Weekly Market Update
May 15, 2017
Presented By:  Todd Day, Portfolio Manager


What Lies Ahead?

The NASDAQ turned in another positive week, but the Dow and S&P struggled and were lower on the week as investors were/are concerned about where the next positive (or negative) catalyst will come from.  

Some of the positive catalysts we have been looking for, such as robust earnings and easing political tailwind risks, have delivered and are now behind us, leaving many to question what is going to push stocks higher or drag them lower. 

Still, the NASDAQ set a new record high four straight days - quiet remarkable!!  But - do not get complacent. 

According to the Dow Theory, which states that indices must confirm one another, the Dow Jones Industrial Average recently flirted with its May 1st closing high, but the Dow Jones  Transportation average failed to challenge its May 1st high.  

This disparate movement between the DJIA and DJTA is worthy of a cautious note.

It is noteworthy that the Dow Theory has lost some of its credibility since its inception some 100 years ago,  but it is still a core concept in modern technical analysis,  just saying.

As one analyst put it - This could be the worst performance for the retailers since the Great Recession.

Retailers large and small have been beset by a plague of problems:

*   Sales shifting to the internet
*   The proliferation of fast fashion outlets
*   The proliferation of private labels
*   The shift to "experiences" like travel and restaurants, rather than buying     apparel
*   And the oversupply of retail outlets in general

More important is the influence of Amazon. The total value of transactions from U.S. consumers on Amazon.com reached $147.0 billion in 2016, about $35 billion more than 2015 (these are estimates from the internet retailer and Channel Advisor Corp.). They estimate that total online retail sales grew about $53 billion last year, to $394.8 billion from $341.7 billion in 2015.

That means that Amazon comprised 65.9% of the growth in U.S. online retail last year, and they separately estimate it was 27.4% of the increase in the total retail market.

Think about that - one company was a quarter of all growth in retail sales.
How do you compete against that?

Answer - you don't.  Macy's, Kohl's, Nordstrom, Dillard's and JC Penny reported and it was ugly.  Many question just how much longer some of these guys will be around....

A fun fact - Amazon is now worth 2 Walmarts.  


As noted last week, all eyes would be on those retail sales figures.  And yes, you guessed it - they weren't great.  Now, April's numbers weren't "weak", they just weren't as good as expected.  Non-store (online) continues to be the juggernaut. 

And, the latest Redbook figures offered even more proof of trouble in bricks and mortar land.  This is a weekly measure of comparable store sales at chain stores, discounters, and department stores. 

The inflation data painted a mixed picture - i nflation at the wholesale level (Producer Prices) jumped 2.5% from a year earlier, the most since February 2012.  But, despite a strong PPI in April, consumer prices were nothing special, especially for core goods: clothes, cars/trucks, health care.

Upward revisions were the surprise for the labor market conditions index where prior readings this year have been revised higher.  This index tracks a wide range of employment statistics including wages which have been soft compared to labor growth.  This year's run, though still moderate, is now the best in 2 years.

The NFIB Index of Small Business Optimism posted another historically high reading in April, but expectations for future business conditions fell due to uncertainty over health-care reform.

And finally, the University of Michigan's consumer sentiment survey shows a lot of confidence among those surveyed, buoyed by the best real income expectations in 12 years.  


The stock market is thriving - there's no question about it.  Many indices are setting new all-time highs including the S&P 500 and Nasdaq 100.  That euphoria is not limited to the US.  World markets are also moving higher and setting records.  

The equity world is in celebration mode except one place. China. 
I n a world of new highs the Shanghai Composite is nowhere near its record.  In fact it may be the only major world market that is falling.  Further, the yield curve in China's jittery bond market just inverted (short term rates are higher  than long term rates).   Pay attention, this is going to be important! 

Oh!  This may be too - The World Health Organization (WHO) just announced an Ebola outbreak deep in the Congo.  


Politics in the U.S. and geopolitical concerns will once again be front and center of investor's focus this week. 

We will hear from a few more retailers reporting earnings this week - Home Depot, Lowes, Walmart and Target.  Home Depot and Lowes should be good, it is hard to Amazon them, but I'm sure Amazon is thinking about it.  Walmart and Target - good luck!! 

There are only a few economic releases this week, but they will give more clues as to the strength, or lack thereof in the economy.  The Empire State manufacturing survey, the Philly FED outlook, industrial production and housing starts will highlight the calendar. 

We'll be keeping an eye on crude oil prices as Opec has announced they would continue production cuts into 2018. 

With all of the major averages at or near all-time highs, the big question is "What's Next! 

Stay tuned and we'll keep you posted.

"Aim at the sun, and you may not reach it; but your arrow will fly far higher  than if aimed at an object on a level with yourself."
- Joel Hawes
Soy-Braised Beef & Tomato-Mint Salad

A refreshing, Asian-inspired take on brisket!

 3 lb. beef brisket, cut into 1-inch chunks with fat trimmed off

 5 cloves garlic, chopped

1/4 cup brown sugar

 1/4 cup rice vinegar

 1/4 cup soy sauce

3 tablespoons fish sauce

1/2 teaspoon pepper

1 pint grape tomatoes, halved

1 small red onion, sliced thinly

1/2 cup mint leaves

 Jasmine rice, steamed



1. Combine beef, garlic, brown sugar, rice vinegar, soy sauce, fish sauce, and black pepper in a 7- to 8-quart slow-cooker.

2. Cook ingredients on low for 6 - 8 hours, until beef is tender.

3. Toss raw onions, tomatoes, and mint leaves into cooked brisket mixture.

4. Steam rice when ready to serve brisket.

5. Serve brisket with a side of steamed rice.


Recipe adapted from Good Housekeeping
Know What Makes a Gift Taxable
When you give gifts of property or money to people, you may need to pay a gift tax to the IRS. Here are some points to consider as you prepare to file your taxes this week.
Are all gifts taxable?
Generally, no. While you should keep in mind that the gift tax could apply to you, most gifts that you give do not trigger the gift tax. 

Here are nontaxable gifts:

*    Gifts that are worth less than the annual exclusion amount for the applicable tax year

*    Tuition or medical payments you made on behalf of another person to an education system or medical facility

*    Gifts to your spouse

*    Gifts to political organizations

*    Gifts to charities

What is the annual exclusion amount?
The annual exclusion amount for 2016 is $14,000. You typically won't have a gift tax for any gift you give another person that is under this amount.
Does the person who receives a gift pay a gift tax?
Typically, no; they aren't responsible for paying a tax on the gift.
If you gave a taxable gift, file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. Other details may apply, and you can find more information on the IRS website.

Tip courtesy of IRS.gov

Avoid a Loose Swing
When you're told to swing "nice and easy," a common problem can emerge: You forget to go after the ball. The result? You become too relaxed in your swing and lose force. You can hit the ball better and avoid a loose swing with the following practice:
First: Understand What a Loose Swing Can Do
Solid contact requires decisiveness in your swing. Without strong grip and force, you get out of synch and lose precision as you move through the impact zone.
Second: Hit the Ball in the Rough - Half Swing
You can practice your swing by hitting your ball out of the rough. When doing so, you have to be more aggressive in order to clear the heavy grass. To nail that shot, you end up bracing for impact to stabilize your swing. This is the goal you need to reach to also hit a solid shot in the fairway: a feeling that your arms and torso connect in unison. 

You can practice this swing by:

At address: You should feel pressure in both armpits, and your biceps should press against your chest.


As a drill: Tuck your shirt sleeves under your arms, keeping your arms pinched against your body. Practice making half swings with this stance, holding your pinch.


Third: Hit the Ball in the Rough - Full Swing
After you practice your half swing, try to recreate that feeling in your full swings. The rough will reveal the quality of your swing: If your arms disconnect from your body and you don't stay strong, you will make awful shots.
Continue to practice your full swings until you hit the ball consistently strong out of the rough - and then watch your improvements unfold in the fairway, too.
Tip courtesy of Golf Digest

Taking Care of Blisters

From new shoes to sunburns to infections, a variety of activities and health complications can cause blisters to form.  While most usually heal on their own, you can follow these care tips to help find relief the next time you get a blister:

Wear a Bandage: Loosely covering the blister with a bandage can create a buffer between your skin and any impact.


Use a Doughnut-Shaped Moleskin Pad: For blisters on areas that receive lots of impact, a doughnut-shaped moleskin pad can provide additional relief. You'll want to put the pad around the blister so that it sticks through the pad's opening in the middle.


Drain Properly: While you should avoid draining a blister at home, you can pop the blister to relieve pressure and pain. When you do this, always sterilize a needle with rubbing alcohol before popping the blister and drain the fluid by pressing it toward the hole.


Clean Thoroughly: Whether you've popped the blister or it tore open, you need to thoroughly dress the wound by first rinsing the area completely with clean water. (Note: Do not use hydrogen peroxide or alcohol, which will cause slower healing!) Then, smooth the flap of skin from the blister down (only tear off if it's infected or dirty) and cover with petroleum jelly and a nonstick bandage.

Tip courtesy of WebMD 

Cut Down Your Water Use at Home
Water may seem like an endless resource as it pours from your showers and faucets at home, but with droughts hitting us around the world, water scarcity is becoming an ongoing problem. You can do your part to reduce waste by cutting down on how much water you use. Here are a few easy ways to make changes:

Use a shower bucket: When you turn water on to prep hot water for a shower, put a bucket under the faucet to capture the flowing water. Save the water to use later for things like watering plants.


Turn off water while brushing your teeth: Every time you let water pour out of a faucet, you are releasing 2.5 gallons per minute. You can cut this waste by turning off the water as you brush your teeth, and only turning it back on when you need to rinse.


Install rain barrels: Lawns and gardens use a lot of water. You can reduce how much you use by collecting rain in barrels and recycling the water whenever you need to water your plants.

Tip courtesy of Care2.com
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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. 

John Brais, Owner & Founder
Investment Advisor Representative
Certified Retirement Financial Advisor
Horizon Financial Services, LLC
3880 Vest Mill Road, Suite 100
Winston Salem, NC 27103
(336) 659-7060


Investment advisory services are offered through Horizon Financial Services, LLC, a North Carolina State Registered Investment Advisor.  Insurance products are offered through 

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