Broker Check

January 29, 2018

| February 07, 2018
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Through last week, about one-fourth of the companies in the Standard & Poor (S&P)’s 500 Index had reported actual revenues and earnings for the fourth quarter of 2017. As far as revenues go, a record number, 81 percent, of companies sold more than expected during the fourth quarter! That was quite an improvement. FactSet reported:

“During the past year (four quarters), 64 percent of the companies in the S&P 500 have reported sales above the estimate on average. During the past five years (20 quarters), 56 percent of companies in the S&P 500 have reported sales above the estimate on average.”

Companies in the S&P 500 are doing pretty well on earnings, too. About three out of four companies have reported earnings higher than expected. Overall, earnings are 4.5 percent above estimates.

Through Friday, annual earnings growth for S&P 500 companies was 10.1 percent! It’s still early in the fourth quarter earnings season, but the data so far seem likely to confirm that 2017 was a strong year for U.S. companies.

Key points for the week

  • Interest rate sensitive sectors of the stock market (Utilities, Real Estate, Telecom) have underperformed year-to-date.
  • The price of the benchmark 10-year US Government Bond declined last week to finish at a yield of 2.66%.
  • GDP estimates for the 4th quarter of 2017 came in below expectations, but strong consumer demand should provide additional growth in 2018.

The Circular Economy.

What is the circular economy? It is “a system that reduces waste through the efficient use of resources. Businesses that are part of the circular economy seek to redesign the current take/make/dispose economy, a model which relies on access to cheap raw materials and mass production. For example, car sharing addresses the inefficiency of privately owned cars, which are typically used for less than one hour a day.

Imagine not owning a car.

Clearly, it’s not something that would work everywhere. However, if you live in a city or town that has public transportation, ride sharing, car rentals, and bicycles, it’s possible. If you’re retired and you can organize your days in the way you like, it may even be sensible because owning a car is expensive. Transportation costs are the second highest budget item for most households, reports U.S. News. Housing costs top the list.

Giving up a car could help save a lot of money.

According to AAA, owning and operating a new car in 2017 cost about $8,469 annually, on average, or $706 a month. Small sedans are the least costly ($6,354 per year), on average, and pickup trucks are the most expensive ($10,054 per year), on average, of the vehicles in the study. The calculations include sales price, depreciation, maintenance, repair, and fuel costs.

AAA’s estimate does not include insurance. In 2017, the national average premium for a full-coverage policy was $1,318 annually, according to Insure.com. Auto insurance premiums are highest in Michigan ($2,394) and lowest in Maine ($864).

Combining the averages, the cost of auto ownership is almost $10,000 a year. It’s something to think about.

What are we reading?

Below are some areas articles we paid particularly close attention to this week. We encourage our readers to follow the links.

Is a 28 Hour Work Week Best for a Healthy Life?

Australian researchers have found a connection between working more than 39 hours per week and risks to your wellbeing. According to US Researchers, most modern employees are productive for just 4 hours per day, with the other hours filled with worrying and padding the day with other activities. The 40-hour work week is a recent societal norm that began in the 1940s, With the shifting of US workers from labor intensive jobs to knowledge workers, it becomes imperative for workers to spend more time reflecting.

US GDP slows in Q4

U.S. GDP (gross domestic product) growth unexpectedly slowed in the fourth quarter. The economy grew at a healthy 2.6 percent, but it failed to meet economists’ expectations of 3.0 percent growth. Rising imports was a drag on growth; however, data showed the economy is still strong.

LG to hike washing machine prices in response to US tariffs

We are concerned about the risk of protectionist policy measures on the market. The Trump administration’s decision to place tariffs on imported washing machines isn’t a major threat, but risks of a trade war are elevated from recent decades. The Trump administration’s focus on trade policy and willingness to engage in brinkmanship fuel our concerns.

Story of the week

Your next job interview could be playing a weird smartphone game

Some employers, such as Walmart and Siemens, are making interviewees play video games before their interviews start. They may seem nonsensical (one game makes players tap a button to inflate as many balloons as possible without popping them before a party), but these “games” or tests compose personality profiles of the interviewees and are said to improve diversity in the workplace. The games are created by U.K.-based Arctic Shores, so if you are really trying to nail that next interview, just download the company’s app and practice.

Weekly Focus – Think About It

“Conservation is a state of harmony between men and land.”

~ Aldo Leopold, American author and conservationist

If you always do what you’ve always done, you’ll always get what you’ve always gotten.

~ Jessie Potter

"It is the greatest of all mistakes to do nothing because you can do only a little. Do what you can."

~ Sydney Smith, Writer and Clergyman

Links & Disclaimers

RJFS and SPC do not offer or provide legal or tax advice. Tax services and analysis are provided by the related firm, S&M through a separate engagement letter with clients. Portions of this newsletter were prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with RJFS, SPC or S&M. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. This information is not intended as a solicitation of an offer to buy, hold or sell any security referred to herein. There is no assurance any of the trends mentioned will continue in the future. Any opinions are those of the author and not necessarily those of RJFS. Any expression of opinion is as of this date and are subject to change without notice.

Opinions expressed are not intended as investment advice or to predict future performance. Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Past performance does not guarantee future results. Investing involves risk, including loss of principal. Consult your financial professional before making any investment decision. Stock investing involves risk including loss of principal. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Please note direct investment in any index is not possible.

Links are being provided for information purposes only. RJFS, SPC and S&M are not affiliated with and do not endorse, authorize or sponsor any of the listed websites or their respective sponsors, and they are not responsible for the content of any website, or the collection or use of information regarding any website's users and/or members.

https://insight.factset.com/record-percentage-of-sp-500-companies-beat-sales-estimates-for-q4

http://www.investinganswers.com/financial-dictionary/ratio-analysis/arithmetic-mean-2546

https://www.accountingcoach.com/blog/what-is-the-difference-between-revenues-and-earnings

https://insight.factset.com/sp-500-earnings-season-update-january-25

https://insight.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_012518.pdf

http://www.morganstanley.com/access/circular-economy

https://money.usnews.com/money/personal-finance/saving-budget/articles/2017-02-14/how-to-save-money-by-ditching-your-car

http://newsroom.aaa.com/tag/driving-cost-per-mile/

https://www.insure.com/car-insurance/car-insurance-rates.html

https://www.brainyquote.com/quotes/aldo_leopold_387729

https://www.theguardian.com/lifeandstyle/2018/jan/15/is-28-hours-ideal-working-week-for-healthy-life

http://www.anu.edu.au/news/all-news/a-healthy-work-limit-is-39-hours-per-week

https://www.cnbc.com/2018/01/26/gdp-q4-2017-first-reading.html

https://www.reuters.com/article/us-lg-elec-tariffs/south-koreas-lg-to-hike-washer-prices-in-u-s-after-tariffs-idUSKBN1FD2Z9

https://www.newscientist.com/article/2159578-your-next-job-interview-could-be-playing-a-weird-smartphone-game/?utm_source=fark&utm_medium=website&utm_content=link&ICID=ref_fark



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