ARTICLES IN 2018

DATE:    April 1, 2018

TO:        POINT VIEW CLIENTS

FROM:   David G. Dietze, JD, CFA, CFPTM  Founder and President

I. Performance Update

Stocks were on a roller-coaster ride during the quarter. The S&P 500 finished January up 5.6%, the best start to a year since 1997! However, in February, volatility exploded, as the monthly jobs report showed wage growth higher than expected, setting off fears of rising interest rates and runaway inflation; the S&P 500 fell 3.6% during the month.  March brought some stability, until fears of regulatory risk for Facebook took down the technology sector, and the market along with it. 
 

   MARKET DATA

03/31/2017 to 03/31/2018

First
Quarter
2018

S&P 500 (dividends reinvested)

13.99%

-0.76%

NASDAQ (dividends reinvested)

20.77%

2.59%

60/40 S&P 500 / TX-EXEMPT SECURITIES BLEND

9.44%

-0.82 %

DOW JONES INDUSTRIALS (dividends reinvested)

19.25%

-1.96%

INTERNATIONAL STOCKS (MSCI EAFE IX ID)

14.51%

-1.72%

TAXABLE BONDS (Barclay’s 1-3 Yr Gov’t/Credit)

0.23%

-0.20%

TAX-EXEMPT SECURITIES (Barclay’s Muni Index)

2.67%

-1.11%

 
Political risk has reemerged as a major concern for investors. The Trump administration has threatened the global economy with tariffs, and China has retaliated. Although the timing and economic impact has yet to be seen, tariffs are never healthy to promote global GDP growth, so investors shunned risk assets.
 
Despite concerns, corporate earnings results continue to be stellar, with 73% of companies in the S&P 500 beating Wall Street analyst earnings expectations. According to Factset, 77% of the companies in the S&P beat sales expectations. With tax reform set to kick in, earnings should continue to march higher.
 
The technology sector continued to be a driving force. Tech constitutes 23% of the S&P 500 and at one point was up 12% for the year, accounting for nearly 65% of the market’s returns. However, this unraveled during the quarter’s final three weeks, prompted by the selloff of the once beloved FAANG stocks (Facebook, Amazon, Apple, Netflix and Google). Tech is one of only two sectors that finished positive for the first quarter.
 
High yielding stocks took it on the chin during the first quarter as well. Post the 2008/2009 financial crisis investors fell in love with bond surrogates: stocks with historically low volatility that pay a high and growing dividend. As fears of faster than expected interest rate hikes increased, these income plays sold off aggressively. Sectors such as REITs, utilities, telecom, and consumer staples are all negative to start the year.
 
The bond market remains volatile. Perception has once again shifted to protection of principal as fears increase of rising interest rates. Bonds across the spectrum sold off dramatically with the yield on the US 10-year Treasury nearing 3% during the quarter, its highest level since 2013. 
 

PREVAILING YIELDS AS OF:

FIXED INCOME ASSET

3/31/17

06/30/17

09/30/17

12/31/17

3/31/18

US Government 10 Yr. Note

2.40%

2.30%

2.33%

2.40%

2.79%

5-Year Certificate of Deposit

0.89%

1.38%

0.99%

1.00%

1.67%

Money Market

0.11%

0.62%

0.71%

0.95%

1.32%

    II.  Looking Forward 

        Volatility was at unusually low levels in 2017. Investors should expect stocks to ebb and flow to greater degrees in 2018 as the Fed looks to raise rates and the political situation in the US remains unpredictable. We continue to see the global economy on solid footing, and corporations in general healthy. Stock sell offs should be used as buying opportunities. As Warren Buffett preaches, “Be fearful when others are greedy, and greedy when others are fearful.”

    III. Enclosures

        The enclosed shows the recent performance of all your Fidelity accounts (if under management for more than 3 months and fully invested by           Point View), and your investment advisory invoice. Our annual Privacy Policy update is also enclosed.

Article Index

Cybersecurity Starts with You by Claire E. Toth, 4.6.18.

Maximizing Your Portfolio's Returns - Beware the Taxman by Elaine Phipps, 4.6.18.

Fear of Rising Rates? Remember The Reason You Own Bonds by Donna St.Amant, 4.6.18.

Stocks Can Rise in a Rising Interest Rate Environment by John Petrides, 3.12.18.

Profit from Recent Volatility with Stock Market Bargains by David G. Dietze, 3.6.18.

Making Sense of the Market Volatility by David Dietze & John Petrides, 2.12.18.

Doing Well While Doing Good by Claire E. Toth, 2.5.18.

Tax Reform: A Bullish Development  by David Dietze, 1.17.18.

Ten Stock Ideas for 2018 by John Petrides, 1.9.18.

Bullish on 2018? Consider Three Key Issues by David Dietze, 1.5.18.

A Bit About Bitcoin by Claire E. Toth, 1.5.18.

Look Out for the Robo-Advisor by Donna St.Amant, 1.5.18.  

Financially Savvy Charitable Giving: Donor- Advised Funds by Elaine Phipps, 1.5.18.

Is FAANG Long in the Tooth? by John Petrides, 1.5.18.

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