Jeff Voudrie’s Week-In-Review 10/21/2013

Trending Indicators:
                US Stock Market               Trending Up
                Canadian Stk Mkt            Trending Up
                 US Bond Market               Trending Up

In the markets:
Markets worldwide were higher by 1% – 3% for the week.  The world’s markets heaved a collective sigh of relief as the threatened debt default in the US was put off for at least a few months. New all-time highs were set in numerous US indices on Friday. Canada’s S&P/TSX index gained +1.9% for the week and reached a two-year high, although it has not yet bested 2011’s highs.

Developed International markets gained +2.6%, outperforming Emerging International markets at +1.1%. Markets are gamely trying to reach positive territory YTD, and are now only -1.1% YTD, a far cry from the -16% just four months ago.  Germany’s DAX index joined the US at all-time highs, one of very few non-US markets to reach that high-water mark.

In the US, concern over the degree to which the government shutdown would affect 4^th Quarter GDP immediately replaced minute-by-minute breathless reporting on the shutdown and debt ceiling debates.  A couple of Fed reports continued the “modest growth” theme: the Philly Fed report came in at 19.8 vs expectations of 15, and the so-called “Beige Book” report was filled with anecdotal evidence of modest to moderate positive growth.  The 3^rd Quarter profit reports poured in this week, with 99 of the S&P 500 reporting.  61% of them beat profit guidance, but only 38% exceeded revenue estimates – lower on both scores compared to Q2.

In Canada, energy and manufacturing companies gained on news that Canada’s #2 trading partner, China, was increasing imports and on a growth trajectory again. Recovery from recession continues in Northern Europe, led by the UK and Germany.  In Southern Europe, Markit predicts that its Purchasing Managers Index (“PMI”) to be released later this month will show that even Spain has begun the recovery process.  In the UK, employment has risen to a record high, job openings are at their highest level since 2008 and the unemployment claims count is falling at the fastest rate since 1997, according to official data.

In China, PMI reports indicate economic growth in the third quarter picked up, and the government’s modest growth target of 7.5% for 2013 should readily be achieved.  China’s consumer price index jumped to 3.1% year-over-year in September from 2.6% in August due to rising food prices, but observers feel not yet so high as to force government action.

(sources: Barrons, Wall St Journal, Bloomberg.com, ft.com, guggenheimpartners.com, ritholtz.com, markit.com, financialpost.com)

Looking Ahead
The nomination of Janet Yellen to replace Federal Reserve Chairman Ben Bernanke is a signal that interest rates may continue to remain low for many more months. Thus the raising interest rate ‘scare’ resulting from Bernanke’s ‘taper’ comments may not continue. If interest rates remain low, then bond funds may do better.

The last few months of the year are historically positive so I continue to increase the equity holdings (slightly increasing targets and putting targeted cash to work). I may also be moving targeted monies back into bonds.

The markets have done very well this year but it belies an underlying fragility, so I will continue to monitor the markets and my client’s accounts closely, taking action as deemed necessary.

Have a wonderful and blessed week!

Your posted comments on this and other questions are welcome.
If you have a question for Jeff an answer is just a click away.
Find a wealth of information at Jeff’s website.

Jeff Voudrie’s Week-In-Review 10/08/2013

Trending Indicators:     
US Stock Market                              Trending Up

Canadian Stock Market                   Trending Up

US Bond Market                               Trending Down

In the markets:

September was an excellent month for US, Canadian and International markets.  US indices gained an average +4.4%, and both Developed and Emerging International gained more than +7%.  Canada trailed  other major markets with a gain of +1.3%.  In the US, SmallCap and MidCap indices led LargeCap, and Internationally, Developed led Emerging by a small margin.

In the US, September is historically the weakest month of the year for the stock market.  But when it is positive, the returns for the last two months of the year are usually quite good.  Since 1950, the 29 years with a positive September resulted in a 25-4 won-loss record for the following November-December period, averaging a gain of +4.1% for the final two months combined.

For the week, markets were mixed worldwide.  In the US, SmallCaps, MidCaps, and the Nasdaq gained less than a percent, while the S&P 500 and Dow 30 lost -0.1% and -1.2% respectively.  Canada’s TSX lost  -0.7% for the week.  Developed International lost less than -1% while Emerging International gained +2% on average

Although there was a dearth of economic data in the US, due to the government shutdown, a milestone of tremendous significance has been reached that has not received much notice.  A Wall Street Journal analysis of global data “shows that the U.S. is on track to pass Russia as the world’s largest producer of oil and gas combined this year – if it hasn’t already.  The U.S. produced the equivalent of about 22 million barrels a day of oil, natural gas and related fuels in July, according to figures from the US’s EIA and the International Energy Agency. Neither agency has data for Russia’s gas output this year, but Moscow’s forecast for 2013 oil-and-gas production works out to about 21.8 million barrels a day.” The US is closing in rapidly on energy independence, which seemed like just a pipedream only a few years ago.  (Saudi Arabia remains the world’s largest supplier of liquid crude oil alone, 11.7 million bar rels a day, according to the IEA. Russia was second at 10.8 and the U.S., third, at 10.3 million.)

The Eurozone manufacturing sector expanded for the third straight month in September, according to Markit surveys.  Growth was recorded throughout the third quarter of the year to lift the sector out of its long-running recession.  Things are even better in the UK:  the UK manufacturing sector continued to expand at a marked pace during September, to round off its strongest quarterly performance since the opening quarter of 2011, and now sits at a 27-month high. The UK labor market also showed further signs of improvement, as the rate of job creation climbed to a 28-month peak.

Markit also reported positive signals on the Eurozone jobs front as the rate of losses eased to a very modest pace, raising the possibility of employment starting to recover in the near future.

In China, the HSBC/Markit final Purchasing Managers Index (“PMI”) reading of manufacturing in China for September came in at 50.2, disappointing but still in positive (expansion) territory. The government’s PMI for manufacturing was 51.1 vs. 51.0 in August. The PMI for the service sector, as posted by the government, was a strong 55.4 in Sept. vs. 53.9 in August.  The Chinese government’s PMI readings concentrate on state-run enterprises, whereas the HSBC/Markit surveys heavily weight private enterprises.

(sources: Barrons, Wall St Journal, Bloomberg.com, ft.com, guggenheimpartners.com, ritholtz.com, markit.com, financialpost.com)

Looking ahead:
The government shut down has been getting a lot of news coverage and so has the impending debt ceiling crisis. Does anyone really believe that our government is going to default? In spite of the current administration trying to promote fear and panic, the markets are holding up relatively well. There are more ups and downs, but in the end we are in about the same place.

up and are recovering their losses from the May/June plunge. Still, I continue to believe that on a risk adjusted basis that equities should continue to out-perform between now and the end of the year.  There aren’t any changes in the asset allocation as of now but, as always, I will continue to closely monitor events and make dynamic adjustments as necessary.

Thank you for allowing me the privilege of working with you! Have a great week!

Author Bio:

A financial services industry veteran with more than 20 years’ experience, Jeff Voudrie is a new breed of private money manager. Using sophisticated electronic monitoring and software, combined with his 20 years’ experience as a money manager, Jeff works with you to create a personal investments management portfolio that reflects your lifestyle goals and risk tolerance. He specializes in stable growth and prudent profits while applying a robust, patented risk management processes. When you work with Jeff, you have the security of knowing that your life savings is getting the attention it deserves.

Jeff Voudrie, a financial planner in Johnson City, TN has been interviewed by The Wall Street Journal, CBS MarketWatch, The London Financial Times and the Christian Science Monitor. He is a former syndicated newspaper columnist and the author of two ground-breaking books: How Successful Investors Tripled the Return of the S&P 500 and Why Variable Annuities Don’t Work the Way You Think They Work. He accepts a limited number of new clients in his personal investments management practice. He and his wife Julie live with their seven children in Johnson City, TN. He is heavily involved in his local church and has done missionary work in Hungary and Cambodia.

Your posted comments on this and other questions are welcome.
If you have a question for Jeff an answer is just a click away.
Find a wealth of information at Jeff’s website.

Jeff Voudrie’s Week-In-Review 9/23/2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Trending Indicators:

       US Stock Market                Uptrend
     CAN Stock Market            Uptrend
US Bond Market               Down

In the markets:

Markets around the world gained again last week, marking the third advancing week for most.  US markets reached new all-time high territory on Wednesday, Developed International markets surpassed their 2011 highs on average, and Emerging Markets – having gained 10% in the last three weeks – are rapidly digging their way out of a large hole although still down -3.9% year-to-date.
Although US markets gave up their post-Fed bounce from Wednesday by the time the week was done, it was nonetheless a good week, with indices advancing an average +1.3%.

The big economic news of the week, of course, was the Fed’s decision (or, non-decision) to leave its QE program of asset purchases unchanged for the time being.   Almost no pundits expected this outcome, and the market quickly rallied.  However, those gains had been erased by Friday leaving only the gains from earlier in the week, which were based on separate Fed-related news: Larry Summers’ withdrawal from consideration as Ben Bernanke’s successor as Fed chair.

The Canadian market’s S&P/TSX index reached a two-year high on Wednesday, but gave most of it back by the end of the week to end with a lesser gain of +0.7%.  Declining energy and miners shares weighed on the market, but the biggest news was the shocking report from Ontario-based BlackBerry.  BlackBerry reported stunning losses, plans to lay off a huge 4,500 employees, and the writedown of a billion dollars of inventory.  Many observers were uncomfortably reminded of similarities to the final days of Quebec-based Nortel, which similarly surprised investors before finally filing for bankruptcy in January, 2009.

It was a quiet week for economic news internationally, with holidays in the Far East, and collective breath-holding in Europe as the continent awaits the outcome of Sunday’s elections in Germany.  Angela Merkel’s coalition has slipped to a statistical tie in pre-election surveys, making the outcome less certain than it seemed not long ago.  The only thing certain is the importance of the outcome to Eurozone economic policies, and particularly to the fortunes of the Eurozone’s debtor nations – Greece, Spain, Portugal and Italy.

(sources: Wall St Journal, Bloomberg.com, ft.com, guggenheimpartners.com, ritholtz.com, markit.com, financialpost.com, stat.go.jp)

Looking Ahead:

The decision by the Federal Reserve to not ‘taper’ in September impacted the bond market and drove down yields. The reaction wasn’t as strong as it was back in May, but we did see some nice gains in the bond funds. Now there is speculation about whether or not they will taper in October. The bottom line, though, is that the underlying economy continues to weaken and the Fed continues to try to spur the economy. About the only thing certain is that volatility and uncertainty will continue. In the end, though, it is all about anticipating which direction the stock and bond markets will take. Currently, I continue to believe that equities have a better risk/reward ratio than bonds but the Fed taper decision may result in the type of stocks invested in to be modified from faster growing companies to slower growing companies.

As always, I continue to monitor the markets closely and will make adjustments to allocation, strategies and investments based on events as they unfold.

God Bless, have a great week!

Jeff Voudrie’s Week-In-Review 9/16/2013

Trending Indicators (Intermediate Time Period)

 US Stock Market                 Trending Up

 Canadian Stk Mkt               Trending Up

US Bond Market               Trending Down

In the markets:

Markets worldwide gained last week, save for those whose fortunes are closely tied to oil or gold.  With the Syrian crisis seemingly easing, equities gained favor.  US indices gained by an average +2%, led by the Dow Jones 30 Industrials at +3%.  In addition to energy and precious metals, techs were also a laggard sector for the week as Apple’s new iPhones (and, especially, their pricing) were met with heavy criticism and vigorous selling of Apple shares.  Leading the worldwide gains were emerging markets, which have had a negative year so far, followed by developed markets at +3% and +2.8% respectively.  Some emerging market indices had their best week in many months.  Canada’s market did not participate in the gains, however, as oil retreated, gold fell to a five-week low and silver fell to its lowest point since June.  Canada’s S&P/TSX index fell -0.8% for the week.

Economic news in the US was, on balance, negative for the week.  The biggest positive – the lowest level of unemployment claims in years – was immediately dashed as the government admitted that a couple of states had not submitted their numbers in time due to computer problems, and therefore the number should be disregarded.  Business inventories and sales both rose to the high side of expectations.  However, hanging heavily over all other news was the inescapable fact that housing activity has dropped off significantly.  The Mortgage Bankers Association said refinancing applications plunged by -20.2% week-over-week to the lowest level since June ’09 and are now down by -70% since May when the initial taper talk from the Fed began. Home purchase mortgage applications also fell by    -2.7% to a 4 week low.  The University of Michigan consumer confidence survey fell to 76.8 from 82.1, below the estimate of 82 and the lowest since April.  The National Federation of Independent Business survey reported a 4-month low in respondents expecting a better economy in the remainder of the year.

Canada’s dollar touched a one-month high on the way to its second straight weekly gain as stronger- than-forecast economic data helped the domestic outlook.  However, the continuing hot housing market in Canada has helped the ratio of Canadian household debt to disposable income rise to a record in the second quarter, despite efforts to slow the housing market down. The ratio of Canadian household debt to income rose to a record high 163.4% in the second quarter from 162.1% in the first quarter, per Statistics Canada.

A surprise fall in industrial production across the Eurozone in July was a disappointing start to the third quarter, and calls into question the region’s recovery that was signaled after Eurozone GDP rose a stronger-than-expected 0.3% in the second quarter.

Several emerging market countries took significant actions during the week to stem market slides and runs on currencies.  Indonesia, to bolster its slipping currency, announced an unexpected 25 bps rate hike which followed a 50 bps hike on August 29^th.  India’s rupee also stabilized during the week concurrent with several central bank actions.  India’s Sensex index rallied +2.4% on the week, Indonesia up by +7.4%, and Thailand higher by +4.9%.

China’s exports rose for a second straight month in August, and industrial production accelerated to 10.4% year-over-year growth in August, the highest amount since March 2012.  Japanese second quarter GDP was revised up to 3.8% annualized growth from 2.6%.

(sources: Wall St Journal, Bloomberg.com, ft.com, guggenheimpartners.com, ritholtz.com, markit.com, financialpost.com, stat.go.jp)

With the US Stock market moving back to a confirmed uptrend, my US Aggressive Growth strategy re-entered the market on Friday. News came out over the weekend that Larry Summers declined the nomination for Chairman of the Federal Reserve once it was clear that Democrats (in general) wouldn’t vote for him. Now, Janet Yellen is the ‘favorite’. There is a big difference in the policies of Summers versus Yellen. Yellen is a Dove like Bernanke and will tend to favor easy money policies and economic stimulus. Summers is more of a Hawk and would be less inclined to continue stimulus. If Yellen becomes the new Chairwoman then it may be negative for the USD but may cause stocks to power ahead even further…just like they are today.

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

Hi,

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Trending Indicators

                US Stock Market              Confirmed Down Trend
                Canadian Stok Mkt            Confirmed Down Trend
                US Bond Market               Confirmed Down Trend

In the markets:

Markets rebounded last week from a recent spate of weekly losses.  Avoiding a fourth consecutive down week, the Dow Industrials rose +0.8%.  The other major US indices outperformed the Dow, led by the Nasdaq at +2.0%.  Canada’s S&P/TSX Composite Index rose +1.3%, closing at its highest level since March 2012.  International markets were strongly positive as well, with Emerging Markets averaging gains of +5.1% (although still down -8.7% for 2013); Developed Markets added a robust +3.3% as well.

The biggest data point of the week  in the US was the Non-Farm Payrolls number, released on Friday.  It was disappointing at 169,000 (consensus was for 190,000), and July’s number was revised down a whopping 58,000, to 104,000.  Nonetheless, the employment rate fell again, to 7.3%, the lowest since December, 2008.  The biggest contributor to the declining employment rate was the decrease in labor force participation, which is now at the lowest level since 1978.  The Fed’s “Beige Book” reported that the Fed sees “modest to moderate” growth in the US, a notch worse than their previous view.  The soft payrolls number has caused many observers to see diminished odds of the Fed tapering its QE program in September.

Canada also reported its payroll number this week, and it was a very strong +59,000, dropping the unemployment rate to 7.1%.  This was more than twice the consensus estimate, but few economists thought it to be a signal of a boom, as the Q2 GDP growth was recently reported as a modest +1.7%.

The recovery in the Eurozone manufacturing sector continued in August.  The Purchasing Managers Index (“PMI”) came in at 51.4, rising for the fourth successive month to reach its highest level since June 2011.  The UK manufacturing sector maintained its robust start to the third quarter of 2013, with its growth rate at the highest since 1994.  The UK economy as a whole is enjoying the strongest growth spurt in 15 years, according to markit.com researchers.  The Eurozone PMI Composite (manufacturing + services) Output Index signaled a second successive monthly expansion in business activity in August.

Emerging Markets, which have had a very rough go this year, may have put in a bottom this summer.   The HSBC Emerging Markets Index (EMI), a monthly indicator derived from Markit’s PMI surveys, recovered from July’s low in August but posted only a marginal rise in output across global emerging markets. The EMI rose from 49.5 to 50.7, the third-lowest figure in over four years.  And the BRI of the BRICs  (Brazil, Russia and India) all continue to struggle, with manufacturing shrinking and – in India’s case – a plunging currency.

(sources: Bloomberg.com, ft.com, guggenheimpartners.com, ritholtz.com, markit.com, financialpost.com, stat.go.jp)

Looking Ahead

The Syrian situation continues to drag on with public support for military action steadily increasing. The market seems to be pricing in little to no action. It is possible that we will see the market resume its uptrend should there not be any action (because uncertainty is decreased) and vice versa.

Regarding the portfolios, I am making some tactical changes in the Growth Stock Portfolio strategy and the Income Fund Strategy. Smaller companies seem to be performing much better than large, well-established companies in this period because they can still grab market share. The changes in the Growth Stock Portfolio will reflect that. Also, interest rates continue to push higher which is negative for bond funds in general. I anticipate further diversifying the bond-oriented positions to include some short hedge positions on 7-10 and 20 yr + treasury bonds.

If you have any questions please let me know…

God Bless, have a wonderful week!