During the New Year’s celebrations, likely there were more than a few toasts to Ben Bernanke. Of course, alcohol is a normal part of holiday gatherings, so it’s understandable that common sense and logic may have impaired partiers to the point that our Fed Chairman was credited for the stock market’s success. While central bank policy has a big influence (perhaps too big) on the capital markets, we’re not sure how much of the equity sector’s move should be attributed to it. That issue aside, 2013 was undoubtedly a very good year for stocks. While the question of whether last year’s historic performance was a coincidence or a direct result of monetary policy needs to be examined closer, let’s take a look back at last year. .
One of many notable market developments during 2013 was the fact that stock indexes were never down on the year. From the January 2nd spike, at no time was the S&P 500 negative year-to-date. Secondly, there were only two down months – June and August. For those inquiring minds, there have been two years with 11 out of 12 advancing months – 2006 and 1958.
2013 was the best year for the Dow Jones Industrial Average since 1995. During the year the blue chip index closed at record highs 52 times. It was the 5th consecutive yearly gain and the index ended 2013 on a 4-month winning streak. Among companies within the index, Boeing was the best performer (up 81%) while IBM was the only loser (down 2%).
The S&P 500 had its best year since 1997. The two best performers were Netflix (up almost 300%) and Best Buy (up 237%) while Newmont Mining was the worst stock in the index (down a little more than 50%). 2013 was the 10th best year ever for the S&P 500 while the Nasdaq’s 38.3% rise ranked as the 7th best. Here are last year’s returns for the major averages.
2013[i]
Dow Jones Industrial Average +26.5%
S&P 500 +29.6%
Nasdaq Composite +38.3%
Russell 2000 +37.0%
I
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends
Assisted by 20/20 hindsight, 2013 was pretty easy. Stocks were stronger from the beginning of the year and, except for a couple of brief declines, steadily climbed throughout the year. By December, everything seemed straightforward and simple. Living it in real time, however, was a much different story.
“All of The Faces and All of The Places,
Wonderin’ Where They All Disappeared.”[ii]
Naturally, 2013’s story starts as “Auld Lang Syne” was being sung to ring out 2012. In sharp contrast to current sentiment, at that time there was widespread pessimism overhanging the markets. Everyone was convinced that stocks were too risky and that bonds (which were finishing a very good year) offered the best combination of safety and return. Throughout 2012, investors had been bombarded with a series of developments that would surely shake the stock market at any minute – Greece, Obama’s reelection, an elevated unemployment rate, sub-normal economic growth, record deficits, and as if to put an exclamation mark on the year, the fiscal cliff.
As 2013 began and the widespread anxiety over the “fiscal cliff” subsided, everyone started to realize that the world wasn’t going to end. But stocks had already spiked so it was logical to wait for the correction which had to be just around the corner. Unfortunately for those not invested, it never arrived. But next was the sequestration that would surely knock the legs out from underneath the economy and the market. Once again the talking heads proved to be wrong.
After this was Chairman Bernanke’s comment that the Fed might begin to “taper” its monthly bond buying which caused second thoughts about rising stock prices (this did cause a bloodbath in the bond market). And while we survived these challenges and even managed to name the new royal baby, the government shut down was sure to be end of the world. As we all know, this too came and passed. Perhaps one of the lessons learned from 2013 is that following conventional wisdom can be risky.
While some have been emotionally converted just by higher prices, others ponder the mystery of how record levels coexist with bad headlines. To this latter group the current landscape is a bubble that will ultimately burst. And while the “bubble” debate is ongoing, the explanation behind the stock market’s incredible rally involves dynamic features.
To be sure the bears and bubble supporters have ammunition. News flows seems to be constantly negative, the public is ready to tar and feather everyone in Washington, job growth is anemic, and we face numerous geopolitical problems. However, there are many reasons for optimism. These include the drive toward energy independence in the U.S., “onshoring” or the return of manufacturing to the U.S. (assisted by lower energy costs and robotics), the increasing global “digitization” led by U.S. companies, medical and biotech breakthroughs, and continued growth of emerging market’s middle class.
Undoubtedly, low interest rates have helped provide capital to these developments. However, let’s hope that these projects are economically viable beyond suppressed interest rates. Otherwise those calling this a bubble will be right.
“If it Suddenly Ended Tomorrow, I Could Somehow Adjust to The Fall”[iii]
This returns us to the New Year’s partiers’ raising a glass to Ben Bernanke which leads to a question – have the Fed policies worked and, if so, how much of the economy and stock market’s performance should be attributed to monetary stimulus? Undoubtedly, they have done a very good job of printing money and buying bonds. Additionally they have successfully kept the short end of the yield curve low. Of course, some think the Fed policy has been successful just because banks aren’t failing and the stock market is setting records. By those standards alone, they have done a good job.
To others, ZIRP, QE, Operation Twist and the other various programs are viewed with more skepticism. Andrew Huszar, who had spent seven years at the Fed before working on Wall Street, returned to the Fed to manage one of the QE operations. Specifically, he managed the Fed’s $1.25 trillion mortgage buy back program during 2009-2010. In a The Wall Street Journal Op-ed, he criticizes the policy by saying, “The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.”
[iv]
Beyond the debate of its effectiveness, the Fed’s stimulus policy has added another layer of risk to the capital markets. The various programs, our central bank has admitted, have never been tried before and, consequently, their outcomes are uncertain. The Fed has also stated on multiple occasions that they are ‘data dependent’ or that they rely on economic information to judge whether more or less stimulus is needed. Yet, many economic reports are far from accurate when released. For example, the monthly employment report, one of the most widely followed reports, is subject to huge revisions. Further these revisions continue many months after the initial release. For a data dependent analyst, we would think that this decision process is, at best, cloudy.
Whatever the driver, the stock markets’ 2013 performance was welcome. Due to many factors, however, we’d caution against expecting a repeat. Valuations are no longer as cheap as they were a year ago, economic growth is not certain, and sentiment seems a little excessive. On this last point, the bull/bear ratio has been extremely bullish for weeks (this is a contrary indicator). Furthermore, The New York Times columnist James Stewart recently wrote, “In the many years I’ve been surveying experts for their predictions for the coming year, I cannot recall another time when optimism about the stock market, the economy and corporate profits was so widespread. As is pessimism about the bond market.”[v]
While we are reluctant to make specific predictions, we are confident there will be some curve balls thrown at the markets some time during 2014. As usual, these situations will provide opportunities. The hard part will be to separate the short term noise from any meaningful change in the economy or market’s composition. We look forward to the journey and hope to raise a toast to 2015.
Jeffrey J. Kerr is a registered representative of
LaSalle St. Securities, LLC, a registered broker/dealer.
Kerr Financial Group is not affiliated with
LaSalle St. Securities, LLC. Securities are offered
Only through LaSalle St. Securities, LLC
940 N Industrial Drive, Elmhurst, IL 60126-1131
Member FINRA/SIPC
[1] J. Buffett, 1977
[1] The Wall Street Journal, January 2, 2014
[1] J Buffett, 1977
[1] Ibid
[1] The Wall Street Journal, November, 11,2013
[1] The New York Times, January 3, 2014
Jeffrey J. Kerr is a registered representative of
LaSalle St. Securities, LLC, a registered broker/dealer.
Kerr Financial Group is not affiliated with
LaSalle St. Securities, LLC. Securities are offered
Only through LaSalle St. Securities, LLC
940 N Industrial Drive, Elmhurst, IL 60126-1131
Member FINRA/SIPC
“I Ain’t Gonna Work on Maggie’s Farm No More”[i]
/0 Comments/in Financial Planning News /by spowellEvery market nerd (hand raised) knows that September’s employment data is released this Friday. However, last week we got some different yet important jobs related news. First as everybody knew, Derek Jeter retired. But the other headline was a real shocker as Bill Gross unexpectedly changed employers.
Derek Jeter, for those who don’t read The New York Post sports page, was the shortstop for the New York Yankees for the past 20 years. He had an all-star career winning 5 World Series championships and will be voted into baseball’s Hall of Fame. He announced his retirement before this season began and played his last game on Sunday.
As the financial world knows Bill Gross is the co-founder of Pacific Investment Management (PIMCO). The firm’s flagship mutual fund, the Total Return Fund, had over $270 billion in assets while the firm wide total exceeded $1.25 trillion as of June 30th. With these remarkable numbers it is no wonder that Mr. Gross is considered one of the kings of the fixed income market.
Naturally the media was abuzz about Gross’s decision as everyone wanted to analyze both the why as well as its consequences. Heck we suspect it was even a topic on Friday’s “The View” and “Good Morning America” but only in between fashion updates and coverage of George Clooney’s wedding.
Of course, Mr. Gross’s decision presents more challenges than just learning his way to Janus’s men’s room. Undoubtedly there will be massive outflow from PIMCO and a corresponding inflow to Janus. But perhaps more importantly, PIMCO, led by Gross, was noted for its “New Normal” economic forecast. This centered on a slower potential growth rate for the U.S. when compared to past recoveries. This included such things as subdued job growth and lower reported inflation. Further it called for lower than normal interest rates for longer than others were predicting.
This “New Normal” approach resulted in PIMCO being a “vol seller” or taking positions that benefit from lower volatility, lower interest rates, and low inflation. Reportedly, this was implemented by such positions as long high yield spreads, TIPS (inflation protected bonds), emerging market debt, and maybe some short positions in equity. As these positions get unwound and re-established, the markets trading those securities could be a little choppier than normal.
Last week’s markets were wild enough without the Gross bombshell. The Dow Jones Industrial Average moved 100 points or more in each of last week’s trading days – 2 days higher but 3 days lower. Thursday was especially bloody as the Dow plunged 254 points and all of the major averages lost between 1.5% and 2%. An astounding 92% of trading volume on the NYSE was in declining stocks. It was the highest reading since February 3rd. The glass half-full view is that this can be a sign of capitulation and recent occurrences have happened around the lows of a move. On the other hand, market internals continue to be poor and traders usually look for capitulation after a more painful correction.
It’s possible, however, that given the declines by the small and mid-cap market sectors (covered in the previous newsletter), the average stock has experienced a meaningful decline and is ripe to recover. This also points to the narrow leadership driving the major averages which masks the underlying stock market weakness. For example, on September 19th the Russell 3000 set a new record high. Significantly, this index equals 98% of the investable stock market. As the index made an all-time high, only 55% of its components were above their 200 day moving average. A more typical and much healthier percentage would be above 80%. The last time such a level of narrow leadership happened was March 2000 – not a good time for the markets.
Coming into the end of September (and the 3rd quarter), stocks have had a tough month. The S&P 500 is down 1.4% for the month (with two days to go) while the mid and small cap indexes are down over 3% and 4% respectively. Here are the year to date performance for the major averages.
2014 YTD[ii]
Dow Jones Industrial Average +3.2%
S&P 500 +7.3%
Nasdaq Composite +8.0%
Russell 2000 -3.8%
I
The lousy performance outside of the large caps, including a painful three months for small caps, might be a function of a correction in the high yield market and strong U.S. dollar. First, junk bonds reached a multi-year high (in price) toward the end of the second quarter. Since then these bonds have lost around 3%. Certainly on the surface this is not an alarming number but in the lower volatility world that is supposed to be fixed income, this is a big number. Also, it represents a large portion of the 4.5% – 5.5% yield that most high yield bonds provide.
The losses in the junk market might be a result of reduced risk appetites, the end of Fed bond buying (although QE was not in high yield), or worries over the economy’s strength. Whatever the cause, this sector of the bond market is at the riskier end of fixed income and it usually correlates with stocks especially smaller caps as they use this market for capital.
Turning to the U.S. dollar, it will record its best quarterly performance in more than 5 years with a better than 7% advance. Looking at a longer term measure, the U.S. dollar index remains well below the levels of early to mid-2000’s, but this recent rise has pressured oil, gold and other commodities. Crude oil closed last week around $93 per barrel and gold finished at $1,214 per ounce.
As 2014’s 4th quarter begins (head shaking in disbelief), we face typical market cross currents. On a global stage, we are confronted with protests in Hong Kong, the Ukraine, ISIL, Ebola, and a struggling Europe. Within our stock market, we have weakening signals and worrisome divergences. On the other hand, the 4th quarter has historically been the best three-months for equities. According to Bespoke Investment Group, during the past 100 years October has averaged a gain of 0.22%, while November and December have averaged increases of 0.71% and 1.47% respectively[iv]
Once again it seems that the capital markets are at an inflection point. Perhaps we are entering a long anticipated painful correction that many have been calling for and we see the large cap indexes move lower. Or perhaps we regain momentum with the bullish seasonality and we madly sprint to year end. Or perhaps the correction has already taken place in certain sectors and the areas that haven’t been hit just slither sideways for a while. We may not get developments such as Bill Gross’s departure from PIMCO but it promises to be an exciting stretch.
[i] Bob Dylan, 1965
[ii] The Wall Street Journal, September 27-28, 2014
[iii] Ecclesiastes, chapter 3, verse 1
[iv] The Bespoke Report, September 26, 2014
Jeffrey Kerr is a Registered Representative of and securities are offered through LaSalle St. Securities LLC, member FINRA/SIPC. Mr. Kerr is an Investment Advisor Representative of and advisory services are offered through Kildare Asset Management, a Registered Investment Advisor. Kerr Financial Group and Kildare Asset Management are not affiliated with LaSalle St. Securities LLC.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Past performance is not indicative of future results. Investing involves risks, including the risk of principal loss. The strategies discussed do not ensure success or guarantee against loss. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. Trading of derivative products such as options, futures or exchange traded funds involves significant risks and it is important to fully understand the risks and consequences involved before investing in these products. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. If assistance is needed, the reader is advised to engage the services of a competent professional.
2ND QTR KILDARE ASSET MGMT PERFORMANACE LETTER
/0 Comments/in Financial Planning News /by spowellOften, when making investment decisions, the obvious needs to be questioned. In other words, when something becomes so widely known that virtually everyone “knows” it, it’s a pretty good bet that it is already reflected in the current price. If this obvious information is already in the securities price, future price movement will likely be caused by other reasons.
An example might be our recent financial crisis. Money printing, bailouts, QE, and poorly thought out stimulus programs causing record fiscal deficits were the policy responses implemented to fix things. Many thought these would ultimately lead to more and bigger problems and even those in favor of these extreme and untried approaches acknowledged that they contained risks And when it seemed ‘obvious’ to everyone that things were going from bad to worse, the economy and markets stabilized and began to move higher. This was largely in spite of policy rather than a result of it as businesses figured out the new landscape, adjusted and moved forward. The point is that what appeared to be obvious (bad approaches would cause more and deeper problems) ended up missing new developments (businesses adapting and figuring out how to progress).
Within the context that history doesn’t repeat itself but does often rhyme, the 2014 stock market has some similar underlying characteristics that force us to look beyond the obvious. Right now everyone knows the stock market is at all-time highs. However, this clear fact has an element of distortion. First the Dow and S&P 500 both began at record levels so any move higher, no matter how small, results in a new record. This nugget seems to be overlooked by journalists as they report on the daily stock market action. To be sure, a “record stock market close” is much more interesting than reporting that the Dow inched higher by 10 points. However, a casual follower could easily be misled by this omission.
2014’s advance, in addition to being shallower than perceived, has also been narrow. The 6-month chart below show both points (Please note this chart includes July. Also, the color code is as follows Dow – blue, S&P 500 – red, Nasdaq composite – purple, and the Russell 2000 – green). As you can see, the S&P 500 has had the smoothest journey this year and especially in the second quarter. Further, despite the media’s portrayal, the majority of the market has made little progress above the March highs.
The chart points out another important development – a substantial divergence between the large cap and small cap of the market. From the beginning of April, the Nasdaq and Russell gave back all of 2014’s gains and then some by mid-May. While they rallied along with the rest of the market throughout July, their 2014 performance has lagged the S&P 500. This divergence grew materially in July as you can see.
Of course, the deviation in the averages can also be seen in the major averages’ quarterly and year to date numbers. Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends
2nd Qtr 2014 [i]
Dow Jones Industrial Average +2.24% +1.5%
S&P 500 +4.69% +6.1%
Nasdaq Composite +4.98 +5.5%
Russell 2000 +1.70 +2.5%
For Kildare Asset Management clients, accounts averaged an increase of 4.7% in the second quarter while the weighted average increase of all Kildare Asset Managed accounts was 5.22%.
The year-to-date performance for 2014 was an average increase of 14.54% and a weighted average increase of 14.36%. These numbers are after all expenses.
While there are few steadfast investing rules, divergences can be a significant indicator of future price action. There has not been this type of separation among the major averages in recent years and certainly nothing came close during 2013’s rally. This type of movement (the broader averages weaker than the larger, narrower ones) might be an indication of upcoming turbulence. Of course, there are past examples where this type of divergence is resolved with the broader market regaining strength and closing the price gap (weaker averages catching up). Nevertheless, it is something to monitor.
The markets are flashing other red flags. The cumulative advance-decline ratio (the summation of the number of issues advancing and declining) has weakened. Further as the market regained record territory at the end of June the number of stocks trading at new 52-week highs was not as great as the number when the April highs were achieved. This means fewer issues were leading the charge.
While this deterioration must be watched, there is no arguing that this has been a remarkable rally. As measured by the S&P 500, we have gained 193.5% during the past 1,942 calendar days which ranks fourth in strength and duration. Interestingly, this move will have to continue through early May 2015 in order to overtake the third longest rally which started in October 1974 and ended in November 1980 (2,248 days). In terms of strength, third place belongs to the 1980’s (August 1982 through August 1987) with a 228.8% gain. For those interested, the same two bull markets capture first and second in both longevity as well as percentage gain. Second place transpired from June 1949 and ended August 1956 (2,607 days) and rose 267.1%. As some might guess, the greatest rally began in December 1987 and ended when the tech bubble burst in March 2000 (4,494 calendar days). During this stretch, the S&P 500 rose an amazing 582.1%.
While it would be quite enjoyable for the current rally to continue to gain on these other historic moves, we must consider the possibility that it falls short. To that end, I continue manage your account with risk control being a high priority. As you know, this involves using part of the portfolio in a combination of hedges and cash balances. Further, I remain diligent in looking for opportunities that present favorable risk vs. return situations.
Looking forward I think the markets will face some obstacles. Current conditions offer many sources of possible causes – geo-political conflicts, the end of QE, inflation, etc. Any of these developments could worsen to a point that they impact the stock market and the economy. This market setup reminds me of a quote from global hedge fund manager Paul Tudor Jones. Mr. Jones is quoted as saying “I’m always thinking about losing money as opposed to making money. Don’t focus on making money, focus on protecting what you have.”[ii] Indeed this will be our priority.
Thank you for your continued trust and business. Please contact myself or Connie with any questions or comments.
[i] The Wall Street Journal, July, 1 2014
[ii] Raymond James Equity Research, July 23, 2014
Sincerely,
Jeffrey J. Kerr, CFA
Jeffrey Kerr is a Registered Representative of and securities are offered through LaSalle St. Securities LLC, member FINRA/SIPC. Mr. Kerr is an Investment Advisor Representative of and advisory services are offered through Kildare Asset Management, a Registered Investment Advisor. Kerr Financial Group and Kildare Asset Management are not affiliated with LaSalle St. Securities LLC.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Past performance is not indicative of future results. Investing involves risks, including the risk of principal loss. The strategies discussed do not ensure success or guarantee against loss. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. Trading of derivative products such as options, futures or exchange traded funds involves significant risks and it is important to fully understand the risks and consequences involved before investing in these products. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. If assistance is needed, the reader is advised to engage the services of a competent professional.
“Speak in French when you can’t think of the English for a thing”[i]
/0 Comments/in Financial Planning News /by spowellTwo weeks ago France’s government dissolved – in Paris the capital markets reacted with the CAC 40 (the French stock market index) jumping 2% while interest rates dropped to fresh lows. Naturally, the mind is immediately overwhelmed with the possibilities of these developments providing similar results in markets around the world including the United States of America. While it’s possible that the former French government was more incompetent than Washington, Wall Street’s response to a change in our Federal leadership could potentially be beyond belief.
Of course, anarchy is not a good outcome, something that even the most callous Wall Streeters realize (or at least most of the callous Wall Streeters realize it). However, watching the quote screens during the past few weeks it seems U.S. stocks aren’t waiting for a government collapse to move higher. Prior to last week the S&P 500 had not had a down week since the last week of July. In late August the index reached the 2,000 level for the first time.
Of course, reaching this threshold combined with the widespread excitement of the Dow Jones Industrial Average repeatedly reaching records gives the illusion that the entire equity market is having another gangbuster year. And while the S&P 500 and Nasdaq are providing very nice returns so far in 2014, the Dow was only up 3% year-to-date on September 1st (‘only’ relative to the number of records it has set) while the Russell 2000 increase was less than 1%.
Here are the major averages year-to-date results through August.
2014 YTD[ii]
Russell 2000 +0.9%
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends
“Twinkle, Twinkle, Little Star”
As mentioned, the Dow has gotten a lot of mileage out of a 3% return. However the security that has unexpectedly become the 2014’s star is the long term government bond. Few realize that many long maturity fixed income securities have provided double digit total returns. In fact the total return of the long-bond ETF (symbol = TLT) is 16.88% in the first eight months.
Please remember that at the start of the year the overwhelming consensus was that bonds were to be avoided. Yet the 10-year Treasury bond’s yield has declined from 3.03% at the end of 2013 to last month’s low of 2.30% – falling yields mean higher bond prices. The August low (in yields) might be an important level as the yield has moved higher in September and closed last week at 2.61%. With the end of QE (although interest rates actually fell when other QE programs concluded) and economic growth seeming to strengthen, perhaps August was the low for the longer end of the yield curve.
Staying in fixed income and returning across the pond, Spain sold a 50-year maturity bond at a remarkable yield of 4% in early September. This is noteworthy in the terms but also given the underlying credit as Spain’s S&P credit rating is BBB or at the low end of investment grade. It’s astonishing that this got sold at such a long term with such a low rate. However when we compare it to Germany, it is not that noteworthy. Investors buying 2-year German debt in August effectively paid the government to invest as the yields were negative.
We wouldn’t expect European interest rates to move higher as ECB president Mario Draghi announced a continental version of quantitative easing. On September 4th the European Central Bank unexpectedly cut interest rates and said they would begin buying asset backed securities and euro denominated covered bonds in October. This was a new step for European bankers and is thought to help the economies as they weakened and risked falling back into a recession.
The fixed income markets are not the only area of unnoticed deception. While our aforementioned S&P 500’s accent on the 2,000 is historic, it masks some troubling undertones. According to Bespoke Investment Group, the average stock in the S&P 500 is down 7.5% from its 52-week high even as the index is making all-time highs. This divergence is larger within the mid and small cap sectors. The average stock in the S&P 400 Mid Cap Index is 11.1% lower than its 52-week high and the average S&P 600 Small Cap Index name has plunged 17.3% from its high. As Bespoke points out, “For this area of the market, the average stock isn’t far from bear market territory”. Blending it together, the average stock in the S&P 500 is 12.4% lower than its 52-week high.[iv]
Breaking it down by sector, Utilities (-6.6%) and Financials (-8.6%) are only sectors where the average stock is not down by more than 10%. The energy sector is the biggest loser – the average stock is down 19.7% from the 52-week high. Combining the two weakest sectors (small cap and energy) results in stocks with lower approval ratings than the NFL. The average small cap energy stock is 29.4% lower than their 52-week high!!
That the average stock is weak at the same time that the indexes are reaching record highs is a clear sign of sector rotation together with a narrowing of breadth. This could be considered a healthy sign in that nothing gets too overheated and there is an eventual recharging of buyer power. On the other hand, a smaller number of stocks leading the charge to record levels could result in these “generals” ultimately falling and the arrival of the long awaited correction.
This rotation could also be a function of the global investment landscape. Excitement over the new I-Phone together with Alibaba’s IPO and a steady economy is offset by numerous international conflicts, a slowing Europe, an Ebola outbreak, and an ending of US monetary easing. Interestingly, as these crosscurrents get digested, the S&P 500 has traded in a narrow range in the past few weeks. At the end of August and beginning of September, the index traded between 1,997 and 2,002 for 8 straight trading days!! Recently the S&P 500 spent 13 consecutive trading sessions without closing 0.5% higher or lower than the previous close. We have to return to the year 1995 to find a comparable stretch.
MKM Partners researched similar behavior to see what happened after such compression. Going back to 1980, there were 5 instances where the S&P 500 traded 10 days or more without closing more than a 0.5%. The average returns after these churns was positive in 1 week, 2 weeks, 1 month and 3 months – respectively 0.85%, 1.24%, 1.83% and 4.71%.[v] If history rhymes with these past occurrences, the S&P 500 will break out to the up side. Many are watching 1,990 on the S&P 500 as major support. This trend could be broken if the index falls below that.
France is the 5th largest economy in the world (larger that the United Kingdom, Canada, Australia and the BRICs). It is remarkable that such an important country’s government can fail and then re-form without much more than a hiccup. Out of such change opportunities often arise and perhaps this is an indication of political irrelevance together with a sign that the global economy is, in general, doing ok. And if Europe can take steps to resolve their problems, the S&P 500 might continue to make history.
[i] Lewis Carroll, “Through the Looking Glass”
[ii] The Wall Street Journal, August 30-31, 2014
[iii] Bruce Springsteen, 1987
[iv] The Bespoke Report, September 12, 2014
[v] MKM Partners, “Technical Strategy”, September 8, 2014
Jeffrey Kerr is a Registered Representative of and securities are offered through LaSalle St. Securities LLC, member FINRA/SIPC. Mr. Kerr is an Investment Advisor Representative of and advisory services are offered through Kildare Asset Management, a Registered Investment Advisor. Kerr Financial Group and Kildare Asset Management are not affiliated with LaSalle St. Securities LLC.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Past performance is not indicative of future results. Investing involves risks, including the risk of principal loss. The strategies discussed do not ensure success or guarantee against loss. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. Trading of derivative products such as options, futures or exchange traded funds involves significant risks and it is important to fully understand the risks and consequences involved before investing in these products. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. If assistance is needed, the reader is advised to engage the services of a competent professional.
“The Internet is just a world passing around notes in a classroom.”[i]
/0 Comments/in Financial Planning News /by spowellIt is remarkable that smartphones and tablets allow their users to access virtually anything ever written in seconds. Having this instantaneous access to news or any other piece of information is supposed to be a good thing. To be sure, getting headlines while standing in line at Starbucks is considered productive and reading about who played well in the Jets training camp scrimmage as you are waiting for a happy hour beverage is invaluable. However, as convenient and industrious as this is, we check the “undecided” box in regard to the total usefulness.
This reluctance in the belief that having unlimited information at your fingertips is beneficial is not a Luddite yearning for the good ole days. Rather it is the fear that blogs and social media sites are viewed with more creditability than they deserve which can then lead to a distorted view of reality. We think the risk of this misinformation is especially high when it involves financial news and data.
No one enjoys the convenience of accessing stock prices more than we do and using various apps to stay on top of the market is vital. Nevertheless, we think many mistake instant access to prices and news for analysis and as a result have a misperception of the markets. As an example, recent client meetings have included a fair amount of surprise when they were told the Dow Jones Industrial Average was only up 1.5% in 2014’s first six months. The incredulity increased when we pointed out that as recently as May the Russell and Nasdaq Composite were negative year-to-date. The Russell remains slightly lower for 2014 which would probably win a few trivia bets. For the record, here is where the major averages stand as of the end of last week.
Russell 2000 -0.3%
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends
There is no doubting that the S&P and Nasdaq have a good 2014. The former has had a much smoother trip in contrast to the latter’s multiple journeys into negative territory and explosive spike from the May lows. The eye openers are the Russell’s break-even year and the Dow’s “meager” gains. Many are stunned to hear that the Dow is only up a couple of percent given that seemingly every day’s headlines include “all-time highs for the stock market”.
The Dow began the year at a record so naturally any move higher from that level produces another record. In the job of being read, journalists realize that reporting blue chips advanced 5 points doesn’t have the same appeal as a “New Stock Market Record” headline does. So we get the juicer version. And with the repetition of this news that we have seen in 2014, it’s no wonder that investors are surprised when they look at the Dow’s YTD returns.
Of course we must consider the possibility of a widespread distrust of Wall Street and consequently people don’t care. To this end, a recent Wells Fargo /Gallup Investor and Retirement Optimism survey reveals some helpful results. When asked during late June and early July only 64% of respondents (1,000 U.S. investors with at least $10,000 invested were polled.) realized that the stock market was up in 2013. Further only 7% knew that the S&P 500 was up over 30% last year. And when asked their preference on where to put new investment funds, only 41% would choose stocks.[i]
While this clearly demonstrates a pessimistic public, it could also be viewed as a pipeline of future buyers if they somehow have a change of heart. Admittedly that isn’t so easy to imagine. With increasing tension surrounding the multiple geopolitical issues, it is hard to throw caution to the wind. Also, in an ironic twist, European economies (lead by Germany and France) are feeling the effects of the Russian sanctions and are close to slipping into a recession. And finally, the Federal Reserve has been reducing stimulus and will continue to move in that direction.
Sometimes figuring out why the market goes higher is not easy. With
the above list in mind, the current rally qualifies. As bombs are flying and governments crumbling, stocks have moved higher. The average S&P 500 is up 4% from the August 7th lows to the last week’s close.
Declining jobless claims is one driver of the move. Recently the weekly claims report fell to 279,000 claims which is the lowest number since before the financial crisis. The four-week moving average has moved down to the 300,000 level again the lowest since 2007.
Second quarter earnings have also helped stocks. The S&P 500 companies’ quarterly earnings growth year-over-year will be around 9.6%. Furthermore, profit margins (operating) remain in the high single digit to low double digit range.
As confounding as the stock market is, it can’t hold a candle to the fixed income market. The 10-year Treasury yield began the year at 3% with everyone predicting a move higher. A combination of a growing economy and the Fed’s “taper” would certainly push interest rates much higher in 2014. Last week the note’s yield closed at 2.40%. Many reasons are offered for this unexpected move lower including a flight to safety given the geopolitical conflicts as well as a shortage of Treasury bonds. This last point is hard to conceive – how can a government with fiscal deficits as large as the U.S.’s have a dearth of bonds. We must remember that the Fed through its QE has been buying billions of dollars of these bonds each month. Institutions who need to offset their liabilities with high quality fixed income investments have had to bid these securities higher (lower interest rates).
On the other hand, the high yield sector of the fixed income market has seen carnage. From late June through July, the high yield exchange traded fund (HYG) suffered a 3.14% decline. This is equivalent to over two-thirds of the fund’s annual yield of 4.25%. It’s hard to make up 66% of your expected yield. To make matters worse, investors pulled $361 million or 3% of the assets in one day at the end of July. This is a significant move to a more conservative approach and could spread to other parts of the capital markets including equities. For now it seems contained as the higher quality parts of the corporate bond market (investment grade) did not encounter the same selling.
As summer unfortunately winds down we look to the last four months of 2014. Whether the start of fall increases public’s focus on the stock market is hard to predict. We would expect the cross currents surrounding the global conflicts to impact investor’s perception of risk. On the other hand, corporate earnings will likely be the counter balance to those events as it appears the U.S. economy is strengthening. Oh if there was only an app that reconciled this battle.
[i] Raymond James, August 13, 2014
[i] Jon Stewart, “The Daily Show”
[ii] The Wall Street Journal, August 23, 2014
Jeffrey Kerr is a Registered Representative of and securities are offered through LaSalle St. Securities LLC, member FINRA/SIPC. Mr. Kerr is an Investment Advisor Representative of and advisory services are offered through Kildare Asset Management, a Registered Investment Advisor. Kerr Financial Group and Kildare Asset Management are not affiliated with LaSalle St. Securities LLC.
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Russell 2000 Index is an unmanaged market-capitalization weighted index measuring the performance of the 2,000 smallest U.S. companies, on a market capitalization basis, in the Russell 3000 index. It is not possible to invest directly in an index. Investing involves risks, including the risk of principal loss. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. If assistance is needed, the reader is advised to engage the services of a competent professional.
Past performance does not guarantee future results
“There is Nothing More Deceptive than an Obvious Fact”[i]
/0 Comments/in Financial Planning News /by spowellThe Dow and S&P 500 both closed last week at record levels. Obviously, one would conclude, stocks are having another good year. Even an experienced market observer would naturally feel it’s a redux of 2013’s 30% advance given that seemingly each day’s headlines include “a new stock market record”. The obvious is that the indexes are at record levels. The current deception is that the underlying signals are suggesting caution.
This most recent rally began in mid-May. Prior to that the markets spent six weeks trading sideways to lower and was marked by a divergence between the blue chips and the rest of the market. Specifically the Dow and S&P 500 moved sideways while the Nasdaq and Russell were soggy. (The Nasdaq was down 3% and the Russell fell over 6% from the start of April to the middle of May.)
But just as the “sell in May and go away” crowd was feeling emboldened, equities stopped retreating and buyers returned. And while the Dow and S&P grabbed headlines, the lagging Nasdaq and Russell has also participated and have recovered their year-to-date losses within a few weeks. Here are the major averages for 2014.
2014 YTD[ii]
Dow Jones Industrial Average +2.1%
S&P 500 +5.5%
Nasdaq Composite +3.5%
Russell 2000 +0.1%
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends
Naturally record stock market levels often coincide with increased investor enthusiasm. While emotion is somewhat difficult to accurately measure, there are clear signs of complacency. Last week Investors Intelligence showed that over 60% of responding advisors were bullish which is the highest level since October 2007. Importantly, Investors Intelligence defines any number above 40% as “excessive optimism”[iii] Also, there were only 17% bearish advisors which is lower than in October 2007.
There are a couple other attention grabbing nuggets to pass along. The CNN Fear and Greed Index reached 86 on Friday which is the highest in a year and also in extreme territory.[i] This survey’s scale ranges from 0 to 100 with higher numbers reflecting greed. Lastly, the CBOE Equity Put/Call ratio hit a low of .43 last week which was the lowest one-day reading since January 2011. This index is based on the buying of put options (bearish) vs. call options (bullish). Readings below .50 and above 1.00 are viewed as abnormal.
For those unfamiliar with these statistics, they are used as contrary indicators. In other words, widespread optimism and few worriers is usually a headwind to higher prices as bullish investors have already put their money to work which could mean a peak in buying power. In the past it has been prudent to step away from the crowd when sentiment gets this ebullient.
Combining the market’s current emotional state with some fundamentals results in even more alarming signs. John Hussman points out that when sentiment is optimistic (II survey above 60% bullish) at the same time as market records and an S&P 500 P/E above 18 (measured by trailing earnings), it has been a sign of a top. Dr. Hussman states that only times that these three stars have aligned were October 2007, January and May 1999, August 1987, and January 1973.[ii] Attention, please.
Dr. Hussman points out that these may have not been the top ticks but, importantly, all preceded material market corrections. While short term timing is difficult, there are some other trends that support near term caution. During the past 10 years, June has averaged a 1.33% decline making it the worst month by a wide margin (the next worst is August with a .45% average decline). Also as a point of reference, over the past 50 years September is the weakest month.
The above data probably suggests a correction (they can be very unpleasant for those who’ve forgotten) but we wouldn’t expect a bear market. Aside from investor’s emotional state, the economy is doing ok. Corporate earnings continue to grow. According to Factset, 497 of the S&P 500 companies have reported 1st quarter earnings with 74% exceeding the mean estimate. 53% have reported revenues above the mean estimate. The estimated growth for 2nd quarter earnings is 5.4%[iii] Further corporate balance sheets remain strong and mergers and acquisitions have been very active.
“Abby someone? Abby who? Abby Normal.”[iv]
Turning to the fixed income market, the U.S. 10-year treasury has had a roller coaster ride recently. From a 2.70% yield at the end of April, the yield dropped to 2.4% at the end of May. The yield then rebounded back to 2.65% during the past 1 ½ weeks. For those not familiar with the bond market, this may not appear
to be that significant, but it is not normal behavior. It is incredible volatility on both an absolute and relative basis. There has been a lot of ink spilled over the cause but there has not been a definitive reason identified. We’ll be keeping an eye at this and will continue to search for causes.
Today’s capital market conditions are challenging. But this is nothing new. We wonder if the record stock prices is the ‘obvious fact’ or the ‘deception’. After all, it seems illogical that this is happening in the face of terrible fiscal and monetary policy. Which leads to the following quote which has been making its way around investment blogs and other social media platforms recently. We think it accurately describes 2014’s markets but it was actually written 25 years ago by the sagacious Merrill Lynch strategist Bob Farrell.
“Money managers are unhappy because 70% of them are lagging the S&P 500 and see the end of another quarter approaching. Economists are unhappy because they do not know what to believe: this month’s forecast of a strong economy or last month’s forecast of a weak economy. Technicians are unhappy because the market refuses to correct and gets more and more extended. Foreigners are unhappy because due to their underinvested status in the U.S., they have missed the biggest double-play (a big currency move plus a big stock market move) in decades. The public is unhappy because they just plain missed out on the party after being scared into cash after the crash. It almost seems ungrateful for so many to be unhappy about a market that has done so well. . . . Unhappy people would prefer the market to correct to allow them to buy and feel happy, which is just the reason for a further rise. Frustrating the majority is the market’s primary goal. . . .” [i]
[i] Robert Farrell, September 5, 1989
[i] www.money.cnn.com/data/fear-and-greed/
[ii] www.hussmanfunds.com, “Weekly Market Comment”, June 9, 2014
[iii] Factset, “Earnings Insight” June 6, 2014
[iv] Young Frankenstein, 1974
[i] Arthur Conan Doyle
[ii] The Wall Street Journal, June 7, 2014
[iii] www.investorsinteeligence.com
“One dog goes one way, the other dog goes the other way, and this guy’s sayin’ ‘Whadda ya want from me?'”[i]
/0 Comments/in Financial Planning News /by spowellThe S&P 500, since it broke above the 1,750 level last fall, has been like the two dogs in Mrs. DeVito’s painting – unable to decide which way to go. Twice it has fallen to 1,750 (most recently in February) but both times reversed and moved higher. Three times the index has tried to push above 1,850 but has been unable to decisively break through. In fact the S&P 500 has spent the last couple of months moving back and forth between 1,820 and 1,890. As shown above, last week’s close was 1,864.
The dogs join the bulls and bears in struggling whether this sideways slither is a base from which we extend 2013’s rally or a significant top before the long awaited correction. One worrisome sign is that the rally’s leaders and favorites have cracked. For example, FireEye (symbol = FEYE), a company offering software products that provide malware protection, approached $100 per share during March’s first week. By April it was below $50. The biotech sector gained 60% in 2013 and was up an additional 20% in 2014 in the first two months. From that peak, the industry index has given up over 20% with many stocks falling much more. Furthermore, the Russell 2000, a strong leader during 2013, has been among the weakest areas during the January retreat and since the March highs.
While the Russell has demonstrated clear signs of distribution, the Dow Jones Industrial Average and S&P 500 have showed relative strength. In fact both large cap indexes recently reached all-time highs. And while this is an undeniably positive development, it is at the same time a warning sign. First, the weakness in the Russell, Nasdaq, and favorite sectors relative to Dow and S&P’s is a troublesome divergence. These indexes moved together during last year’s rally so this breakdown in the pattern is another sign that things are changing.
Also, two weeks ago the Russell finished a few points of its 200 day moving average (DMA). Remarkably this last happened almost 1 ½ years ago (November 2012) which we interpret as an important trend change.
Applying this analysis to the S&P 500, it has been over 350 trading days or 17 months since this index has touched its 200 DMA. This streak is the 10th longest since 1928, the 4th longest since 1965 (soon to be the 3rd longest) and the longest in 15 years. As MKM Partners describes this, “To say that the SPX (S&P 500) is ‘due’ for a 200 DMA test would be a bit of an understatement”[ii] The current 200 DMA for the S&P is around 1,761 or about a 7% correction from the recent highs.
What does this mean, if it were to happen? History tells us that one week to one month returns are negative after the test. Again quoting MKM Partners, “after such a sustained period of a steady rise, once it finally breaks, weakness tends to persist in the near term. In fact in 8 of the 9 longest streaks, returns were negative a week later by an average of nearly 3%”[iii]
Beyond this indicator, further worries are supported by the fact that defensive asset classes (bonds and utilities) are strongly outperforming equities. Remembering way back to the beginning of the year as we are learning to dislike the polar vortex, everybody’s 2014 forecast included higher interest rates. This once again proves that when everyone thinks the same way, nobody is thinking – interest rates are lower as the 30-year Treasury bond has provided a 10.52% year-to-date. Furthermore the Dow Jones Utility Average is up almost 9% in 2014.
Taking a look at where the major averages stand, they rebounded strongly last week after some nasty selling two weeks ago. We start the week, except for the S&P, lower on a year-to-date basis. We’ve also included the 1st quarter numbers.
2014 YTD[iv] 2014 1st Qtr
Dow Jones Industrial Average -1.0% -0.7%
S&P 500 +0.9% +1.3%
Nasdaq Composite -1.9% +0.5%
Russell 2000 -2.2% +0.8%
Before looking one way (forward), we look the other way (backward). The S&P 500’s first quarter marked the 5th consecutive positive quarter. This has happened 5 times in the past 40 years. In 4 out of those 5 occurrences, the next quarter was negative. The fifth time it was part of an historic streak of 14 consecutive quarters in the mid-1990’s. It’s little wonder that the dogs can’t make up their mind.
On a shorter term and despite these divergences and warning signs, April has been a good month. April has been the best month for the S&P 500, the Dow, and the Nasdaq over the past 10 years, averaging 2.33%, 2.33%, and 2.56% gains respectively. The Dow hasn’t had a negative April since 2005. Of course, this could be a prelude to a “sell in May and go away” moment.
For the investor with a longer time frame, we think the economic back drop continues to be ok and that some exposure to the stock market makes sense. However, the markets may offer a better entry point in the intermediate term. Of course, as we have seen in 2014, sectors can present buying opportunities without the averages declining. For example, “old” technology and energy have performed well this year and we expect similar sector rotation throughout the rest of the year.
An important part of the investing process is managing risk and the recent price action has flashed some warning signs that should not be ignored. This is not to suggest an oncoming bear market but rather some the possibility of some painful turbulence. For those prepared, it presents an opportunity. This is especially true for those with a time frame beyond the next quarter. This brings back to our belief that 2014 will be a choppy year with an agonizing pullback or two. Or as part-time art critic Tommy DeVito describes it, “Ping! Pow! Boom! Bing!”[v]
[i] “Goodfellas”, 1990
[ii] MKM Partners, Technical Strategy, April 13, 2014
[iii] Ibid
[iv] The Wall Street Journal, April 12, 2014
[v] “Goodfellas”, 1990
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Russell 2000 Index is an unmanaged market-capitalization weighted index measuring the performance of the 2,000 smallest U.S. companies, on a market capitalization basis, in the Russell 3000 index. It is not possible to invest directly in an index. Investing involves risks, including the risk of principal loss. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. If assistance is needed, the reader is advised to engage the services of a competent professional.
Past performance does not guarantee future results
“I Got High Hopes”
/0 Comments/in Financial Planning News /by spowellSince the beginning of 2013 many investors have been hoping for a correction or some sort of meaningful decline. The stock market started last year with a bang and steadily and constantly climbed for the rest of the year. This move extended the advance that hasn’t contained a normal 10% or greater pullback and naturally, added to the frustration of the crowd on the sidelines waiting for a “better” entry point.
Upon the arrival of 2014 prices finally broke. While the pullback was somewhat minor as historical corrections are measured, it was nevertheless greeted not with a welcome embrace but with angst and fear. The bigger worry is not that a 3% – 5% retracement happened but instead that it caused such pandemonium. It would seem logical that following the 30% advance in the prior 12 months a correction would be expected. Further is should be viewed as helpful as it would strengthen the long term health of the move.
Of course part of the problem is not that the pullback “did” happen as much as “when” it happened. January is commonly thought of as an indicator of the rest of the year. Many talk about the direction of the first week of the New Year as predicting the rest of the month and, in turn, January’s performance foretells the rest of the year.
According to WSJ Market Data Group, the Dow Jones Industrial Average’s January performance has predicted the full-year direction 87 times in the last 116 years (75%). On the years of a January down Dow, the blue chip index was lower 26 of those 42 years (62%). Interestingly, sometimes instead of being predictive, January is an inflection point. Following a lower January, the Dow is down in the remaining 11 months only 48% of the time.[i]
There is another indicator with higher accuracy and is more foreboding for 2014 – the “December Low Indicator”. This watches the Dow’s December low point and forecasts a down year when that level is violated anytime during the first quarter of the New Year. There have been 31 occurrences since 1950 and in all but 2 years (1996 and 2006) the Dow was lower for the year by an average of 10.9%.[ii] To add to the worry, there have been only 4 instances (out of 31) of wrong signals when these two indicators are “combined”.
For those not keeping score at home, let’s review what has happened this year. First, the major indexes were lower in January. The Dow lost 5.3% during the month while the S&P 500 and the Russell declined 3.6% and 2.8% respectively. The Nasdaq composite led the way by only falling 1.7%. On the December Low Indicator, the Dow easily fell below the December 13, 2013 low of 15,739.43. The Dow’s closing low for 2014 is 15,372.80 on February 3, 2014.
This is not to suggest that we should give up on 2014 as we need to remember that no forecast is foolproof. Further we have the Fed and other policy makers keeping at least one eye on the financial markets and are ready to act if conditions deteriorate. This has likely played a roll in the strong rally that stocks have had off last month’s lows. Also, maybe January was a deviation and the markets have returned to the steady climb that started in late 2012. However, there are some further signs that imply that 2014 won’t be a rare non-conforming year after January’s signals.
Starting in January many market internals have weakened. Such things as market breadth, new highs vs. new lows, and divergences among the indexes are indicating that overall market strength has declined. The stock market’s breadth (a measure of the number of advancing stocks vs. declining stocks) has narrowed during the recent rally indicating the latest rally has had fewer participants. Further the number of issues making 52-week highs and 52-week lows has weakened. Lastly, while the S&P 500, the Dow Jones Transportation Average, and Russell 2000 reached record highs earlier this month, the Dow Jones Industrial Average has yet to exceed the record level reached at the end of 2013. Here are the year-to-date numbers for the major indexes.
2014[iv]
Dow Jones Industrial Average (-3.1%)
S&P 500 (-0.04%)
Nasdaq Composite +1.6%
Russell 2000 +1.5%
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends
Investor sentiment can have a big influence on asset prices and, currently, we worry that we don’t have enough worry. Unlike the emotional landscape at the start of 2013, the present mindset is at a minimum complacent and, within sectors, ecstatic. Readers might find the diagram[i] below helpful in determining where the 2014 capital markets reside. While we haven’t gotten to the point where all sports bars have channels set to Bloomberg or CNBC, lets see what happens after March Madness. We are not suggesting the polar vortex is about to target its wrath on stocks and bonds, however, in the short to intermediate term, a correction would clear out investor smugness.
Despite the short term emotional state being too bullish, there is still much skepticism on a longer term time frame. The financial crisis of 2008-2009 has turned many investors into Mark Twain’s cat. Namely they view equities the same way that the feline who sat on a hot stove looks at an oven. In other words, every stove is to be avoided no matter its temperature. Similarly the scars of the Great Recession are seared into our memories and some think that all stocks are to be shunned. The good news is that this disdain may provide further fuel for the rally to continue for years to come.
In the meantime, in addition to the tape sending some subtle signals that bear watching, some other developments have our attention. Under the heading “that the more things change the more they stay the same” we can’t help but think that we have seen this movie before and would prefer to avoid the final scenes.
Specifically some 2014 valuations would make the internet startups of the late 1990’s blush. Darlings such as Tesla Motors (losing money and selling at 14 times sales), Facebook (P/E = 108 and 17 times sales), Chipotle Mexican Grill (P/E = 58 for Mexican food?), and SolarCity Corp (losing money and 48 times revenue) rival anything from the tech bubble. Insane valuations can even be found among more mature companies such as Amazon.com. The company that is dramatically shifting the retail environment changes hands at 609 times earnings. These valuations assume a lot of future success.
Another Wall Street trick was also recently spotted. Reminiscent of the late 90’s research on high flying stocks, last month Morgan Stanley doubled its price target on Tesla. The timing was a little odd being that it happened the day before the company sold a convertible bond. Yet strangely, as part of the report, the analyst did not change either the sales or earnings estimates. Nevertheless, the stock jumped 20%. It’s peculiar that regulators didn’t question the timing of the change or the fact that Morgan Stanley was lead underwriter on the bond deal.
Rising prices result in higher monthly statement balances which in turn help us feel better (and smarter). But sometimes these feelings cause us to become over confident, take short cuts, and ignore risks. We don’t know anyone who would do such things, but we are told by reliable sources that it does happen. Attention to changing developments and disciplined decisions will to be valuable habits for the rest of the 2014.
Jeffrey J. Kerr is a registered representative of LaSalle St. Securities, LLC, a registered broker/dealer. Kerr Financial Group is not affiliated withLaSalle St. Securities, LLC. Securities are offered Only through LaSalle St. Securities, LLC940 N Industrial Drive, Elmhurst, IL 60126-1131 Member FINRA/SIPC
[1] The Wall Street Journal, January 31, 2014
[1] Finance.Yahoo.com, February 3, 2014
[1] Bruce Springsteen, 1973
[1] The Wall Street Journal, March 15 2014
[1] minyanvill.com
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Russell 2000 Index is an unmanaged market-capitalization weighted index measuring the performance of the 2,000 smallest U.S. companies, on a market capitalization basis, in the Russell 3000 index. It is not possible to invest directly in an index. Investing involves risks, including the risk of principal loss. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. If assistance is needed, the reader is advised to engage the services of a competent professional.
Past performance does not guarantee future results
“I Took Off For a Weekend Last Month Just To Try To Recall The Whole Year.”[i]
/0 Comments/in Financial Planning News /by spowell[i] J. Buffett, 1977
During the New Year’s celebrations, likely there were more than a few toasts to Ben Bernanke. Of course, alcohol is a normal part of holiday gatherings, so it’s understandable that common sense and logic may have impaired partiers to the point that our Fed Chairman was credited for the stock market’s success. While central bank policy has a big influence (perhaps too big) on the capital markets, we’re not sure how much of the equity sector’s move should be attributed to it. That issue aside, 2013 was undoubtedly a very good year for stocks. While the question of whether last year’s historic performance was a coincidence or a direct result of monetary policy needs to be examined closer, let’s take a look back at last year. .
One of many notable market developments during 2013 was the fact that stock indexes were never down on the year. From the January 2nd spike, at no time was the S&P 500 negative year-to-date. Secondly, there were only two down months – June and August. For those inquiring minds, there have been two years with 11 out of 12 advancing months – 2006 and 1958.
2013 was the best year for the Dow Jones Industrial Average since 1995. During the year the blue chip index closed at record highs 52 times. It was the 5th consecutive yearly gain and the index ended 2013 on a 4-month winning streak. Among companies within the index, Boeing was the best performer (up 81%) while IBM was the only loser (down 2%).
The S&P 500 had its best year since 1997. The two best performers were Netflix (up almost 300%) and Best Buy (up 237%) while Newmont Mining was the worst stock in the index (down a little more than 50%). 2013 was the 10th best year ever for the S&P 500 while the Nasdaq’s 38.3% rise ranked as the 7th best. Here are last year’s returns for the major averages.
2013[i]
Dow Jones Industrial Average +26.5%
S&P 500 +29.6%
Nasdaq Composite +38.3%
Russell 2000 +37.0%
I
Assisted by 20/20 hindsight, 2013 was pretty easy. Stocks were stronger from the beginning of the year and, except for a couple of brief declines, steadily climbed throughout the year. By December, everything seemed straightforward and simple. Living it in real time, however, was a much different story.
“All of The Faces and All of The Places,
Wonderin’ Where They All Disappeared.”[ii]
Naturally, 2013’s story starts as “Auld Lang Syne” was being sung to ring out 2012. In sharp contrast to current sentiment, at that time there was widespread pessimism overhanging the markets. Everyone was convinced that stocks were too risky and that bonds (which were finishing a very good year) offered the best combination of safety and return. Throughout 2012, investors had been bombarded with a series of developments that would surely shake the stock market at any minute – Greece, Obama’s reelection, an elevated unemployment rate, sub-normal economic growth, record deficits, and as if to put an exclamation mark on the year, the fiscal cliff.
As 2013 began and the widespread anxiety over the “fiscal cliff” subsided, everyone started to realize that the world wasn’t going to end. But stocks had already spiked so it was logical to wait for the correction which had to be just around the corner. Unfortunately for those not invested, it never arrived. But next was the sequestration that would surely knock the legs out from underneath the economy and the market. Once again the talking heads proved to be wrong.
After this was Chairman Bernanke’s comment that the Fed might begin to “taper” its monthly bond buying which caused second thoughts about rising stock prices (this did cause a bloodbath in the bond market). And while we survived these challenges and even managed to name the new royal baby, the government shut down was sure to be end of the world. As we all know, this too came and passed. Perhaps one of the lessons learned from 2013 is that following conventional wisdom can be risky.
While some have been emotionally converted just by higher prices, others ponder the mystery of how record levels coexist with bad headlines. To this latter group the current landscape is a bubble that will ultimately burst. And while the “bubble” debate is ongoing, the explanation behind the stock market’s incredible rally involves dynamic features.
To be sure the bears and bubble supporters have ammunition. News flows seems to be constantly negative, the public is ready to tar and feather everyone in Washington, job growth is anemic, and we face numerous geopolitical problems. However, there are many reasons for optimism. These include the drive toward energy independence in the U.S., “onshoring” or the return of manufacturing to the U.S. (assisted by lower energy costs and robotics), the increasing global “digitization” led by U.S. companies, medical and biotech breakthroughs, and continued growth of emerging market’s middle class.
Undoubtedly, low interest rates have helped provide capital to these developments. However, let’s hope that these projects are economically viable beyond suppressed interest rates. Otherwise those calling this a bubble will be right.
“If it Suddenly Ended Tomorrow, I Could Somehow Adjust to The Fall”[iii]
This returns us to the New Year’s partiers’ raising a glass to Ben Bernanke which leads to a question – have the Fed policies worked and, if so, how much of the economy and stock market’s performance should be attributed to monetary stimulus? Undoubtedly, they have done a very good job of printing money and buying bonds. Additionally they have successfully kept the short end of the yield curve low. Of course, some think the Fed policy has been successful just because banks aren’t failing and the stock market is setting records. By those standards alone, they have done a good job.
Beyond the debate of its effectiveness, the Fed’s stimulus policy has added another layer of risk to the capital markets. The various programs, our central bank has admitted, have never been tried before and, consequently, their outcomes are uncertain. The Fed has also stated on multiple occasions that they are ‘data dependent’ or that they rely on economic information to judge whether more or less stimulus is needed. Yet, many economic reports are far from accurate when released. For example, the monthly employment report, one of the most widely followed reports, is subject to huge revisions. Further these revisions continue many months after the initial release. For a data dependent analyst, we would think that this decision process is, at best, cloudy.
Whatever the driver, the stock markets’ 2013 performance was welcome. Due to many factors, however, we’d caution against expecting a repeat. Valuations are no longer as cheap as they were a year ago, economic growth is not certain, and sentiment seems a little excessive. On this last point, the bull/bear ratio has been extremely bullish for weeks (this is a contrary indicator). Furthermore, The New York Times columnist James Stewart recently wrote, “In the many years I’ve been surveying experts for their predictions for the coming year, I cannot recall another time when optimism about the stock market, the economy and corporate profits was so widespread. As is pessimism about the bond market.”[v]
While we are reluctant to make specific predictions, we are confident there will be some curve balls thrown at the markets some time during 2014. As usual, these situations will provide opportunities. The hard part will be to separate the short term noise from any meaningful change in the economy or market’s composition. We look forward to the journey and hope to raise a toast to 2015.
Jeffrey J. Kerr is a registered representative of
LaSalle St. Securities, LLC, a registered broker/dealer.
Kerr Financial Group is not affiliated with
LaSalle St. Securities, LLC. Securities are offered
Only through LaSalle St. Securities, LLC
940 N Industrial Drive, Elmhurst, IL 60126-1131
Member FINRA/SIPC
[1] J. Buffett, 1977
[1] The Wall Street Journal, January 2, 2014
[1] J Buffett, 1977
[1] Ibid
[1] The Wall Street Journal, November, 11,2013
[1] The New York Times, January 3, 2014
Jeffrey J. Kerr is a registered representative of
LaSalle St. Securities, LLC, a registered broker/dealer.
Kerr Financial Group is not affiliated with
LaSalle St. Securities, LLC. Securities are offered
Only through LaSalle St. Securities, LLC
940 N Industrial Drive, Elmhurst, IL 60126-1131
Member FINRA/SIPC
Past performance does not guarantee future results
John Adams – “In my many years I have come to a conclusion that one useless man is a shame, two is a law firm, and three or more is a congress.”[i]
/0 Comments/in Financial Planning News /by spowellNow that the government shutdown is over (at least until the beginning of 2014), the news media’s talking heads will stay busy by telling us who the winners and losers are. To some, the analysis of this episode’s heroes and goats, complete with self-righteous criticisms, is the critical next step. Those responsible for this ridiculous and childish behavior, in their view, need to be more responsible and conform better to Washington’s status quo. We think this indignation is misplaced.
While the Republicans are widely criticized and blamed for the recent shutdown, even from within their own party, their “offense” is not punishable by hanging (figuratively or otherwise). Fiscal responsibility is the duty of everyone in public service. That one prioritizes this responsibility higher than another does not make them the cause of all evil. Granted it is disheartening that the situation deteriorates into a shutdown. However, it is equally disappointing how our elected leaders have become so distant from their voters that they have taken on characteristics of an elite ruling class.
U.S. government deficits began around the same time as independence was declared. While George Washington and his men fought, John Adams and Ben Franklin were in Europe with their hands out. It’s unclear whether it was Adams’ ability to pitch high yield bond deals or the Dutch and French hatred of the British that secured funding but bonds were sold and debt accrued.
While fiscal deficits have been common during our country’s existence, there are also many stretches where Washington lived within its means. Government funding crisis resulting in shutdowns, though not as old as Treasury bonds, are not only a millennium event. It might surprise many, including President Obama, that government shutdowns and funding shortfalls began about three-quarters of the way through the 20th century. The first shutdown took place as cassettes were replacing 8-tracks and disco inexplicably started to gain popularity – 1976. For 10 days starting on September 30, 1976, the first partial government shutdown took place. These closures became a monthly event the next year. At the end of September, October, and November of 1977, we experienced a 12-day shutdown followed by two 8-day closings.[i]
Afterward, they became an almost annual event from the late 1970’s through the late 1980’s. In fact prior to the latest incident, there have been 16 separate federal government operational interruptions with the longest being a 21-day shutdown during the Clinton administration from December 15, 1995 to January 6, 1996.[ii]
Of course, having a smooth fiscal operation is preferable to a series of disruptions. However, a natural part of a representative democracy is differences of opinion and, sometimes, messy arguments. We can’t help but think that if those so appalled by this shutdown were in charge 200 years ago, we’d still be part of the British Empire.
One of the commonly believed risks associated with this shutdown was that it would slow the economy further and possibly resulting in a recession. So when Congress announced an agreement had been reached, stocks jumped. The Dow Jones Industrial Average rose over 300 points and the S&P 500 climbed over 2% on the day following the news.
Realization that the Fed would not begin to slow their monthly bond buying added another tailwind to the markets. Since our government got back to work, stocks have rallied over 6%. Bond yields have stabilized with the U.S 10-year Treasury note around 2.6%. Here are the numbers for the major averages through the end of last week.
2013[i]
Dow Jones Industrial Average +19.2%
S&P 500 +23.5%
Nasdaq Composite +29.9%
Russell 2000 +29.0%
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends
These impressive gains have left many investors behind, which is easy to understand given 2013’s headlines. The year started off with fears surrounding the fiscal cliff which was followed by sequestration, which was followed by anxiety over “tapering”. Add in dismal job growth and an historically bad labor participation rate and a rational being would guess that stocks would be lower.
On the surface it appears that the worse news is, the better it is for stocks. Part of this is that bad news is good in that it better ensures continued monetary stimulus. However there are some overlooked positive developments. Corporate profits, as measured by the S&P 500 operating earnings, are at record levels.
Furthermore, energy related sectors focused on the North American drilling products and services are experiencing growth. Another talked about development is the American industrial renaissance. Cheap energy combined with increased cost of labor in developing countries has spurred the return of manufacturing to the United States. Of course, exciting new industries involved in the digitization of society and new technologies related to cloud computing, automation, and robotics are contributing to economic growth.
We think this reinforces our thought that the business community figures out the landscape and its rules and then works for success. In other words, while the media is telling us how damaging a government shutdown is, companies throughout the economy continue to strive to get better.
Nevertheless, some obstacles just won’t go away and it’s hard to believe that our political leaders will resolve the issues that caused last month’s shutdown. The result is that we will likely face another shutdown at the start of 2014. We don’t get a sense that the opposing sides of the debate have softened their views.
Unfortunately, this might be difficult to change. Currently, about 50% of the population pays no taxes but are recipients of many benefits. Another 30% pay taxes approximately equivalent to the benefits received. The remaining 20% do the heavy lifting. The 50% clearly like their situation and their representatives will do everything possible to keep it that way. The others might be more forcefully looking to change things.
Ben Franklin once said, “Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote”[i] It’s possible that the 20%, feeling threatened, are digging in to force a more balanced equation.
If successful, this could ultimately result in a stronger economy and a more efficient government. We aren’t holding our breath but will be closely watching the upcoming debate over fiscal policy.
Returning to the stock market, prices seem a little extended. With year end in the near future and underperformance being grounds for termination (lagging the markets can mean loss of assets or even a pink slip), there are many anxious investors with significant ground to make up. We think it is hazardous to predict the next two months, but will be on watch for opportunities that the markets present.
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Russell 2000 Index is an unmanaged market-capitalization weighted index measuring the performance of the 2,000 smallest U.S. companies, on a market capitalization basis, in the Russell 3000 index. It is not possible to invest directly in an index. Investing involves risks, including the risk of principal loss. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. If assistance is needed, the reader is advised to engage the services of a competent professional.
[1] US Diplomat & Politician (1735 – 1826)
[1] The Washington Post, September 25, 2013
[1] Ibid
[1] The Wall Street Journal, November 2-3, 2013
[1] GaveKal, Daily Comment, 10/1/13
Past performance does not guarantee future results
Jeffrey J. Kerr is a registered representative of
LaSalle St. Securities, LLC, a registered broker/dealer.
Kerr Financial Group is not affiliated with
LaSalle St. Securities, LLC. Securities are offered
Only through LaSalle St. Securities, LLC
940 N Industrial Drive, Elmhurst, IL 60126-1131
Member FINRA/SIPC
[i] The Wall Street Journal, November 2-3, 2013
[i] The Washington Post, September 25, 2013
[ii] Ibid
Past performance does not guarantee future results
“She Moves In Mysterious Ways”[i]
/0 Comments/in Financial Planning News /by spowellThe markets can have unexpected reactions to news headlines. Sometimes good news inexplicably gets sold and at other times prices rally after bad news. While this can be maddening to the professional, it is especially confounding to the retail investor. It doesn’t help when the financial media talking heads and internet headlines assign some superficial and often misleading sound bite to it.
Often, it’s this reaction to the news that is more important than the news itself. When a market doesn’t react as expected it could be a sign that something else is going on. For example, a market that doesn’t go down on bad news can be a sign of underlying strength. Similarly, a drop after some positive news report can be a forecast of continued selling pressure.
Part of our job, in managing risk, is to understand both sides of a trade. In other words if we are bullish, we have to have a sense of what the bears are looking at. This also applies to when we are less optimistic – we need to know what the bulls are thinking. The headlines don’t always provide the information needed and sometimes the mystery runs deep. When the markets act especially illogical and we can’t find a reason, it’s a sign to keep digging.
The markets have had to digest some big headlines recently. Just within the past few weeks we’ve had Larry Summers remove his name for consideration as the next chairman of the Federal Reserve, the current chairman decided not to “taper”, and the federal government is shutdown. While these are whipsawing the capital markets, we think there are some other less obvious influences that need to be considered.
We mentioned in our last newsletter, the employment situation, as measured by the labor participation rate, is troublesome. Also corporate earnings growth might be decelerating. According to FactSet, Q3 earnings growth was expected to be 6.5% (6/30/13 estimate). That growth estimate shrank to 3.2% by the end of September.[i] Analysts are typically optimistic especially as the forecast period increases, but the size of this decline is worrisome.
Furthermore, of the S&P 500 companies that have issued Q3 guidance, 82% lowered earnings forecast which is well above the 5-year average of 62%.[ii] The summer’s interest rate spike has slowed housing sales. Consumer confidence has fallen slightly. And the emerging markets have taken a big hit during the summer. Whether this is a function of rising U.S. interest rates (which increases the cost of debt in the EM’s), falling commodity prices (less revenues), or a temporary correction is unknown, there has been significant slowing in emerging market economies.
Of course, with stocks at record levels, the news can’t be completely bad. Over 4 years of quantitative easing has helped risk assets like equities. While reasonable people might debate that the economic benefits of spending $85 billion per month (or over $1 trillion per year) do not outweigh the costs, the Fed’s policy of monetizing the government’s debt has helped the capital markets.
In early September, Verizon Communications sold $49 billion of bonds which is the largest debt deal ever. It is almost 3 times Apple’s much talked about bond sale earlier this year. Undoubtedly, these offerings probably wouldn’t have gotten done or, at least, not at the size that they did without QE. This milestone by Verizon helped push September’s investment grade corporate debt sales to $145.7 billion.
QE has helped the economy as well. The U.S. private sector growth has averaged 3.4% since Q4 2009. The overall GDP numbers have been lower because of reduced government spending which ultimately is an economic positive. Moreover, corporate profit margins are at record levels. This once again proves that U.S. businessmen and women figured out the changing landscape and have been successful despite questionable fiscal and monetary policy.
Looking forward, there are more positives. An index of OECD leading indicators is rising. The GaveKal Q Indicator (a monthly series of leading indicators and market prices that indicate global growth) is positive. And the Citi G10 economic surprise index is at a 2-year high.[iv]
The U.S. stock market has rebounded from some turbulence in August as the Dow, S&P 500, and Russell all reached record highs in mid September. 2013’s first nine months have provided good returns. Here are the numbers for the major averages through the end of last week.
2013[v]
Dow Jones Industrial Average +16.4%
S&P 500 +18.6%
Nasdaq Composite +25.2%
Russell 2000 +26.5%
Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends
Mark Twain said “October. This is one of the peculiarly dangerous months to speculate in stocks.” (He followed that by saying, “The others are July, January, September, April, November, May, March, June, December, August, and February.”)[vi]
Entering the 4th quarter, the markets are facing some strong cross currents. Such things as possible monetary tightening, dysfunctional political leadership, some not so cheap valuations, and really bad football being played by the MetLife Stadium teams are countered by an American manufacturing revival, a drive toward lower costing energy independence, and dynamic growth in our society’s growing digitization.
Whether the bullish view wins out over their ursine opponents, our ongoing prediction is that the markets will offer opportunities. Future headlines might not easily reveal these situations, but when bad news gets bought, it’s probably time to take notice.
[1] Clayton, Evans, Hewson, Mullen, Kidjo
[1] FactSet.com/insight, 9/27/13
[1] ibid.
[1] SNLTranscripts.org
[1] GaveKal, Quarterly Stragegy Chart Book, September 2013.
[1] The Wall Street Journal, September 28-29, 2013
[1] “Pudd’nhead Wilson”, Mark Twain, 1894
This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Russell 2000 Index is an unmanaged market-capitalization weighted index measuring the performance of the 2,000 smallest U.S. companies, on a market capitalization basis, in the Russell 3000 index. It is not possible to invest directly in an index. Investing involves risks, including the risk of principal loss. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. If assistance is needed, the reader is advised to engage the services of a competent professional.
Past performance does not guarantee future results
Jeffrey J. Kerr is a registered representative of
LaSalle St. Securities, LLC, a registered broker/dealer.
Kerr Financial Group is not affiliated with
LaSalle St. Securities, LLC. Securities are offered
Only through LaSalle St. Securities, LLC
940 N Industrial Drive, Elmhurst, IL 60126-1131
Member FINRA/SIPC
Past performance does not guarantee future results