old, her sister was half her age. Today Mae is 100 years old, so how old is her sister now?

Last month’s answer:

99 years old. Half of 2 is 1, 2 + 98 = 100, and 1 + 98 = 99.

February 2017

THE MONTH IN BRIEF
Stocks advanced again in January. The Dow Jones Industrial Average closed above 20,000 for the first time, and the S&P 500 gained 1.79% on the month. As January ended, politics took center stage: investors focused first on the controversy surrounding President Donald Trump’s executive orders, then on earnings and economic indicators. As the forex market sensed that the new administration might prefer a weaker currency, the dollar stumbled. Growing haven demand sent prices of metals higher, while prices of energy futures fell. Consumer confidence plateaued at a high level, while home sales declined. While the latest consumer spending report was solid, the first estimate of fourth-quarter growth was unimpressive.1

DOMESTIC ECONOMIC HEALTH
Was 2016 really the poorest year for U.S. economic growth since 2011? Yes, according to the Bureau of Economic Analysis. It said that the economy expanded 1.9% in Q4, which means our GDP was only 1.9% for the whole year. It appears 2016 will be recorded as the eleventh straight year in which our economy grew less than 3%.2

The manufacturing and service sectors kept growing in December. Data from the Institute for Supply Management’s purchasing manager indices showed the pace of expansion picking up for the factory sector – that PMI improved 1.5 points to 54.7. The service sector PMI remained in good shape at a mark of 57.2. Industrial output rose 0.8% for December; hard goods orders fell 0.4% in that month, but actually rose 1.7% minus defense orders.3,4

Consumer spending was strong in December. The latest Department of Commerce report showed personal spending rising 0.5% and personal incomes 0.3% in the last month of 2016. (A month earlier, spending had advanced 0.2%, and incomes, 0.1%.) Retail sales grew 0.6% in December, but were flat minus gas and auto sales.4

The Department of Labor’s December employment report underwhelmed some analysts. Employers added 156,000 net new jobs to their payrolls, which left total 2016 hiring growth at 2.2 million – the lowest yearly figure since 2011. On the bright side, hourly wages averaged $26.00, thanks to a 2.9% annualized increase, the best seen since June 2009. The U-3 unemployment rate was at 4.7%; the U-6 rate counting underemployment, at 9.2%.5

Two respected consumer confidence gauges went opposite ways in January. Falling 1.5 points to 111.8, the Conference Board’s index remained at a high level. The University of Michigan’s consumer sentiment index finished January at a solid reading of 98.5, rising slightly from its preliminary mark of 98.1.4

By one measure, consumer inflation was rising. The Consumer Price Index showed a 2.1% yearly advance in December, up from 1.7% a month earlier. In contrast, the Federal Reserve’s preferred inflation gauge, the core PCE price index, showed yearly inflation at 1.7%. Meanwhile, the headline Producer Price Index rose 0.3% in December, to bring its 2016 advance to 1.6%.4

President Trump signed a number of executive orders during his first ten days in office, including an order that temporarily prohibited citizens of seven predominantly Muslim countries from entering the United States. Foreign governments, tech firms, and some Wall Street market participants pondered the long-term effects of the order. Another executive order stated that for every new regulation implemented by a federal agency during Trump’s administration, two regulations would have to be revoked. A third, widely expected executive order took the U.S. out of the Trans-Pacific Partnership.6

GLOBAL ECONOMIC HEALTH
At long last, the European Central Bank met its inflation target: in December, euro area consumer prices rose at an annualized pace of 1.8%. That was the most inflation seen in the euro area since Q1 2013. (As recently as May, the region had year-over-year deflation.) Core inflation, however, was still under 1% in December. January ended with Eurostat, the European Union’s statistics agency, announcing Q4 euro area economic expansion of 0.5%, the best in three quarters.7

On January 17, U.K. Prime Minister Theresa May released a 12-point plan to invoke Article 50 of the EU Treaty and begin the Brexit process in March. A week later, the U.K.’s high court ruled that Parliament had to vote to permit this. Assuming Parliament greenlights the plan, the precise terms of the Brexit must still be determined, and Parliament must vote on them as well. Parliamentary approval of those terms would mean a softer Brexit; parliamentary disapproval would mean a hard Brexit, with the U.K. having to renegotiate trade deals, treaties, and immigration laws with other European nations.8

America’s departure from the Trans-Pacific Partnership could be a boon for China, and it may also significantly impact the economies of other Asian nations. The economy of the P.R.C., which grew at the slowest pace in a quarter-century in 2016, could presently benefit from the adoption of the 16-nation Regional Comprehensive Economic Partnership treaty, a TPP alternative that excludes the U.S. If America puts protectionist measures into place, increased trade with China would help the economies of Indonesia, Malaysia, Vietnam, Thailand, and the Philippines, which all send 10% or more of their exports here.9,10

WORLD MARKETS
Key emerging market benchmarks had declined in the weeks after Donald Trump’s presidential election victory, but they rallied in January. India’s Sensex added 3.87%; Argentina’s MERVAL, 10.99%. South Korea’s KOSPI gained 2.03%. Brazil’s Bovespa was up 7.41% for the month. Hong Kong’s Hang Seng improved 6.18%, while the MSCI Emerging Markets index rose 5.45%. As for China’s Shanghai Composite, it gained 1.17%.11,12

December brought major gains for the key European indices, but they mostly went sideways or negative in January. The FTSE Eurofirst 300 declined 0.49%. France’s CAC 40 fell 2.33%; Russia’s Micex, 0.69%; Great Britain’s FTSE 100, 0.61%; and Spain’s IBEX 35, 0.39%. Germany’s DAX benchmark stood out with a 0.47% advance. To round out the global data, the MSCI World rose 2.35%; Canada’s TSX Composite, 0.64%. Japan’s Nikkei 225 lost 0.38%; Australia’s All Ordinaries, 0.77%.11,12

COMMODITIES MARKETS

In December, energy futures soared while metals stumbled; in January, the inverse occurred. Gold and silver, respectively, advanced 5.07% and 10.50% last month. That took gold to a January 31 settlement of $1,209.80 on the COMEX, while silver closed out the month at $17.57. Meanwhile, platinum gained 8.66%, and copper, 8.80%. January was also a fine month for ag futures: cocoa slipped 2.15%, but coffee rose 8.92%; corn, 2.35%; cotton, 4.94%; soybeans, 2.68%; sugar, 4.10%; and wheat, 1.77%.13

Across the energy patch, there were broad losses. Natural gas fell hardest, dropping 16.21%. Unleaded gasoline gave back 6.97%; heating oil, 4.75%; and light sweet crude, 1.97%. Oil was at $52.84 on the NYMEX when the closing bell rang on January 31. The U.S. Dollar Index slid 2.54% during the month to close at 99.60 as January ended.1,13

REAL ESTATE
The latest reports from the Census Bureau and the National Association of Realtors showed that both new and existing home sales had retreated in December. The pace of new home buying tumbled 10.4% while resales fell 2.8%. The year-over-year numbers? New home sales rose 12.2% in 2016; resales, 0.7%. Why such a tiny increase in resales for 2016? Some prospective homeowners had a hard time finding anything suitable to buy as the year went on. The NAR said that the total existing home inventory in December was the smallest seen in this century. (In fact, inventory had shrunk 6.3% in 12 months.) Its report showed the median sale price of an existing home at $232,200 in December.14,15

Pending home sales did rise 1.6% for December after a 2.5% November fall, the NAR noted. The annual gain for the S&P/Case-Shiller home price index improved 0.2% in November to 5.3%. Housing starts rose 11.3% in December, while permits for new construction declined 0.2%, the Census Bureau stated.4

Another factoid from last year deserves mention. During 2016, interest on a conventional home loan averaged 3.65%, the lowest number recorded by Freddie Mac since it began tracking rates in 1971.14

In January, mortgage rates were notably higher than that – but as Freddie Mac data reveals, they still declined month-over-month. Between December 29 to January 26, the average interest rate on the 30-year FRM fell 0.13% to 4.19%. Average interest rates on the 15-year FRM and the 5/1-year ARM, respectively, decreased 0.15% and 0.10% over the same period to 3.40% and 3.20%.16,17

LOOKING BACK…LOOKING FORWARD
The post-election rally fizzled as the month ended, leading to these January 31 closes: Dow Jones Industrial Average, 19,864.09; S&P 500, 2,278.87; Nasdaq Composite, 5,614.79; Russell 2000, 1,361.82. Unlike the big three, the Russell took a January loss, slipping 0.35%. The CBOE VIX was also a January loser, down 14.74% to a month-end close of 11.99. With a 16.36% January gain, the PHLX Gold/Silver index outperformed all other consequential U.S. indices.1

Sources: barchart.com, bigcharts.com, treasury.gov – 1/31/171,18,19,20

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

January ended with the bulls a little unsure of themselves. Wall Street and foreign stock markets reacted negatively. It is worth noting that stock market retreats have been common in the first February of a new presidency. The S&P 500 has had a median return of -1.47% in such Februarys over the last 50 years, advancing in only 42% of them. Then again, past performance is no guarantee of future results, and the six months from November to April traditionally trend bullish. If stocks do waver in February, it may not foretell how the market will behave for the rest of the year or even for March.21

UPCOMING ECONOMIC RELEASES: The list of major news items appearing across the balance of February: the January Labor Department jobs report, data on January factory orders, and the latest ISM service sector PMI (2/3), the preliminary February University of Michigan consumer sentiment index (2/10), the January PPI (2/14), January industrial output and retail sales, plus the January CPI (2/15), January housing starts and building permits (2/16), January existing home sales (2/22), the final February University of Michigan consumer sentiment index and January new home sales (2/24), January capital goods orders and pending home sales (2/27), and the December S&P/Case-Shiller home price index, the Conference Board’s monthly consumer confidence index, and the federal government’s second estimate of Q4 growth (2/28). January personal spending figures and the January PCE price index will be released on March 1.

Please feel free to forward this article to family, friends or colleagues.
If you would like us to add them to our distribution list, please reply with their address.
We will contact them first and request their permission to add them to our list.

<<RepresentativeDisclosure>>

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The MERVAL Index (MERcado de VALores, literally Stock Exchange) is the most important index of the Buenos Aires Stock Exchange. The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. The Bovespa Index is a gross total return index weighted by traded volume & is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The FTSE Eurofirst 300 measures the performance of Europe's largest 300 companies by market capitalization and covers 70% of Europe's market cap. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The MICEX 10 Index (Russian: Индекс ММВБ10) is an unweighted price index that tracks the ten most liquid Russian stocks listed on MICEX-RTS in Moscow. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain's principal stock exchange. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The MSCI World Index is a free-float weighted equity index that includes developed world markets, and does not include emerging markets. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Mexican Stock Exchange, commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. The All Ordinaries (XAO) is considered a total market barometer for the Australian stock market and contains the 500 largest ASX-listed companies by way of market capitalization. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. The Philadelphia Gold and Silver Index is an index of thirty precious metal mining companies that is traded on the Philadelphia Stock Exchange. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 - barchart.com/stocks/indices.php?view=performance [1/31/17]

2 - thestreet.com/story/13969585/1/stocks-mixed-after-u-s-gdp-shows-mediocre-end-to-2016.html [1/27/17]

3 - instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm [1/5/17]

4 - investing.com/economic-calendar/ [1/31/17]

5 - blogs.wsj.com/briefly/2017/01/06/december-jobs-report-the-numbers-3/ [1/6/17]

6 - thehill.com/policy/finance/overnights/317002-overnight-finance-trump-signs-2-for-1-order-for-regs-dems-block [1/30/17]

7 - bloomberg.com/news/articles/2017-01-31/euro-area-inflation-surges-to-1-8-intensifying-ecb-debate [1/31/17]

8 - cnn.com/2017/02/01/europe/uk-brexit-bill-debate/ [2/1/17]

9 - smh.com.au/world/china-eyes-opportunity-as-us-pulls-out-of-transpacific-partnership-20170123-gtxbi1.html [1/27/17]

10 - bloomberg.com/politics/articles/2017-01-31/trump-trade-risk-to-next-asian-economic-tigers-seen-in-indonesia [1/31/17]

11 - markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp [1/31/17]

12 - msci.com/end-of-day-data-search [1/31/17]

13 - money.cnn.com/data/commodities/ [1/31/17]

14 - usatoday.com/story/money/2017/01/26/new-home-sales-prices-mortgage-rates/97081430/ [1/26/17]

15 - inman.com/2017/01/31/decembers-numbers-hows-real-estate-market-looking/ [1/31/17]

16 - freddiemac.com/pmms/archive.html?year=2016l [1/31/17]

17 - freddiemac.com/pmms/archive.html?year=2017 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F1%2F16&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F1%2F16&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F1%2F16&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F31%2F12&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F31%2F12&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F31%2F12&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F31%2F07&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F31%2F07&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F31%2F07&x=0&y=0 [1/31/17]

19 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [1/31/17]

20 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/31/17]

21 - schaeffersresearch.com/content/bgs/2017/01/31/how-to-trade-the-tricky-month-of-february [1/31/17]

Jamin 'Jay' Kirkwood, CFP™, MBA, NSSA Presents:

MONTHLY QUOTE

“It is the dull man who is always sure, and the sure man who is always dull.”
    

- H.L. Mencken

MONTHLY TIP

What is the easiest way to create a college fund? For the typical family, it might be simply arranging automatic contributions to a tax-advantaged college savings account, starting when the child is born.

MONTHLY RIDDLE

When Mae was 2 years old, her sister was half her age. Today Mae is 100 years old, so how old is her sister now?

Last month’s riddle:
It is not alive. It asks you no questions. Yet now and then, it demands an answer from you. What is it?

Last month’s answer:

Your phone.

January 2017

THE MONTH IN BRIEF
While the Dow Jones Industrial Average did not top 20,000 in December, it did advance nicely, gaining 3.34%. The Federal Reserve took its interest rate target to 0.50-0.75%, adjusting the federal funds rate for just the second time in two years; around the world, other central banks held rates steady, and one even pledged additional easing. Oil prices jumped. Closely watched consumer confidence and purchasing manager indices rose, and unemployment declined. Home sales improved even as mortgage rates neared highs unseen since 2011. Wall Street and Main Street seemed optimistic about the economy’s future.1,2

DOMESTIC ECONOMIC HEALTH
The Fed adjusted its dot-plot for the next three years as it raised the benchmark interest rate by a quarter-point in December. Its latest forecast projects two to three rate hikes per year through 2019, with three occurring this year. Fed policymakers see the economy expanding 2.1% in 2017.2

Employers grew their payrolls by 178,000 net new hires in November, noted the Department of Labor’s latest jobs report. Unemployment dropped 0.3% to 4.6%; the jobless rate was last that low in August 2007. (The broader U-6 rate, which also counts the underemployed, declined 0.2% to 9.3%, the lowest figure since April 2008.) The average hourly wage was $25.89, up 2.5% in the past year.3

The Institute for Supply Management’s manufacturing purchasing managers index gained 1.3 points in November, moving up to 53.2. ISM’s service sector PMI also improved, coming in at 57.2, 2.4 points above its October level. (In fact, this was the best reading for the service sector PMI in 13 months.)4,5

Speaking of goods and services, the month ended with the federal government’s final assessment of third-quarter growth: 3.5%. Hard good orders, however, fell 4.6% in November, 6.6% with defense orders subtracted; industrial output was off 0.4% in the eleventh month of the year.6,7

The Fed’s core PCE price index was flat for November and showed a 1.6% yearly advance. Both the headline and core Consumer Price Index rose 0.2% for November; in contrast, the headline and core Producer Price Index each rose 0.4%.6,7

The Conference Board’s monthly index of consumer confidence jumped to 113.7 in December, rising 4.3 points. The year’s final University of Michigan household sentiment index came in slightly higher at a reading of 98.2.4,6 

Household confidence aside, November’s personal spending and retail sales numbers were run-of-the-mill. The Department of Commerce stated that consumer spending rose a modest 0.2% in November, while retail purchases were up but 0.1%, 0.2% with auto sales factored out. Personal incomes were flat.6,7

GLOBAL ECONOMIC HEALTH
China’s official purchasing managers index showed a fifth consecutive month of factory growth in December; though, the 51.4 mark was 0.3 points below the November reading. Greater infrastructure spending and increased home construction in the PRC helped Chinese manufacturing sustain its pace in the second half of the year; although, factory output moderated slightly in December. The Bank of Japan left its key interest rate in negative territory last month, a reassuring decision for investors in the Asia-Pacific region.8,9

The European Central Bank announced an extension of its bond-purchase program through December 2017. The caveat was that the ECB would trim the monthly amount of those purchases, starting in March, from €80 billion to €60 billion. Eurozone inflation was just 0.6% in the year’s last report, with the most recent data (Q3) putting economic growth at 0.3%. Italian prime minister Matteo Renzi resigned early in December after the effort of his Democratic Party to change Italy’s constitution was rejected by voters. That happened just as it appeared the country’s third-largest bank would need a bailout. As banking problems continued, observers wondered if the tenure of his replacement, Paolo Gentiloni, would be short.10,11

WORLD MARKETS
Major European stock indices rallied their way toward 2017 in December. Out in front, Germany’s DAX advanced 7.90%. Going clockwise around the continent from there, Russia’s Micex gained 6.07%; France’s CAC 40, 6.20%; and Spain’s IBEX, 7.64%. Across the English Channel, the U.K.’s FTSE 100 gained 5.29%.12

The Hang Seng and Shanghai Composite suffered some large December losses. The former fell 3.46%; the latter, 4.51%. Argentina’s MERVAL slipped 3.01% for the month; Brazil’s Bovespa, 1.24%. December brought nice gains for some other indices in the Americas and the Asia-Pacific region, however. The Nikkei 225 rose 4.40%; the Australian All Ordinaries, 3.94%; the South Korean KOSPI, 2.43%. Just north of us, the TSX Composite added 1.36%; to our south, the Bolsa advanced 0.72%. India’s Sensex was essentially flat, off just 0.10% for the month. As for notable regional and multinational benchmarks, the FTSE Eurofirst 300 rose 5.74%; the MSCI World, 2.29%. The MSCI Emerging Markets fell just 0.06%.12,13

COMMODITIES MARKETS

With OPEC nations set to reduce output, the price of oil was poised to rise – and rise it did. Crude finished the month at $53.89 on the NYMEX, gaining 10.02% in December. How much did oil advance in 2016? 46.12%. Other marquee energy futures had large December gains: heating oil rose 10.79%; natural gas, 11.89%; and unleaded gasoline, 12.85%. The major crop futures mostly lost ground – cotton slipped 1.30%; sugar, 1.51%; soybeans, 2.81%; coffee, 6.85%; and cocoa, 11.22%. Wheat and corn were exceptions. The former commodity gained 6.84%; the latter, 4.16%.14

December was not a good month for metals. Gold closed the year at $1,152.00 on the COMEX, losing 1.74%; silver futures declined 3.25% to end 2016 at $15.96. Across 2016, gold gained 7.18%, and silver, 15.04%. Copper lost 4.67% in December; platinum, 0.77%.14

REAL ESTATE
On the final Friday of 2016, Bloomberg found the average interest rate on a 30-year fixed rate mortgage at 4.09%, approaching a five-year high. A day earlier (December 29), Freddie Mac’s Primary Mortgage Market Survey measured an average of 4.32%, up from 4.08% on December 1. Freddie also charted the following December rises for other key home loan varieties: 5/1-year ARM, 3.15% to 3.30%; 15-year FRM, 3.34% to 3.55%.15,16

The latest data indicated that home sales had picked up in November. Resales increased 0.7% to an annual pace of 5.61 million units, according to a report from the National Association of Realtors. New home buying jumped 5.2% in the eleventh month of 2016 by the measure of the Census Bureau. As for home prices, the October edition of the S&P/Case-Shiller home price index showed a 5.6% year-over-year gain, as opposed to 5.4% in September.4,6

Looking to the near future in the housing market, the NAR reported a 2.5% drop in pending home sales in November following the 0.1% increase for October. Permits for new projects fell 4.7% in November as fall ebbed into winter; groundbreaking declined 18.7%.4,6

LOOKING BACK…LOOKING FORWARD
On December 30, the most-watched U.S. indices closed out the year at the following levels: Dow Jones Industrial Average, 19,762.60; S&P 500, 2,238.83; NASDAQ Composite, 5,383.12; Russell 2000, 1,357.13; CBOE VIX, 14.04. Here are the monthly gains that took them to those levels: DJIA, 3.34%; S&P, 1.82%; NASDAQ, 1.12%; RUT, 2.63%; VIX, 5.33%. The S&P GSCI commodity index was the December front-runner on Wall Street, rising 5.56%. Defying the naysayers, the stock market performed quite respectably last year.1

Sources: barchart.com, bigcharts.com, treasury.gov – 12/30/161,17,18,19

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

Could the bull run slow to a trot this month? Or will the Dow rise above 20,000? Entering 2017, there are some factors that could certainly provide a tailwind for the bull market. If consumer confidence remains high, and employment and wage data continues showing improvement, this bodes well for consumer spending and, by extension, near-term corporate earnings. If infrastructure spending ramps up this year, the resulting job growth could also foster wage growth. So, while this current bull market is one of the longest, bullish sentiment has definitely increased, and January could be another month of gains for the major U.S. indices.

UPCOMING ECONOMIC RELEASES: The list for the rest of January includes the December ISM service sector PMI and Challenger job cut report (1/5); the Department of Labor’s December jobs report and data on November factory orders (1/6); the December PPI, December retail sales, and the initial January University of Michigan consumer sentiment index (1/13); a new Federal Reserve Beige Book, the December CPI, and December industrial output (1/18); December housing starts and building permits (1/19); December existing home sales (1/24); December new home sales (1/26); the first estimate of Q4 growth, January’s final University of Michigan consumer sentiment index, and December hard goods orders (1/27); the December PCE price index, December consumer spending, and December pending home sales (1/30); and, lastly, the January consumer confidence index from the Conference Board and the November S&P/Case-Shiller house price index (1/31).

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<Disclosure>

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The MICEX 10 Index (Russian: Индекс ММВБ10) is an unweighted price index that tracks the ten most liquid Russian stocks listed on MICEX-RTS in Moscow. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain's principal stock exchange. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The MERVAL Index (MERcado de VALores, literally Stock Exchange) is the most important index of the Buenos Aires Stock Exchange. The Bovespa Index is a gross total return index weighted by traded volume & is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. The All Ordinaries (XAO) is considered a total market barometer for the Australian stock market and contains the 500 largest ASX-listed companies by way of market capitalization. The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Mexican Stock Exchange commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The FTSE Eurofirst 300 measures the performance of Europe's largest 300 companies by market capitalization and covers 70% of Europe's market cap. The MSCI World Index is a free-float weighted equity index that includes developed world markets, and does not include emerging markets. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. The S&P GSCI is the first major investable commodity index; it is one of the most widely recognized benchmarks that is broad-based and production weighted to represent the global commodity market beta. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 - barchart.com/stocks/indices.php?view=performance [12/30/16]

2 - cnbc.com/2016/12/14/fed-raises-rates-for-the-second-time-in-a-decade.html [12/14/16]

3 - blogs.wsj.com/briefly/2016/12/02/november-jobs-report-the-numbers-3/ [12/2/16]

4 - marketwatch.com/economy-politics/calendars/economic [12/30/16]

5 - instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm [12/5/16]

6 - investing.com/economic-calendar/ [1/1/17]

7 - briefing.com/investor/calendars/economic/2016/12/12-16 [12/16/16]

8 - channelnewsasia.com/news/business/growth-in-china-s-factories-services-slows-in-december-official/3406468.html [12/31/16]

9 - cnbc.com/2016/12/19/asian-markets-to-focus-on-boj-decision-rba-minutes-and-currencies.html [12/19/16]

10 - orlandosentinel.com/business/sns-bc-eu--europe-economy-20161208-story.html [12/8/16]

11 - nytimes.com/2016/12/14/world/europe/italy-paolo-gentiloni.html [12/14/16]

12 - markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp [12/30/16]

13 - msci.com/end-of-day-data-search [12/30/16]

14 - money.cnn.com/data/commodities/ [12/30/16]

15 - fool.com/mortgages/2016/12/30/with-trump-reflation-mortgage-rates-end-2016-near.aspx [12/30/16]

16 - freddiemac.com/pmms/archive.html?year=2016l [12/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F30%2F11&x=0&y=0 [12/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F30%2F11&x=0&y=0 [12/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F30%2F11&x=0&y=0 [12/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F29%2F06&x=0&y=0 [12/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F29%2F06&x=0&y=0 [12/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F29%2F06&x=0&y=0 [12/30/16]

18 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [12/30/16]

19 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [12/30/16]

Jamin 'Jay' Kirkwood, CFP™, MBA, NSSA Presents:

MONTHLY QUOTE

“Everything is vague to a degree you do not realize till you have tried to make it precise.”
    

- Bertrand Russell

MONTHLY TIP

A durable power of attorney is a vital estate planning tool, especially for a business owner. If an owner becomes incapacitated and there is no power of attorney in place, a court may appoint a guardian to manage his or her company, someone who might be far from that owner’s first choice.

MONTHLY RIDDLE

It is not alive. It asks you no questions. But now and then, it demands an answer from you. What is it?

Last month’s riddle:
If you carry my burden, you will never stand or lie on your back. While I am not rich, I leave a silvery track. What am I?

Last month’s answer:

A snail.

December 2016

THE MONTH IN BRIEF
November was certainly newsworthy, presenting investors with three historic moments. First, Donald Trump won the presidency in a stunning upset that confounded political analysts. Next, the stock market rallied spectacularly after receiving that unanticipated news – the Dow Jones Industrial Average repeatedly closed at all-time peaks, advancing 5.41% on the month. Finally, OPEC nations agreed to reduce oil output for the first time since 2008, a development that sent crude prices soaring. On the whole, the latest U.S. economic indicators looked good. Existing home sales maintained their pace, even as mortgage rates climbed. A December interest rate hike by the Federal Reserve looked more and more likely.1,2

DOMESTIC ECONOMIC HEALTH
Consumers spent significantly in October. The latest reports from the Department of Commerce showed personal spending up 0.3% in the tenth month of the year, and both headline and core retail sales advancing 0.8%. Personal incomes increased by an impressive 0.6% in October.3,4

Consumer confidence surged in November. The Conference Board’s monthly index hit 107.1, jumping 6.3 points from its October reading; analysts polled by MarketWatch felt it would rise to 102.5. The University of Michigan’s November consumer sentiment gauge rose to 93.8.3

On the hiring front, companies added 161,000 net new workers in October. (The Department of Labor also revised August and September hiring totals upwards by a combined 44,000.) Unemployment was at 4.9%; the U-6 rate (which also counts the underemployed) was at 9.5%. Yearly wage growth reached a six-and-a-half-year peak at 2.8%.5

The manufacturing and service sectors appeared healthy, according to the latest key U.S. purchasing manager indexes. The Institute for Supply Management’s globally watched factory sector PMI rose 0.4 points to 51.9; its service sector PMI fell 2.3 points to 54.8, but was still well above 50, the number delineating expansion from contraction. In other news relating to manufacturing, hard goods orders rose 4.8% in October (core orders were up but 0.4%), and the federal government’s second estimate of Q3 GDP improved to 3.2% from an initial 2.9%.3,6

Inflation pressure did increase for consumers in early fall. The Consumer Price Index showed a 0.4% October gain, leaving it up 1.6% annually. Core consumer prices had risen 2.1% in 12 months. Affected notably by fuel costs, the Producer Price Index was flat in October and only up 0.8% year-over-year.3,4

On November 17, Federal Reserve chair Janet Yellen sent a strong signal that an interest rate adjustment was near. She commented that a rate hike could occur “relatively soon,” as monetary policy appeared to be only “moderately accommodative.” Only “gradual increases in the federal funds rate” might be needed to meet an oncoming inflation threat, she noted.7

GLOBAL ECONOMIC HEALTH
OPEC countries formally agreed to decrease oil output on November 30, surprising those who thought that its tentative summer accord would never be finalized. Saudi Arabia and Iran agreed to major production cuts, and while Russia does not belong to OPEC, word came that it would also agree to cut output if OPEC set per-nation production quotas. In the wake of the deal, Morgan Stanley analysts commented that oil prices might rise by as much as $5 a barrel.2

An encouraging economic sign emerged from Europe. Yearly euro area inflation ticked up to 0.6% in November, with annualized core inflation at 0.8%. As last month ended, European investors waited to see if the European Central Bank would choose to extend its current bond-purchase program beyond March. Bloomberg reported that the euro area jobless rate remained at 10.0% in October.8

The Philippines appeared to displace China as Asia’s fastest growing economy. According to Reuters, its GDP reached 7.1% in the third quarter. China’s official Q3 GDP reading came in at 6.7%.9

India suffered through a cash crunch last month as Prime Minister Nandrenda Modi shockingly decided to outlaw the country’s 500-rupee and 1,000-rupee notes. The move instantly took 86% of India’s money supply out of circulation. Modi was combating the country’s "black money” problem – wealthy households secreting portions of their incomes in pursuit of tax savings. He announced that new currency would quickly be issued, but former Prime Minister Manmohan Singh denounced the tactic as a “monumental management failure” and “a case of organized loot and legalized plunder of the common people.”10

WORLD MARKETS
Foreign stock benchmark performance in November can be summed up in a convenient phrase: all over the place. Russia’s MICEX led the way, going +6.21%. Close behind were the Nikkei 225 at +4.94% and the Shanghai Composite at +4.71%. Australia’s All-Ordinaries went +2.45; Canada’s TSX Composite, +2.01%; and the MSCI World index, +1.25%. European gains included the CAC-40 at +0.65% and the FTSE Eurofirst 300 at +0.36%.11,12

Several major indices lost ground in November. They included the DAX at -0.52%, the Hang Seng at -0.72%, the FTSE 100 at -3.04%, Brazil’s Bovespa at -3.71%, India’s NFTE 50 at -4.65%, the MSCI Emerging Markets at -4.67%, Spain’s IBEX 35 at -5.58%, and Mexico’s Bolsa at -5.61%.11,12

COMMODITIES MARKETS

Gold futures sank in November as investors ran back to equities. The yellow metal lost 7.93% for the month to a COMEX close of $1,172.00 on November 30. Silver futures mirrored that descent, sinking 7.44% to a month-end close of $16.48. While platinum fell 6.92%, copper (a base metal) absolutely took off, rising 19.07%.13

Boosted by news of the OPEC deal, light sweet crude finished the month with a flourish, rallying sharply to leave its monthly advance at 4.75%. Oil futures closed at $48.98 on the NYMEX November 30. Natural gas gained 12.28%; heating oil, 5.12%; unleaded gasoline, 2.21%. As for crops, cotton rose 4.49%; soybeans, 3.02%; corn slipped, 4.51%; wheat, 7.47%; coffee, 9.96%; and sugar, 10.88%. The U.S. Dollar Index rose 3.25% month-over-month to a November 30 settlement of 101.47.13,14

REAL ESTATE
New and existing home sales went opposite ways in October. Resales increased 2.0% by the estimate of the National Association of Realtors, while the Census Bureau reported a 1.9% reduction in the pace of new home buying. During the year ending in October, the median sale price for an existing home rose 6.0% to $232,200, while the median sale price for a new home went 1.9% higher to $304,500.15

The average interest rate on a conventional home loan rose half a percent during November, with the bond market expecting greater infrastructure spending (and greater inflation) in the near future. Freddie Mac’s November 23 Primary Mortgage Market Survey (its last of the month) showed the 30-year FRM averaging 4.03% interest; average interest on the 15-year FRM and 5/1-year ARM was, respectively, at 3.25% and 3.12%. On October 27, the numbers were: 30-year FRM, 3.47%; 15-year FRM, 2.78%; 5/1-year ARM, 2.84%.15,16

Looking at some of the other real estate reports issued in November, the 20-city S&P/Case-Shiller home price index was up 5.5% year-over-year in its September edition, improved from 5.2% a month earlier. Issuance of building permits increased just 0.3% in October, but housing starts advanced 25.5%. Finally, the NAR reported an 0.1% October gain for pending home sales.3,4

LOOKING BACK…LOOKING FORWARD
Small caps had a phenomenal month. The Russell 2000 gained 11.02% as investors sensed its member firms would especially benefit from presumed increases in defense and infrastructure spending. The Dow’s 5.41% November gain outdistanced the 3.41% advance of the S&P 500 and the 2.62% improvement of the Nasdaq. The November 30 closing settlements: DJIA, 19,123.58; NASDAQ, 5,323.68; S&P, 2,198.81; RUT, 1,322.34. The CBOE VIX ended the month down at 13.33.1,14

Sources: barchart.com, bigcharts.com, treasury.gov – 11/30/1614,17,18,19

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

November certainly did not play out according to expectations. Who thought Wall Street’s benchmarks would rally to all-time highs, especially with the way they slumped before the election? Perhaps, December will pleasantly surprise us as well. Assuming the Federal Reserve raises the federal funds rate, can stocks retain some of their impressive momentum through the end of the year? In the near term, possibly. Some of the investing and economic factors that garner the most attention – GDP, consumer spending, consumer confidence, hiring, and earnings growth – have been quite positive recently. (In fact, the earnings recession is now over. As November ended, 98% of S&P 500 firms had reported quarterly results according to FactSet, with Q3 earnings for the S&P up by 3.2%.) So, yes, this bullishness may persist through the end of the year. On the horizon, there is the fear that accelerating inflation (and corresponding tightening) could keep the bulls in check. That could be something to worry about as 2017 unfolds.20

UPCOMING ECONOMIC RELEASES: After the December 2 release of the Department of Labor’s November jobs report, the December roll call of scheduled news items proceeds as follows: the November ISM service sector PMI (12/5), October factory orders (12/6), December’s preliminary consumer sentiment index from the University of Michigan (12/9), a Federal Reserve interest rate decision, November retail sales, the November PPI and November industrial output (12/14), the November CPI (12/15), statistics on November groundbreaking and building permits (12/16), November existing home sales (12/21), the November PCE price index, November durable goods orders and the final estimate of Q3 growth (12/22), November new home sales and the final December University of Michigan consumer sentiment index (12/23), the year’s last consumer confidence index from the Conference Board plus October’s S&P/Case-Shiller home price index (12/27), and then November pending home sales (12/28). The November personal spending report will be issued in early January.

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<<RepresentativeDisclosure>>

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. MarketingPro, Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The MICEX 10 Index (Russian: Индекс ММВБ10) is an unweighted price index that tracks the ten most liquid Russian stocks listed on MICEX-RTS in Moscow. Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The All Ordinaries (XAO) is considered a total market barometer for the Australian stock market and contains the 500 largest ASX-listed companies by way of market capitalization. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The MSCI World Index is a free-float weighted equity index that includes developed world markets, and does not include emerging markets. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The FTSEurofirst 300 Index comprises the 300 largest companies ranked by market capitalisation in the FTSE Developed Europe Index. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The Hang Seng Index is a freefloat-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The Bovespa Index is a gross total return index weighted by traded volume & is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. The Nifty 50 (NTFE 50) is a well-diversified 50-stock index accounting for 13 sectors of the Indian economy. It is used for a variety of purposes such as benchmarking fund portfolios, index-based derivatives and index funds. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain's principal stock exchange. The Mexican Stock Exchange commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. The PHLX Utility Sector Index is composed of geographically diverse public U.S. utility stocks. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 - google.com/finance?q=INDEXDJX%3A.DJI&ei=NVU_WJnQNsP12Abo6r2QCQ [11/30/16]

2 - bloomberg.com/news/articles/2016-11-30/opec-decision-day-as-ministers-meet-to-salvage-deal-on-oil-cuts [11/30/16]

3 - marketwatch.com/economy-politics/calendars/economic [11/30/16]

4 - investing.com/economic-calendar/ [11/30/16]

5 - tinyurl.com/hmn5mnb [11/4/16]

6 - instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm [11/3/16]

7 - marketwatch.com/story/yellen-says-fed-may-hike-interest-rates-relatively-soon-2016-11-17 [11/17/16]

8 - bloomberg.com/news/articles/2016-11-30/euro-area-inflation-accelerates-before-key-ecb-decision-on-qe [11/30/16]

9 - reuters.com/article/asia-economy-gdp-idINL4N1DF2BO [11/16/16]

10 - tinyurl.com/gvz6l29 [11/28/16]

11 - markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp [11/30/16]

12 - msci.com/end-of-day-data-search [11/30/16]

13 - money.cnn.com/data/commodities/ [11/30/16]

14 - barchart.com/stocks/indices#/viewName=performance [11/30/16]

15 - usatoday.com/story/money/business/2016/11/23/economy-manufacturing-durable--goods-jobless-claims/94329992/ [11/23/16]

16 - freddiemac.com/pmms/archive.html?year=2016l [11/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F30%2F15&x=0&y=0 [11/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F30%2F15&x=0&y=0 [11/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F30%2F15&x=0&y=0 [11/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F30%2F11&x=0&y=0 [11/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F30%2F11&x=0&y=0 [11/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F30%2F11&x=0&y=0 [11/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F30%2F06&x=0&y=0 [11/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F30%2F06&x=0&y=0 [11/30/16]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F30%2F06&x=0&y=0 [11/30/16]

18 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [11/30/16]

19 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [11/30/16]

20 - marketwatch.com/story/get-ready-for-a-big-buying-opportunity-if-us-stocks-falter-2016-11-30/ [11/30/16]

Jamin 'Jay' Kirkwood, CFP™, MBA, NSSA Presents:

MONTHLY QUOTE

“Honest differences are often a healthy sign of progress.”
    

- Mahatma Gandhi

MONTHLY TIP

If the retirement plan where you work has an auto-escalation option, take advantage of it. It can be a great way to put retirement saving on auto-pilot, especially for a younger worker just starting to save for the future.

MONTHLY RIDDLE

If you carry my burden, you will never stand or lie on your back. While I am not rich, I leave a silvery track. What am I?

Last month’s riddle:
What grows when it eats, but dies when it drinks?

Last month’s answer:

Fire.

November 2016

THE MONTH IN BRIEF
Bulls were reined in during October. The S&P 500 lost 1.94% as Wall Street responded unenthusiastically to the fall earnings season. Even though much of the economic news that emerged in October was good, investors saw an interest rate hike on the horizon and remained concerned about an increasingly controversial presidential race. Consumer confidence waned, but improved manufacturing, consumer spending, and retail sales numbers all factored into stronger growth. New and existing home sales accelerated. The price of oil rose, then quickly fell; the price of gold slipped, then recovered just a bit. Overseas, a timeline was set for the Brexit. In the big picture, appetite for risk waned as investors remained cautious.1

DOMESTIC ECONOMIC HEALTH
Economic indicators flashed clear signals that the economy was picking up. Household spending rose a healthy 0.5% during September, the most since June. Household incomes rose 0.3% in the ninth month of the year. Retail sales were up 0.6% for September, with core retail purchases rising 0.5%.2,3

Important twin gauges of business activity showed both manufacturing and service sector growth. The Institute for Supply Management’s non-manufacturing purchasing manager index jumped up to a reading of 57.1 in September, improving 5.7 points. ISM’s factory PMI also recovered from an August spent in contraction territory, rising 2.1 points to 51.5 in September; even more encouragingly, ISM’s new factory orders index increased by 6.0 points.3,4 

Complementing all this, the federal government said that the economy grew 2.9% in the third quarter – a real upturn from the 1.4% GDP recorded for Q2.5

Had full employment been reached? Perhaps it was close at hand, since the hiring pace seemed to be moderating. The Department of Labor said that companies had added 156,000 net new jobs in September, while revising the August gain north to 167,000. The jobless rate rose slightly to 5.0%; the U-6 rate including the underemployed remained at 9.7%. Average hourly wages improved another 0.2%.3

Was inflation pressure mounting? Not really. The PCE price index advanced 0.2% in September, which left the core PCE index up 1.7% year-over-year, the same as in August. The Consumer Price Index showed a 1.5% annual gain in September, up from 1.1% a month earlier; core consumer prices were up 2.2% in 12 months, ticking down from 2.3% in August. Producer prices rose 0.3% in September, but that still left them up just 0.7% year-over-year.2,3

Some indicators did descend, most notably those measuring consumer confidence. The Conference Board’s monthly barometer dipped 4.9 points in October to a respectable 98.6 mark, while the University of Michigan consumer sentiment index fell to 87.2 at month’s end. Headline capital goods orders also declined 0.1% for September, with core orders down 1.2%.5

GLOBAL ECONOMIC HEALTH
In London, United Kingdom prime minister Theresa May announced definite plans for the Brexit. The U.K. will invoke Article 50 of the Lisbon Treaty no later than the end of March 2017. Assuming this occurs, the U.K. will leave the European Union in the summer of 2019. Until then, it intends to remain a player in all E.U. summits and member state negotiations. Speaking of the broader E.U., Eurostat reported economic growth of 0.3% for the euro area in Q3 and estimated annualized inflation for the euro area at 0.5% in October.6,7

The World Bank projected 6.7% growth for China in 2016, declining to 6.5% in 2017, and then 6.3% in 2018. It believes that the second-fastest growing economy in Asia this year will be that of the Philippines at 6.4%. Malaysia’s 2016 GDP is projected at 4.2%; Indonesia’s, at 4.8%. China aside, the Bank expects growth to pick up across Asia in the near future, projecting 4.8% growth for the rest of the region’s economies this year, 5% GDP in 2017, and 5.1% growth for 2018. Meanwhile, news arrived that Japan’s retail sales and industrial output were flat in September; retail sales were down for a seventh straight month and 1.9% lower over the past 12 months.8,9

WORLD MARKETS
Many foreign indices outperformed ours. To our respective north and south, the TSX Composite advanced 0.42% last month; the Bolsa, 1.62%. Argentina’s MERVAL rose 7.16%. European indices had a good month – there were gains of 1.47% for the DAX, 1.37% for the CAC-40, 4.81% for the IBEX 35, 0.59% for the Micex, and 0.80% for the FTSE 100. The FTSEurofirst 300 was an exception, losing 0.90%.10

The Nikkei 225 soared 5.93% during October to pace the major Asian indices. The Shanghai Composite was not that far behind, rising 3.22%. October also brought gains of 0.66% for India’s Sensex and 2.49% for the FTSE Taiwan 50. Australia’s All Ordinaries retreated 2.22%, and Hong Kong’s Hang Seng, 1.56%. The MSCI World index lost 2.01%, but the MCSI Emerging Market index rose 0.18%.10,11

COMMODITIES MARKETS

As the Halloween trading day drew to a close on Wall Street, a look at the COMEX and NYMEX showed monthly losses for both gold and oil. The yellow metal slipped 3.27% for the month, settling at $1,276.70. Light sweet crude dropped to $46.76 at month’s end with oil investors still awaiting finalization of OPEC’s deal to restrain output; futures took a 2.68% fall for October.12

Reviewing the performance of other commodities last month, we see solid gains for some key crops. Coffee rose 9.25%; corn, 5.80%; cotton, 4.02%; soybeans, 5.30%; and wheat, 2.86%. Cocoa lost 0.90% in October; sugar, 2.09%. Among metals, silver slipped 7.09%; platinum fell 4.71%; and copper, 0.11%. Silver finished the month at $17.84. Unleaded gasoline futures lost 4.66% in October; heating oil futures, 1.62%. Natural gas futures gained 3.65%. The U.S. Dollar Index settled at 98.32, rising 3.03% in a month.1,12

REAL ESTATE
Aside from a drop in groundbreaking, the news out of this sector was decidedly upbeat. New home sales rose 3.1% in the ninth month of 2016, taking the 12-month advance to 29.8% and leaving the pace once again near a 9-year high. Meanwhile, the National Association of Realtors noted a 3.2% monthly advance for existing home sales.3,13

Home prices – as measured by the 20-city S&P/Case-Shiller index – were up 5.3% year-over-year as of August, compared with 5.0% in the year ending in July. The Census Bureau said that building permits increased 6.3% for September; though, housing starts did retreat 9.0%. Pending home sales were up 1.5% for September according to NAR.3,5

Mortgages grew more expensive last month. By October 27, the mean interest rate for the 30-year FRM was at 3.47%, according to Freddie Mac’s Primary Mortgage Market Survey, while average rates on the 15-year FRM and the 5/1-year ARM respectively stood at 2.78% and 2.84%. Back on September 29, the mean rate on the 30-year loan averaged 3.42%; the average interest on the 15-year fixed was 2.72%; and the mean interest on the 5/1-year adjustable rate mortgage was 2.81%.14

LOOKING BACK…LOOKING FORWARD
All three major U.S. equity indices lost ground in October. The blue chips retreated least – the Dow Jones Industrial Average gave back 0.90% for the month. Dropping 2.31%, the Nasdaq Composite exceeded the S&P 500’s 1.94% loss. The Russell 2000 stumbled 5.42%. Unsurprisingly, considering all this, the CBOE VIX soared 29.42% with uncertainty rising on Wall Street. The Halloween settlements: DJIA, 18,142.12; NASDAQ, 5,189.13; S&P, 2,126.15; RUT, 1,191.39; and VIX, 17.06. The VIX outgained all consequential U.S. indices last month by a wide margin; the PHLX Utility Index logged the biggest advance among the equity indices for October, rising 1.12%.1

Sources: barchart.com, bigcharts.com, treasury.gov – 10/31/161,15,16,17

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

At this writing, it seems highly unlikely that the Federal Reserve will authorize an interest rate hike at the start of November, as the Federal Open Market Committee has historically preferred to refrain from any policy decisions that could influence presidential elections. According to FactSet data, year-over-year earnings growth is apparent for the first time since Q1 2015 (blended Q3 earnings growth was at 1.6% through Halloween). Still, there is nothing resembling a bull run as we enter November. Hopefully, some risk appetite will return after the election, and investors will view solid economic indicators as validations of an improving economy, first, and as further evidence for a federal funds rate increase, second. Wall Street could see a lot of volatility this month, not merely reflective of the election. We can only hope the evident tension among institutional investors eases and the market surprises to the upside.18 

UPCOMING ECONOMIC RELEASES: After the Federal Reserve policy statement on November 2, the rest of the major items on the economic release slate arrives in this order: the ISM October non-manufacturing PMI; September factory orders and the October Challenger job-cut report (11/3); the Department of Labor’s October employment report (11/4); September consumer credit (11/7); the preliminary November consumer sentiment index from the University of Michigan (11/11); October retail sales (11/15); the October PPI and October industrial output (11/16); the October CPI and October housing starts and building permits (11/17); October existing home sales (11/22); the final November University of Michigan consumer sentiment index, October new home sales, October capital goods orders, and the minutes from the November Federal Reserve policy meeting (11/24); the newest consumer confidence index from the Conference Board, the September S&P/Case-Shiller home price index, and the second estimate of Q3 growth (11/29); and then the November ADP payrolls report, a new Federal Reserve Beige Book, and October PCE prices, consumer spending, and pending home sales (11/30).

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If you would like us to add them to our distribution list, please reply with their address.
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<<RepresentativeDisclosure>>

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. MarketingPro, Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is not a solicitation or recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Mexican Stock Exchange commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The MERVAL Index (MERcado de VALores, literally Stock Exchange) is the most important index of the Buenos Aires Stock Exchange. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain's principal stock exchange. The MICEX 10 Index (Russian: Индекс ММВБ10) is an unweighted price index that tracks the ten most liquid Russian stocks listed on MICEX-RTS in Moscow. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The FTSEurofirst 300 Index comprises the 300 largest companies ranked by market capitalisation in the FTSE Developed Europe Index. Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The FTSE TWSE Taiwan 50 Index consists of the largest 50 companies by full market value, and is also the first narrow-based index published in Taiwan. The All Ordinaries (XAO) is considered a total market barometer for the Australian stock market and contains the 500 largest ASX-listed companies by way of market capitalization. The Hang Seng Index is a freefloat-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The MSCI World Index is a free-float weighted equity index that includes developed world markets, and does not include emerging markets. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. The PHLX Utility Sector Index is composed of geographically diverse public U.S. utility stocks. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

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