Blog / Events

Please see an article/chart referencing previous Virus outbreaks and how the market reacted.

https://www.marketwatch.com/story/heres-how-the-stock-market-has-performed-during-past-viral-outbreaks-as-chinas-coronavirus-spreads-2020-01-22

EPIDEMICMONTH END6-MONTH % CHANGE OF S&P12-MONTH % CHANGE OF S&P
HIV/AIDSJune 1981-0.3-16.5
Pneumonic plagueSeptember 19948.226.3
SARSApril 200314.5920.76
Avian fluJune 200611.6618.36
Dengue FeverSeptember 20066.3614.29
Swine fluApril 200918.7235.96
CholeraNovember 201013.955.63
MERSMay 201310.7417.96
EbolaMarch 20145.3410.44
Measles/RubeolaDecember 20140.20-0.73
ZikaJanuary 201612.0317.45
Measles/RubeolaJune 20199.82%N/A
Non Farm Payrolls Feb 2020

The US economy added 273 thousand jobs in February of 2020, the most since May 2018, compared to an upwardly revised 273 thousand in January and market expectations of 175 thousand. In February, biggest job gains occurred in health care and social assistance, food services and drinking places, government, construction, professional and technical services, and financial activities. The change in total nonfarm payroll employment for December was revised up by 37,000 from +147,000 to +184,000, and the change for January was revised up by 48,000 from +225,000 to +273,000. With these revisions, employment gains in December and January combined were 85,000 higher than previously reported.

https://tradingeconomics.com/united-states/non-farm-payrolls
Housing Starts Beat Forecast

Housing starts in the US fell 3.6 percent from a month earlier to an annualized 1.567 million units in January of 2020 but beat market forecasts of 1.425 million. Housing starts for December were revised up to 1.626 million units from 1.608 million, the highest level since December of 2006. In January, single-family housing which is the largest share of the housing market, went down 5.9 percent to 1.010 million units from 1.073 million in December which was the highest since June of 2007. On the other hand, starts for the volatile multi-family segment increased 3 percent to 0.547 million. Starts declined in the South (-5.4 percent to 0.778 million) and the Midwest (-25.9 percent to 0.18 million) but rose in the West (1.2 percent to 0.431 million) and the Northeast (31.9 percent to 0.178 million). Meanwhile, building permits jumped 9.2% to 1.551 million, well above expectations of 1.450 million and the highest level since March 2007.

https://tradingeconomics.com/united-states/housing-starts
Inflation Year over Year January 2020

US core consumer prices, excluding volatile items such as food and energy, increased 2.3 percent from a year earlier in January 2020, the same as in the previous month and above market forecasts of 2.2 percent. United States Core Inflation Rate – data, historical chart, and calendar of releases – was last updated on February of 2020 from its official source.

https://tradingeconomics.com/united-states/core-inflation-rate
Employment Change January 2020

Private businesses in the US hired 291 thousand workers in January 2020, the most since May 2015, easily beating market expectations of a 156 thousand increase. The service-providing sector added 237 thousand jobs, mostly in leisure & hospitality, education & health and professional & business industries. Meanwhile, the goods-producing sector added 54 thousand jobs, boosted by employment in construction. United States ADP Employment Change – data, historical chart, and calendar of releases – was last updated on February of 2020 from its official source.

https://tradingeconomics.com/united-states/adp-employment-change
4th Quarter 2019 Update

Whiteford Wealth Management, Inc.

404 Broadway Street, South Haven, MI 49090

Tel: (269) 637-4400 Fax: (269) 637-4407

January 2, 2020

Market Update


Welcome to our 4th Quarter Update for 2019. Happy New Year! We hope that everyone had a safe and well-cherished holiday season with their family and loved ones. We were particularly blessed this year with two new additions to the Whiteford Wealth Management, Inc. family: Scott’s baby boy, Novak, and Tom’s baby girl, Norah. They are both happy, healthy, and surrounded by love. Life is good! We also lost two of our beloved pets in 2019, Kevin/Mary’s Reggie and Alisa’s Yuri. However, Alisa and Ken both adopted beautiful little puppies named Hugo and Nova, respectively. They can frequently be found assisting us in our office and are more than happy to welcome guests at our door!

Here is an outline of this update:

  1. The US Chinese Trade War Update;
  2. United States Economy;
    1. Biggest Winners and Losers Across Industries;
    1. Impeachment Proceedings and Its Effects on the Markets;
  3. Housekeeping;
    1. Explaining 1% Cash + Two Quarters of Distributions;
    1. RMDs and our plans for 2020;
    1. Monthly Distributions;
  4. Our Short-Term/Long-Term Goals.
Name of Index Jan. 2, 2019 (close) Jan. 2, 2020 (close) Percentage Change
Dow Jones Ind. Avg. 23,346.24 28,868.80 23.66%
NASDAQ (IXIC) 6,665.94 9,092.19 36.40%
S&P 500 2,510.03 3,257.85 29.79%
CBOE 10-Yr (^TNX) 2.661% 1.882% -29.27%
U.S. Bond Index (AGG) 106.57 112.68 5.73%

Please be advised that the percentage change in yields in bonds do not necessarily represent a similar increase in value, it only serves to show you that a substantial change in interest rates has occurred—although it does in fact affect the values of outstanding bonds. Generally speaking, when interest rates rise, bond values fall. Also, many stocks of the DJIA and the S&P 500 have dividends which are not included in the NAV’s percentage change on the associated index. Most NASDAQ companies have historically lower dividends but they are also not quantified here. The U.S. Bond Index has historically been almost entirely driven by dividends of interest payments, so any change in value in the above chart is entirely due to appreciation—or when negative, depreciation—in the value of the underlying bond market.

Let’s compare these figures to our foreign counterparts around the globe. We’ll do so by comparing the major indexes of Germany, China, UK, & Japan.

Name of Index Jan. 2, 2019 (close) Jan. 2, 2020 (close) Percentage Change
DAX (Germany) 10,580.19 13,385.93 26.52%
SSE Comp. (China) 2,465.29 3,085.20 25.15%
FTSE 100 (UK) 6,734.23 7,604.30 12.92%
Nikkei 225 (Japan) 19,561.96 (Jan. 4) 23,656.62 (Dec. 30) 20.93%

As illustrated in the next chart, we had a great couple of years when considering where we started just four years ago. It is extraordinarily important to take a step back and look what has happened since the beginning of 2016 and the rocky start that we had that year.

Name of Index Dec. 31, 2015 (close) Jan. 2, 2020 (close) Percentage Change
DJIA 17,405.03 28,868.80 65.86%
NASDAQ 5,007.41 9,092.19 81.57%
S&P 500 2,043.94 3,257.85 59.39%
AGG 108.01 112.68 4.32%
DAX 10,743.01 (Dec. 30) 13,385.93 24.60%
SSE Comp 3,539.18 3,085.20 -12.83%
FTSE 100 6,242.32 7,604.30 21.82%
Nikkei 225 19,033.71 (Dec. 30) 23,656.62 (Dec. 30) 24.29%

Source: Google Finance

Please also look to the following website for MCSI data on all countries listed (click the country tab about 1/3-way down). Look at the YTD and the rolling 1, 5, and 10-year periods.

https://www.msci.com/end-of-day-data-search

Clearly, the best country to be invested in since the close of 2015 and even earlier continues to be the United States. There have been and always will be short-lived opportunities within specialized markets overseas; however, we will always continue to invest our clients’ savings with a long-term view. The US market at this point still seems to us to be the best place to do so, so no changes are recommended at this time aside from small account changes that we have discussed with many clients recently.

The U.S. – China Trade War Update

US-China Trade War Tariffs: An Up-to-Date Chart' (December 19 version, includes China's announcement of a small tariff decrease in effect December 26, 2019)

The gift that keeps on giving! There is always plenty to discuss when it comes to the trade conflicts between the US and China. The primary focuses have been in the fields of technology, aluminum & steel, and of course, intellectual property rights. Here is a chart to help briefly describe what has occurred since January 2018.

https://www.piie.com/blogs/trade-investment-policy-watch/trump-trade-war-china-date-guide

As you can see in the chart, China continually had higher tariffs than the US all of the way up until Fall of 2019. That is when the two countries began charging import tariffs at approximately the same rate.

On December 13th, 2019 President Trump called for a halt in increasing tariffs in anticipation of a Phase One deal being signed this mid-January 2020. This deal will hopefully bring about a change in the trendlines for the tariffs that have been imposed over the past 24 months. This goes in line with our acknowledgement that the Chinese government typically wants to settle legislative matters before the start of the Chinese New Year which occurs this year on January 25th. Please see the below fact sheet on what is set to be agreed upon.

https://ustr.gov/sites/default/files/US-China-Agreement-Fact-Sheet.pdf

That being said, we do see continued hope in reaching a conclusion to the trade war between our two countries and those indirectly affected across the globe. Our predictions lead us to believe that 2020 should be a robust year internationally should there be quality resolutions enacted going forward.

United States Economy

The U.S. stock markets, namely the DJIA, the NASDAQ, and the S&P 500, have rounded out the year in 20%+ territory. That being said, it’s important to remember that December 2018 was not fun for investors. However, we are pleased with the ultimate results for our clients. Despite the news reporting on foreign affairs, 2019 ended up being a relatively quiet year as far as geopolitics goes. There were a couple of big events that were covered quite extensively, such as the Brexit vote that occurred just recently. But overall, we were relatively satisfied with that result and apparently so were the typical investors overseas, outside of Britain, of course. Germany and the Eurozone seemed to appreciate the end to many uncertainties that surrounded this pivotal vote.

Interest rates were brought up in the last update and they seemed to affect much of the world in a positive light. The Federal Reserve opted to not lower them a fourth time this year, but the positive affects had already taken root from the previous three.

The 2020 holiday season numbers were relatively robust coming from retail sales when compared to last year. The 3-3.5% increase from last year leads us into the most successful holiday season on record. This was, of course, bolstered by yet another boon in online sales with more and more retailers rushing into the space that has been dominated by only a few during the past several holiday seasons.

The tariffs threatened against France seemed to slow the French pursuit of heavy-handed legislative threats against US technology companies operating in the country. We are pleased by that result. Many companies operating between the US, Canada, and Mexico are apparently getting used to the new reality: there will be tariffs, but they will be moderately predictable. While we don’t typically endorse any sort of tariff, we will always favor predictability. So does the global investor.

The impeachment proceedings were also brought up during our last update. The House, as predicted, did vote to impeach the President. However, the House is now stalling and not sending their decision to the Senate, as many believe that it will die on the Senate floor in its current condition. Despite these well-televised proceedings, we encourage recognition of the fact that the US economy tends to do better during times of legislative gridlock, as made apparent during every shutdown in our country’s history. These impeachment proceedings seem to be no different: if legislators are busy trying to impeach a President, poorly thought-out legislation gets held up as well and the economy is allowed to operate unimpeded.

Historically-speaking, President Nixon’s impeachment proceedings did not alter the market much at that time. Runaway inflation and the overall bear market that was going on didn’t seem to be affected by Nixon’s ultimate resignation. President Clinton, on the other hand, was impeached during a relative market boom with the internet bubble chugging along. This was a time that is comparable to the market in which we find ourselves today. Investors continued to clamor into the stock market and this is what we feel will be the inevitable outcome of President Trump’s impeachment proceedings.

What industries did well and which ones did not during 2019?

Remember:

  1. These figures always lag by about 1.5 quarters, meaning the data utilized here is as of October 29, 2019
  2. The US Gross Domestic Product (GDP) is $21.340 Trillion, up 3.7% from 2018
    1. Private Industry: $18.725 Trillion, up 3.8% from 2018
    1. Government: $2.616 Trillion, up 2.8% from 2018
  3. Agriculture, Forestry, Fishing, and Hunting: $165.7 Billion, down 0.5%
  4. Mining: $331.7 Billion, down 4.3%
  5. Utilities: $332.7 Billion, up 2.1%
  6. Construction: $883.9 Billion, up 5.3%
  7. Manufacturing: $2.355 Trillion, up 1.5% with durable goods leading the way vs. nondurable goods
  8. Wholesale Trade: $1.269 Trillion, up 4.7%
  9. Retail Trade: $1.1636 Trillion, up 3.3%
  10. Transportation/Warehousing: $682.3 Billion, up 3.7%
  11. Information: $1.1176 Trillion, up 4.7%
  12. Finance, Insurance, Real Estate, Rental, and Leasing: $4.4856 Trillion, up 4.3% with Finance & Insurance leading the way vs. R.E., Rental, and Leasing marginally
  13. Professional/Business Services: $2.7279 Trillion, up 5.8%, with Professional, Scientific, and Technical Services leading the pack healthily
  14. Educational Services, Healthcare, and Social Assistance: $1.8647 Trillion, up 4%, with Healthcare and Social Assistance leading the way
  15. Arts, Entertainment, Recreation, Accommodation, and Food Services: $891.8 Billion, up 3.6%
  16. Other Services EX: Gov’t: $453.2 Billion, up 3.7%
  17. Federal GDP: $808.3 Billion, up 2.2%
  18. State and Local GDP: $1.8073 Trillion, up 3.1%
  19. Total Goods Producing Industries: $3.7364 Trillion, up 1.7%
  20. Total Service Producing Industries: $14.9883 Trillion, up 4.4%
https://www.bea.gov/data/gdp/gdp-industry

Clearly, the US economy continues its trend towards dominating the service needs of both itself and the rest of the world in lieu of developing its manufacturing bases, although Construction is a clear outsider to that rule of thumb, as the only industry that had more momentum that Construction was Professional, Scientific, and Technical Services. That subcategory was up 6.2% and already accounted for approximately twice the GDP as Construction did.

These findings are clearly depicted in the market returns that we have seen in key industries such as technology services based out of Silicon Valley and payment processors such as Visa, Mastercard, Paypal, and the like.

Mining was the biggest loser of 2019: down 4.3% as an industry. This is evident in many companies associated with that industry, although there are clear winners: those that have continued toward the trend of monopolizing their specific niche industry. We have simply stayed away from this industry in the vast majority of cases.

Healthcare was on many people’s minds, as every month most of us write a fat check to our insurance provider. That industry has seen explosive growth over the last several years and now we are seeing a return to relative normalcy in regard to stock market returns when compared to other industries.

This is part of the reason that we saw the stock market returns that we did in 2019: Private Industry GDP is up 3.8% in only 6 months’ time! Because our model portfolios focus primarily on companies that operate in the service sector, we were able to see very healthy portfolio growth for our clients this year.

Overall, when we compare the U.S. economy to its overseas counterparts, it is fair to conclude that the U.S. is still the best place to invest one’s life savings. We are beginning to see things normalize overseas so, it’s important to remember: if the global economy does well, so does the U.S. economy! This continues to bode well for investors and our clients, so we will stay the course.

Housekeeping Items

With a new year ahead of us, we would first like to reiterate the fact that 2019 went quite well for our clients. With the upcoming election cycle in 2020, we have decided to alter our model portfolios slightly, generally speaking, in the following ways:

  1. Increase allocations of select client portfolios into very short-term bond allocations to hedge their risk;
  2. Verify that RMDs are considered more so than they have in recent years—many of more conservative clients will be seeing their RMDs taken earlier in the year than it is normally done;
  3. Verify that the cash positions of our client portfolios consider several months of upcoming cash distributions instead of just one or two;
  4. Increase cash holdings past the 1% as-is typical allocation in the above situations.

Our Short-Term & Long-Term Outlook—Conclusion

So, what’s next for our clients? Many of these points come straight from the last Market Update, as our long-term goals have not changed.

  1. Continue to realize that the near-term is going to continue to be driven by impulsive behavior as investors all around the world get used to the idea of average returns paired with larger volatility.
  2. Continue to keep a primarily large-cap and international mega-cap focused allocation in our model portfolios.
  3. Continue moving toward a more traditional model of investing. This will offset the expected increases in volatility.
    1. This should account for 10-20% of the model portfolio.
    1. If you have already been moved, we will likely stay put at this time or have a slight increase.
  4. Continue to watch geopolitical tensions and their inevitable outcomes.
  5. Increase everyone’s awareness that 2020 is an election year—these are typically more volatile and the media typically distorts economic data in order to further their political agendas.

Should this brief synopsis of our opinions—and these are purely opinions based on our own analysis of the data—stir any questions about the markets, about our service, or anything else for that matter, please feel free to reach out to us. It takes a great deal of trust to allow someone to manage your life’s savings. The fiduciary duty that we voluntarily assume because of our relationship is nothing compared to the ethical duty that we have to you and your family. It’s not something that we take lightly; so, until the next time we speak, we will be in the boat with you—have a wonderful 2020!

Thank you for your continued trust.

Kevin S. Whiteford

Kevin S. Whiteford
President
Whiteford Wealth Management, Inc.

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research, Inc., a Registered Investment Advisor. Whiteford Wealth Management, Inc. and Cambridge are not affiliated.

This letter is not meant to solicit the purchasing of any equities, bonds, mutual funds, or any investment of any kind. Any direct mention of any investment is meant purely as a reference point in the analysis of the issues discussed in this letter.

These are the opinions of Kevin S. Whiteford and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Indices mentioned are unmanaged and cannot be invested into directly. Past performance is not a guarantee of future results. Diversification and asset allocation strategies do not assure profit or protect against loss.

US Unemployment Rate December 2019

The US unemployment rate held steady at 3.5 percent in December 2019, remaining at the lowest level since 1969 and in line with market expectations. The number of unemployed people decreased by 58 thousand to 5.75 million while employment rose by 267 thousand to 158.80 million. The labor force participation rate was unchanged at 63.2 percent. Unemployment Rate in the United States averaged 5.73 percent from 1948 until 2019, reaching an all time high of 10.80 percent in November of 1982 and a record low of 2.50 percent in May of 1953

https://tradingeconomics.com/united-states/unemployment-rate

 

ISM Non-Manufacturing PMI December 2019

The ISM Non-Manufacturing PMI for the US increased to 55 in December of 2019 from 53.9 in November, slightly beating market forecasts of 54.5. The reading pointed to the biggest expansion in the services sector in four months as production and inventories rose faster while new orders, new export orders and employment slowed. Companies are positive about the potential resolution on tariffs and capacity constraints have eased a bit although difficulties with labour resources remain, according to Anthony Nieves, Chair of the ISM. Non Manufacturing PMI in the United States averaged 54.63 points from 1997 until 2019, reaching an all time high of 62 points in August of 1997 and a record low of 37.80 points in November of 2008.

https://tradingeconomics.com/united-states/non-manufacturing-pmi

 

US Jobless Claims Fall in Latest Week 12-21-19 End

US Jobless Claims Fall in Latest Week

The number of Americans filling for unemployment benefits decreased by 13 thousand to 222 thousand in the week ended December 21 from the previous week’s upwardly revised 235 thousand and compared with market expectations of 224 thousand.

 

According to unadjusted data, the largest declines were reported in Texas (-2,596), Georgia (-1,963) and New York (-1,882) while the biggest increases were observed in Missouri (+2,931), Iowa (+2,880) and New Jersey (+2,067).

The 4-week moving average was 228,000, an increase of 2,250 from the previous week’s revised average. The previous week’s average was revised up by 250 from 225,500 to 225,750.

The advance seasonally adjusted insured unemployment rate was 1.2 percent for the week ending December 14, unchanged from the previous week’s unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending December 14 was 1,719,000, a decrease of 6,000 from the previous week’s revised level. The previous week’s level was revised up 3,000 from 1,722,000 to 1,725,000. The 4-week moving average was 1,703,500, an increase of 19,250 from the previous week’s revised average. The previous week’s average was revised up by 750 from 1,683,500 to 1,684,250.

 

https://tradingeconomics.com/united-states/jobless-claims

 

Stillborn Tax Exemption

Recently the State of Michigan House of Representative unanimously passed a bill that allows for a stillborn tax exemption:

The Michigan House today unanimously approved state Rep. Mary Whiteford’s legislation assisting parents of a stillborn baby through a Michigan income tax personal exemption.

“This is about what’s most important – our families, particularly those going through the very difficult time after losing a baby,” said Whiteford, of Allegan County’s Casco Township. “There is nothing we can do to take away the pain and loss for families dealing with a stillbirth. But we can acknowledge the baby, and provide some financial relief on expenses.”

There are roughly 550 to 650 stillbirths in Michigan each year, according to recent statistics. Families dealing with stillbirths often face thousands of dollars in expenses, first preparing for a baby and finally with funeral expenses.

Michigan provided a stillborn child tax credit from 2006 until broad tax changes eliminated multiple credits in 2011. Rather than a credit, Whiteford’s legislation would provide assistance through a one-time exemption for a dependent.

Whiteford noted current law allows families to claim a dependency exemption for a baby who dies after a breath or two at birth.

“Michigan families suffering through a stillbirth deserve the same acknowledgement of a lost life,” Whiteford said.

A taxpayer would need a certificate of stillbirth from the Department of Health and Human Services to qualify.

House Bill 4522, which received broad bipartisan co-sponsorship support after the vote, advances to the Senate for further consideration.

 

http://gophouse.org/michigan-house-unanimously-approves-rep-whitefords-plan-stillborn-tax-exemption/

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