December 20, 2016
The cheapest way to begin investing

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
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 3, 2016
Stock Market Highs

What to do during Stock Market Highs

Both the DOW Jones Industrial Average and S&P 500 have reached all time highs in recent weeks, which may have sent your stocks skyrocketing, but as we’ve seen in the past, the stock market highs and lows are anybody’s guess. In May of 2000, the S&P closed at 1,537 and then just over two years later bottomed out to 777. As the markets recovered, we saw yet another big gain in October of 2007; only to watch the bubble burst yet again a year and half later when the S&P closed at 677. Now with closing numbers over 2100 being recorded in July of this year, you may be asking yourself what should I do?   Review and rebalance your portfolio With the markets at an all time high, the first thing you to assess is, where you are in your retirement? If you’re still 15-20 years away, you may want to rebalance and forget about it or you may want to sit still and hold on tight. However, if you’re creeping into the 5-10 year range, it may be time to pull back a little. For example, let’s say you’ve got 80% invested in stocks, now may be a good […]
April 25, 2016

Stocks End Mixed as Tech Falls on Earnings

Stocks End Mixed as Tech Falls on Earnings WEEKLY UPDATE – APRIL 25, 2016 Stocks ended last week mixed on earnings that were largely better than expected, though the tech sector disappointed. For the week, the S&P 500 gained 0.52%, the Dow grew 0.59%, and the NASDAQ lost 0.65%.[1] First-quarter earnings reports drove a lot of market activity last week. Though analysts expect overall S&P 500 earnings to be negative for the fourth quarter in a row, the news so far is more about earnings surprises and fewer negative revisions to estimates. Given how low the bar was set by many corporate teams, it’s not so unexpected to see positive surprises. With reports in from 132 S&P 500 members, overall earnings are down 7.9% on 1.1% lower revenues, though nearly three-quarters beat their earnings estimates.[2]   However, the tech sector is another story. Tech stocks sold off after disappointing results from major players. Overall, much of the tech sector is painting a picture that is the inverse of the rest of the market – many companies are failing to rise to the expectations built over previous quarters of strong growth, disappointing investors.[3] Will investors hold on to their optimism in […]