Inflation worries caused by a single economic report have led to increasing concern that the economy may be overheated. A rapidly expanding economy could lead the Fed to increase interest rates at a faster than expected pace. The January Unemployment Report from the Bureau of Labor Statistics showed an increase in average hourly wages of 9 cents, pushing the annual increase to 2.9% from 2.6%. A couple points of caution on this report are needed. First, it is possible that some or even most of the wage increase is due to 18 states raising their minimum wage as of January 1st. If that is the case, this will likely be a one-time bump in average wages rather than a sustained trend higher. Second, there could be a temporary weather impact on this report (which won’t repeat once the weather gets warmer). Some workers were not able to work full-time because they couldn’t make it to work on certain bad weather days. If these workers were lower paid workers, that would push up the aggregate average hourly wage for January because the lower paid workers worked fewer hours. We’ll need to wait for the February, March, and April reports to see if the increase in average hourly wages is a trend or if the January report is just a blip on the radar. [+] Read More

You many have heard people speak about the "January Effect," but what does it actually mean? In short, the January Effect is a concept suggesting that the first month of the year tends to experience a seasonal increase in stock prices. Some even take the anomaly a step further, suggesting that a positive January means a positive calendar year. With January around the corner, does the “January Effect” concept hold water? Let’s investigate. [+] Read More

The Information Technology sector has been on a roll so far in 2017. The returns for the sector year-to-date are nothing short of eye-opening: as of May 30, Information Technology has returned just over 20%, which puts it fairly far ahead of the next best performer, Consumer Discretionary (+11.52%). By comparison, the broad S&P 500 index is up a much lesser +7.7%, which while strong is still pretty modest compared to technology’s run.1 This strong performance has some investors scrambling to beef-up their investment portfolio’s technology holdings, in an effort to ‘join the party’ so to speak. But investors should take pause before rushing to buy more technology stocks. Doing so would essentially mean “chasing heat,” which is just another version of market timing– a tactic that is not necessarily advisable for the long-term investor. [+] Read More

There’s a popular saying that people often use to characterize or describe human behavior: “we are our own worst enemies.” This phrase probably wasn’t created with the original intent of describing investor behavior, but one thing’s for sure—it often hits the nail on the head. You have probably read before that investors’ emotions often get in the way of sound long-term decision making. During times of pronounced market volatility or downturns, investors often get worried (understandably) about sustaining too many losses, and they will alter their long-term strategy as a result. In other words, experiencing declines in the market often leads to the feeling of needing to “do something to stop the losses,” which means making knee-jerk reactions. Research shows, however, that those knee-jerk reactions can cost investors quite a bit over the long-term. [+] Read More

There seems this growing feeling that the market is on shaky ground. As an investor, you may feel it too: the presidential election is unique to the point of being wild, Europe appears to be in disarray, corporate profits have seen better days, GDP growth in the U.S. has been lower than average. Perhaps that is why a recent Bloomberg survey of forecasters said they expect the S&P 500 to finish the year 1% lower. They cited some of the concerns mentioned above, but also pointed to negative sentiment tied to rising interest rates, elevated stock valuations, and the aging business cycle.1 The question for investors is: is it time to rethink portfolio strategy, perhaps favoring a defensive posture? [+] Read More

Monitoring the performance of an investment portfolio is a tricky task. On one hand, many investors would benefit from not becoming overly focused on performance. Doing so tends to lead to an unhealthy focus on short-term volatility/price movements, which can easily lead to an investor making a knee-jerk, emotional decision that runs counter to their long-term goals. [+] Read More

If you’re starting to get the feeling that the mutterings of a next bear market are growing, it’s because in many senses they are. A recent Bloomberg article noted that some high profile market forecasters—among them Goldman Sachs and Bill Gross—were raising warning signs about rising stocks and bonds. [+] Read More

The U.S. presidential election has capitalized the news media, social media, and pop culture for nearly a year now, and we still have several months before the campaign's end and the voters have their say. Here at WrapManager, we don’t take a political stance on elections, but we do track market trends and activity and the election environment can have an effect on the stock market. It’s interesting to look back at how politics have affected financial markets in the past. Though we can’t predict what might happen this time around, looking back can help us identify previous trends. [+] Read More

The recent market volatility has shifted focus away from the upcoming presidential election (a little), but there’s still not a day that passes without at least a few hours of campaign coverage. Take the build-up to November as you will, but we think we can all agree that until the actual results are in, it’s more rhetoric and political posturing than anything else. A topic du jour for political posturing is…you guessed it… the economy! Both parties try to persuade voters that their policies are better for the economy and the markets, so we decided to take a closer look at how the economy and stock market have performed under different kinds of leadership. As you review some of the findings below, please keep in mind we do not favor one party over the other—our primary goal is to help our clients reach their long-term goals, and how we view politics personally should not (and does not) play a role in the investment plans we create and manage. Also, the findings below should not set any kind of expectation for future returns depending on who wins. If anything, you should view the findings below as little more than ‘interesting cocktail party facts!’ So…Republicans or Democrats – Who’s Better for the Economy? Two Princeton economists performed some comprehensive research on the matter, in a paper titled “Presidents and the U.S. Economy: An Econometric Exploration.” For all of the interesting discoveries they make in the process, perhaps the biggest takeaway is that political party doesn’t seem to matter all that much The economy and stocks tend to perform better when a Democrat is in power, but Messrs. Blinder and Watson make it clear in their paper that gaining an edge in economic and stock market performance is more arbitrary than policy related: “It appears that the Democratic edge stems mainly from more benign oil shocks, superior [productivity] performance, and perhaps greater defense spending and faster growth abroad.” The analysis looked at a 64-year period starting with President Harry Truman and ending with President Barack Obama, which includes seven complete Democratic terms and nine Republican ones. Some findings: [+] Read More