Tag Archives: JPMorgan

Q 4 2020 Newsletter Video Audio Podcast Review of Year Events, Cause and Effects By John Kvale

Welcome to our Video and Audio Podcast Review of our Q 4 2020 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 a 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

Unlike the last two Newsletters which had very little economic and market related comments, this one is all about where we have been, what has occurred and where we may be going!

J.K. Financial q 4 2020 newsletter

Let’s get going!

Thanks in advance!

Q 4 2020 Newsletter

(YouTube)

As the spread of the Covid Virus occurred, Capital Market Participants in true anticipation form, voted with their feet and sold assets across the board well ahead of the eventual lock downs.

The largely followed S&P 500 (Larger US Companies) fell over 33% along with major international markets such as the German Dax falling over 35% and US Small companies represented by the Russell 2000, falling over 40%.

The most startling item of the drop was the speed at which this drop occurred, 27 days!

Ignoring the speed of these most recent declines is a bad idea as we need only look earlier in 2018 to see ANOTHER very fast drop.

The FOMC Steps In – Lowers Rates

By Mid-March as Capital Markets continued their descent, the FOMC (Federal Open Market Committee) led by Jerome Powell, dropped the hammer on interest rates by a full 1% to zero. During normal times, .25% is the usual adjustment as can be seen by the late 2019 and early 2020, non-crisis adjustments.

FOMC Adds More Fuel

Correctly using the financial crisis of 07-09 as the play book, the FOMC took the bazooka out, and starting buying assets to flood the markets with liquidity.  The current bazooka is much bigger (about 3 X) this time as can be seen by the difference in balance sheet increase of $1 Trillion in 07-09 versus the $ 3 Trillion and counting increase currently.

It Worked (Maybe Too Well), Capital Markets Took Notice

You know us to be very positive – all through the many negatives that have occurred !

You also know we will call it like we see it!

Markets have officially gone too far and are ahead of themselves, expect bumps and no extra risk taking is warranted at this time – CAREFUL!

We hope you enjoy … talk to you Next Year – 2021 !!!

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

The Fed, Economics, Interest Rates and Interest Rates Review Part 1

On Friday, we gave you a preview of this post and in completing it over the weekend, it became a bit longer than expected, so we are doing a two part series.

Some of this is also in our coming Newsletter, but with more turf here, we can dig a little deeper, especially in a two part series…

Mid week last week the FOMC (Federal Open Market Committee) led by Jerome Powell and company released their estimates of where interest rates will be over the next several years.

This chart, known as the Fed Dot Plot, represents a dot for each voting member …. looks like there is a ton of group think going on as everyone is pretty much in agreement on the near term view and with a variance of only one percent in the longer term view – far right (One vote at 2% and two at 3%)

This chart from our Friends at JPMorgan includes not only the FOMC estimates but what the Capital Markets are assuming – (This estimates comes from the Futures Market and is easily ascertained)

Market estimates can and do change quickly.

Here is a blow up of the far right portion of the graph – Orange is market expectations again from the futures market and Purple is long run assumptions.

So markets think that rates will stay low and the FOMC also agrees.

Is there any reason that the FOMC would HAVE to raise rates?

Yep, one word ….

Inflation!

In Part 2 we will discuss …

Have a Great “FOMC and Interest Rates” Day!

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

Three Views of the Consumer – Balance Sheet, Net Worth, Debt Service … Looking Good!

Over the weekend… doing what Financial Nerds do, after actually looking for an earnings update from Factset, but only being about 40% through the earnings season and after reviewing an almost 100 page slide deck from JPMorgan, the following consumer related charts jumped out, so we decided to share

Three Views of the Consumer

Recall that the consumer makes up over two thirds of the US GPD/Economy/Economic Growth via his/her spending… one can infer a happy consumer is a spending consumer…

These are averages across the country, so there are certainly different individual cases, but this is definitely worth a look…

Here is the Consumer latest Balance Sheet

Liabilities are most interesting to us, especially the non-mortgage liabilities…

10-25-19 Consumer Balance sheet

Consumer Debt Service is at a very low and serviceable level

The Great Recession of 07-09 has had at least the one good long term effect of keeping the consumer debt service low… not sure if fear or regulation, but still low compared to this multi-decade Chart…

Worth noting this chart variance in NOT very large… very interesting ..

10-25-19 Household Debt Service

Consumer Net Worth

Appreciation of most financial assets post Great Recession 07-09 has cleared new higher ground for the consumer, adding to confidence, happiness and freedom of spending…

Ignore the value the numbers are too big to comprehend, just take note of the higher high in the far right…

10-25-19 Household Net Worth_Page_01

These numbers being so interesting, likely have spawned a deeper dive in our next Newsletter with additional facts and national averages that may make for a great New Years Resolution Article…

Have a Great “Updated Consumer” Day!

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

Earnings Matter, ultimately the most, let’s take a peek at how they are doing

With earnings being the ultimate driver of Capital Markets it’s always good to stick our heads down into the weeds occasionally to see how corporate managers are navigating the waters.

Our favorite go-to source for this information is from our friends at Factset, a research arm that does terrific tracking …

Here are a few charts with our notes:

This following is an estimate of Earnings for the remainder of 2019 and for the year 2020 – notice expectations are positive year over year 2018 to 2019 but not much growth is expected from the analyst community – Tariff agreement would likely change this expectation quickly…

img_1243-e1557890593225.png

Next up, how the change in estimates has occurred in real time – take note of the drop near the end of the year 2018 – while it looks like a larger than normal drop, and we prefer it increasing, it is only about a 5% total expected drop but again still a year over year increase as seen from the prior chart.

img_1242-e1557890631119.png

Lastly, we had to throw one of our favorite charts in from our friends at JPMorgan – the lagging blue line, that actually looks out of place, is the current market expansion rate – note how slow this expansion (2007-current) has been. We find this very interesting as even the 2001 expansion was at a much faster pace than our current. Could we be entering an extended period of slower, but more stable growth? This would also speak to lessened concerns of inflation and lowered expectations moving forward…

img_1244.png

Overall, lets give corporate managers an A to almost A+, especially those dealing with overseas trading partners of any kind.

Have a Great “Update Earnings” Day!

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

Higher Interest Rates Can be a Good Thing

There is much rhetoric about higher interest rates being a headwind for equity markets. Heck we have even mentioned it multiple times. While we agree the immediate/short term reaction may be a headwind, longer term may be a much different story.

A Silver lining found?

Higher Interest Rates CAN be a good thing

From our friends at JPMorgan

Raising Rates Good

If you are scratching your head a little about this chart, not to worry, we did too.

Rates currently reside in the lower green area, well BELOW the stagnation dot. According to JPMorgan’s analysis, raising rates would actually stimulate demand as rates are so low now they are having a stifling affect rather than stimulative.

Look for a much deeper dive into this in our coming Newsletter, and a soon to be released post (as promised earlier) on just how many times rates have been raised during an election year … We were very surprised, and bet you will be too !

Have a Great Day!

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

 

 

Class Action Settlements … JPMorgan. (Clients Only)

Recently there have been a couple of mass notifications regarding Class Action Settlements, most recently with JPMorgan.

Not to worry, we participate as a group for all applicable. Donald uploads all the date needed at once, rather than individually. The forms you receive are not necessary.

No action is needed from your side!

Thanks to all who let us know!

Have a great day!

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