Point View WealthPoints

Profit from Recent Volatility with Stock Market Bargains

8661104aa0996c5e6484_2fd3ad42a7da81ca4ae8_2378186c4fdcac016cb5_5a188208fef9d9c58400_cbe5b12dba7708227335_3864c2019f353e8102da_45fe80013b443d130e7d_ce70107ce0e1cd8bb7f3_Dietze_David-174826B.jpg
Point View's David Dietze.
75572c5720d659dc8de7_Screen_Shot_2018-03-06_at_3.31.58_PM.jpg
8661104aa0996c5e6484_2fd3ad42a7da81ca4ae8_2378186c4fdcac016cb5_5a188208fef9d9c58400_cbe5b12dba7708227335_3864c2019f353e8102da_45fe80013b443d130e7d_ce70107ce0e1cd8bb7f3_Dietze_David-174826B.jpg

Markets retreated in February, the worst down month in two years. A record surge in volatility caused several ETFs designed as leveraged bets on low volatility to plunge, with at least one being forced to liquidate and hand its investors a near total loss.

The Causes of February’s Market Retreat

The initial catalyst for the sell off was inflation. The January jobs report showed that wage growth rose 2.9% year over year.  After years of pundits fretting over the lack of inflation, this was enough to send bond yields soaring and investors running for the exits.

Sign Up for E-News

Concerns were compounded by the transition from Janet Yellen to Jerome Powell as Chair of the Federal Reserve.  President Trump’s call for tariffs, 10% on aluminum and 25% on steel, further spooked markets.

That the markets were trading at nearly 19 times earnings, well above average but admittedly less than prevailed in the Dot Com era of the late 1990s, did not help. Complacency and bullishness ran deep, and many investors had let their guard down.

Why We Are Longer Term Bulls

Despite the threat of higher inflation, higher interest rates and trade tantrums, we remain bullish longer term.

Corporate earnings appear strong. This year’s profits should climb 6 to 8%.  Assuming price to earnings multiples stay constant, that would translate into a 6 to 8% market gain.

However, last December’s tax reform, primarily a tax cut for corporations, cut the Federal tax rate from 35% to 21%, meaning shareholders’ earnings went from 65 cents on each pretax dollar to 79 cents, a gain of just over 20%. Tax reform will provide a tailwind to earnings.

Interest rates remain low. Although rates may rise over time, this is still a good time to buy a house or invest capital in a business. Real rates of interest are historically low.

The economy is strong. Wall Street’s and Main Street’s perception that the regulatory burden will remain low under the new Administration persists.  Joblessness is at a multi-decade low.

Overseas economies have benefited greatly from quantitative easing abroad.  This is providing a robust lift to US multinationals; nearly 50% of the S&P’s revenues come in from overseas.

Bond Surrogates Have Declined Precipitously This Year

Despite the 10% correction following one of the best January’s in years, the S&P 500, including dividends, remains up nearly 1% for the year. However, a number of stock sectors, known for their low volatility, above average dividends, and low cyclicality, remain down for the year, in some cases by double digit percentages.

These stock sectors are often called bond surrogates.  Many investors who normally bought bonds for their rich yields started purchasing stocks that had many bond characteristics – stability, big dividends, less influenced by shifts in the economy, in other words, “bond surrogates.”

This year, as interest rates moved up over inflation concerns, change in the Fed’s chair, and indications that rates would rise overseas, bond prices fell. As investors fled bonds, they also fled the bond surrogates. Because stocks do not mature like bonds, their durations were infinite. Examples of these sectors include real estate, utilities, telecom, and consumer staples.  

Note: David G. Dietze, JD, CFA, CFP™ is President and Chief Investment Strategist of Point View Wealth Management, Inc., a registered investment advisor at 382 Springfield Avenue, Summit. 

For 25 years, Point View Wealth Management, Inc. has been working with families in Summit and beyond, providing customized portfolio management services and comprehensive financial planning, to develop and achieve their financial goals.  Click here to contact  David DietzeJohn PetridesClaire TothDonna St.Amant, and Elaine Phipps, or call 908-598-1717 to learn more about Point View Wealth Management, Inc. and how we can help you and your family meet your financial objectives. To sign up for our complementary commentaries and newsletters, e-mail us at firm@ptview.com.

 

The opinions expressed herein are the writer's alone, and do not reflect the opinions of TAPinto.net or anyone who works for TAPinto.net. TAPinto.net is not responsible for the accuracy of any of the information supplied by the writer.

TAP Into Another Town's News:

You May Also Be Interested In

Sign Up for E-News

Westfield

17-Year-Old Academy for Information Technology Student Dies; GoFundMe Page Established to Help Family

July 21, 2018

SCOTCH PLAINS, NJ — Seventeen -year-old Fenov Pierre-Louis, a Roselle resident and student at Union County's Academy for Information Technology, lost his battle with stage 4 Nueroblastoma cancer this week.

Friends have set up a GoFundMe page to help his family. 

Diagnosed when he was a second grader, Fenov fought the disease for about half of his lifetime, ...

Corruption Has No Place in Union County

July 19, 2018

The Union County Freeholders’ decision to appoint State Senator and newly-elected Union County Democratic Chairman Nick Scutari’s chief of staff, Ed Oatman, as county manager smelled of corruption from the start. To place a political consultant like Oatman in the role of overseeing 2,800 employees and running the day-to-day operations of the $500 million county budget suggests ...

Westfield Police Blotter: Multiple Businesses Report Thefts & More

July 18, 2018

July 11,2018 3:50 p.m.

A business located on the 100 block of Central Avenue reports being the victim of a theft. Unknown actor came into the business and removed $2,200.00 worth of property.

July 12, 2018 2:40 a.m.

Danny Burke, age 32, of Edison, NJ was arrested for driving while intoxicated pursuant a motor vehicle stop. Subject was arrested, processed and released to a ...

Drive for Autism Foundation to Hold 17th Annual Drive for Autism Golf Event

July 22, 2018

The Drive for Autism Foundation is pleased to announce that its annual golf event, Drive for Autism XVII will be held at Royce Brook Golf Club in Hillsborough, NJ on Sept. 17, 2018.

The Drive for Autism Golf Outing which has been held since 2002 has raised and distributed over $700,000 to local school programs.  Previous beneficiaries of grants were Morris Union Jointure Commission ...

Orange Cat Found in Westfield

Cat found Saturday in a storm drain on Watchung Fork. Text 908-821-7119 if you recognize him/her.

IRS Working on a New Form 1040 for 2019 Tax Season

The IRS plans to streamline the Form 1040 into a shorter, simpler form for the 2019 tax season. The new 1040 – about half the size of the current version – would replace the current Form 1040 as well as the Form 1040A and the Form 1040EZ. 

 

This new approach will simplify the 1040 so that all 150 million taxpayers can use the same form. The new form ...

AtlantiCast

AtlantiCast: Episode 18

On this week’s AtlantiCast, you’ll find out how accessing care at Atlantic Health System is now easier, more affordable and closer to home than ever, learn which item from the produce aisle could be the newest weapon against cancer, see what Atlantic Health System, the New York Times and Instagram all have in common and much more.

 

 

Picking up the Pieces – The Benefits of Account Consolidation

Over a lifetime of investing we often have numerous accounts located at different financial firms.  Rarely are these accounts managed with a grand plan that takes into account all the individual pieces.   Account proliferation can be detrimental to your investment performance, increase your risk profile, and lighten your pocketbook.  

Account consolidation offers the ...

Big Changes in Store for New Jersey’s Employers and Employees

Big changes are in store for New Jersey’s workplaces, with dramatic legislation aimed at improving conditions for New Jersey’s workers. These changes include the enactment of New Jersey’s Equal Pay Act, a new law to help the unemployed, and passage of New Jersey’s Paid Sick Leave Act. Most likely one or all these laws will impact you or someone in your family.

New ...

5 Simple Ways to Save Water this Summer

According to the L.A. Times, the average American uses an estimated 98 gallons of water EACH day.  

Here are five simple ways you can save water, to help you conserve water this summer and take some pressure off of your drains.

1. Unless you are using it, turn the faucet off. How many of us still leave the water running while we shave or brush our teeth?According to ...

26 Homes Sold July 8-15 in Westfield and Surrounding Towns

There were 26 homes sold between July 8 and July 15 in Westfield, Scotch Plains, Fanwood, Cranford and Mountainside`

TOWN          ADDRESS    STYLE            RMS   BRS BTH   GAR   Sale Price

Cranford  115  Bryant Ave ...

It's Not What You Are Eating, It's What's Eating You

EMOTIONAL EATING: FEEDING YOUR FEELINGS

Emotional eating can be described as episodes of binge-eating, grazing and/or eating when not hungry to soothe feelings. Emotional eaters have a pattern of eating to cope with stress, emotional conflicts and problems of daily life.

Emotional eating is eating for reasons other than hunger. Instead of physical symptoms initiating the eating, ...

ELL Summer Experience at Westfield Public Schools

Westfield students representing six different languages recently enjoyed a weeklong summer camp focused on providing meaningful enrichment activities for students to continue their English language acquisition while having fun.

The ELL (English Language Learners) Summer Experience ran from July 9-13 at Wilson School, welcoming students in grades 1-4 whose native languages are Russian, ...

Westfield Area YMCA: Take Swim Lessions This Summer

The Westfield Area YMCA is providing a free one-week guest pass to non-members which will also enable access to purchase a week of swim lessons at full member rates during the summer.  The one-week guest pass includes use of the Y’s fitness facilities, land and water group exercise classes and open gym/swim.

“Our goal is to have people of all ages and skill levels grow to ...

Lindabury, McCormick, Estabrook & Cooper Welcomes Stephen A. Timoni to Firm

Lindabury, McCormick, Estabrook & Cooper P.C., announced that Stephen A. Timoni has joined the firm in its Westfield office. Stephen will focus his practice in the areas of Corporate and Health Care Law.

“Stephen brings additional depth and experience to our firm. He has tremendous experience in complex corporate, M&A and health care areas of practice. We anticipate that Stephen ...

Livingston Council Votes on Ordinance to Prohibit Vape Shops

July 19, 2018

LIVINGSTON, NJ — Concern about the increased use of electronic cigarettes and other vapor products were among the reasons why the Livingston Township Council adopted an ordinance prohibiting “vape shops,” or any establishment that primarily sells “electronic devices, liquid nicotine or vapor products,” in the township’s retail commercial ...

Obituaries

Eric Lieberman, 47, of Scotch Plains, passed away suddenly and unexpectedly Tuesday, May 22, 2018 ...
Read more