- Our Services
- Publications & Video
- Client Login
Jim Kniffen's Current Market Assessment as of January 22nd, 2018Submitted by Townsend Asset Management Corp. on January 25th, 2018
The US and international stock markets continue with an even stronger upward trend. This trend continues to enjoy support from economic growth and corporate earnings growth. The Trump administration’s new tax law is having a positive effect on many aspects of our economy. Hundreds of major corporations are announcing new jobs, pay raises, bonuses, major capital investment in their businesses and increasing dividends, all which seem to have been well received by Wall Street.
The danger spots in the market at present are bonds, utilities, and REIT’s. Clients are encouraged to be a little bit more aggressively invested than normal.
The four charts featured below all show positive direction:
1. Four Major Market Indicators: Employment, Industrial Production, Real Sales, and Real Income. There are many others, but these are the ones that matter most. The current growth rate of the Gross Domestic Product (GDP) is 3.3%. This is better than it has been in a long time. These four indicators are the driving forces behind economic growth and all are currently trending up.
2. Index of Leading Market Indicators. Currently this reading is favorable.
3. Corporate Earnings. Publicly traded company earnings are presently increasing. It is now “Earnings Season” where corporations report their earnings for the 4th quarter of 2017. Indications here are strongly positive.
4. Major Market Trend. This is clearly going up. This data can be used to avoid major losses like those experienced in 2000-2002 and 2008-2009. If this indicator crosses over again, there may be implications for your portfolio allocation. For now, block out the noise and stay invested.
Application to client accounts:
These major forces and indicators provide guidance at a very high level. Further analysis is applied to compare trends in different parts of the market. Then investment vehicles are analyzed and compared to select those that offer the best exposure to each part of the market. It is not uncommon for different accounts to hold similar investments. However, each client portfolio is constructed with the owner’s unique risk and liquidity preferences in mind.
One quick note on politics: Politics and markets are inextricably linked. However, I adhere to the premise that if the market doesn’t support a preconceived notion or idea, then the notion must be incorrect (not the market.) Markets may not reflect a person’s view of the current political environment, but that is not important! What is important is the evidence provided by the market and economic data. Follow the market trend. Look for indicators of possible change – but follow the market trend!
Jim Kniffen, CFP® is a Senior Investment Advisor at Townsend Asset Management Corp., a registered investment advisory firm located in Raleigh, North Carolina offering comprehensive wealth management expertise to its clients. Email Jim@AssetMgr.com .