Home Latest Commentary chevron_right Adviser Fund Update September Begins with an Uptick September 3, 2010 Market Roundup After a rough month in the markets, September kicked off with the ISM Manufacturing survey, which surprised economists with a gain in August after three months of declines. The stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. market lit up on the news, with the Dow gaining almost 255 points, or 2.5%, on the day Wednesday the 1st. Thursday’s gains were more modest at 51 points, and could reflect some reassessment of the state of the economy given that there’s been some recent evidence of a bit more spending and a bit more confidence on the part of consumers. This is in great contrast to Monday’s 141-point decline in the Dow, which came as trading was the slowest of the year. This is a time when a lot of Wall Street is on vacation and trading becomes erratic. Consumer incomes improved for the ninth month out of the last 10 (they went down fractionally in June). On a year-over-year basis personal incomes are up 3.0%, the highest rate since October 2008. Consumer spending is up at a 3.4% year-over-year rate which isn’t particularly impressive, but it’s not contracting the way it was in 2009. And Thursday morning’s report on chain store sales seemed to show that consumers are boosting spending a little bit–an encouraging sign. That said, overall spending is still well behind where it was a couple of years ago. Friday’s encouraging employment report will be a key note in setting the market’s tune over the coming holiday-shortened week. Futures were up on the news that private employers added 67,000 jobs in August, higher than forecast, while the rise in hourly wages and temporary positions (along with a half million more people resuming the search for employment during the month) can be considered signs of growth in progress and growth to come. Overall, however, the economy lost 54,000 jobs, as the government dropped 114,000 temporary census positions. Next week there’s really a dearth of reports for traders to hang their hats on, so it’ll be grin-and-watch-it time for the markets. Last week’s revision to second quarter GDP was not as dire as had been priced in to the markets. From the prior 2.4% estimate, the number was revised down to 1.6%, not a great number in and of itself, and one that exhibits what we already know; slow growth is slowing, and while the absence of growth isn’t the result, the probability that it could be is correlated to the weakening pace. Fed Chairman Ben Bernanke’s speech in Wyoming near the end of August was less than earth-shattering, but confirmed that the Fed is well aware of its central role in keeping economic conditions favorable towards growth. That said, Bernanke’s comment that “Central bankers alone cannot solve the world’s economic problems,” was spot on. As for economic indicators, we can deal with reports of a slowing in durable goods orders because the rebound from the bottom of the economic cycle was so strong. And we can also cope with the markets taking a step back because they too had a sharp rebound from their early-2009 lows. Should earnings growth rates in the current and ensuing quarters also slow, it won’t come as much of a surprise. In any case, the almost V-shaped bounce for earnings (up 51% year-over-year in the first quarter), for the stock market (up 52% from the March 2009 bottom) and for many economic indicators, is slowing down. Housing remains the weak link despite some of the lowest mortgage rates ever recorded. Partly, the consumer is worried about deflation and falling values (something we don’t worry about because we believe the Fed is watching this very closely and will do all it can to prevent it, plus the fact that there are pockets of inflation already appearing, such as within the food commodity area). Another problem for housing is that banks are not willing lenders. It’s one thing to say mortgage rates are at record lows, but quite another to find a banker willing to lend you money at that rate or even something close to it. And finally, of course, the job market is problematic as businesses have found ways to cut jobs and still increase production and earnings. Without a steady paycheck it’s tough to buy a home. We know we’ll have to vie against electioneering rhetoric and broken clock doomsayers over the next month or two. But the theme that interests us most is one that has yet to be challenged: Businesses have found a way to profit in what remain recession-like spending patterns from the private sector, consumers and the government. Yet, that fact is not only being overlooked but also bypassed by a continued flight to perceived safety in bondsA financial instrument representing an IOU from the borrower to the lender. Bond issuers promise to pay bond holders a given amount of interest for a pre-determined amount of time until the loan is repaid in full (otherwise known as the maturity date). Bonds can have a fixed or floating interest rate. Fixed-rate bonds pay out a pre-determined amount of interest each year, while floating-rate bonds can pay higher or lower interest each year depending on prevailing market interest rates., particularly government bonds. What this means, simply put, is that stock valuations are even more attractively valued on a relative basis, and more attractive on an absolute basis given their future earnings potential (growth potential), especially when contrasted to the historical indebtedness (threat to growth) of government issuers. We’re hopeful that what we’re seeing right now is what we’ll call the “pause that refreshes” (a well-known Coca-Cola marketing slogan that, unfortunately, was coined and used in 1929). No, we don’t think we’re heading for a Depression; we think we’re just in a slowing phase. As investment advisors we counsel patience, and a bit more confidence in American ingenuity and strength than some on Wall Street are willing to give right now. About Adviser Investments Adviser Investments operates as an independent, professional wealth management firm with expertise in Fidelity and Vanguard funds, actively managed mutual funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., fixed-income investing, tactical strategies and financial planning. Our investment professionals focus on helping individual investors, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., foundations and institutions meet their investment goals. Our minimum account size is $350,000. For the fifth consecutive year, Adviser Investments was named to Barron’s list of the top 100 independent financial advisers nationwide and its list of the top advisory firms in Massachusetts in 2017. We have also been recognized on the Financial Times 300 Top Registered Investment Advisers list in 2014, 2015 and 2016. For more information, please visit www.adviserinvestments.com or call 800-492-6868. Disclaimer: This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations, personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed. Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, riskThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline. factors, strategies, affiliations, services offered and fees charged. Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. The Barron’s rankings consider factors such as assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. This award does not consider client experience and is not indicative of future performance. Editors at the Financial Times bestowed “elite” status on 300 firms in the U.S., as determined by assets under management, asset growth, longevity, compliance record, industry certifications and online accessibility. © 2018 Adviser Investments, LLC. All Rights Reserved.