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Perspectives

August Market Commentary

by Fortem Financial September 7, 2017

August was a choppy, but essentially flat month for the markets. The price return of the S&P 500 was -0.19%, the Dow Jones Industrial Average was -0.07%, and the Nasdaq’s price return was 1.59%. The Barclays Aggregate Bond Index was up about 0.67%. As for volatility in the markets, the VIX hit its year-to-date high on August 11th, climbing nearly 70% higher than where it started the month. Much of the increase in the VIX can be attributed to the tensions with North Korea, and certainly some of it seemed to revolve around headlines including President Trump. However, we also saw more market-centric headlines like “Deflating Nasdaq breadth may be a sign of exhaustion (Reuters).”

As we’ve written earlier this year, some sectors of the equity market appear to be getting over-valued, and the sensitivity of high growth stocks to negative news and reporting can cause a quick, dramatic fall in those stock’s price. Some current examples this year are Tesla’s 14.6% drop from June 30 to July 6, Netflix’s drop of 8.7% from June 8 to June 12, and NVIDIA’s drop of 12.6% from June 21 to July 3.

The question we ask ourselves is, “When will the party stop?” We rely upon various sources of economic and market data to help answer this question. Understanding that the U.S. economy is a Consumer Driven economy, we look to see how consumers feel. In reviewing the last 30 years of history, it is unexpected to see a prolonged drop in U.S. equities without a meaningful drop in Consumer Confidence. With the increase in consumer confidence over the last year, we don’t anticipate a prolonged market selloff at this point.

Additionally, over the last year the S&P 500’s operating earnings increased by 12%, and its revenue growth over the last quarter was up 5.1%. While these numbers can be somewhat volatile, with higher consumer confidence, and relatively strong levels of business confidence, we believe the market’s value remains fair. We’ve also been tracking Capital Expenditures for a while and although they haven’t been great, they have been increasing. The increase in capital expenditures validates that business confidence looks to stay strong.

In our opinion, the answer to the question of when will the party end is not yet. However, virtually no one ever times the end of the market’s rally perfectly. We believe fitting your portfolio to your needs helps to greatly mitigate the risk of loss during a market selloff. For those who take more consistent distributions, this means lower risk equities with higher dividends and probably more fixed income as well. For those who are not, and will not be taking distributions for some time, a higher exposure to more volatile growth oriented stocks may be acceptable. The process of careful planning to meet your needs improves the probability of meeting your goals in the future.

 

 

Categories: Monthly Market Commentary

Brian Amidei, along with Partners Joseph Romano and Brett D'Orlando have also been named *2014, 2015, 2016, 2017, 2018 Five Star Wealth Managers!

Disclosures:
Awards and recognitions by unaffiliated rating services, companies, and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Fortem is engaged, or continues to be engaged, to provide investment advisory services; nor should they be construed as a current or past endorsement of Fortem or its representatives by any of its clients. Rankings published by magazines and others are generally based on information prepared and/or submitted by the recognized advisor. Awards may not be indicative of one client’s experience or of the Firm’s future performance. Neither Fortem nor the recognized advisor has paid a fee for inclusion on a list, nor purchased any additional material from the award provider. The criteria for each award is listed below:

Five Star Professional Disclosure:
The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
Fortem Financial 2016. All rights reserved.

Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. The opinions expressed are solely those of the author, and do not represent those of Fortem Financial, LLC or any of its affiliates. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. Forward looking statements are based on current expectations and assumptions, the economy, and future conditions. As such, forward-looking statements are subject to inherent uncertainty, risks, and changes in circumstance that are difficult to predict. Actual results may differ materially from the anticipated outcomes. Carefully consider investment objectives, risk factors and charges and expenses before investing. Fortem Financial is a registered investment adviser with the SEC. Advisory services are offered through Fortem Financial.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

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