What’s on Tap: Invest on Facts, Not Headlines

  • Vanguard Founder John C. Bogle: 1929–2019

  • Preliminary Earnings Trends: Wall Street Analysts Lower Expectations

  • Economic Data Indicates Consumers Willing and Able to Borrow

  • Financial Planning Friday: Flexible Spending Account (FSA) Deadline

  • Looking Ahead to Earnings, Home Sales and More

As the investment world bid farewell to a legend this week, stocks around the world sustained a January rally on stronger-than-expected fourth-quarter earnings and hopes of a breakthrough in U.S.-China trade talks.

The week provided another reminder of why making portfolio bets on current events is a losing proposition. The record-length U.S. government shutdown ground on, as did the Mueller investigation into Russian influence in the Trump campaign. The U.K. parliament overwhelmingly rejected Prime Minister Theresa May’s Brexit deal, and she narrowly survived a no-confidence vote. China’s trade data was worse than expected, raising concerns of a global economic slowdown.

In other words, there was no relief from most of the concerns that put investors off in December. Yet stocks across the globe gained ground. The takeaway: Trading based on headlines isn’t a successful long-term (or even short-term) investment strategy.

For the year through Thursday, the Dow Jones Industrial Average has gained 4.6%, while the broader S&P 500 has returned 5.2%. The MSCI EAFE index, a measure of developed international stock markets, is up 3.7%. As of Thursday, the yield on the Bloomberg Barclays U.S. Aggregate Bond index has risen to 3.30% from 3.28% at 2018’s end. On a total return basis, the U.S. bond market has gained 0.1% for the year.

Vanguard Founder John C. Bogle: 1929–2019

Vanguard founder Jack Bogle died from cancer on Wednesday at the age of 89. Bogle’s vision in launching Vanguard in 1975 and his advocacy for individual investors over the years since have had a tremendous, positive impact on the mutual fund industry. The move to make funds more shareholder-friendly by cutting costs benefited all investors as Vanguard’s competitors responded with their own fee cuts over time, eventually leading some to offer index funds with operating expenses of zero.

We did not always agree with Bogle’s investment recommendations or market calls, but Braver Capital Management and investors worldwide owe him a debt of gratitude for his efforts to make investing more affordable for the individual and for tirelessly promoting the idea that the shareholder—or client—should come first.

Preliminary Earnings Trends: Wall Street Analysts Lower Expectations

Wall Street analysts have been ratcheting down expectations for 2019 corporate earnings. With the bar lowered, there is plenty of room for upside surprises. Corporate leaders from businesses large and small, domestic and multinational have just managed through a volatile and confounding environment. For now, it’s too early to call an earnings trend, as we have seen bellwether investment firms and consumer lending banks reflect both sides of that sector’s coin—it’s a tricky landscape for banks that depend on trading revenue more than consumer lending. We’ll be watching to see if consumer-oriented companies continue to do relatively well.

Economic Data Indicates Consumers Willing and Able to Borrow

Consumers drive the U.S. economy, and when they are feeling flush, they’re more willing to borrow, and borrow big. One reason we believe our economy remains on a growth path: American Express’ report of a record fourth-quarter profit and outlook for robust gains in 2019. Consumers don’t buy things with credit cards they don’t plan on paying back.

Plus, housing market data suggest that the sector’s 2018 slump may have been temporary, and not the start of a broader slowdown: Homebuilder confidence rose this month—bucking a negative trend—as lower mortgage rates led to the highest level of mortgage applications since April 2010. 

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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

Flexible Spending Account (FSA) Spending Deadline

 For those of you who have one, have you checked the balance of your Flexible Spending Account (FSA)? The deadline to spend that money is fast approaching. Pre-tax dollars contributed for health care expenses do not roll over every year—you must use it or you lose it.

The deadline for spending down your FSA may vary depending on your employer, so it’s a good idea to get in touch with your plan administrator if you’re unsure of when those 2018 contributions disappear. Typically, the grace period for spending last year’s FSA savings runs out by March 15. If your deadline is sooner than that, it’s a good time to start strategizing on how to use that cash—are there any medical supplies you can stock up on? Do you have any receipts from doctor’s appointments that you could use for reimbursement?

If you have any questions or are unsure about how to determine your FSA spending deadline, or what kinds of expenses qualify for FSA spending, please contact your portfolio team and we’ll be happy to point you in the right direction. 

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 Looking Ahead to Earnings, Home Sales and More

Please note that stock markets and the Braver Capital Management offices will be closed Monday, January 21 in observance of Martin Luther King, Jr. Day. We’ll be back at our desks and by our phones ready to assist you on Tuesday.

Following the holiday next week, we’ll see economic reports on new- and existing-home sales, chain store sales, leading indicators and durable goods orders.

The trickle of fourth-quarter earnings reports turns into a stream next week. Among those we’ll be analyzing for what they have to say about where we are and where we may be heading:  

·     Halliburton (energy sector as a bellwether of global economic activity)

·     Capital One (consumer activity indicative of pace of economic growth)

·     IBM and Texas Instruments (their information technology reflects both business and consumer activity trends)

·     Johnson & Johnson and Abbott Labs (health care headwinds are political, not demographic)

·     Ford and United Rentals (big bucks for big trucks and equipment rental reflect health of economy and prospects for growth)

·     American Airlines and Union Pacific (traveling and shipping activity are indicators of a growing or slowing economy).

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


Please note: This update was prepared on Friday, January 18, 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.