By Jay Pluimer, AIF® CIMA®
Friday, 16 August 2019
The big news on August 15th announced an impending recession due to an inverted yield curve. Some clients may have been surprised to see that as a major headline since there have been other headlines over the past few months saying the exact same thing, just without an 800-point drop in the market. The goal of this update is to explain what an inverted yield curve is and what it means for your investments.
What is an Inverted Yield Curve?
It’s important to start by differentiating the stock and bond markets from the economy. The markets react to what is happening in the economy and then try to predict what will happen next. In this case, the bond market has been reacting to slower global growth by paying less interest for long-term bonds. Usually, an investor expects to get paid more (higher yield) for buying a long-term bond because there is more risk and uncertainty than with a short-term bond. The headlines on August 15th reflect that 10-year Treasury bonds are paying less interest than 2-year bonds (which, for perspective, was accurate by 0.022% and lasted for less than a day). However, the yield curve isn’t 100% accurate in predicting a recession, nor can it predict when the recession will start or how long it will last. The yield curve inverted in late 1966 right before an extended period of economic growth and there was also a brief inversion in 1998 when the yield curve was very flat, similar to our current environment, which also didn’t accurately predict a recession.
Market Commentary | Q2 2019
By Jay Pluimer, AIF® CIMA®
Monday, 08 July 2019
The Summer Solstice delivered a lot of Minnesota sunshine along with positive market momentum. We ended the second quarter with positive Stock and Bond markets for the first half of the year, and with Stock markets reaching new record highs. In fact, this was the seventh best June in history and the best since 1926.
By Jay Pluimer, AIF® CIMA®
Friday, 12 April 2019
After a very difficult ending to 2018, the markets made a large recovery to start 2019. In fact, the 13.1% return for the S&P 500 Index was the best quarterly return since the third quarter of 2009, and the best first quarter since 1998. The big momentum change actually started at the end of 2018 with a combination of optimism that the US and China would reach an agreement to avoid a trade war along with comments from the Federal Reserve that future interest rate increases may be less aggressive than anticipated. Since a trade agreement between the US and China is still pending...
By Jay Pluimer, AIF® CIMA®
Wednesday, 30 January 2019
We were happy to see 2018 end on an uptick for the stock market after the return of volatility and some harsh reminders about negative returns. The fourth quarter had down months in both October and December, resulting in all of the major equity markets reaching “correction” territory which is defined as a return of negative 10%. We also saw other parts of the market reach a “bear market” which is defined as a negative return of 20%. It is important to note that market corrections are normal, expected, and factored into the long-term plans we design for clients. However, that knowledge doesn’t make it any easier to handle headlines about record market drops or concerns about what might happen next.
By Jay Pluimer, AIF® CIMA®
Wednesday, 15 August 2018
We have been talking to a lot of clients about ethical and impact investing lately. Opportunities to align investment dollars with personal values have become more available as investor demand has increased. It is now possible to effectively make investments that focus on the environment, sustainability, workplace disparities, or gender equality. In fact, from 2014 to 2016 these types of investments grew by more than 33%.[1] The desire to align personal values with spending dollars has already been demonstrated in consumer spending, as 66% of consumers now saying they’re willing to pay more for sustainable goods (a 55% increase from 2014). [i] People are not only buying with the environment in mind, but they are also investing in companies that promote social themes as well.
