September 2017 NewsletterSubmitted by Rademacher Financial Inc. on October 3rd, 2017
Mixed Results from Market in August
|7/13/17 Close||8/31/2017 Close||Change||Gain/Loss|
|Russell 1000 Growth||1,222.93||1,243.06||20.13||1.65%|
|Russell 1000 Value||1,153.15||1,136.44||-16.71||-1.45%|
|Barclay's Capital Bond Composite||279.64||282.41||2.77||0.99%|
Performance reflects price returns as of 4:30 EDT on August 31, 2017.
The major U.S. stock indices ended August largely mixed, with the S&P 500 and Dow essentially flat from the month before, the Russell 2000 down 1.39% and the Nasdaq up slightly at 1.26%.
- Real GDP rose at a 2.1% annual rate in the first half of 2017.
- As expected, consumer spending rebounded in the second quarter, but with some signs of slowing as we headed into September.
- Wage growth has remained moderate with average hourly earnings trending 2.5% higher than a year ago, despite the continued tightening in labor market conditions.
- Business optimism surged following the presidential election and has remained elevated in recent months. That enthusiasm has likely contributed to the increase in business fixed investment in the first half of the year, but the recovery in energy exploration also has played a part.
- Following the failure to repeal and replace the Affordable Care Act, attention in Washington will turn to tax reform, which will be difficult to achieve.
- The U.S. Department of Energy recently released a grid reliability study that offered a broad-based perspective on U.S. power generation, including insights on wind/solar, natural gas, coal and nuclear power. Most interestingly, the report took a balanced approach that didn’t declare any “winners” or “losers,” but described three key factors for retirements of coal and nuclear power plants. The number-one reason was cited as low-cost natural gas, followed by declining demand for electricity and improving economics of wind and solar, explained Pavel Molchanov, Senior Vice President and Energy Analyst.
- The strong Euro began to impact the local European markets as the shares of exporters and dollar earners started to wilt. However, the potential for earnings growth for more domestic-centered European corporations is promising, with the focus on economic reform measures from countries like France likely to be high in September.
- As the U.K. government discusses arrangements to slow down and possibly stop a full Brexit, there is also some hope for out-of-favor U.K. domestic shares for the balance of the year and into 2018.
- With the Korean Peninsula crisis dominating headlines, typical safe havens like the yen have been pushed up and Japanese bonds down.
- Despite China’s geographic proximity and deep economic links to Japan, Chinese shares pushed to levels not seen since late 2015 following continued strong economic growth rates.
- In emerging markets, the Brazilian market traded with near decade-high levels in local currency terms thanks to firming resource prices and continued inflow resurgence.
- The 10-year Treasury gave up 2 basis points in yield over the last week of the month.
- CD rates were mixed when compared to prior weeks. The short end of the curve (one-year and less) was flat, while intermediate CDs, two-, three- and five-years, were all 5 basis points higher for the week.
- Changes in municipal yields corresponded closely to changes in the Treasury markets, leading to little change in muni-Treasury ratios. Yields were flat to lower over the course of last week. The short end of the curve (one to five years) was flat, while a majority of the intermediate to long end of the curve was 3 basis points lower.
- The U.S. economy continues its slower than historically normal advance. This gives the appearance of two steps forward and one step backwards.
On a Personal Note…
In August Katelyn returned to Kansas as her internship in Washington D.C. ended. She learned a lot about how a larger political organization works. It really has hit home for Rachel and I that from now on the kids will really only be visiting. Ok… I’m probably speaking for myself and not Rachel! While Katelyn was home she had a job interview! She aspires to work on political campaigns after she graduates and has been working her network to set up her first position.
Garrett finished his summer work at KU Maintenance. I think there were parts of the summer job he liked and parts he didn’t. I think when he had to rebunk the beds after unbunking them for about the 3rd time, he wasn’t too thrilled. Garrett’s roommate from last year challenged him to participate in a short course triathlon later in September. He says he is training, except I don’t think I have heard anything about swimming yet! We will see how it goes.
Rachel helped both kids prepare to return to school. I packed the SUV the night before and nothing else was going to fit. I pushed hard to latch the second-row seat and squeezed the tail gate close. Rachel road tripped out to the east coast with the kids. They dropped off Garrett first so that big sister could see Garrett’s school for the first time. After both kids were settled, Rachel took a couple of small detours on the way home stopping at one of her glass manufacturers and the Indianapolis Museum of Art.
After the kids and Rachel left in August, I started on a “small” project setting up my SUV for overland travel (i.e. up a mountain trail). Basically, I started building a chuckwagon type kitchen box and organizing system for the SUV. Rachel and I are planning a couple of weekend camping trips this fall. I don’t know that I will have everything ready to go by then but, it’s a start. Rachel thinks we are going to be exploring nearby areas. I’m sure we will on short weekend excursions but, I’m looking west to the Rockies.
I’m looking forward to the cooler fall weather soon.
I’ll catch you next time…
Phillip A. Rademacher, CFP®