December 12, 2016
Heritage Investors Investment Strategy

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 […]
August 17, 2016

S&P 500, Dow, and NASDAQ Post New Records

S&P 500, Dow, and NASDAQ Post New Records WEEKLY UPDATE – August 15, 2016 Stocks ended last week mostly flat, falling slightly on Friday after the major U.S. indexes set new record highs on Thursday on positive earnings surprises. The NASDAQ also notched a seventh week of gains, its longest winning streak since 2012.[1] For the week, the S&P 500 gained 0.05%, the Dow grew 0.18%, the NASDAQ added 0.23%, and the MSCI EAFE grew 2.73%.[2] Earnings season is mostly behind us, and, with nearly all of the S&P 500 companies having reported in, we have a good overall picture of last quarter’s performance. Total earnings for the index so far were down 3.7% on -0.7% lower revenues relative to Q2 2015. However, 71.1% have managed to beat profit expectations, which has given stocks a boost in recent weeks.[3] Here’s what we can take away from the second quarter. Though earnings growth is still negative, it’s a vast improvement over what we saw in the first quarter from the same group of companies. Results are also better than the 4-quarter moving average. Revenue growth is also negative, showing that many companies are still (seven-plus years into the economic recovery) struggling […]
May 31, 2016

Dow, S&P 500 Post Best Week Since March

Dow, S&P 500 Post Best Week Since March WEEKLY UPDATE – MAY 31, 2016 Stocks ended a solid week on a high note ahead of the Memorial Day weekend after statements by Federal Reserve officials boosted expectations of a rate hike this summer. For the week, the S&P 500 gained 2.28%, the Dow rose 2.13%, the NASDAQ increased 3.44%, and the MSCI EAFE added 2.11%. [1] Markets jumped on Fed statements last week after the previous week’s release of minutes from the April Fed meeting fanned expectations of an interest rate hike soon. On Friday, Fed Chair Janet Yellen stated support for an interest rate hike over the next few months, indicating that yes, the Fed is looking hard at a June or July rate increase if data holds.[2]  One measure of the probability of a rate hike at the June meeting rose to 34% after Yellen’s remarks, while bets on a July increase increased to 60%, more than double the probability estimate of a month ago.[3] Does the data support the Fed’s view of healthy economic growth? So far, it might. We got our second look at first-quarter economic growth Friday, and the latest official estimate shows that the […]
May 16, 2016

VIDEO: May 2016 Educational Economic Update

May 2016 Educational Economic Update Justin Goodbread, Knoxville Tennessee Wealth Manager & Financial Planner discusses current market conditions. Heritageinvestor Hello folks, this is Justin Goodbread, CERTIFIED FINANCIAL PLANNER™ from Heritage Investors with our May 2016 educational economic update. In this video, we’ll talk about some of the economic events that influenced markets in the last month, and give you some insight into what they could mean for you as an investor. Please stay tuned at the end for a required disclosure statement. The Federal Reserve Open Market Committee met in late April and, unsurprisingly, decided to leave interest rates where they are. Though the Fed still expects to raise rates this year, central bankers clearly intend to move carefully. Though the Federal Reserve seems ready to raise interest rates as soon as economic growth picks up, the latest economic data doesn’t support their narrative. Before the meeting, many investors were expecting a June rate hike; however, the Fed’s cautious tone and the November election make it more likely that the next rate hike won’t come until December. Investors also got a look at fresh economic growth numbers. The advance estimate of first-quarter Gross Domestic Product showed that economic growth stumbled, […]