September 7, 2017

Why Does the Market Not Take a Hit when Natural Disasters Happen?

Growing up in a small coastal city of Southern Georgia taught me to reverence hurricanes. They are not just something you see on TV; they are actual monsters to fear. Riding out a storm was never an option with my parents. The sheer magnitude of devastation they leave in their wake quickly brings you to your knees. Now as a CERTIFIED FINANCIAL PLANNER™ in Knoxville, TN, my heart aches for those preparing to overcome Hurricane Harvey in Houston. Not only that one but Hurricane Irma, which is barreling directly toward South Florida. What damage will be left in the wake of her landfall for those residents is yet to be determined. While the heartbreak and gut wrenching scenes of havoc play out before our very eyes, I was recently asked why the stock market has not taken a hit of epic proportions with these destructive storms displacing so many Americans. After all, Houston is the fourth largest city in the U.S. Additionally, the Texas giant produces about 3% – 4% of our county’s $18 Trillion in Gross Domestic Product. Despite those numbers, the market, unlike many of us, seems to be unfazed. With the city being such a major contributor […]
December 20, 2016
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Fed Raises Rates

Last week was mixed for the markets, as the Dow increased by 0.44%, while the S&P 500 lost 0.06%, the NASDAQ dropped 0.13%, and the MSCI EAFE gave back 0.55%. We also saw a variety of data released, giving a similarly mixed view of recent economic activity. Retail sales and the Consumer Price Index showed modest gains, while industrial production and housing starts both declined. The biggest headline from last week, however, was a development the market anticipated for quite some time: The Federal Reserve decided to raise its benchmark interest rates – for only the second time since 2006.   Why did the Fed raise rates? The Federal Open Market Committee (FOMC), the group of Fed officials who meet to determine interest rates and other policies choices, has a mandate to “foster maximum employment and price stability.” In its quest to uphold this mandate, the FOMC aims to keep inflation at 2%, as this level can help support accurate financial forecasting and decisions while preventing harmful deflation. The act of adjusting interest rates can help control inflation and support economic strength. At its most basic, when the Fed lowers rates, they are indicating that the economy is contracting – […]
December 12, 2016
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Rational Exuberance?

On Friday, December 9, all three major U.S. stock indexes ended at record highs. For the first time in five years, they each posted gains every day of the trading week. The S&P 500 was up 3.08%, the Dow added 3.06%, and NASDAQ increased 3.59%. International stocks in the MSCI EAFE even gained 2.9%, despite potential risks from the Italian referendum and impending end of the European Central Bank’s quantitative easing. From our vantage point, we see a rally that appears to be picking up steam. Looking at this impressive growth, however, it’s easy to wonder whether the markets are becoming overvalued and a correction is in order. In keeping with this concern, last Monday, December 5, marked the 20th anniversary of Former Federal Reserve Chief Alan Greenspan’s famous warning about “irrational exuberance.” Back in 1996, Greenspan worried that overvalued stocks and extreme investor enthusiasm could drive stocks to reach unsustainable levels. His warning didn’t slow the markets’ growth at the time, and several more years passed before the eventual dot-com crash. So, are we facing the same irrational exuberance as in 1996? Hardly. We’d argue that rather than being overvalued, the markets have yet to reach their fair price. Domestic […]
December 6, 2016

A Mixed View

After a three-week run where all major U.S. indexes posted significant gains, we saw a mixed view in the market last week. The Dow was up 0.10%, but the S&P 500 lost 0.97% and the NASDAQ was down 2.65%. The MSCI EAFE‘s measure of international developed markets also dropped 0.24%. Rallies such as the one we’ve experienced since Donald Trump’s election can’t go on forever, so we aren’t too concerned about these minor pullbacks. In fact, as we’ve recently said, when you look more deeply at the data, we see many reasons to believe that our economy is moving in the right direction. Good News This Week Positive economic news for the U.S. continued to come in this week, including reports that: Unemployment dropped again to 4.6% – hitting its lowest level since August 2007. Manufacturing increased for the third straight month. Personal income increased 0.6% in October. Q3 GDP was 10% higher than previously thought. Of course, despite the ongoing indications that our economy is doing well, everything isn’t perfect in the U.S. We’d like to see the economy growing even faster than it is. And while unemployment is low, the measure of people who are underemployed is still […]