On a daily basis, the market volatility that emerged at the start of the year continues to be felt. But, aside from the daily swings, April was a rather dull month. The S&P 500 rose 0.2 percent. The MSCI ACWI rose 0.8 percent as international developed stocks performed well during the month. The Aggregate Bond Index dropped 0.7 percent in the face of solid economic numbers. Increasing oil prices buoyed energy stocks and contributed to the weak performance seen in consumer staples, which is often the least volatile sector.
For all the volatility, the market hasn’t moved much from the beginning of the year. The S&P is down 1 percent, and the MSCI ACWI is down 0.7 percent. Running to safe investments hasn’t helped. The Aggregate Bond Index is down 2.1 percent
The April jobs report demonstrated the overall health of the U.S. economy. Unemployment fell to 3.9 percent, an 18-year low and minority unemployment was quoted as being at record lows. The economy generated 164,000 jobs, and hourly earnings rose 2.6 percent. All three numbers were good but slightly below expectations. Fewer people than expected looked for work in April, pushing the unemployment rate lower. Economists had predicted 192,000 jobs, and hourly earnings were expected to rise slightly more than reported.
After initial concerns, the news was viewed positively by most investors. The economy is growing at a healthy rate, and wage data hasn’t shown many signs of worrisome inflation. While the jobs report offered some reassurance inflation is well controlled, we continue to expect it to pick up modestly in the coming months if labor markets remain tight.
What do asset managers and researchers make of the current state of world economies and markets? A portfolio manager cited by Barron’s said, “…until proved otherwise, we remain in a long bull market, and there is an absence of indicators outside of the equity market itself (most notably in credit markets or financial conditions) to suggest this has ended.”
Michael Wilson, Chief U.S. Equity Strategist at Morgan Stanley has a different opinion. “Even strong earnings results haven’t been able to boost most stocks into positive territory. Why? Because rising interest rates have reached a point at which they have become a constraint on valuations.”
Some researchers are concerned about growth outside the United States. Alvise Marino, an FX strategist for Credit Suisse told The Wall Street Journal, “This is really a Goldilocks [U.S. employment] report…But investors are worried that global growth is not as strong as some had thought.”
Key points for the week
- Equity performance so far this year is flat, while bonds are down.
- Unemployment fell to 3.9 percent in April.
- Job growth and average hourly earnings’ reports were solid but below estimates.
- Trade talks between the United States and China. The talks were described as “frank, efficient, and constructive,” although significant issues have yet to be resolved.
- A Federal Open Market Committee meeting. The Federal Reserve indicated it expects to raise rates during 2018 but did not do so last week.
- Sky-high rates in Argentina. In an effort to shore up the nation’s currency, Argentina’s central bank “…hiked rates to 40 percent from 33.25 percent, a day after they were raised from 30.25 percent.”
New Medicare Cards
Individuals covered by Medicare will be receiving new Medicare cards in the mail. The new cards are being issued to help prevent fraud and fight identity theft. Medicare is removing Social Security Numbers from Medicare cards and your new card will have a new Medicare Number that's unique to you.
When are new cards being mailed?
Medicare will be mailing new red, white, and blue paper Medicare cards between April 2018 and April 2019. Card mailings will be staggered, so the timing will depend on where you live.
Newly eligible people will begin receiving the new cards starting in April. The following table from the Centers for Medicare & Medicaid Services shows when Medicare will be mailing cards to existing Medicare recipients. You can check the status of card mailings in your area on medicare.gov/newcard.
Here are some tips on using your new Medicare card
- Your new card will be mailed to you automatically. You don't need to do anything as long as your address is up-to-date. If you need to update your address, contact Social Security at gov/myaccount or 1-800-772-1213.
- Once you receive your new Medicare card, destroy your old Medicare card (SHRED!) and start using your new card right away.
- Doctors, other health-care providers, and facilities will ask for your new Medicare card when you need care, so carry it with you.
- If you're in a Medicare Advantage Plan (like an HMO or PPO), your Medicare Advantage Plan ID card is your main card for Medicare. You should still keep and use it whenever you need care. However, you also may be asked to show your new Medicare card, so you should carry this card, too.
- Medicare will never call you uninvited and ask you to give out personal or private information to get your new Medicare Number and card.
- Scam artists may try to get personal information (like your current Medicare Number) by contacting you about your new card. If so, hang up and call 1-800-Medicare.
What are we reading?
Below are some articles we paid particularly close attention to this week. We encourage our readers to follow the links.
With the unemployment rate reaching historical lows, shouldn’t wages be rising faster? A better measure of employment may be the labor force participation for 25 to 54-year-old workers. It is apparent that even though the unemployment is below 4%, wage growth pressure is less now than last decade. The author suggests that this may be due to the 25-54 working age population ratio being 3% lower now than compared to the 2000s.
Berkshire Hathaway just wrapped up its annual meeting in Omaha, and the local paper, Omaha World-Herald, confined itself to running only two special sections with a couple dozen stories in advance of the meeting. Key topics included where to eat when visiting Omaha, why attending the event is wonderful, and why Warren Buffet is so unique. There wasn’t even one slightly negative story to balance out the positivity. Conspiracy theorists might point out Berkshire Hathaway owns the paper. But, actually, the coverage has always been this positive.
Founders of new companies aren’t who many people think they are. Sure, you’ve read stories about entrepreneurs who leave college to found companies that become behemoths. In fact, The Thiel Fellowship encourages young people to skip college and, “Pursue ideas that matter instead of mandatory tests. Take on big risks instead of big debt.”
While helping young people pursue new ideas is admirable, research from the Massachusetts Institute of Technology (MIT) and the National Bureau of Economic Research (NBER) suggest a different age group is more likely to found successful fast-growth companies:
“Our primary finding is that successful entrepreneurs are middle-aged, not young. Taking numerous measures to identify potentially high-growth firms as well as studying ex-post growth of each firm, we find no evidence to suggest that founders in their 20s are especially likely to succeed. Rather, all evidence points to founders being especially successful when starting businesses in middle age or beyond…Across the 2.7 million founders in the U.S. between 2007-2014 who started companies that go on to hire at least one employee, the mean age for the entrepreneurs at founding is 41.9. The mean founder age for the 1 in 1,000 highest growth new ventures is 45.0. The most successful entrepreneurs in high technology sectors are of similar ages. So, too, are the most successful founders in the entrepreneurial regions of the U.S.”
Almost one-fourth of new entrepreneurs are ages 55 to 64, reports Entrepreneur.com. They often have financial stability, professional support networks, and experience – all things The Thiel Fellowship tries to provide to younger founders.
What’s the point of this story? Age is just a number. People of all ages have great ideas and great potential.
Weekly Focus – Think About It
“The critical ingredient is getting off your butt and doing something. It's as simple as that. A lot of people have ideas, but there are few who decide to do something about them now. Not tomorrow. Not next week. But today. The true entrepreneur is a doer, not a dreamer.”
~ Nolan Bushnell, Entrepreneur
"The indispensable first step to getting the things you want out of life is this: Decide what you want."
~ Ben Stein, Professor and Writer
"In the end, all business operations can be reduced to three words: people, product and profits. People come first."
~ Lee Iacocoa, Auto Executive
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 is 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. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock companies maintained and reviewed by the editors of the Wall Street Journal. Please note direct investment in any index is not possible.
The MSCI ACWI (All Country World Index) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2007 the MSCI ACWI consisted of 48 country indices comprising 23 developed and 25 emerging market country indices. The developed market country indices included are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The emerging market country indices included are: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. The Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market.
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.
http://www.barrons.com/mdc/public/page/2_3064-485653.html (Click on “U.S. & Intl Recaps,” then "Keeping up with the facts")
http://thielfellowship.org(Click on down arrow)
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