Jeff Voudrie’s Week In Review April 7, 2014

Trending Indicators
            US Stock Market                    Trending Downstock_index_up
            Canadian Stk Mkt                  Trending Up1376413350_Stock Index Up
            US Bond Market                     Trending Up1376413350_Stock Index Up (Yields Trending Down)

Jeff’s Comments:
The markets ended the week with a selloff on Friday. Momentum and Biotech stocks were particularly hard hit and the selloff came on high volume. Is this the start of a much larger correction than we’ve seen in several months? There’s no way to know yet, but we all realize that we are in highly manipulated markets and that we are experiencing ‘bubble-type highs’. For instance,  74% of companies that came public in the last 6 months don’t have any profits! That number is only eclipsed by the level set in the Tech Bubble of 1999 where 80% of IPOs weren’t profitable. Make no mistake, there is risk in these markets and, as we saw on Friday when the NASDAQ dropped 2.6% in a single day, RISK HAPPENS FAST which is why I recognize the importance of closely watching what happens throughout the day.

Generally, my clients are not currently fully invested.  There are some strategies that are currently invested in stocks but not at ‘full strength’. Other strategies have been in cash for several weeks now. That doesn’t mean my clients have been immune to the markets fluctuation but it does mean the volatility/risk has been much less. I’ll continue to monitor the markets and the accounts closely and take action as needed.

Have a wonderful and blessed day!

Jeff

Here is the weekly market wrap (consensus opinion) from TRoweprice.com:

Week Ended April 4, 2014

Stocks reach new highs before sharp pullback on Friday
Stocks recorded modest gains, bringing some of the major indexes to new highs during the week before pulling back on Friday. Gains were strongest among mid-cap shares, while the technology-heavy Nasdaq Composite Index recorded a loss due to a late sell-off among highly valued biotechnology shares and other “momentum” stocks.

Investors await further signs of spring thaw
With first-quarter earnings reporting season set to begin next week, investors focused on economic data. Most were looking for signs that the economy had regained some traction after slowing due to harsh winter weather early in the year. Data late in March had raised hopes that a “spring thaw” might be in the works and was one factor in helping stocks recover from losses early in the month.

Labor market data are encouraging
The week’s important labor market data largely validated such hopes. Stocks gained Wednesday following a solid report on payroll gains from payroll processing firm ADP, and investors were also encouraged by a Commerce Department report of increased durable goods orders in February. T. Rowe Price Chief Economist Alan Levenson notes that, along with the weather, the winter slowdown was also due to a slower pace of inventory accumulation that is likely to reverse in the spring.

Friday brought additional good news on the labor front, although the market’s reaction was less enthusiastic. The Labor Department reported a healthy increase in March payrolls, along with better gains than originally estimated in January and February. Levenson notes that a rise in weekly earnings evident in the data should help support a retail sales rebound in the coming weeks.

More volatility in biotech likely, but long-term drivers remain in place
After an initial gain on the payroll data, however, markets turned sharply lower to end the week as investors resumed selling momentum stocks. These fast-growing and highly valued companies have led market returns over the past year but have exhibited periodic weakness in recent weeks. The Nasdaq Biotechnology Index has declined by roughly 17% since late February, and T. Rowe Price health care analysts would not be surprised to see more volatility in the group in the weeks ahead. Nevertheless, they continue to believe that the biotech industry will be a major driver of long-term value creation within health care as the pace of technological discovery accelerates based on our expanded knowledge of biological mechanisms.

Income gains may bolster corporate revenues
Slow employment and wage gains have been one factor restraining corporate revenue growth since the last recession. Earnings have fared far better, thanks in large part to cost-cutting measures and technology upgrades that increased profit margins. Still, many T. Rowe Price managers believe that companies will become more reliant on increasing revenues in order to grow profits as they exhaust cost-saving options and the labor market tightens. Thus, stronger consumer spending, along with improving business investment, may be arriving at an opportune time to support further—if more moderate—stock market gains.

U.S. Stocks1
Index2 Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 16412.71 89.65 -0.99%
S&P 500 1865.09 7.47 0.91%
NASDAQ Composite 4127.73 -24.60 -1.17%
S&P MidCap 400 1367.89 10.60 1.89%
Russell 2000 1154.89 4.34 -0.75%

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.

2The Dow Jones Industrial Average and the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments by market capitalization of the U.S. equity markets. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock market and the National Market System.

Always At Your Service,
Jeffrey D. Voudrie, CFP® Practitioner

Jeff Voudrie’s Week In Review Feb 24, 2014

Trending Indicators

US Stock Market               Trending Up1376413350_Stock Index Up
Canadian Stk Mkt            Trending Up1376413350_Stock Index Up

US Bond Market               Yields Trending Down

Jeff’s Commentary
There continues to be a disconnect between the information we get from Washington (especially the Federal Reserve) and what is currently happening in the market.  That disconnect stems from the fact that the Federal Reserve relies on data that is approximately 3-6 months old. Money managers, though, place greater emphasis on current numbers and over the last few months the current numbers have shown a marked slowing in economic growth and an uptick in inflation.

Based on the Fed’s comments the markets should have rallied. Remember, cutting stimulus and raising interest rates is a good thing when it is are result of increasing economic growth. In those situations it leads to a stronger USD and that is GOOD for America. Instead, the markets failed to rally shortly after the announcement and the intraday highs set after that were on very weak volume.  From a money management perspective, it is important to understand this lag because it removes some of the confusion over how one should react.

So what do I like? I like inflation protection including shiny metals and the stuff we eat at breakfast. I like utility companies and banks that pay attractive dividends. I do not believe that consumer discretionary will do well in an environment of slowing growth and rising inflation.

Overall, I have been increasing the amount invested in equities at a measured pace. And the bond funds that I am using continue to pull their load.

There is still an elevated level of risk in the stock markets and we’ve seen Biotech stocks take a hit the last few days. In general, though, the markets still have not had a meaningful correction and the trend remains up.

Here is information from TRoweprice.com:

Stocks rise on positive economic data and waning Ukraine worries
Stocks recorded solid gains and wiped away much of the previous week’s declines as investors welcomed positive economic signals and appeared to grow less worried about the situation in Ukraine. The gains helped the Standard & Poor’s 500 Index establish a new intraday high on Friday before falling back in late trading. The Nasdaq Composite underperformed the Dow Jones Industrial Average and the S&P 500, due in part to the Nasdaq’s heavier weighting in biotechnology shares. Biotech stocks were among 2013′s strongest performers but have stumbled recently.

Yellen remarks cause brief pullback…
Markets endured a brief pullback on Wednesday afternoon following remarks from new Federal Reserve Chair Janet Yellen after the central bank’s scheduled policy meeting. The Fed’s decision to further taper its quantitative easing program was largely as expected, but stocks dropped sharply after Yellen suggested that Fed interest rate increases could begin “around six months” after the central bank finishes its long-term bond purchases. T. Rowe Price Chief Economist Alan Levenson believes that Fed asset purchases will cease by the end of 2014.

…but signal little real change in Fed policy
This was a shorter time frame than many had expected, but Levenson notes that it represented no real change from what the Fed has been communicating for months—that hikes will probably start around mid-2015 and be gradual. In any case, markets regained some momentum late in trading Wednesday, which carried through most of the rest of the week.

U.S. Stocks1
Index2 Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 16302.64 236.97 -1.65%
S&P 500 1866.43 25.30 0.98%
NASDAQ Composite 4276.79 31.39 2.40%
S&P MidCap 400 1379.60 16.18 2.76%
Russell 2000 1193.50 12.89 2.57%

Jeff Voudrie’s Week In Review Feb 24, 2014

Trending Indicators

US Stock Market              Trending Up1376413350_Stock Index Up (Caution Warranted)
Canadian Stk Mkt

US Bond Market               Trending Up1376413350_Stock Index Up

Jeff’s Comments
The markets have bounced off some oversold signals this morning as I write this on decent volume as I speculate there is some short covering going on.  I have my buy list ready to go and am waiting to execute it but will wait until at least the first 30 minutes of trading is past so that I can get a better idea of what is going on. The underlying issues plaguing this market remain: growth is slowing, inflation is accelerating and the value of our currency continues to deteriorate.

That is the opposite of the situation we experienced in 2013 when growth was accelerating, inflation was not a factor and the USD was strengthening. So even IF I make some buys today, it will most likely be limited and they will be seen as trades (days to weeks in duration) as opposed to investments (months to years in duration).  The bond funds continue to perform well relative to the stock market—especially when taking into account the volatility/risk associated with each. Here is a chart of the S&P 500 YTD (+1.07%) versus PONDX (+1.55%) and OSTIX (+1.69%). Note that Google charts don’t include dividends. Including dividends, PONDX is up 2.63% and OSTIX is up 1.69%.

Note: I do not have accounts fully invested in bonds and am not implying that the accounts are currently  out-performing the market. I have the account positioned defensively with a large portion of the money targeted to equities currently in cash.

Look at this AAII Investor Sentiment Survey as one reason why I am hesitant to add new equity positions near all-time highs when we are long overdue for a correction:

Every (it seems) is still leaning long in this market. Risk happens fast in a manipulated market when too many people get caught on the wrong side of the trade. When that type of market begins to correct we can see a several percentage point decline in just a few days.

Please let me know if you want me to be more aggressive in your account.

Have a wonderful and Blessed day!

Here is what I view as the consensus opinion viewpoint on the markets from TRowePrice.com:

Week Ended March 14, 2014

Stocks fall on China and Ukraine worries

Stocks declined and gave up the previous week’s gains as investors worried about renewed signs of a slowdown in China and increasing geopolitical tensions regarding Ukraine. The Standard & Poor’s 500 Index retreated from the record high it had established the previous Friday and joined the Dow Jones Industrial Average in negative territory for the year to date. The technology-heavy Nasdaq Composite and the smaller-cap indexes declined for the week but held on to modest gains for the year-to-date period.

The Chinese economy appears to have slowed more than expected…
Concerns about the Chinese economy that dogged markets in January reappeared during the week. Stocks fell in morning trading Monday following news over the weekend that Chinese exports had fallen sharply in February, although some experts cautioned that a long Lunar New Year holiday might deserve part of the blame.

…but stimulus from Chinese policymakers is unlikely
On Thursday, however, stocks fell sharply on evidence that more fundamental factors might be at work, as data showed that Chinese industrial production declined in January and February. Investors were also disappointed by remarks from Chinese Premier Li Keqiang, who appeared to indicate that officials were willing to tolerate growth that falls short of their 7.5% gross domestic product growth target and would not respond with stimulus measures.

U.S. Stocks1
Index2 Friday’s Close Week’s Change % Change
Year-to-
Date
DJIA 16065.67 -387.05 -3.08%
S&P 500 1841.13 -36.91 -0.39%
NASDAQ Composite 4245.40 -90.82 1.65%
S&P MidCap 400 1363.42 -24.36 1.56%
Russell 2000 1180.61 -21.53 1.46%

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.

2The Dow Jones Industrial Average and the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments by market capitalization of the U.S. equity markets. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock market and the National Market System.

Always At Your Service,
Jeffrey D. Voudrie, CFP® Practitioner

Jeff Voudrie’s Week In Review Feb 11, 2014

Trending Indicators

US Stock Market                     Trending Downstock_index_up
Canadian Stk Mkt                    Trending Up1376413350_Stock Index Up

Bond Market                           Yields Trending Down,stock_index_up Prices Trending Up1376413350_Stock Index Up

Jeff’s Comments:
We are seeing the underlying trends that resulted in a stock rally in 2013 change. In 2013, growth was accelerating most of the year and inflation remained tame.  Interest rates  and the value of the USD were going up (positive for the stock market). So far, in 2014 we are seeing growth SLOWING, inflation RISING and the USD and interest rates going DOWN. As a result, the US stock market has been correcting. So far the correction has been greater than any correction that occurred in 2013 and it may not be over yet.

The proprietary indicators that I use resulted in several of the strategies that I use moving to cash. So our cash position is higher than normal awaiting the signal for that money to be moved back into equities. The bonds funds have benefitted from the recent decline in yields.

All eyes will be on Janet Yellen today and we’ll see whether she is going to continue to add more punch to the punch bowl. If she hints that they will slow down their tapering (thus stimulated the economy more) we could see another market rally.

Market Summary from TRowePrice:

Week Ended February 7, 2014

Major indexes mixed for week
In a week dominated by economic headlines, large-cap stock indexes overcame a sharp early selloff and ended higher. Small- and mid-cap stocks ended the week lower, hurt by their greater vulnerability to weaker domestic growth signals. The smaller-cap indexes also held up better in the previous week’s declines, which may have made them more vulnerable to this week’s selling.

Disappointing manufacturing growth unnerves investors
Markets got off to a very poor start to the week following the release of disappointing manufacturing data. The Institute for Supply Management reported that the rate of growth in factory activity slowed sharply—although the sector continued to expand. Poor vehicle sales in January, which the auto makers attributed to fewer Americans venturing out to showrooms in the cold weather, added to the dour mood.

The coldest January in years may be partly to blame
T. Rowe Price economists agree that unusually severe winter weather may have been partially to blame for the downbeat economic data—the nation experienced its coldest January in two decades. However, they also note that very strong growth in the ISM index in the last months of 2013 was due for a correction, if only because wholesalers need to trim inventories. Regional surveys and other manufacturing gauges suggested that manufacturing activity continued to expand moderately in January.

Initial jobs data is reassuring
The disappointing manufacturing and auto data left investors waiting anxiously for labor market data later in the week. The initial reports were reassuring. Private payrolls firm ADP reported a healthy gain in its count of private sector jobs created in January, while Thursday’s weekly report on initial jobless claims showed a sharp drop.

Job growth data lags expectations, but households report better conditions
The Labor Department’s nonfarm payrolls report on Friday showed that employers added only 113,000 jobs in January, well below expectations. Investors appeared to focus on bad weather as an explanation, however, and stocks rallied as the week ended. T. Rowe Price economists note that a different government gauge of the labor market, known as the household survey, was more positive. The household survey showed a large increase in the number of Americans reporting that they had a job, helping bring down the unemployment rate to 6.6% in January—its lowest level since October 2008.

U.S. Stocks1
Index2 Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 15794.08 95.23 -4.72%
S&P 500 1797.02 14.43 -2.78%
NASDAQ Composite 4125.86 21.98 -1.21%
S&P MidCap 400 1307.77 -7.13 -2.59%
Russell 2000 1115.57 -16.85 -4.13%

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

Jeff Voudrie’s Week In Review Jan 27, 2014

Trending  Indicators:

US Stock Market              Trending Up1376413350_Stock Index Up

Canadian Stk Mkt             Trending Up1376413350_Stock Index Up

US Bond Market               1376413350_Stock Index UpBonds Trending Up, Yields Trending Downstock_index_up

 

In The Markets

The S&P 500 Index endured its largest weekly seeing its largest weekly loss since June 2012 as investors worried about signs of a slowdown in the global economy. The benchmark index fell 2.1%, extending its January decline to 3.1%. The Dow Jones Industrial Average fell even further, and the smaller-cap indexes, which are typically more volatile, also saw large declines. All of the major indexes moved into negative territory for the year to date.

The overseas weakness set the tone for a lower start in U.S. equities with cyclical sectors leading the decline. Consumer discretionary (-1.9%) and technology (-2.1%) finished just ahead of the broader market thanks to the relative strength of Starbucks (SBUX 74.98, +1.59) and Microsoft (MSFT 36.80, +0.75) after both beat their bottom-line estimates. Staying on the earnings theme, most of the reports received between yesterday’s close and today’s open were ahead of expectations but that mattered little to the broader market. However, Kansas City Southern’s (KSU 99.49, -17.79) seven-cent miss mattered quite a bit as the stock plunged 15.2% while also weighing on the Dow Jones Transportation Average, which tumbled 4.1%. This marked the largest one-day loss for the bellwether complex since September 2011 as the broad liquidation resulted in 17 of 20 components posting losses in excess of 2.0%. Due to the sharp losses, the industrial sector (-3.1%) ended at the bottom of the leaderboard.

Elsewhere, financials (-2.3%) and materials (-2.7%) lagged while energy (-2.1%) ended in-line.

Meanwhile, defensive sectors—sans health care—outperformed with losses between 0.9% and 1.1%. Procter & Gamble (PG 79.18, +0.94) contributed to the relative strength of the consumer staples sector after reporting a one-cent beat. For its part, the health care sector lost 2.3%.

Treasuries booked gains with the 10-yr yield ending lower by five basis points at 2.73%.

The aggressive selling fueled strong demand for volatility protection as indicated by a 30.0% surge in the CBOE Volatility Index (VIX 17.89, +4.12), which ended at its highest level since October 15.

For the second day in a row, the selloff was accompanied by above-average volume as 902 million shares changed hands at the NYSE.

 

Index

Started Week

Ended Week

Change

% Change

YTD %

DJIA

16458.56

15879.11

-579.45

-3.5

-4.2

Nasdaq

4197.58

4128.17

-69.41

-1.7

-1.2

S&P 500

1838.70

1790.29

-48.41

-2.6

-3.1

Russell 2000

1168.43

1144.13

-24.30

-2.1

-1.7

 

Looking Ahead

So is this the start of a long anticipated correction of 10% or more? It is too early to tell. One thing that is clear is there are a lot of nervous investors out there that are quick to sell and ask questions later. I expect the economic numbers out this week to show that the growth continues to slow and that inflation continues to rise.  It is normal to see market declines, what has been abnormal is how few of them have occurred in 2013. Pullbacks in a market are actually healthy and help investors maintain a proper attitude toward risk.

Overall, though, the markets are still trending up. I am tactically taking steps to protect account values but am also ready to take advantage of opportunities as they occur.

Jeff Voudrie’s Week In Review Jan 21, 2014

Trending Indicators

US Stock Market              Trending Up1376413350_Stock Index Up
Canadian Stk Mkt             Trending Up1376413350_Stock Index Up
US Bond Market               Yields Trending Up1376413350_Stock Index Up

In The Market

All eyes turn to earnings, but broad pattern difficult to discern
Fourth-quarter earnings reports had an important impact on stock prices during the week, but it was difficult to determine the overall direction in which they pushed the market. Both bank and technology earnings were mixed, with prominent firms in both segments exceeding or falling short of analyst expectations.

Earnings are growing, but on what foundation?
T. Rowe Price managers note that, while earnings have continued to grow, the market’s strong rally over the past year has outpaced improvement in corporate fundamentals. Corporations have ample cash and have successfully trimmed costs, but revenues have grown only slowly—Thomas Reuters estimated that revenues for the S&P 500 grew only 1.8% in 2013. Corporate profit margins are at their highest levels in decades, which may mean that they will come down as cost-cutting options run out and wages rise. While they remain optimistic over the market’s long-term prospects, given the extent of the rally over the past year, many would not be surprised by a short-term pullback in stock prices.

(source: troweprice.com)

U.S. Stocks1
Index2 Friday’s Close Week’s Change % Change
Year-to-Date
DJIA 16458.56 21.51 -0.71%
S&P 500 1838.70 -3.67 -0.52%
NASDAQ Composite 4197.58 22.92 0.50%
S&P MidCap 400 1347.87 0.31 0.40%
Russell 2000 1168.31 4.57 0.40%

This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

1Source of data Reuters, obtained through Yahoo! Finance Closing data as of 4 p.m. ET.

2The Dow Jones Industrial Average and the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments by market capitalization of the U.S. equity markets. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock market and the National Market System.

Looking Ahead
There is an underlying shift that is underway in the markets where there are growth divergences between what is happening in developed countries (Europe versus US) and undeveloped countries. China and Japan are down and China continues to struggle under mountains of debt—some fearing that their credit bubble may pop (but don’t hold your breath!). There are sector divergences in the U.S. meaning that not all stocks are going up as the broad market does. With signs of inflation beginning to tick up, consumer discretionary stocks that did so well in 2013 are beginning to lose favor.

I continue to favor stocks in this environment but selection and constant monitoring is key.  It is also interesting to note that our bond picks are doing well in a tough environment:

YTD…

Bonds
PONDX                 1.40%
OSTIX                     .59%

Stock Funds
FCNTX                    .06%
JATTX                      .34%

(Keep in mind that I only use stock mutual funds sparingly and instead focus on building customized portfolios using individual stocks and exchange-traded funds.)

Have a wonderful day!

Jeff Voudrie’s Week In Review Jan 13, 2014

Trending Indicators

                US Stock Market              Trending Up1376413350_Stock Index Up

                Canadian Stk Mkt             Trending Up1376413350_Stock Index Up

                US Bond Market               Bond Yields Trending Up1376413350_Stock Index Up

In The Markets

Stocks End Mixed Following Weak Jobs Report

The broader stock indexes rose in the first full trading week of 2014, while the Dow Jones Industrial Average recorded a modest loss. The large-cap indexes remained in negative territory for the year to date, while the S&P MidCap 400 Index climbed to new highs. Health care and utilities stocks were particularly strong for the week.

Earnings reporting season begins

The fourth-quarter earnings reporting season began after the market closed Thursday, when aluminum giant Alcoa—typically the first major corporation to release results—announced a decline in fourth-quarter earnings that was slightly larger than analyst estimates. The report had little effect on the broader market, however. The reporting season gets into full swing next week, with the release of major bank earnings.

Job growth slowed considerably in December with the addition of just 74,000 jobs. This was well below the consensus of 197,000. The unemployment rate plunged to 6.7% from 7.0% but that was a result of another sharp drop in the labor force participation rate. Furthermore, aggregate wages fell 0.1% after increasing 0.7% in November. The drop is expected to put downward pressure on consumption growth unless consumers decide to lower their savings rate.

Short-term strength in precious metals continued, which contributed to the strength of the materials sector. The Market Vectors Gold Miners ETF (GDX 22.01, +0.74) jumped 3.5% while the broader sector ended ahead of the remaining cyclical groups with a gain of 0.4%. Even though the sector displayed strength, there were still some pockets of weakness. Namely, Alcoa (AA 10.11, -0.58) fell 5.4% after missing bottom-line estimates by two cents. The company said it expects to see global aluminum demand grow at 7.0% in 2014, which matches last year’s growth rate.

Outside of materials, the discretionary sector (+0.4%) was another notable outperformer among growth-sensitive groups. Homebuilders provided significant support as the iShares Dow Jones US Home Construction ETF (ITB 24.76, +0.35) jumped 1.4% amid today’s retreat in yields.

Speaking of lower yields, they also factored into the outperformance of rate-sensitive telecom services (+0.4%) and utilities (+1.4%). The other two countercyclical groups were mixed as health care (+0.4%) outperformed while consumer staples (+0.2%) ended in-line with the S&P 500.

On the downside, the financial sector (-0.1%) was the lone decliner. Citigroup (C 54.72, -0.48) underperformed the other majors with a loss of 0.9%.

Trading volume was well below average as only 656 million shares changed hands on the NYSE floor.

Russell 2000 +0.1% YTD

Nasdaq -0.1% YTD

S&P 500 -0.3% YTD

DJIA -0.8% YTD

Looking Ahead

From a money management perspective I continue to remain cautious. Overall, I believe equities will be the place to be for 2014 with one caveat—allocations and exposure must be managed closely. We are in highly manipulated markets and are entering a period that may see rising interest rates, slowing growth and rising inflation. We are overdue for a  ‘normal’ equity correction of 10-20% and it may occur sometime in 2014.  Investors should not become complacent, nor should they trust their life’s savings to a buy and hold type of investment philosophy.

Jeff Voudrie’s Week In Review Jan 6, 2014

Trending Indicators:

    US Stock Market              Trending Up 1376413350_Stock Index Up

   Canadian Stk Mkt             Trending Up 1376413350_Stock Index Up

   US Bond Market              1376413350_Stock Index Up Yields Trending Up/Bond Prices Trending Downstock_index_up

image001

 

Stocks decline after finishing strong year on high note

Stocks recorded modest losses for the week. Shares rallied on Tuesday, the final trading day of 2013, helping all of the major indexes reach their highest levels of the year. The S&P 500 Index closed the year with its best annual gain since 1997, while the Dow Jones Industrial Average had its best showing since 1995. Traders and investors seeking to harvest some of last year’s big gains returned from the New Year’s Day holiday on Thursday in a selling mood, however, driving the S&P 500 to its biggest one-day loss in three weeks. The technology-oriented Nasdaq Composite Index underperformed, as analysts downgraded two prominent firms in the sector.

Consumers are more confident but still concerned about minimal income gains

With some traders on vacation or unable to make it into work because of a major snowstorm in the Northeast, and others anxious to adjust their portfolios around the calendar’s year-end, it was perhaps more difficult than usual to determine which factors were driving stock prices. One factor behind Tuesday’s advance appeared to be a report from the Conference Board showing that its gauge of consumer sentiment had risen more than many expected. While consumers remained worried about their future earnings potential, the Board’s index of sentiment toward current conditions reached its highest level in more than five and a half years. Consumers in the survey also expressed considerably more optimism about the number of jobs available in the coming months.

                   (Source: troweprice.com, yahoo.com, google.com, briefing.com)

How I have my client’s portfolios positioned (generally)

Toward the end of 2013, two of the trading strategies (US Aggressive Growth and US Growth & Income) that I am using went to cash due to the internal proprietary indicators those strategies are based on. Those indicators have now switched back to green and I have been moving those funds back into the market. There is a third strategy (US Targeted Growth) where I had been locking in profits in the second half of December. I have resumed moving those funds back into the market as well on market pullbacks.

Trading volumes have been light on market pullbacks and there is still a real possibility of a 3-5% correction, but the risk/reward ratio (in my analysis) favors being invested at this times. Bond funds continue to struggle and investors continue to flee bonds and REITS.  The medium-term market environment is changing after almost 30 years of ongoing interest rate declines. And with the stock markets continuing to set new all-time highs, risk is also increasing. Although the markets are generally going up, not all stocks are participating. For instance, utility stocks are lagging whereas financial and growth stocks are doing well. So stock selection is the key.

Have a wonderful and blessed week.

Jeff Voudrie’s Week In Review 12-16-2013

Trending Indicators:

                US Stock Market              Trending Down stock_index_up
                Canadian Stk Mkt             Trending Down stock_index_up
                US Bond Market               Trending Up1376413350_Stock Index Up

The stock market experienced a flat finish to an otherwise-forgettable week. The S&P 500 shed less than one point, maintaining its December loss of 1.7%. Small-caps outperformed as the Russell 2000 gained 0.4, but the index remains lower by 3.1% this month.

image005

On Monday, the stock market did not generate too much excitement following a broad-based rally on Friday. Tuesday’s session saw the major averages spend the trading day in a steady downtrend. Despite persistent selling pressure, the losses were limited in scope. Wednesday featured a continuation of the selling from the previous day. Seven of ten sectors settled with losses of 1.0% or more while only two groups finished above their respective lows. The major averages finished the Thursday session on a lower note.

Looking Ahead:

Mass media publications like Barron’s (which I subscribe to) portray what can be seen as ‘consensus opinion’. I like to read it to get other peope’s views on the markets and their opinions on what is ahead. Since most of the writers and those quoted are part of The Wall Street System and espouse what is best for the financial services industry, I often take what is said with a grain of salt.

 image006For instance, many of the articles are talking about how growth will continue in 2014 and that it will be another good year in the stock market. Their outlook for 2014? “Bullish on 2014”.

The tendency of the WSS is to take yesterday’s news and project it into the future. As a money manager/risk manager, it is vital that I look ahead. And my expectation is quite different from theirs. They say growth will accelerate, I think it will slow because the Fed’s easy money policies are causing inflation. Inflation slows growth. Secondly, I believe that we will see inflation accelerating and the economic growth slowing  as long as the Fed keeps interest rates low. Low rates=declining dollar= slowing growth= increasing inflation.

keeps interest rates low. Low rates=declining dollar= slowing growth= increasing inflation.

I am investing and managing my client’s investment portfolios accordingly. Currently, internal proprietary indicators show that the US and Canadian stock markets are signallying a down trend. Thus 2 of 4 strategies have moved to cash to lock in profits. And another strategy has been taking profits and moving more defensively. That doesn’t mean the market will immediately go down, it just means that the risk associated with any short-term up move is not worth it. Of course, the indicators are tracked on a daily basis and as they change, so may my investing actions.

My wife and I celebrate our 27th anniversary this week. I wouldn’t be the person I am today without her support the last 3 decades, her guidance and her prayers. I am very blessed!

Have a wonderful week!

Source: troweprice.com, google.com, barrons.com, ycharts, yahoofinance, etc.

Jeff Voudrie’s Week In Review 12-9-2013

Trending Indicators:

US Stock Market    Trending Up  1376413350_Stock Index Up

Canadian StkMkt    Trending Up  1376413350_Stock Index Up

US Bond Market     Price trending down, yields up

 

In The Markets

Stocks snap winning streak

Stocks ended mixed for the week, snapping a streak of eight weekly gains for the S&P 500 Index. Economic and profit concerns drove some of the trading, but some speculated that investors’ desire to lock in gains following the market’s strong run so far in 2013 may have also played a role. The S&P MidCap 400 Index recorded a small gain, but the small-cap Russell 2000 Index suffered a notable loss and fared worst among the major benchmarks.

Worries grow over Fed tapering…

For much of the week, investors appeared to continue a recent pattern of treating good news for the economy as bad news for stocks. This was particularly true on Thursday, when stocks fell after the Labor Department reported a sharp drop in weekly jobless claims. The data reinforced a report the previous day from a private payroll processing firm showing a large gain in jobs in November. Investors worried that the good jobs data might cause the Fed to announce-perhaps as early as its December meeting—that it would begin tapering its purchases of bonds, which has helped keep a lid on interest rates and encouraged investment in riskier assets, including stocks.

(source: troweprice.com, google.com, barrons.com, ycharts, yahoofinance, etc.)

Is The Party Ending?

2013 may be only the 10th years since 1950 that the S&P500 stock market index did NOT experience at least a 5% decline. There was a 4.97% decline between May and late June, but the continued upward trend has been historic. Typically, there is a decline of 10% or more at least every 12 to 18 months since 1946. It has been 26 months since the last decline of 10% or more.

The last market correction ended in October of 2011. Since then, the S&P 500 has gained 60% while earnings growth has only gained 13%. In other words, there continues to be a huge dis-connect between what is occurring in the stock market and the underlying economy.

Retired Investors Urged to Remain Cautious:

Let me repeat my warning from last week: The markets continue to set all-time highs while the economy sputters along. There is a dis-connect between the two and it go on far longer than we think. On the other hand, the markets are in a situation where they can correct quickly on any piece of news from the Federal Reserve. Those that have been invested in equities for months should monitor the markets closely. Those who have missed the current run up should avoid investing large portions of their wealth in equities at this time.

Look Ahead:

There is a rotation that is quietly occurring in the market. Money has been flowing out of bonds and into stocks. Investors bullishness is at record levels and the Federal Reserve continues to manipulate our markets. The kinds of stocks that have done well lately may not be the ones that are poised to do well the next 6 months. Much of 2013 has been typified by growth accelerating whereas the current economic readings seem to be indicating the possibility of growth slowing again. Thus large, well-established and/or dividend paying stocks may come back into vogue.