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It’s the 2nd Longest Economic Expansion in U.S. History – How Long Can It Last?

Posted by Michael J. O'Connor | CWS®, Vice President Investments

June 6, 2018

It’s the 2nd Longest Economic Expansion in U.S. History – How Long Can It Last?

Through April of this year, this economic expansion is now 106 months old. If the US economy continues to grow through May – which seems all but assured – it would make this economic expansion the second longest in US history. Looking out even further, if the economy continues to grow through July 2019, it would become the longest period of growth in the history of the country.

There’s a real chance it could happen – in a recent poll of global fund managers by Bank of America Merrill Lynch, only 13% of them thought a recession was likely in the near term. Using Corporate America (earnings) as in indicator, the numbers also support the case for more growth: in Q1 2018, the blended earnings growth rate for S&P 500 companies is 24.5% as of this writing, which would mark the highest earnings growth rate the economy has seen in nearly eight years.

Introducing the MILES Bond Portfolio

June 5, 2018

Investing on your own in fixed income markets can be extremely challenging. Unlike the stock market where equities trade thousands of times throughout the day on a public exchange, the bond market is notoriously difficult to navigate because trades are not placed on an exchange, they are instead placed over the counter and even the most liquid bonds available may only change hands a few times per day. Even if an investor is able gain a grasp on the fair value of a particular bond, building out a diversified portfolio of bonds is an entirely different challenge given that the minimum investment for one particular bond could be $10,000 (or more). And even if you think you’ve found the perfect bonds for you it can be challenging and time consuming to find sellers willing to sell those bonds to you at your preferred price. Investing in Fixed Income via Mutual Funds and ETFs Investing in fixed income through a mutual fund or traditional ETF solves many of these problems. Rather than purchasing an individual bond, a mutual fund or ETF buyer is purchasing a basket of bonds. By making one purchase they gain exposure to hundreds or even thousands of bonds. [+] Read More

Nuveen Sees Equities Treading Water, Although Fundamentals Look Solid

May 31, 2018

Equities Prices Are Likely to Continue Churning, But Should Eventually Move Higher Equity markets struggled to gain clear direction last week. Investors focused on geopolitical issues, particularly U.S./China trade negotiations and the on-again-off-again prospects for a summit with North Korea. Other issues included the sustainability of the U.S. and global economic expansions, rising bond yields, the spike in oil prices and Federal Reserve policy. The S&P 500 Index rose 0.3% for the week. Income-oriented sectors, technology and consumer discretionary led the way, while energy and materials were laggards. Treasury markets also gained ground as the 10-year Treasury yield fell back below 3%. [+] Read More

Avoiding Slow Failure in Retirement Planning

May 30, 2018

Editor’s Note: This article was written for the WrapManager Wealth Management blog by guest author Justin Sibears, a Portfolio Manager at Newfound Research. More information about Justin and Newfound can be found at the bottom of the article. Slow failure in investing happens when portfolio returns are insufficient to generate the growth needed to meet your objectives. No one event causes this type of failure. Rather, it slowly builds over time. Think death by a thousand papercuts or your home slowly being destroyed from the inside by termites. Traditionally, this type of slow failure was probably the result of taking too little risk. Oversized allocations to cash, which as an asset class has barely kept up with inflation over the last 90 years, are particularly likely to be a culprit in this respect. [+] Read More

J.P. Morgan Shares Global Equity Views for 2Q 2018

May 24, 2018

Taking Stock of Trends, Opportunities, and Risks At first glance, the current environment remains rather favorable for equity investors. Profitability is strong and continues to rise around the world, interest rates are still very low in most countries and valuations don’t yet look excessive, for the most part. But after an exceptionally positive 2017 and a rip-roaring start to 2018, investors have become more nervous, fearing that a breakdown in international trade relations or a monetary policy mistake could bring this economic cycle to an end. Volatility has returned to markets, with investors more inclined to punish perceived disappointments rather than celebrate successes. [+] Read More

Are Stocks Attractively Valued?

May 22, 2018

Over the past couple of years, the S&P 500 Forward P/E ratio has been above its 25-year average. This has led some market commentators to warn that equities aren’t attractively valued. A Price to Earnings (P/E) ratio is a valuation measure that shows how much investors are willing to pay for a dollar of a company’s earnings. For example, a company that has a stock price of $30 and earnings per share of $2 would have a P/E ratio of 15 ($30/$2 = 15). A reading above the long-term average is typically interpreted to mean that stocks are expensive relative to the historical average. Similarly, a reading below the long-term average is typically interpreted to mean that stocks are cheap relative to the historical average. The recent pullback in equities to start the year coupled with continued strong earnings growth has left the S&P 500 Forward P/E ratio at 16.1x at the end of April 2018. The 25-year average S&P 500 Forward P/E ratio is exactly 16.1x. This marks the first time in over 2 years that this reading has not been above the 25-year average. [+] Read More

How Does Exchange-Rate Risk Impact the Purchase and Coupon Payments of Foreign Bonds? – Doug’s Quiz Corner

May 18, 2018

Tackling Currency Risk When Purchasing Foreign Bonds Consider this Scenario Your friend Lucy is a US resident who bought a British bond at par with a £10,000 value at maturity. The bond was exactly one year from maturity at the time she purchased it and it pays a 2% semi-annual coupon. There are two coupon payments remaining including the payment at maturity. [+] Read More

BlackRock Weekly Commentary Asks Is This As Good As It Gets?

May 17, 2018

An Unusual Earnings Season With many developed market firms having reported first-quarter results, we can say without doubt it’s been an unusual earnings season. Strong beats were met with little investor cheer. The worry: Earnings are close to a peak. Yet we see more room for earnings to climb this year and next, and reaffirm our overweight to U.S. equities. [+] Read More

Legacy Planning with Donor Advised Funds

May 16, 2018

If part of your legacy and estate planning involves giving to charity, you may want to consider Donor Advised Funds (DAF). DAFs are not generally telegraphed as a solution for investors with charitable inclinations, but perhaps they should be – DAFs offer a unique approach to giving assets, potentially growing your assets, and then donating them to the charity (or charities) of your choosing – all in a tax efficient manner. So What Are Donor Advised Funds Exactly? The IRS defines them as a fund or account operated by a charitable, 501(c)(3) organization, which is known as a “sponsoring organization.” Once a Donor Advised Fund is established at a sponsoring organization, contributions are made to the account by individual donors. These contributions can range from anything to cash, or mutual funds, or commercial or residential real estate, to life insurance policies and more. Once the donor makes the contribution, the sponsoring organization has legal control over it, but the donor is generally entitled to an immediate tax deduction associated with the charitable contributions and would also maintain control over the investment management and distribution of funds from the account. [+] Read More

Nuveen Feels Reasons for Optimism Outweigh Reasons for Caution

May 10, 2018

Reasons for Optimism Slightly Outweigh Reasons for Caution Corporate earnings were in focus for much of last week. Results continued to come in stronger than expected and earnings are on track for their best quarter since 2010. But concerns remain that earnings growth may have peaked in the current cycle. Investors also focused on economic data, including another drop in U.S. unemployment and indications that global growth momentum may be slowing. Amid these crosscurrents, stocks were mixed, with the S&P 500 Index dropping 0.2% for the week. Technology was a standout performer, while telecommunications and healthcare lagged. Upside and Downside Risks May Result in Ongoing Volatility We do not believe that we are close to the end of the current cycle of global economic expansion, but the endgame may develop more quickly than many investors expect. At this point, it appears that upside and downside risks for the economy and financial markets may be pretty well balanced. [+] Read More