Buy, Sell and Ponder October 2017 Hi guys!
LA port traffic has seen record imports.....July, August and now September.....with 40% of imports coming through LA. This looks good for Christmas. Also, where or at what price would you start to think about GE? Just pondering a bit....
Also, a Fidelity update:
Quarterly market update: fourth quarter 2017
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Key takeaways
The global economy is experiencing a relatively steady, synchronized expansion amid low inflation, with low risk of recession.
U.S. fiscal policy is supportive of growth, and hopes for tax-cut legislation represent a potential upside for corporate earnings.
A shift toward tighter global monetary policy may boost market volatility, underscoring the importance of diversification.
Each quarter, Fidelity's Asset Allocation Research Team (AART) compiles a comprehensive quarterly market update. Here is a summary of their outlook, plus key investor takeaways for the third quarter of 2017. For a deep dive into each, read the Quarterly market update: fourth quarter 2017 (PDF) or the interactive PDF.
First, let's look at how the markets did in Q3.
Market summary: Goldilocks backdrop persisted, widespread gains across asset markets
The synchronized expansion in global economic activity—along with low inflation and accommodative monetary policies—continued to provide a steady backdrop for asset markets in the third quarter of 2017. Non-U.S. equities spearheaded a global stock market rally for the third quarter in a row, bolstered by a weaker dollar and a strengthened economic backdrop. Credit spreads tightened further amid the "risk-on" tone, allowing emerging-market and high-yield corporate bonds to add to their solid year-to-date gains. Steady interest rates kept high-quality bonds in the black, and all asset categories posted positive returns.
Since equity markets hit a near-term bottom in early 2016, global assets have posted exceptional returns while experiencing remarkably low levels of volatility. Compared to historical averages, price fluctuations of riskier assets were extremely subdued, even as they registered big gains. More defensive assets such as investment-grade bonds posted smaller gains, but also experienced unusually low volatility.
Economy/macro backdrop: Synchronized global economic upturn, but markets may be tested by monetary policy shift
The global economy is experiencing a relatively steady, synchronized expansion. Broadly speaking, most developed economies are in more mature (mid-to-late) stages of the business cycle, with the eurozone not as far along as the United States. Recession risks remain low globally, although less accommodative policy in several countries, including China, may constrain the upside to growth going forward.
A rebound in global trade continued to bolster the global economy. The global expansion has been underpinned by a turnaround in export-oriented sectors and manufacturing activity. China's rising import demand over the past year has helped push the percentage of major countries with expanding new export orders to more than 90%. China’s economy remains in expansion, however, policymakers' tighter stance is beginning to show an impact, and peaking activity suggests that upside to China's cyclical trajectory is limited.
Elsewhere, the eurozone is on a cyclical upswing, enjoying a reasonably synchronized mid-cycle expansion across both its core and its periphery. The U.K., however, is confronting late-cycle pressures, as consumers’ expectations deteriorate alongside rising inflation and faltering real income growth.
The U.S. economy remains in expansion, between the mid- and late-cycle phases. Tight labor markets are supporting wage growth and the U.S. consumer, keeping recession risk low. So far, low inflation has been the key to a prolonged mid-to-late cycle transition in the United States. U.S. inflation is likely to remain range-bound due to multiple factors: Tight labor markets, rising wages, and increasing food costs have been supportive, while slowing shelter costs and other transitory factors have served to dampen inflation. Historically, rising wages pressure profit margins and cause the Federal Reserve (Fed) to tighten monetary policy; this in turn has caused a flattening of the yield curve and raised debt-servicing costs for businesses. While many of these indicators remain relatively healthy, they have all deteriorated and are indicative of a maturing U.S. business cycle.
U.S. fiscal policy is supportive of growth, and hopes for tax-cut legislation represent a potential upside for corporate earnings. However, tax cuts may do more to boost inflation than growth, as rate cuts tend to have a bigger impact on growth when there is a large amount of economic slack and monetary policy is easing (unlike today). Meanwhile, escalating tensions in the Korean peninsula represent a potential catalyst for meaningful market risk, as the U.S. and China are the world's 2 economies that are most central to global trade.
Firming U.S. inflation and global growth have given the Fed confidence to continue gradually hiking its short-term policy rate; other central banks may also recognize the need to begin moving away from extraordinary easing. The Fed's unwinding of its balance sheet, and the ECB's likely tapering of asset purchases next year, could pose a liquidity challenge to markets. Overall, the global economy is in a synchronized expansion amid low inflation, with low risk of recession. Going forward, a shift toward global monetary policy normalization may boost market volatility.
Asset markets: Non-U.S. valuations still most attractive, higher market volatility may be on the way
The third quarter was another strong quarter for U.S. and global equity markets. Growth stocks and emerging-market categories were the strongest performers, boosted by their exposure to big gains in the information technology sector. Credit categories continued to lead gains in the bond market, and year-to-date returns were almost universally positive across major asset categories and sectors.
Turning to fundamental factors, international corporate earnings growth has accelerated for several quarters and surpassed U.S. corporate profit growth. Earnings revisions have also stabilized for the first time in years, although lofty forward earnings growth expectations may provide a tougher hurdle to clear in the year ahead, particularly in emerging markets.
Generally speaking, stock valuations are mixed using one-year-trailing earnings; U.S. price-to-earnings ratios are above average, developed markets are below average, and emerging markets are roughly average. Forward estimates for all markets look more reasonable. Using 5-year peak inflation-adjusted earnings, P/E ratios for foreign developed and emerging equity markets remain lower than those in the United States. Despite dollar weakness in 2017, the value of most currencies also remains in the lower half of historical ranges versus the U.S. dollar. Meanwhile, yields and credit spreads across bond sectors remained low relative to history.
With the U.S. exhibiting the mid- and late-cycle phase dynamics, it's worth looking at the historical playbook. Historically, the mid-cycle phase of the U.S. business cycle tends to favor riskier asset classes, while late cycles have the most mixed performance of any business-cycle phase. The late-cycle phase has often featured more limited overall upside and less confidence in equity performance, though stocks have typically outperformed bonds. Inflation-resistant assets, such as commodities, energy stocks, short-duration bonds, and TIPS, have performed relatively well, as have non-U.S. equities.
From an asset allocation standpoint, given the maturing U.S. business cycle, the likelihood of less reliable relative asset performance patterns and increased volatility as a result of the risks in the global monetary policy, smaller cyclical tilts may be warranted. The possibility of higher volatility underscores the importance of diversification.
Long-term themes
Slowing labor force growth and aging demographics are expected to tamp down global growth over the next 2 decades. We expect GDP growth of emerging countries to outpace that of developed markets over the long term, providing a relatively favorable secular backdrop for emerging-market equity returns. Over long periods of time, GDP growth has a tight positive relationship with long-term government bond yields (yields generally have averaged the same rate as nominal growth). We expect interest rates will rise over the long term to an average that is closer to our 3.6% nominal GDP forecast, but this implies they would settle at a significantly lower level than their historical averages.
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the Pudd
Scottrade Account Promotion I rolled most of my TRP 401k over to an IRA at Schwab in 2014. I forget what Schwab's promotion gave me to do so, $1500-$2000 I think, and there were no taxes.
Fidelity OTC Portfolio Manager Fired
Wife's job change and her 401K Thank you for your Input:
To answer some questions -
The second line in the IRS 401K guide has this "have a severance from employment" so I would think the distribution was normal and legal.
Next my wife is over 60yo.
Then the size of distribution is in the mid six figures.
The distribution will most likely stay in the Roth IRA as of now.
Just looking for ideas.
Thanks
Gary
AAII Investor Survey: Bullish Sentiment Approaching 40% FYI: This week’s sentiment survey from AAII showed an increase in bullish sentiment back near 40% and back near the recent high of 4
1.29% from mid-September. While 40% is hardly an extreme reading by any stretch of the imagination, this year there have only been four weeks where bullish sentiment actually topped 40%. With 40% being hard enough, an actual majority is a long way off, and that should keep the current streak of
145 straight weeks below 50% safe for the foreseeable future.
Regards,
Ted
https://www.bespokepremium.com/think-big-blog/bullish-sentiment-approaching-40/
2017 Capital Gains estimates
Scottrade Account Promotion Yeah, I subsequently found some of that info, tnx, pretty much identical to the other way, into ML. I shoulda done more but wanted to keep a big slug in Fido. Maybe in 10 months I will do the reverse and see if I can hit $2500, depending on how the market does ... I doubt I will even if possible.
BlackRock's Fink Warns Of Risk Of Inverted Bond Yield Curve From the article: Despite nearly nine years of gains in U.S. stock markets, investors are flocking to bonds. ... U.S. based bond funds have brought in more than $2 for every $1 gathered by equity funds this year ... BlackRock alone reported nearly $60 billion in bond fund inflows and another $20 billion in “cash management” products that also invest in debt during the third quarter, compared to $12 billion for equity funds.
That explains Fink’s concerns looking out a year or two. Interesting conundrum. On one hand, investors are seeking shelter from what they perceive as expensive equity markets. On the other hand, they’re avoiding cash and the short end of the curve because they yield next to nothing. As a consequence, longer bonds are pulling in money. If that continues long enough it could drive down long term rates to levels below what shorter paper yields. That’s rate inversion. Yes, it is often a precursor of recession.
What I think is different here is that usually the inversion is brought about by central banks raising rates at the short end to choke off an overheating expansion. But in the case Fink outlines, it would be a result of investors piling into the longer end of the curve in search of yield. But investors aren’t that dumb - are they?
