What’s on Tap: Solid Earnings Overshadow China Concerns

  • 2019 Stock Market Gains Make Up 2018 Losses

  • China’s Economy Slowing (but Still Growing)

  • Braver Capital’s Quarterly Webinar: Looking Ahead to 2019—What Could Go Right

  • Financial Planning Friday: Understand Your Expenses

  • Looking Ahead to the Fed Meeting, Earnings and More Economic Data

As we were going to print, President Trump agreed to a short-term deal that would end the longest government shutdown in U.S. history and fund the government for three weeks while longer-term budget negotiations take place. Congress appears likely to pass the agreement today, in which case an announced back-pay provision will grant welcome relief to the hundreds of thousands of government workers who have missed their first two paychecks of the year. If you or someone you care about is a federal employee—continuing to work without pay—we thank you for your endurance.

While the White House’s chief economist claimed this week that there could be zero economic growth in the first quarter as a result of the shutdown, we think today’s agreement means the economy will continue to expand. (That said, the president stated he may resort to another shutdown if his border security demands are not met by February 15.) Some cracks are beginning to appear, but we believe that recession fears are premature. Just this week, we saw the fewest jobless claims posted since 1969.

For the year through Thursday, the Dow Jones Industrial Average has gained 5.4%, while the broader S&P 500 has returned 5.5%. The MSCI EAFE index, a measure of developed international stock markets, is up 4.5%. As of Thursday, the yield on the Bloomberg Barclays U.S. Aggregate Bond index has inched down to 3.27% from 3.28% at 2018’s end. On a total return basis, the U.S. bond market has gained 0.4% for the year.

2019 Stock Market Gains Make Up 2018 Losses

With all of the Sturm und Drang over 2018’s losses, and more so the lousy fourth quarter, we’d bet most investors would be surprised to learn that, as of Thursday’s close, the S&P 500 index (including reinvested dividends) is up 0.9% from where it ended 2017. Being able to keep market gains and declines in perspective could be considered a survival skill for successful investors.

Unfortunately, a rational perspective can be tough to keep in focus when the financial media, like baseball announcers, fall back on meaningless statistics to try to make sense of the randomness of short-term market fluctuations. The Wall Street Journal ran a chart this week that illustrated the average daily move for two-week periods since 2017 or so, using the data to note that the recent two-week stretch had been the calmest since September.

Really? What long-term investor thinks in two-week periods? This is called data mining and it doesn’t tell us anything meaningful.

We care more about the fact that our strategies help us stay invested during periods of stock market volatility, and are poised to react to changing market trends. Investors pulled $152 billion from stock and bond funds in December—a fire sale that created wealth-building opportunities for those of us with a longer, more disciplined view.

China’s Economy Slowing (but Still Growing)

The financial media also beat the drum about China’s economic slowdown this week—its 6.6% growth in 2018 was the slowest pace in 28 years. That’s certainly an eye-catching figure, but let’s look at it another way: That growth rate, in the second-largest economy on the globe no less, remains the envy of most other countries.

How do we gauge China’s economy? Mainly by watching the rate of imports (domestic growth) and exports (global demand). The most recent numbers reflect a slowdown in both, which, while not a harbinger for global recession, is at least a yellow flag.

Braver Capital’s Quarterly Webinar: Looking Ahead to 2019—What Could Go Right

We’re gearing up to host our first-quarter webinar next week, Looking Ahead to 2019—What Could Go Right, which will feature commentary from Portfolio Manager Steve Johnson, Equity Research Analyst Kate Austin and Chief Investment Strategist Charlie Toole. The event goes live on Wednesday, January 30 at 4:00 p.m., EST.

If you can’t make it on Wednesday, an on-demand replay will be available following the event. We hope you can join us!

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Here’s the next installment in our recurring series of useful tips, suggestions and reminders put together by our financial planning team. If there are topics you’d like us to address, please contact your portfolio team or write to us at info@bravercapital.com.

Financial Planning Friday

Understand Your Expenses in 2019

 To be an investor, you must also be a saver. And that requires spending less than you earn. So, the first step to becoming a successful long-term investor is understanding your spending habits. We think there’s an easy and practical way to get started on the task.

Begin with the easy stuff. List regular monthly bills that have recurring payments—think mortgage, cable, cell phone, insurance payments, utilities, gym memberships, transportation. Then, track your other daily expenses over the next month to get a feel for where the rest of your money is going. Groceries, shopping, gas, eating out, entertainment… you get the picture.

After you’ve reviewed your spending, it’s time for a savings plan. We typically recommend that clients who are still accumulating assets should try to save at least 10% of their income (including any employer match) toward retirement.

Automating your savings so that they flow from your paycheck into designated accounts such as retirement or long-term investment accounts is a great shortcut.

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Looking Ahead to the Fed Meeting, Earnings and More Economic Data

Next week’s Federal Reserve meeting will take center stage. We don’t expect the Fed to hike the fed funds rate, but will be watching Chair Jay Powell’s subsequent press conference closely and will be listening for any comments he has on the impact of the partial government shutdown.

Other scheduled reports for next week include data on home prices, consumer confidence, manufacturing and the service sector, car sales and January’s unemployment rate. Also on the slate, but possibly delayed by the shutdown, are reads on income, spending and savings, inflation, construction spending and the first estimate of fourth-quarter economic growth. 

Fourth-quarter earnings season rolls on, with reports due from Caterpillar (global infrastructure spending, itself a tell on global growth), Whirlpool (big-ticket items reflective of consumer strength), 3M (indicator of economic strength), Apple (consumer spending), eBay (a backward look at holiday spending)… and many more.

If you’d like to learn more about our tactical or fundamental strategies, please contact Steve Johnson at 844-587-7393 or info@bravercapital.com.


Please note: This update was prepared on Friday, January 25, 2019, prior to the market’s close.

This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations or personal investment advice, or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. 

Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. 

Companies mentioned in this article are not necessarily held in client portfolios and our references to them should not be seen as a recommendation to buy, sell or hold any of them.

© 2019 Braver Capital Management, an Adviser Investments, LLC company. All Rights Reserved.