Monthly Market Update
May 1, 2017
Presented By:  Todd Day, Portfolio Manager





           


In This Issue
The Markets
Recipe
Tax Tip
Golf Tip
Health Tip
Green Fact
   Sell in May and Go Away? 
Maybe Yes - Maybe No!

        
As they say, the rear view mirror is always more clear than the windshield - eventually we will know. 

It was another month of fresh new highs for the major averages.  The Dow and the S&P 500 have now been up 5 of the last six months and the NASDAQ has turned in six straight months of gains.  And last week, the NASDAQ hit 6000 for the first time ever, the Dow recaptured the 21,000 level, the Russell 2000 (small caps) climbed into record territory, mid-cap stocks also hit new all-time highs, but the S&P 500 fell 1.84 points, not percent, from a new all-time high.  I've studied market history going back over 100 years.  New all-time highs are never something we find in downtrends and they definitely aren't bearish. 

The major averages did not start the month out in a positive mood with auto sales disappointing, comments from the FED and bomb droppings, but we stayed in a tight trading range that I spoke of last month - quiet resilient actually when things could have really gotten ugly. 

So what fueled the major averages to new highs?  The key driver was that earnings were coming in much better than expected.  Top line revenue growth was +7% and earnings growth is running better than 12%.  I said last month that there were little catalysts to push stocks much higher unless earnings came in better than expected. 

The banks were the first to report and outside of Goldman's stunning miss, banks did much better than expected.  We then started to get a few industrial names - Caterpillar, Dow and Proctor & Gamble and surprisingly enough, they were better too.  A few tech names announced their earnings late last week and they got things off to a ripping start with Amazon and Alphabet (Google) reporting blow out quarters.  These are the numbers that helped the NASDAQ to lead the charge for the major averages. 

The results from the French elections also help put the risk trade back on.  But it's not over - at the time of this writing, the centrist candidate is leading the anti-everything candidate ahead of the final election on May 7th, so this will be a key factor for stocks around the globe in May.


Economy

On the economic front, we did an about face from the good data in January and February.  Weak auto sales, a horrible jobs number, anemic retail sales, stalling manufacturing and services data and to top it all off -  first quarter GDP (Growth's Disappointing Pattern) came in at a paltry .7%.  This was the slowest quarter in 3 years and even slower than France - that's horrible.  This was a mixed report with the weakness in consumer spending not fitting with the strength in business investment.  Still, all the sky high confidence readings in the quarter did nothing to help actual spending.

Across the ponds, geopolitical concerns were a key driver of market sentiment earlier in the month, but the results of the French election lite a fire under European stocks.  The risk-on trade in the U.S. also helped fuel them higher.  In Asia, stocks finished higher for the month as better data out of China and Japan had investors bidding up stock prices. 

So - it's  "Sell in May and Go Away"  time again, but before you go and sell in May, remember the S&P 500 has been higher in May 7 of the past 10 years.  Historically, May thru October is the weakest 6-month period for stocks.  But, the "godfather" of technical analysis, Ralph Acampora, says with new highs in micro-caps, small-caps, mid-caps and large caps - the risk on trade is back on...

I expect the "main" focus for investors to be on politics and geopolitics.  Earnings season is winding down so we'll be looking for the next major accelerant to push the averages higher.  

As earnings season winds down, we will get 131 S&P 500 companies announcing this week.  Tech names like Apple, Facebook and Netflix will be reporting.  And now then retailers - I'll be watching those retail figures in light of the whole retail environment which has been dying a slow death thanks to online retailers (think Amazon).

We will be watching to see if the diversion between the soft and hard data on the economy continues or we finally get some harmony among the two.  The main focus to start May will be the FED's May 2-3 meeting - not expected to raise rates, but it will be the guidance.  The other big headline will be the April jobs report due out Friday.  There are also a slew of other data points we'll be watching.  The economic data this week could be crucial in resolving the debate around growth.

Investors will also be watching the results of the Italian and French elections - the decisive runoff in the French elections Sunday could have a MAJOR impact on the markets next Monday morning. 

It is evident this will be a crucial week for the markets - we enter an historically week period for stocks, earnings, however will be a short term catalysts, combined with a slew of data and then throw in politics (healthcare and tax reform) and geopolitics (North Korea) -  tighten your chin strap and check your harness and stay tuned and we'll keep you posted.     


         
"You are never too old to set another goal or to dream another dream."
- C.S. Lewis
Green Olive Tapenade

   

Make a simple, savory appetizer guests will love!
 

Ingredients:
 
  • 10 oil-packed anchovy filets, finely chopped
  • 1 cup Castelvetrano olives, pitted and crushed*
  • 1 cup Cerignola olives, pitted and crushed*
  • 1 cup parsley, coarsely chopped
  • 1/4 cup drained capers, coarsely chopped
  • 2 tablespoons lemon zest, finely grated
  • 1/4 cup fresh lemon juice
  •  Kosher salt
  • Black pepper, freshly ground
 
*   If you are unable to find either of these briny, meaty olives, you can substitute with other varieties or use just one kind.
 
Directions:
 
  1.  Set aside a large jar or medium bowl.
  2. Combine all the ingredients in the container you choose.
  3. Season with salt and pepper, to taste.
  4. Serve immediately on crostini or cover and chill for up to 1 week.
 
Recipe adapted from Bon Appetite | Epicurious


 
Tips for the Sharing Economy
 
Do you rent a spare room in your house, provide car rides for a fee, or earn money from other nontraditional arrangements? You may be a part of the sharing economy. And if you made any income from such platforms, you have some key financial details to address when filing your taxes.
 
Is the income taxable?
Yes. No matter if you made money part- or full time, the IRS taxes the income you make. This rule applies if you received payments in cash or if you received a return such as Form 1099 or Form W2.
 
Can you take deductions?
Some business-expense deductions may apply for taxpayers who qualify. A deduction for a business expense could be an item such as claiming the standard mileage rate (54 cents a mile in 2016) if you use your car for business.
 
Do taxes apply if you rent a home you also live in?
You will generally have to account for specific tax rules if you rent a home that you live in at any point throughout the year, called the "Residential Rental Property (Including Rental of Vacation Homes)." You can identify the status of taxable rental income using the IRS tax assistant tool .
 
Other factors do apply, and you can learn more on the IRS website . You can also explore the agency's Sharing Economy Tax Center to understand other tax details that may affect what you owe or the steps you need to take.
 


Tip courtesy of IRS.gov



Strengthen Your Game by Compressing Your Irons
 
Do you struggle to complete your backswing before starting your downswing? If so, you're not alone. Amateur players often have short, quick backswings - which keeps them from loading up and creates a powerless, out-of-synch downswing. By learning to create and store energy in your swing, you'll be able to go hard when hitting the ball. Follow these tips to better compress your irons.
 
Load Your Swing: Use Your Glutes
When you take your club back, you should feel two things happening:
  1. You shift your weight into the inside of your back foot at the heel.
  2. Your muscles in the right side of your butt (left for lefties) will contract (highly important!).
 
You want to keep turning until your glutes feel fully loaded - this is when your backswing ends.
 
Carry Through Your Swing: Shift, Push, then Swing
Once you end your backswing, you'll want to laterally shift your lower body in the direction of the target. This move shifts your weight into your left heel (right heel for lefties). Pay attention to how you move your feet. You want to push into the ground without falling out of your position. Keep your feet planted and fire your club through the ball.
 
Tip courtesy of Ron Kaspriske | GolfDigest
 

Get Ahead on Spring Allergies
 
Spring allergies can affect everyone around the country - and for some sufferers, the effects last year round. Once the allergies hit, you can experience symptoms like puffy eyes, runny nose, and itchy throat. You can manage your spring allergy with these simple tips.
 
1. Prepare for the season
If you can predict when allergy season will hit you, then you can proactively address it before a runny nose gets the best of you. At least 1 week before allergy season starts, you should begin taking your allergy medicine. This preventive measure will help the medicine be in your system before your immune system starts responding to allergens.
 
2. Try herbal remedies
Some studies have shown that taking specific herbal remedies may help you manage your allergies. These include:
  •   Butterbur extract, which comes from the shrub
  •   Biminne, which is a Chinese herbal formula including ingredients such     as ginkgo biloba and Chinese skullcap
 
Remember, you should always consult your doctor before starting any herbal medicine regimes.
 
3. Spruce up your home
You can take some measures at home to help limit your allergen exposure. Minor tweaks can really make a significant difference, such as:
  • Closing windows to prevent pollen from coming inside
  • Taking shoes off at the door, so you don't track allergens into the home
  • Using a vacuum cleaner with a HEPA (high efficiency particulate air) filter
 
 
Tip courtesy of Mayo Clinic

Tips to Help You Recycle Plastic Items
 
Recycling the plastic containers we use can do a lot to help minimize landfill and environmental waste, since plastic does not decompose like organic materials do. From beverage bottles to vegetable containers and more, a variety of plastic can find its way into your home. As you recycle your plastic items, here are some key details to keep in mind.
 
  • Styrofoam Pickup: Many recycling centers don't do curbside pickup for specific types of plastic, such as styrofoam. But, they may recycle the item if you drop it off at their center. You can typically call ahead to find out what options are available for you.
  • Big Box Recycling Support: Grocery stores and retail chains (and other shopping locations) often have recycling drop-offs for items that your recycling center doesn't pick up. Check your local stores when shopping to identify what items they take.
  • Cleaned Plastic: Cleaning out your plastic before sending it off to recycle is a good habit, even if your local recycling center doesn't require you to do so. This step will deter mold from growing and may keep animals from scavenging the items.
 
 
Tip courtesy of Greenopedia
 
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

 

Diversification does not guarantee profit nor is it guaranteed to protect assets

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

 

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

 

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

 

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

 

The Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI.

 

The Pending Home Sales Index, a leading indicator of housing activity,  measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos and co-ops.  The PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years. The results are weighted to produce the index.

 

The Chicago Board Options Exchange Market Volatility Index (VIX) is a weighted measure of the implied S&P 500 volatility. VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized.

 

The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index.

 

The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index.

 

Google Finance is the source for any reference to the performance of an index between two specific periods.

 

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

 

Past performance does not guarantee future results.

 

You cannot invest directly in an index.

 

Consult your financial professional before making any investment decision.

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.

  

These are the views of Horizon Financial Services, LLC, and should not be construed as investment advice. Neither Horizon Financial Services, LLC nor its Investment Advisor Representatives or Associates gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information. 


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Certified Retirement Financial Advisor
Horizon Financial Services, LLC
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Winston Salem, NC 27103
(336) 659-7060


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