Weekly Insight: May 15 – 19, 2017

Market Insight: 


Stocks closed lower after a highly volatile week that saw a Friday rally partially compensate for a steep sell-off on Wednesday. The large-cap S&P 500 Index and the S&P MidCap 400 Index fared better than the other major benchmarks. After reaching its lowest level in over two decades the previous week, the Chicago Board of Exchange’s Volatility Index (VIX) spiked by almost half on Wednesday. Other markets were also notably volatile, with the dollar reaching its lowest level relative to the euro since October, while the price of gold rose sharply.

What should be noted is that while the overall stock market (including the S&P 500, Dow Industrials and Nasdaq) declined, some economic sectors actually advanced during this period. While the market was reversing, Real Estate increased by over 1%, reminding us of the importance of maintaining a “right diversification” in our holdings.

Weekly Highlights:

•   Jobless claims remain near record lows. For the week ended May 13, initial claims came in below expectations at 232,000. This is well below the rolling four-week average, which ended the week at 240,750. Continuing claims for the week ended May 6 fell to 1.898 million – below the fourweek average of 1.946 million. These figures stand at 29- and 43-year lows, respectively, indicating ongoing strength in the labor market.

•   New home sales surprise on the upside. The National Association of Home Builders Housing Market Index (NAHB) rose to 70 in May, beating expectations. Current sales remain strong, especially in the West, while traffic has remained over break-even levels. This week’s readings of new housing starts and permits, however, were largely disappointing.

•   Crude oil inventories fall. In the week ended May 12, crude inventories fell to 520.8 million barrels, marking six consecutive weeks of falling inventories, according to the Energy Information Agency (EIA). Gasoline and distillate inventories also fell. These developments helped to push WTI crude contracts to over $50/barrel by mid-day Friday.

Business Owners: Four Critical Questions

If you own a business or professional practice, you will need to pay special attention to the challenges faced when transitioning from your company as you transfer its ownership to someone else. Whether you intend to sell the business (to an outside party or to inside employees) or gift it to your children, most owners are finding that exiting their company is a lot harder than they had thought. The planning can begin by answering a few short questions:

1. Leaving the business in style means, for me, that I will have $______________ of annual after-tax income for the rest of my (and my spouse’s) lifetime. 

2. I plan to work until ______________________. And at that date, I will no longer be an employee of the company, although I may still be receiving a portion of my total retirement income from the business. 

3. I intend to transfer the business to _______________________________. 

4. When I leave the business, I intend to do the following: (HERE: FILL IN AS MANY BLANKS AS YOU WANT. YOU’VE EARNED IT!)

Getting the Most From Your 401(k) – Jun 6 from 4:00 – 6:00PM

For most, a 401(k) or other qualified retirement plan is a central part of their investment nest egg. However, apart from making regular contributions, most investors are not paying attention to their plan. According to a 2014 Charles Schwab survey, more than half of 401(k) plan owners wish it were easier to choose the right investments. And according to investment research, not doing so can have a dramatic impact on the funds available for your retirement.

To get the most our of your 401(k) you should diversify your portfolio by spreading your investment to different equities and bonds available in your plan. But how much and where? Today most plans will have a “target dated” option in which your contributions will be automatically allocated to a blended model that changes as you age. While this is “better than nothing,” its overall effectiveness will depend on 1) the funds that are used, 2) the fees that are charged, 3) the actual allocation plan that is implemented. Keep in mind that this may or may not be best for you.

It’s important for you to understand how your retirement account is currently invested and, more importantly, how to monitor and even make decisions on how your funds are allocated. Join me for a 2-hour workshop, Getting the Most From Your 401(k) (and other retirement plans).