Weekly Update
Markets were up this week due to solid job growth in the US, eased concerns with the political situation in Italy, confidence in the European Central Bank’s quantitative easing plan, and several other strengthened labor market metrics in the US.
The initial concerns around the announcement of US tariffs on imports from China, the EU, and NAFTA partners have at least momentarily dissipated. Investors are patiently awaiting the results of the G-7 summit taking place on June 8
th
and 9
th
as well as any news that comes from the highly anticipated June 12
th
North Korean summit. Much of the focus of the G-7 summit will be on the announced tariffs and the response may send markets up or down.
Technologically Challenged
Technology companies have garnered much press lately with many at
all-time high
stock prices and valuation. Technology companies are usually “growth stocks” – public companies associated with low dividend payments and high price to earnings valuations. With all the excitement around these companies as of late,
even many traditional “value” investors are following the crowd
and investing in mevany of the largest technology companies to boost performance.
If you haven’t heard about ‘FANG’ on TV these past six months, you likely will. FANG is an acronym used in the investment world for Facebook, Amazon, Netflix, and Google. These four stocks have been the Wall Street sweethearts of this bull market, and as a result, many investors remain smitten with their performances. However, with a recent
shake-up in sector identification
by S&P Dow Jones, Facebook, Netflix, and Alphabet (Google’s parent) will now be listed under a ‘communications’ sector and will no longer be listed under ‘technology’.
This may not seem like a big deal but many sector specific funds may change significantly as a result. To evaluate portfolio risk, it’s important to understand excess exposure to specific companies like for instance over allocating to FANG. This is an excellent opportunity to ask a trusted professional to evaluate your portfolio to ensure your allocation is tailored to meet your goals and objectives.
Social Security Taps into Reserves
The
Social Security program’s costs will exceed income in 2018
– the first time since 1982 – forcing it to dip into its reserves to cover benefits. This is three years sooner than many expected projections. At this rate, if nothing changes, the reserves will be depleted by 2034 and Social Security will not be able to pay its full scheduled benefits. Why is this happening? Simply put, people are living longer and young families are having fewer children, in turn creating a smaller labor force. These have been consistent trends since the 1960s.
