You are viewing a preview location.

October 17, 2016

The Markets

 

Welcome to our first commentary under our new brand GPS Wealth Management.  While many things remain consistent the only changes will be enhancements in technology, portfolio management, financial planning tools and more….visit our new and improving website:  www.gpswealthmn.com

 

‘Tis the season!

 

Third quarter earnings season, that is.

 

Every quarter, companies report earnings to let investors know how profitable the companies were during the quarter. When profits grow, a company’s share price may move higher. When profits decline, a company’s share price may move lower.

 

For five consecutive quarters, the Standard & Poor’s 500 Index (S&P 500) has been in an earnings recession – the earnings for the companies in the index have declined every quarter. Another earnings decline is expected for the third quarter. As of September 30, analysts estimated a -2.0 percent earnings decline for the third quarter, according to FactSet.

 

A negative estimate doesn’t necessarily mean all S&P 500 companies will do poorly. Certain sectors of the market have been performing a lot worse than others. Of the 11 sectors in the S&P 500, only three – Energy, Industrials, and Telecommunication Services – were expected to have negative earnings. For example, on September 30, estimates suggested the Energy sector would experience a year-over-year earnings decline of -67.2 percent, while Utilities would see earnings growth of +5.3 percent.

 

Only 7 percent of S&P 500 companies have shared third quarter earnings so far. Through last week, Energy sector earnings were weaker than expected (-72.5 percent) and Utilities earnings were stronger (+6.1 percent). FactSet detailed S&P 500 companies’ performance through Friday:

 

“…76 percent have reported actual EPS [earnings per share] above the mean EPS estimate, 3 percent have reported actual EPS equal to the mean EPS estimate, and 21 percent have reported actual EPS below the mean EPS estimate. The percentage of companies reporting EPS above the mean EPS estimate is above the 1-year (70 percent) average and above the 5-year (67 percent) average.”

 

Fourth quarter offers a brighter earnings outlook. S&P 500 companies are expected to see profits increase. Analysts’ current estimates suggest earnings will be up 5.3 percent during the period.

 

GPS INVESTMENT STRATEGIES:  We continue to maintain our themes in active fund managers with an edge, low-cost and smart beta ETF’s and alternative strategies that have been consistent performers.  This week we plan to start “writing” covered calls on the S&P 500 in certain accounts to produce portfolio income as the market seems near its resistant point.  The upcoming election will be interesting and we are working with our global partners to establish strategies for each outcome.  The GPS “Risk Evaluator” which measures risks in the investment world on a scale of 1-10 (1 being low risk, 10 being high) is now at a 7 meaning we see more risks than opportunities.  Our philosophy has always been to take advantage of opportunities such as deep market corrections as well as be patient until such opportunities present themselves. 

Our main focus has and will continue to position our clients for their individual success.  As Fiduciaries, we strive to keep our clients positioned for success rather than positioning them for potential failure. 

 

maybe more americans should study communications. Parents aren’t all that comfortable talking with their children about certain topics. The T. Rowe Price 2016 Parents, Kids & Money Survey found that sex and death are at the top of the list, followed closely by family finances. That’s right: family finances. Parents are more comfortable talking about terrorism, drugs, and bullying than they are talking about money!

 

A shortage of conversation may be at the root of some financial misunderstandings. For instance, when it comes to paying for college, 62 percent of children (ages 8 to 14) expect their parents to cover the entire cost of any college the child chooses. Yet, just 12 percent of parents said they would be able to pay the full cost of college. In addition, 67 percent of children said their parents are setting money aside so they can attend college. However, only 58 percent of parents reported they are saving money to pay for their children’s college.

 

The disconnect between children’s expectations and parents’ reality may explain why 16 percent of parent respondents said they had used retirement savings to pay for college expenses and 11 percent expect to do so.

 

Remarkably, college isn’t the only non-retirement expense where parents have spent their retirement savings. Funds earmarked for retirement have been used to pay for vacations (17 percent), holidays (15 percent), day-to-day expenses (13 percent), and weddings (8 percent).

 

Communication is critical. If you haven’t talked with your children about money, it may be a good time to start. There are a lot of resources available to help you. Give your financial professional a call for advice in this area of your portfolio.

 

Additionally, if you have been using retirement assets for other purposes, it may be time to implement and adhere to a financial plan. Doing so may help you arrive at retirement with enough money to live comfortably.

 

Weekly Focus – Think About It

 

“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”

--Warren Buffett, CEO of Berkshire Hathaway

 

Best regards,

 

The GPS Wealth Team

 

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

 

 

* Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

 

Sources:

http://www.investopedia.com/terms/e/earnings.asp

https://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_10.14.16

https://corporate.troweprice.com/Money-Confident-Kids/Site/Media/Resources/Articles/2016-pkm-survey-supplemental-results-summary (Slides used are 37 and 53)

https://corporate.troweprice.com/Money-Confident-Kids/Site/Media/Resources/Articles/2016-pkm-survey-results-summary (Slides used are 10, 14, 15, 28, and 30)

http://www.brainyquote.com/quotes/quotes/w/warrenbuff161460.html

 

 

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Spire Wealth Management, LLC), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Spire Wealth Management, LLC.  To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Spire Wealth Management, LLC is neither a law firm nor a certified public accounting firm and no portion of the website content should be construed as legal or accounting advice.  A copy of the Spire Wealth Management, LLC’s current written disclosure statement discussing our advisory services and fees is available upon request.

 

 

er.