On the road to nowhere? Or are we?
While capital markets around the globe may seem subdued, especially compared to last year’s movements, looking beneath the surface there is much going on.
Increased Company Earnings
With the corporate tax cuts, earnings are increasing. Public companies are enjoying terrific earnings growth and logging excellent earnings reports as the year continues. With little movement in capital markets and increased earnings, valuations by most any measure, are becoming less expensive. Also, worth notice in our Q3 Newsletter is a detailed article concerning lowered numbers of public traded companies, a possible source of different valuations moving forward.
Financially Happy Consumer
Broadly, the consumer from a financial standpoint is doing well. A happy consumer, leading to a more freely spending consumer, is an important point for the United States since the Gross Domestic Economy is made up of over two thirds consumer spending. Much of this financial happiness comes before a lower tax burden, likely to be felt by consumers next tax season – again in our Q3 Newsletter there are multiple family scenarios detailing the tax savings due next year.
Interest Rates
Market participants have digested multiple rate increases in stride, unlike times before. With gradual rate increases already occurring in the year, and more expected, normalization of interest rates is occurring without the fears of past. Being the first time in almost a decade to have rate increases, we are on Inverted Yield Curve watch (detailed article again in our Q3 Newsletter) as a possible predictor that rates have moved too far, and a signal of a possible recession. So far this has not occurred.
In closing, our patience theme from the beginning of the year seems to be still best suited.
Have a Great Summer!
John A. Kvale CFA, CFP
Q 4 2018 Newsletter Video Audio Podcast Review By John Kvale
Welcome to our Video and Audio Podcast Review of our Q 4 2018 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.
Click Here for direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page
November 17th – Saturday before Thanksgiving – Dallas Athletic Club from 3-5 pm
Let’s get going!
Q 4 2018 Newsletter
And here is your review!
Capital Market Talk
Earnings and Markets Eventually Converge
In this hugely in depth article, first we discuss the effect of earnings eventually driving capital markets, but disconnects can occur. It can even be a good thing for Capital Markets to WAY underperform earnings, as they are this year because in brings valuations back in line.
Here is the key graph
Higher Rates, a Short Term Headwind, Eventually a Tailwind
With sustained lower rates over the last decade, memories have faded on the tugging headwinds that higher rates have – IN THE SHORT TERM – on the mandatory safety asset class of bonds.
Higher rates are a great thing as Bonds/Fixed Income Assets have a place for almost all investors due to their safety and liquidity.
Once the headwinds subside our fixed income investments will have ridden the yield curve higher and begin paying more income in the form of yield – into our pockets – Finally!
Too High of Rates Can Create Trouble
Too high of rates or an overshoot CAN create trouble … or a recession…
Our friends at JPMorgan – historically show that rate is about 5% – yea FIVE percent –
We disagree and think a lower level may now be this tipping point, due to the decade low interest rate level we have just experienced-
Current at two percent, we have a long way to go before getting too antsy
Inverted Yield Curve Update
So far to good- no inversion yet!
Financial Planning
This series of articles came out of no where and in like domino fashion, once one was done the next took form and fell into place-
App of the Quarter – Hardware
Our editor took the fancy picture out due to copyright fears, but our experience with the Firestick has been exceptional – Here are the highlights of our findings
Enjoy the fall –
See Ya next Year – Wow 2019 here we come!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com
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Tagged Bonds, Earnings, Firestick, HIgh Deductible, Inverted Yield Curve, Plup, Rates, Roku, S