Being probably the least fan of SNL – Saturday Night Live – in our family, it is on the calendar to attempt to stay up this weekend and watch Elon Musk host SNL. Once announced there has been some grumblings among actors, a fiery Musk Tweet and fiery Tweet response that are likely no more than showmanship, but like many I can’t wait to see the show!
Ratings increase? Bet so!
John Maulden SIC conference
Last year the John Mauldin SIC – Strategic Investor Conference – was available virtually … and once again it is this year. This conference lasts for two weeks and started this week … has close to 50 high-powered guests, with complete replays and slide decks … we are excited to present the high points of some of these speakers just as we did earlier this week with the Warren Buffett Berkshire Hathaway annual meeting and our Q 3 2020 Newsletter …
Taper Talk – Floating the Balloon ?
Local favorite Dallas Federal Reserve chair Robert Kaplan who is not a voting member of the FOMC but still remains on the board this year was the first to mention the word Taper – Well he didn’t really mention taper but mentioned the slowing of asset purchases.
No more than a few days later Treasury Secretary Janet Yellen also mentioned something with regards to asset prices and the possibility of slowing purchases.
With a rather yawning capital market response, it would not be beyond a reasonable belief that they are floating some of these out to see market responses.
Look for more comments from us on this and a very watchful eye for more speakers slowly adjusting the aircraft carrier.
Friday
Ahhhh… but today is a Friday heading into a wonderful spring weekend and a possibly very entertaining SNL skit tomorrow night!
In true Groundhog like fashion, Capital Markets, after getting way ahead of themselves early in the quarter, saw their shadow only to turn, run and hide.
Included in the newsletter, which we sent early to give everyone a chance to view and remind of the tax strategies, is an article about the VIX and its reverse brother the XIV. These funny products along with the more recently noted tariff talk has been the recent excuse for capital markets to act like a bashful Groundhog.
The reality is capital markets got way ahead of themselves and needed time to rest. From our perch we would much rather them rest go sideways or even down a little bit, rather than getting WAY ahead of themselves like they did early in the quarter, only to quickly revert and likely overshoot to the downside.
Interest Rate Increase
In this most recent quarter we did just digest another small interest rate increase. Our new Federal Reserve Chairman Powell, looks to continue the gradual increase rates, slowly normalizing short term interest rates, and continuing on the path left by his predecessor Janet Yellen.
Capital Markets have a very unique way of signaling Interest rates have been raised too far called an inverted yield curve. Look for rhetoric about an inverted yield curve soon, as the historic importance and accuracy of this effect are in our crosshairs at this time.
Consumer and Earnings
With an economy that is two thirds driven by the consumer, a happy and spending consumer along with company earnings, which are beginning to digest the new tax reform, lead to a good backdrop.
As we mentioned in our Newsletters and repeatedly at street-cents, this is likely a year we will need patience, we see no change in that view at this time.
On Monday of next week we hopefully successfully do a major upgrade to our internal email systems. This will mean each of our company emails will be down, but not all at the same time. As the switch occurs, while promised nothing will fall through the cracks by our IT team, if you happen to send an email and you have not heard from us, please re-send it just to be safe.
Rates
Ok, it’s a Friday so we will be brief, Janet Yellen, head of the Federal Open Market Committee (FOMC) notched another rate increase under her belt without disrupting the capital markets. Once thought impossible, so far, slow and steady (tortoise- not the hare) is winning the interest rate normalization race.
This is a good chart of the ever increasing rates… finally !
Ahhhh…. Today is a Friday… enjoy your day and your weekend !
It is very interesting to watch the once ferocious markets hate a possible interest rate increase, only now to greet it like family.
Interest Rate Increase Today
It is highly likely the FOMC (Federal Open Market Committee) led by Janet Yellen will raise short term interest rates up to the 1% threshold at their announcement later today. What is more interesting is just a few quarters ago even a whiff of a raise threw the capital markets into a tailspin.
Past rate increase events:
The US Dollar soared as other countries across the world continued to push their rates down.
US Capital Markets threw a temper tantrum in dispute of a raise.
Headlines beamed with fear of the crazy FOMC raising rates.
Probably our favorite chart from our friends at JPMorgan- higher rates can be a good thing
There will be a day that it does matter. Rates can go too far which results in an inverted yield curve (short term rates are higher than long). For now it seems everyone is on the same page and digestion of higher rates is occurring.
Have a Great “Higher Short Term Interest Rate” Day!
Shhh…. at the penning of this post the gang is still sleeping (promised full attention this week) …. Couldn’t keep away from this mid-spring break update…
Rate Increase Today
Janet Yellen and the FOMC (Federal Open Market Committee) have signaled two rate increases this year. The capital markets have fully priced in an increase today. Their increase will move “Short term” rates to .75 % or 75 basis points.
This will help short term bonds, checking accounts and the like.
Recall our friends at JPMorgan think rates have been too low for too long…. if they are correct, this increase may help accelerate the economy.
We agree!
Only time will tell if this is correct.
One thing is for certain, the capital markets are much more receptive to these increases than they have been in recent past.
Due to speed and security concerns, this will be my last post until next week …. shhh… the family will never know !
Not surprisingly, Janet Yellen and the gang at the FOMC (Federal Open Market Committee) hit the pause button last week on an interest rate increase.
No Rate Increase
Basically the FOMC is signaling no rate increase before the election. As strong of a conviction (huge review) that we have for a rate increase, we are fine with a delay given the coming election (first debate tonight.)
Capital Markets Pleased
Treasury Yields (rates) Down Bonds Up, Equities Up, Utilities (rate sensitive) Up
We were slightly surprised by the overzealous capital market reactions!
We are at the half way point of the year. In this review of the year so far and preview of the remainder, we look longer than our regular month for sentimental and digital diary reasons!
Here is our June 2016, Extended view – Economic and Capital Market Review, with a great financial planning tip, and of course our Video for your viewing and listening pleasure.
After discovering we DID NOT have a comprehensive high level Estate Planning article, a two-part series was happily created – for the record more articles similar to this are expected due to their popularity and handy reference ability:
ESTATE PLANNING DOCS
Will – Document that directs non-beneficiary directed assets (Ex ..house, property, cash and regular investment assets) and may create trusts for minors, names a Custodian, Executor and may also create trusts and Trustees for estate tax minimization and other uses (see final statement in article below on Trusts.)
Power of Attorney– Financial document that appoints someone other than you to make most financial decisions in your absence. .
Healthcare Power of Attorney – Document that appoints someone to make important healthcare decisions if you are unable.
HIPPA – Allows your appointed person to receive medical information on your behalf.
Living Will- Cease and Decease – DNR – These titles are one in the same and are frequently confusing. This document allows medical professionals to NOT mandate all possible care, should you become deceased mentally, but not in body function.
Estate Planning Docs Part Two – Trusts
TRUSTS – ALL TYPE REVIEW
Revocable Trust – By far the most common and most commonly misunderstood Trust of the bunch. Revocable means it can be changed at the grantors request.
Testamentary Trust – Trust that is usually embedded in a Will and is created upon the grantors death.
Irrevocable Trust – The Hulk of Trusts. Being Irrevocable, once established and funded, this Trust is a beast. Estate tax, liability, inheritance are just a few items that can be addressed with an Irrevocable Trust.
QTIP Trust : Qualified Terminal Interest Trust – Most common set up by Grantor to give direction to assets beyond the spouse.
Credit Shelter/A:B Trust – Type of trust that is used to help minimize Estate taxes by maximizing the first person in a married couples Estate tax exemption upon death commonly resides in a Will.
GST or Generation Skipping Trust – This handy estate planning trust gives relief to Grantors by jumping a generation and essentially skipping the Grantors children and passing to the grandchildren.
ILIT : Irrevocable Life Insurance Trust – This trust is very useful in getting life insurance proceeds out of a Grantors estate.
With the British vote to exit the European Union, the Federal Open Market Committee (FOMC) lead by chair Janet Yellen will be hard pressed to raise rates. The only reason we can see higher rates sooner rather than later now would be some (multiple reports needed) major inflationary factors that feed through to the economic reports- While big advocates of higher rates and our research shows rates have been raised during an election year, it’s likely off the table for the remainder of the year.
Brexit changes US Presidential Election
Brexit may also change the US Presidential election as the polls of the British were so far from accurate, we expect many to have less confidence in our current US Presidential polls.
Capital Markets Update
New all time high?
With the afore-mentioned rate increase off the table and possible international perceived disruption due to Brexit – US capital markets may be the recipient of fresh capital from global corners of the world.
New highs (S&P 500) would not surprise us at this time and the odds are now better than not from our perch. Minor expansion in Bunny like fashion (explanation to come upon occurrence) looks possible, of course twists and turns have been the norm lately.
Earnings are the ultimate driver of equity prices, and US capital markets are currently frothy if not overpriced. We think they can get more overpriced due to the above concerns.
The biggest news of the month and maybe so far for 2016 is the Janet Yellen, Federal Reserve Chair and Federal Open Market Committee president put a possible rate hike back on the table. We have a terrific article that goes in great detail about this coming in the next Newsletter. Here are a couple of takeaways:
FED is taking the temperature of the capital markets- they are taking it in stride so far
Can/has the FED raised rates during an election year? Answer soon
Capital Markets may be ready for higher rates
Cool graph from TradingEconomics.com
Capital Markets Update
Holding Strong
World Markets are holding up pretty well after an obviously punkie start of the year and after digesting the afore mentioned possible FED rate increase. Could be a very summer doldrums summer…or not of course .. time will tell !
What a different a month (or two) can make. Here is our March 2016, all new…trendy format Monthly Capital Market Review and last minute tax tips, along with a Video for your viewing and listening pleasure. Hope you are enjoying!
As Moto Moto said in Madagascar, these tips are so good we had to say them twice!
Our favorite tax savings ideas that still work for last year (2015 taxes):
Itemize your standard tax deduction
HSA- Health Savings Account
Fund an IRA
Simplified Employee Pension – SEP deduction/contribution against non W-2 income (1099)
Tax Fraud Alert
As noted here, last month we had our first incidence of fraud in February. We are now up to 9.5 so far, as we have one incident that we think was fraud, but could not be proven!
Be sure to keep your guard up!
Economic Update
PMI Manufacturing Index
PMI (Definition: The ISM manufacturing composite index indicates overall factory sector trends. The relevance of this indicator is enhanced by the fact that it is available very early in the month and is not subject to revision.) Graph from our friends at Econoday.
Less than 50 is contraction, greater than 50 is growth.
Employment Situation
While there was a small increase in unemployment claims late in March, the overall employment picture, via hiring, as can be seen below, again from our friends at Econoday, remains steady. It is worth noting, these reports can be volatile.
Capital Markets Update
Updated Support and Resistance
This Graph, included in our Newsletter, shows the updated Support and Resistance lines and levels of the current market.
As mentioned in our Yellen Speaks post, after telling capital market participants that slower rate increases were more likely (late 2015 she told the world to expect four increases, now only two) capital markets smartly broke through the lower upper resistance. Now, can we go to new highs ? Maybe …
Never go all in or all out !
Oil and Market Correlation Chart
For those that think oil does not affect the sentiment and capital markets, look at this chart from Liz Saunders :
Sorry for the motor mouth/fingers … there were a lot of moves worth noting, especially very near the end of the month !
Yesterday afternoon, Janet Yellen, current Federal Reserve President (FOMC) gave a talk during lunch at the Economic Club of New York.
Yellen Lets the Dogs Out
In the simplest terms, she told capital markets she would be slower in moving rates higher.
Break In – Donald is doing a bit of research now that we may all find interesting … How many times and when has the FOMC raised in an presidential election year?
Back to the speech:
Guess when the transcript of the speech was released?
Here are the big boys – S&P 500
Here are the little brothers – Small Cap Stocks – Russell 2000
So near the end of such a volatile quarter, we suspect many may have been caught off guard…. Allocation and never going “All in or All out” is our friend … Once again !
Newsletter is in the works…and has a great chart talking of market levels…that may need to be updated after Janet let the dog’s out!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, please consult your financial advisor prior to investing!
Background
The is the vocal portion of J.K. Financial, Inc. a Dallas Texas Based Fee Only Total Wealth Financial Planning Firm. Founded by John Kvale, a Dallas Texas Fee only Financial Planner and Total Wealth Manager.
Musk Hosts SNL … Mauldin SIC Conference … Robert Kaplan Talks Taper
Being probably the least fan of SNL – Saturday Night Live – in our family, it is on the calendar to attempt to stay up this weekend and watch Elon Musk host SNL. Once announced there has been some grumblings among actors, a fiery Musk Tweet and fiery Tweet response that are likely no more than showmanship, but like many I can’t wait to see the show!
Ratings increase? Bet so!
John Maulden SIC conference
Last year the John Mauldin SIC – Strategic Investor Conference – was available virtually … and once again it is this year. This conference lasts for two weeks and started this week … has close to 50 high-powered guests, with complete replays and slide decks … we are excited to present the high points of some of these speakers just as we did earlier this week with the Warren Buffett Berkshire Hathaway annual meeting and our Q 3 2020 Newsletter …
Taper Talk – Floating the Balloon ?
Local favorite Dallas Federal Reserve chair Robert Kaplan who is not a voting member of the FOMC but still remains on the board this year was the first to mention the word Taper – Well he didn’t really mention taper but mentioned the slowing of asset purchases.
No more than a few days later Treasury Secretary Janet Yellen also mentioned something with regards to asset prices and the possibility of slowing purchases.
With a rather yawning capital market response, it would not be beyond a reasonable belief that they are floating some of these out to see market responses.
Look for more comments from us on this and a very watchful eye for more speakers slowly adjusting the aircraft carrier.
Friday
Ahhhh… but today is a Friday heading into a wonderful spring weekend and a possibly very entertaining SNL skit tomorrow night!
Enjoy, Talk to you Next week!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Posted in Economy, Education, FOMC, General Financial Planning, Investing/Financial Planning, Market Comments, Retirement Planning
Tagged Janet Yellen, John Mauldin, Robert Kaplan