Weekly Market Update
April 24, 2017
Presented By:  Todd Day, Portfolio Manager

           


 
Viva La France!!


Breaking over the weekend
- The French citizens took to the polls in the first round of their Presidential elections and STOCKS around the globe are surging higher on the results.

This comes on the back of a winning week on Wall Street despite the high uncertainty of those results.  See - investors were nervous that the anti-immigration, anti-EU, anti-Euro candidate, Marie La Pen would win.  So, a win by the independent centrist, Emmanuel Macron, would mean stability - no cries to leave the EU and abandon the Euro. 

The week did not start that way, however! 

Early in the week, stocks got pounded as some big name Dow components (IBM, Goldman and Johnson & Johnson) disappointed Wall Street as geopolitical tensions already had investors on edge.

Later in the week, stocks reversed course as comments out of the U.S. Treasury secretary on tax reform reignited the reflation trade optimism and President Trump also said he would be rolling out those very reforms this week.

The French elections gave cause for concern late week, but in the end, the major average held onto small gains.  

         
STOCKS

It was another big week for bank earnings and there were some surprises.  
Bank of America got the party started by topping on revenues and earnings.  The CEO said the economy is doing great and the company is firing on all cylinders.  Morgan Stanley and Blackrock also topped expectations.

BB&T also turned in a solid quarter despite loan growth being down, but Kelly King, CEO, said he was optimistic we would see a surge in loan growth.

BUT - In a RARE MISS - Goldman Sachs Reports Q1 earnings $5.15 vs $5.31 Est., Sales $8.03B vs $8.45B Est.   Trading revenues were sharply lower verse growth at JPM and BAC, and they got clobbered on long-dollar call (betting the U.S. Dollar would rise during the Q1.) This was a pretty stunning miss, one that occurs about 10% of the time for Goldman.

AND - Harley Davidson is certainly not living high on the hog after reporting a disappointing quarter. 

Homebuilder, DR Horton, beat on the top and bottom lines and raised its revenue forecast.  This is bullish for the housing market. 

ECONOMY

In their March meeting minutes, the Federal Open Market Committee (FOMC) indirectly touched on the "hard data versus soft data" debate that's been filtering through the economics blogosphere. 

"Hard data" refers to concrete improvements in the economy, such as a firm hiring more people or an increase in average wages or an improvement in manufacturing activity. Meanwhile, "soft data" refers more to Americans' sentiments and beliefs about the direction of the economy.

Since the election, sentiment data has surged for the consumer and small business owners, yet the hard data has yet to match the same enthusiasm. 
This is the crux of the debate around "hard data versus soft data:  Will these improving sentiment indicators actually translate to concrete improvements in the U.S. business sector, or are they just a reflection of Americans' hopes for the current US administration?

The short answer, of course, is that we won't know until after we see what the Trump administration actually pushes through.  It will also take time for the effects of those policies to show up in the hard economic data - so - the debate goes on... let's see how we did last week.
,
Sentiment among the nation's homebuilders (NAHB) came in short of expectations, but still at a lofty level.  Housing starts were weak, permits were so-so, but completions continue to accelerate.  Existing home sales rose 4.4% to 5.71 million in March (5.6 million expected) - That's a 10 year high!

Industrial production came in above expectations, but it was only up .5%, you can't even see that.  And, activity in the New York and Philadelphia regions cooled a bit, but still remains high. 

The latest Beige Book survey shows more concern about policy uncertainty than earlier in the year, reflecting concerns about tax reform & healthcare, and the latest PMI manufacturing and services data suggest the US economy lost further momentum at the start of the second quarter.  Both numbers came in below expectations and the details inside weren't too good either.
But, to only fuel the "soft verse hard" debate; the index of leading indicators just keep getting better.
So at this point, it's a coin toss, but you never want to be on the wrong side of a coin toss.

INTERNATIONAL

Stocks in Europe took a pause as geopolitical concerns grew and investors were concerned about any surprise that may come from the French elections.  The FTSE 100 dropped more than 2% mid-week, having their worst session since Brexit vote. 

In Asia, markets were mostly higher despite the surge in geopolitical tensions. 

THIS WEEK

As mentioned earlier, stocks are set to surge on the results of the French elections - the NASDAQ is looking to open in record territory, but the Dow and S&P 500 are still shy of new highs.

Earnings will kick into high gear this week (busy week of season) and we'll hear from over 180 of the S&P 500, 63 on Thursday. 
 
On the economic calendar, there is a lot of data to hit the tape this week, but the one everyone will be eyeballing will be the 1st read on first quarter GDP.  This number is expected to come in around 1% growth or a touch less.  
We will also get some housing market data as well as manufacturing.    
Geopolitical tensions have decreased over the last few days, but the Middle East and North Korea are still on the "wall of worry". 

Make it a great week and tune in next week and we'll bring you up to speed on the markets.  



         
"Be brave. Take risks. Nothing can substitute experience."
 - Paulo Coelho
Toasted Spaghetti With Clams

   
Enjoy the toasted flavor of this simple pasta dish! 


Ingredients:

3 tablespoons extra virgin olive oil
3/4 pounds of spaghetti, broken into 2-inch pieces
2 garlic cloves, minced
Crushed red pepper
3 cups bottled clam broth
1 cup water
3 dozen littleneck clams, rinsed
1/4 cup flat-leaf parsley, minced

Directions:
  1. Heat olive oil in a large skillet over medium heat until it shimmers.
  2. Add the raw spaghetti pieces and sauté, stirring constantly until golden (roughly 3 minutes).
  3. Toss in minced garlic and a large pinch of the crushed red pepper. Cook until they become fragrant (about 1 minute).
  4. Add the water and clam broth, and bring the mixture to a boil.
  5. Cover the skillet with a lid, and cook until the noodles are just al dente (around 8 minutes).
  6. Add the clams to the skillet, nestling them so they are snug within the pasta.
  7. Cover the skillet again and cook until the pasta is al dente and clams open (about 7 minutes)
Finishing Touches - Before Serving

 

Liven up the pasta with a few tablespoons of water if it's slightly dry from cooking.

 

Top pasta dish with minced parsley and enjoy.


 

Recipe adapted from Food and Wine

 
Tax Benefits of Higher Education
 
Pursuing higher education can provide you with tax benefits that help offset the money you owe, if either you, your spouse, or your dependents attended in 2016. You have two credits available: 1) American Opportunity Credit and 2) Lifetime Learning Credit. Here are tips for knowing if these credits apply to you and how to claim them.
 
American Opportunity Credit
  • For: Students who actively pursued a degree or another recognized college credential at least part time and for a minimum of one academic period in 2016
  • Worth: Benefit maximum is $2500 per student
  • Time Limit: Only applicable during first four years of attendance at an eligible college or vocational school
Lifetime Learning Credit
  • For: Students who pursued any postsecondary education, including courses taken to acquire or improve job skills
  • Worth: Benefit maximum is $2000 per tax return, no matter how many students in your household can claim this credit
  • Time Limit: No limit on the number of years you can claim this credit
Other qualifying factors may apply, and you can learn more on the IRS website . When filing taxes, claim your credits using Form 8863 .

Tip courtesy of IRS.gov
Improve Your Game by Training Your Brain
 
Being mentally sharp during golf is just as important as the mechanical aspects of your game. When your mind isn't clear - or you're distracted - an extraordinary shot can easily turn into a dud. You can sharpen your game by training your brain to focus. Here are a couple of tips for bringing the right headspace to the course.
 
1. Focus Your Attention
When you are taking a shot, your mind digests the movements you plan to make and then tells your body what to do. Having clarity and confidence as you swing is essential for maintaining fluid control. If you're unsure or feel tentative about your decision, then you'll probably bring a different tempo to your swing - and miss the opportunity to play your best.
 
Suggested fix?
Learn to remain present in the moment. Don't consume your mind with thinking about what you did before or what you'll do after this hole. Instead, keep your attention on what you need to do now.
 
2. Look at Moves in Reverse
Sometimes, looking from the starting point of a move can keep you stuck on what to do next. Planning your approach at the tee box gives you multiple steps and potential scenarios and outcomes to consider. You can train your brain to sharpen its focus by thinking about the last step of your move first.
 
Suggested fix?
W ork in reverse by imagining sinking the putt and consider each shot that got you there. Visualize each move and how they connect to one another. If you feel confident with this visual play, then go ahead and bring it to life.

Tip Courtesy of THINQ Golf & Golf Tips Magazine
Self-Care Tips for Managing Anxiety

Having an anxiety disorder or trouble managing anxiety can require medical care. But, certain lifestyle choices may also help keep anxiety under control. Here are some self-care tips to help you manage your anxiety, regardless of whether you take medication to assist you.

Quit or Avoid Cigarettes and Caffeinated Beverages: Nicotine and caffeine can increase anxiety levels. Decreasing or completely avoiding both of these substances can help decrease your anxiety.

Write Daily Logs in a Journal: A journal can be helpful for tracking your daily activities and moods as an ongoing log of your emotional health. Both you and any therapist you may be seeing can use these insights to gain deeper understandings of the stress in your life and any anxiety triggers you are experiencing.
 

Eat Healthier Foods: Studies have shown a possible link between healthy eating and decreased anxiety levels. You can support your preventive care by eating more fruits, vegetables, whole grains, and fish.

 

Socialize: Staying isolated doesn't improve anxiety. So, make sure you spend time with friends and family, and make socializing part of your mental health routine.


Tip courtesy of Mayo Clinic
Ways to Buy Sustainable Seafood: Fish

Your food-shopping habits can support your green living goals. One important factor worth paying attention to is how you buy your seafood - and specifically knowing how to make sustainable choices. Consider these two green tips the next time you're buying fish to bring home for dinner.
 
1. Know the Source
Knowing where your fish comes from can help you answer important sustainability questions, such as: Do their fishing practices accidentally catch other animals? Are the fish harvested ethically in relation to their population numbers? You'll want to identify details including:
  • If the fish is wild or farmed
  • What their fishing methods are
  • How abundant the populations are
T he Monterey Bay Aquarium Seafood Watch provides helpful resource for navigating many of these consumer questions.
 
2. Buy Local Seafood
Whenever you buy food locally, you minimize the amount of shipping needed to get you the fish you want - which is usually energy extensive. Plus, you support your local fisherman while buying food that is typically less expensive and has more abundant populations.
 
You explore sustainable fish options by state through the Seafood Watch guide .

Tip courtesy of U.S. News
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

 

Diversification does not guarantee profit nor is it guaranteed to protect assets

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

 

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

 

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

 

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

 

The Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI.

 

The Pending Home Sales Index, a leading indicator of housing activity,  measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos and co-ops.  The PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years. The results are weighted to produce the index.

 

The Chicago Board Options Exchange Market Volatility Index (VIX) is a weighted measure of the implied S&P 500 volatility. VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized.

 

The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index.

 

The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index.

 

Google Finance is the source for any reference to the performance of an index between two specific periods.

 

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

 

Past performance does not guarantee future results.

 

You cannot invest directly in an index.

 

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

  

These are the views of Horizon Financial Services, LLC, and should not be construed as investment advice. Neither Horizon Financial Services, LLC nor its Investment Advisor Representatives or Associates gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information. 



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(336) 659-7060


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