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Weekly Economic Update – September 21, 2020

In this week’s recap: The tech sector slip continues for stocks; the Federal Reserve signals that interest rates will not be increased for some time.

THE WEEK ON WALL STREET

Stocks slipped as the technology sector remained under pressure and a mid-week announcement by the Federal Reserve failed to inspire investors.

The Dow Jones Industrial Average declined 0.03%, while the Standard & Poor’s 500 fell 0.64%. The Nasdaq Composite index dropped 0.56% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 0.75%.1,2,3

TECHNOLOGY PULLS STOCKS LOWER

As has been the case in recent weeks, technology stocks led the market higher, then lower in an otherwise turbulent week of trading.

Merger and acquisition activity announced at the start of the week generated a rush back into technology stocks, sparking a rebound from the previous week’s drop. Stocks continued to advance until Wednesday, when investors began to digest comments from the Fed’s Federal Open Market Committee meeting. The Fed delivered a message that coupled assurances of continued low rates with concerns about the health of the economic recovery.4

THE FED STAYS THE COURSE

In the last Federal Open Market Committee (FOMC) meeting before the November election, the Fed signaled that interest rates would not be increased “until labor market conditions have reached levels consistent with the committee’s assessments of maximum employment and inflation has risen to 2% and is on track to moderately exceed 2% for some time.”4

Most Fed officials do not see this happening until 2023.

While the Fed maintained its view on the importance of fiscal stimulus to help American workers and businesses, it did improve its outlook for unemployment in its latest economic outlook. The Fed now expects unemployment would average around 7-8% in the final three months of the year, down from its June prediction of around 9-10%.5

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Existing Home Sales.
Thursday: Jobless Claims. New Home Sales.
Friday: Durable Goods Orders.

Source: Econoday, September 18, 2020
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

 

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Tuesday: Nike (NKE), Autozone (AZO), Fedex (FDX).
Wednesday: General Mills (GIS).
Thursday: Costco Wholesale (COST), Darden Restaurants (DRI), Carnival Corp. (CCL).

Source: Zacks, September 18, 2020
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

WEEKLY TIP

Always explore the alternatives before you make a big-ticket purchase. A few minutes of online searching may bring you exactly what you want (or close) at considerable savings.

WEEKLY QUOTE

“Simplicity is the ultimate sophistication.”

LEONARDO DA VINCI

WEEKLY RIDDLE

A family has a mother, father, and four daughters. Each daughter has one brother. How many people are in the family?

 LAST WEEK’S RIDDLE:

A plastic bottle filled with cola weighs one liter. What do you need to add to it to make it weigh less than two ounces?

ANSWER:

Add a hole to it.

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Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
Please consult your financial professional for additional information.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.
Copyright 2020 FMG Suite

CITATIONS:
1. The Wall Street Journal, September 18, 2020
2. The Wall Street Journal, September 18, 2020
3. The Wall Street Journal, September 18, 2020
4. The Wall Street Journal, September 16, 2020
5. The Wall Street Journal, September 16, 2020

CHART CITATIONS:
The Wall Street Journal, September 18, 2020
The Wall Street Journal, September 18, 2020
treasury.gov, September 18, 2020


Chasing the Hot Dot – September 3, 2020

In our opinion, there are two strong factors that cause investors to make irrational decisions. Investors often experience extreme fear near market bottoms and high levels of greed when we are close to market tops.  Investors have to keep both of these emotions in check, if they want to be successful over the long term.

As most of us have heard, the Nasdaq, and some technology names have made amazing strides in the past 5 months.  In fact, companies like Apple have gone from less than $220 a share all the way to $540 a share (Before their stock split) in just the last five months.  Elon Musk’s company, Tesla, has gone from $360/share to $2500/share over that same time period.  Amazon, the “King of Retail”, has gone from $1626/share to $3,500/share since March.  These moves have astounded investors and analysts alike.  Although these gains have been very impressive, we caution our clients against purchasing shares of companies that have experienced such high returns over such a short period of time.  The so called “Smart Money” was buying these shares 4-5 months ago, and they will likely be happy to sell their shares to people who are chasing after the “Hot Dot”.

Valuations of the overall market have been very stretched, and we believe the market is over-valued at this point relative to historical Price to Earnings ratios.  To make strides in the market we often need to do the opposite of the herd.  The best investors of all time, like Warren Buffet, tell investors to “buy when there is blood in the streets”.  We utilized this advice to buy into the Nasdaq indexes for our client’s in our modeled accounts back in March.  To be a successful investor we need to consider buying when people are fearful, and selling when people are greedy.  It is tempting to buy into these high-rolling technology companies at this point to try to hop on the band wagon of growth.  We all have that friend who talks about “all of the money” they’ve been making by investing in technology stocks that can “never go down” because of the corona virus environment.  We want to encourage you to not give up your well diversified approach to investing to chase after companies who have earnings multiples that have not expanded this quickly since the dot.com boom.

If you’re a long-term investor, its likely you’ve seen these moves before.  Many of our clients got to experience the “irrational exuberance” of the 1999-2000 tech bubble, and unfortunately, many clients also experienced that bubble bursting.  From October 10th of 1999 to March 15th of 2002, the Nasdaq index fell by 78%.  That would equate to $100,000 turning into $22,000 in 18 months.  Investors who got in at the tail end of the dot.com boom were the ones who experienced the most pain.  We see eerie similarities to the dot.com bubble of 1999 to the extreme moves that we have seen in the Nasdaq recently. We are sending out this cautionary email, because we have received many inquiries in the last 2 weeks as to buying into these companies at these high levels.  As always, it is our client’s decision, but we do our best to help you steward your assets in the best way possible.

Bigcharts.com* (For All pricing of stocks & indexes)


OLV Offices Safely Reopening – June 1, 2020

As of June 1, 2020, OLV Investment Group has begun the process of safely reopening both office locations! We are so thankful for our clients and their willingness to meet via zoom video and phone conferencing as we have navigated Governor Whitmer’s “stay at home” orders.  We fully understand that COVID-19 presents real risks to a portion of our population, which includes some of our clients. As we are in the process of slowly reopening, we will continue and encourage our full-service distance meetings via video or phone conferencing.  However, should you request an in-person meeting we are happy to see you face to face. Our main concern is for YOU – our clients, and we are happy to meet however you are most comfortable! We have taken many precautions including a deep cleaning of our office, an ample supply of hand sanitizer, and available masks for all who enter our facilities. Advisors and office staff will gladly wear masks upon client request.

When our office staff calls to set up your next review, please let them know what review process you would like to utilize.  You are welcome to change the type of review you choose at any time in the future.  We remain steadfast in our prudent and safe approach to managing our client relationships. We thank you for your patience and trust as we continue to move forward in these unprecedented times.

The core values of OLV Investment Group are “Grace, Growth, Grit and Generosity.” During these hard times, we are holding fast to these values. We believe that showing “Grace” for each other during this season will carry us through. Together, we will “Grow” as individuals and as a nation. Our Financial Advisors continue to show the same “Grit” and dedication to you and your goals as always, looking to the bright future which lies ahead. Finally, we sincerely believe in “Generosity” by giving of our time and resources to help the community, the country, and the world.

Remember: Tough markets will not last, but tough Investors will.

The advisor’s cell phone numbers are as follows: 

  • Joel LaGore: 248-318-2697
  • Jesse VanValin: 810-275-4110
  • Scott Carty: 734-474-6458
  • Paul Drinkhahn: 734-915-0145
  • Ben Oliver: 810-240-8437