Highlights of this Week’s Update:
- Seats still open for upcoming Social Security Workshops. Call to reserve your seat(s) today.
- Putting last week’s stock market action into perspective.
- We’ve been here before in recent years.
- Buying Opportunity? Very possible based on recent history and what could occur ahead for the next several months.
- It’s a good time to review long term financial goals/objectives before investment strategies.
- S. economic fundamentals mixed but positive from a medium to longer term view.
- Call us with any questions or for a review of your long term plan and goals.
READ ON FOR FURTHER DETAILS………………………………………….
Seats Still Available for Upcoming Social Security Workshops:
We still have available seating for each of our three workshops covering Social Security strategies, claiming options, available benefits, and much more. If you, a family member, or someone you know could benefit from this information, please call to reserve your seats today! The sessions will be held in our corporate conference room. The dates/times will be as follows:
Wednesday, August 26th: 3:00-4:30PM
Friday, August 28th: 10:30AM-12:00NOON
Wednesday, September 2nd: 10:30AM-12:00NOON
Call 405-844-9826 today!
The Markets:
First, let’s address the elephant in the room from this past week: The stock market. Based on the headlines, one would think the world might be coming to an end (again). We need to stop and put what just happened in the proper perspective. The Dow Jones Industrial Average dropped approximately 530 points on Friday, or around 3%. According to an article on CNBC, it was touted as one of only three times in the last five years the index has shed 500 points. The big difference this time: The Dow was coming off a much higher level, making the drop in percentage terms less, which is very important to remember. For the week, the Dow gave up 5.82% and is now off 7.65% for the year. Off its closing high for 2015 back on May 19th of 18,312.39, it is now down right at 10%. A “correction” is considered at least 10% off a recent high. Keep in mind, the Dow only consists of 30 stocks. (Google Finance)
It may be more important to look at a broader index such as the Standard & Poor’s 500 stock index as this measurement of equities consists of 500 stocks across several industries. Friday, the S&P 500 gave up just over 3% as well. Technically, the S&P 500 is still not in “correction” territory, as it is now down just 7.5% off its closing high back on May 21st of 2,130.82. For the calendar year, it’s off 4.27%, most of that drop occurring last week. (Google Finance) The S&P 500 experienced its last correction back in 2011.
Keep in mind, this index fell just last year from its 2014 high on September 18th of 2,011.36 to close on October 15, 2014 at 1,862.49, or a drop of 7.4%, only to rise back to 2,058.90 by the end of 2014. That was a recovery of approximately 10.55% in about 2 ½ months. (Google Finance) This presented a buying opportunity less than a year ago, even as of last Friday’s close. The S&P 500 still remains 5.8% higher than its October, 2014 bottom.
Will this be another buying opportunity as we move towards the end of 2015? There is no shortage of current opinions stating a case for both ends of the spectrum, and everything in between. At this point, we tend to feel that now could be a chance to add to certain investments, and are taking advantage of the current market declines where possible. It could also be a time to consider adding funds to an investment portfolio at lower prices. Time will tell, but given recent history as well as some positives that still exist in the U.S., the present declines could be providing investors with a chance to take advantage of recent market volatility. At the start of this year we had expected 2015 to provide us with increased volatility and that a “sideways” market could be a real possibility. So far we have had volatility, and up until last week, basically a “sideways” market. How will the year-end with over four months still to go? We will keep you posted.
Enough about the stock market for now. We hope this helps put last week in a longer term perspective. This is not the time to change investment strategy just because of a short term market change. It could, however, be an opportune time to review your long term financial plan and goals. If they have not changed, then there is no reason to change your overall investments at present, but to stay the course.
Interest rates dropped last week with the uncertainty in global equity markets. The yield for the 10 Year U.S. Treasury fell back to 2.05% Friday. Oil prices also declined on supply and global growth worries, with the price of West Texas Intermediate Crude closing at $40.29, off another $1.89 for the week. Gold rose $38.25 per ounce to finish at $1,156.50. (CNBC, U.S Treasury)
The recent weakness in stocks has been a bit sharper around the globe, with emerging markets taking the biggest hit (Bloomberg). Weakness in emerging market countries can be explained primarily by rising anxieties directed at China’s slowing economy. While U.S. exports to China make up less than 1% of the U.S. economy (U.S. Census, U.S. Bureau of Economic Analysis), emerging market economies are much more dependent on China. Falling commodity prices and lingering fears we may get another modest devaluation in China’s yuan are adding to the uncertain mood.
A similar time for emerging markets occurred in 1998 that temporarily affected global stock markets, and we felt you might want to read the following article that compares that time to the present. We have provided the link for you.
The Cost of Getting Scared out of Stocks in 1998 | Pragmatic Capitalism http://www.pragcap.com/the-cost-of-getting-scared-out-of-stocks-in-1998/
Positives
A quick review of the U.S. economy is more reassuring if we take both a medium- and longer-term approach
Housing is gradually firming, with July single-family housing starts hitting their best level since December 2007 (U.S. Census) and existing home sales hitting their highest level since February 2007 (National Association of Realtors).
A key measure of the broad-based service sector is at its highest level since the economic recovery began (Institute of Supply Management) and first time jobless claims, which are an excellent measure of layoffs, have held below 300,000 for 24-consecutive weeks. Historically, it’s very low (St. Louis Federal Reserve). To put that into perspective, we have to go back to late 1999 – early 2000 to observe a similar trend (St. Louis Federal Reserve). And that happened when the economy was expanding at a healthy clip.
Where we are seeing weakness – manufacturing. Blame the severe cutbacks in energy projects and the impact of the stronger dollar on exports. Some will argue the recovery has been subpar, but even modest growth lends support to corporate earnings.
We are here to answer any questions or concerns you may have and please don’t hesitate to call us at any time. You NEED to be utilizing our new MyWealth system for your personal financial management/long term planning if you are not yet doing so. Call today for your own personal tour
God Bless,
Your TEAM at F.I.G. Financial Advisory Services, Inc.
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1 The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
3 The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
5 New York Mercantile Exchange front-month contract; Prices can and do vary; past performance does not guarantee future results.
6 London Bullion Market Association; gold fixing pricing at 3 p.m. London time; Prices can and do vary; past performance does not guarantee future results.
Looming Risks Overlooked