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Articles by Bert Whitehead
Weighing the Week Ahead: Is Strong Earnings Growth Already Reflected in Stock Prices?
The economic calendar is normal, with an emphasis on housing. Earnings season begins in earnest, with widespread, high expectations. Especially after Friday’s selloff, many will be wondering: In my last edition of WTWA I asked whether the Trump Trade had reached a tipping point. That was a good guess, since the week was filled with sharp market moves driven by hints, tweets, comments, and speculation about each.
Next Recession? Pundit Prognoses
This is the second in a multi-part series where we examine pundits' opinions and predictions on the latest topics.
Two of the Most Important Investing Paragraphs We Have Ever Read
During major sustained advances in stock prices, which usually occupy from five to seven years of each decade, the investor can complacently hold a list of stocks which are currently unpredictable. He doesn't worry about the top because he knows he is never going to sell at the top.
U.S. CPI Inflation: Two Trends to Watch
We expect the pace of medical services inflation to rebound to around 3.0% in 2018 after moderating to 2.0% year-over-year in 2017. One supporting factor is a Trump administration policy change that increased outpatient Medicare reimbursement rates by 4.4% in January 2018.
The Future of the FPA, the CFP Board and the Organizations that Run the Planning Profession
Last month, I asked readers of Advisor Perspectives to help me think through some complicated issues regarding the future of the profession. Should the professional associations (like the FPA and NAPFA) consolidate in order to create more scale and unity, or should we maintain a healthy competition between them?
A Bit About Bob
Our CEO is Robert Huebscher, but we know and love him as “Bob.” We would like you to get to know him, so this section is dedicated to updates and facts about Bob! Did you know that Bob is a proud grandfather? Today, we'd like you to meet Bob's granddaughter Evelyn, who knows him as "Bobbo".
TIPS Outperform Treasurys in 2018 First Quarter
In a quarter characterized by rising interest rates, TIPS outperformed comparable maturity straight Treasurys, but still produced a negative return. On average, TIPS fell 1.1%, less than the 1.6% decline in comparable maturity straight Treasurys. During the quarter, the average yield on TIPS rose by two basis points (bp) to 0.36%, while the average yield on straight Treasurys increased by 40 bp to 2.58%.
Venerated Voices™ Q1 2018 Rankings
Advisor Perspectives, a leading publisher serving financial advisors and the financial advisory community, has announced its Venerated Voices™ awards for commentaries published in Q1 2018. Rankings were issued in three categories: The Top 25 Venerated Voices™ by Firm, The Top 25 Venerated Voices™ by Author and The Top 10 Venerated Voices™ by Commentary.
How Did Factors Perform During a Roller Coaster First Quarter?
Equities experienced heightened volatility during the first quarter of 2018, with the S&P 500 Index surging 7.55% from Dec. 31 2017, through Jan. 26, 2018, before dropping nearly 8% through quarter-end.1 Early in the quarter, market activity was buoyed by upward revisions to corporate profit outlooks following federal tax cuts in December, coupled with a squeeze on short volatility positions.
Thoughts on Trade
When the report on international trade came out earlier this month, protectionists were up in arms. Through February, the US' merchandise (goods only, not services) trade deficit with the rest of the world was the largest for any two-month period on record. "Economic nationalists" from both sides of the political aisle, think this situation is unsustainable.
The Good Shepherd Investor
David was the King of Israel and the writer of many of the Psalms. He spent his formative years as a shepherd and framed his life’s work around the key concepts from his profession. Herds were the primary form of wealth back then, while common stocks are a primary form today. We feel we serve as a shepherd of our concentrated stock portfolio and of our end clients/shareholders.
How to Avoid the Mid-Sized Firm Trap
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives. Prior to having three kids (in three years, by the way), I never fully grasped what a precarious position it is to be in the middle. Mid-sized advisor firms, upon graduating from being a one- or two-person operation, find themselves contending with all sorts of growing pains.
The S&P 500 is Overvalued These 10 Dividend Growth Stocks Are Not: Part 3
The Great Recession of 2008 – which ended in the spring of 2009 – brought on one of the greatest and longest bull markets in modern history. For true value-oriented dividend growth investors, the recession created a virtual cornucopia of excellent dividend growth stock investment opportunities that existed until the end of August 2013. However, by the end of 2013 to current time most dividend growth stocks have progressively become more and more richly valued.
Schwab Market Perspective: Keeping Things in Perspective
Kneejerk, emotionally- (and algorithm-) driven decisions appear to be playing a part in some violent market moves over the past month. Investors who keep the endless flow of news in the proper perspective stand a better chance of being successful. Trade risks have risen but for now an actual trade war is not underway; while the U.S. economy remains healthy, inflation isn’t forcing the Fed’s hand, and what is likely to be a strong earnings season is getting under way.
Symmetry Policy: How to Adapt to a More Volatile Market Environment
It’s easy to understand why the return of equity market volatility in the first quarter of 2018 caused some consternation for investors. But Dylan Ball, head of European Equity Strategies, Templeton Global Equity Group, is largely unfazed. He outlines how he’s adapted his approach to what he considers to be more normal levels of volatility, incorporating deep stock research and an eye on risk/return dynamics.
Monthly Market Risk Update: April 2018
Market risks come in three flavors: recession risk, economic shock risk, and risks within the market itself. So, what do these risks look like for April? Let’s take a closer look at the numbers. Recessions are strongly associated with market drawdowns. Indeed, 8 of 10 bear markets have occurred during recessions. As I discussed in this month's Economic Risk Factor Update, right now the conditions that historically have signaled a potential recession are not in place.
How I Own My Gold
Those who own gold often argue how to best own it. I encourage anyone holding gold to assess the pros and cons of different choices of gold ownership to make an educated rather than emotional decision. Let me explain. I commissioned the above cartoon back in 2011 in response to an assertion by CNBC’s Steve Liesman no one would accept a gold coin in a grocery store. My take was that, hell, if I offered a gold coin, I’m pretty sure I would find a taker if I wanted to exchange it for some groceries.
Fed Minutes: Policymakers Shrug at Market Volatility, Stay Focused on Gradual Path
The minutes of the March 2018 Federal Open Market Committee (FOMC) meeting affirmed our outlook that the Fed will likely continue to gradually and methodically increase interest rates and that the bar is relatively high for policymakers to change the current plan for two or three more hikes in 2018.
You Break It, You Buy It
Throughout 2017, fiscal and monetary policy continued on a steady path. Janet Yellen remained in charge of the Federal Reserve, and no significant economic legislation was passed until the end of the year. With the passage of the Tax Cuts and Jobs Act, the installation of Jerome Powell as chair of the Federal Reserve board of governors, and a spending resolution that loosened government expenditures, we have entered a new era.
How to Get Your Tax Weekend Back
Bearing the Burden The “Tax Cut Act” Increased Taxes for the Rich Losing Your Deductions Immigration Fiasco Fort Lauderdale, Chicago, New York, and Raleigh This weekend millions of Americans and/or their accountants are preparing to file income tax returns. Tax day is an annual event as significant as the Fourth of July – though far less fun. My friends outside the US – and I have many – observe our ordeal with a combination of amusement and pity.
Checks and Balances
I still balance our checkbook every month. I realize that I am in the minority; only a third of Americans use checks regularly and only 20% reconcile their personal ledgers with their bank statements. But I’ve always found the discipline useful. At first, it helped ensure that we remained solvent (which was touch-and-go for a while); today, it keeps me in close touch with trends in revenue and expenses.
What a Trade War Means for Asian Bonds
Media reports have been focusing on a “trade war” following President Donald Trump’s decision to impose tariffs on up to US$60 billion in Chinese imports, targeting technology products. Beijing responded by imposing its own taxes on U.S. imports. The result has been an increase in market volatility on both sides of the Pacific. We believe news reports of protectionist measures are mostly noise and that investors should instead focus on long-term fundamentals.
Spotlight: Rio Tinto and the World’s First “Intelligent” Mine
Later this year, Rio Tinto will seek board approval to spend $2.2B to build the world’s first “intelligent” mine, a network of robots and autonomous vehicles all working together on the site of the earth’s largest iron ore complex in Western Australia. Whether or not the project is approved, the firm already is 10 years ahead of rivals in autonomous technology, the firm’s CEO told the Economist in a recent article.
What To Do If Your Social Media Stinks Like the Cleveland Browns
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives. The Cleveland Browns had record of 0-16 in 2017, the worst in the National Football League (NFL). They were one of only five teams to go winless in the history of the NFL. Feel free to substitute similar teams from other years or other sports as you read this article.
How Safe Is NAFTA?
With US-led trade skirmishes opening up on multiple fronts, it’s natural to wonder if the North American Free Trade Agreement (NAFTA) is in jeopardy. Here, Franklin Templeton Multi-Asset Solutions’ Stephen Lingard explains why he thinks NAFTA is not likely to be canceled—at least not outright. As 2018 has progressed, we’ve seen global trade conditions continue to deteriorate.
Why U.S. Stocks May Still Not Be "Cheap Enough"
Prospects for a trade war are having an impact on markets, but for bargain hunters, stocks are still expensive. Russ suggests looking outside the U.S. Last year’s stellar equity market was notable for its resilience as well as the magnitude of the gains. In 2017 investors simply shrugged off an increasingly unconventional U.S. political landscape. This is no longer proving to be the case. Until recently, events in Washington D.C. were blamed for the volatility, but other catalysts were responsible.
Russia: A Riddle, Wrapped in a Mystery, Inside an Enigma
Bob Dylan once sang, “Something is happening here, but you don’t know what it is, do you, Mr. Jones?” That’s what it kind of feels like today. There’s something going on behind the scenes in Russia –something we’re not privy to. On the heels of new U.S. sanctions and a chemical weapon attack in Syria, the Russian market fell 10% on April 9th, a much larger reaction than expected.
The Bond Market Is Waving a Flag That We Should Pay Attention To
The current bull market in U.S. equities has been impressive on many fronts, and specifically with respect to its magnitude of returns and longevity. The magnitude of returns, up an impressive 335% on a cumulative basis over the March 2009 to March 2018 time period1, has also manifested itself in market valuations.
10 More of 50 Fairly-Valued Dividend Growth Stocks Offering Moderately High Yields: Part 2
This is the second of a five-part series presenting 50 dividend growth stocks that I have screened for current fair value. With this article I will be covering 10 additional dividend growth research candidates in addition to the initial 10 that I presented in part 1 found here. Furthermore, I wanted to be clear that these are not necessarily my favorite, nor what I consider the best dividend growth stocks out there.
The March Employment Report
We need a little less than 100,000 jobs per month to absorb new entrants into the work force. We’re well beyond that. Nonfarm payrolls rose less than expected in March (+103,000), but the trend remained strong, well beyond a pace consistent with the growth in the labor supply. Despite a strong trend in payroll growth, the unemployment rate held steady at 4.1% for the sixth consecutive month.
The China Syndrome
The China Syndrome is a 1979 disaster thriller movie about a television reporter and her cameraman who discover safety cover-ups at a nuclear power plant and stars Jane Fonda, Jack Lemmon, and Michael Douglas. According to Wikipedia: While visiting the (fictional) Ventana nuclear power plant outside Los Angeles television news reporter Kimberly Wells (Jane Fonda), her cameraman Richard Adams (Michael Douglas) and their soundman Hector Salas witness the plant going through an emergency shutdown.
The Return of Volatility
Markets began the year as they had been over much of 2017, but changed their tone over the quarter—volatility reemerged, interest rates rose, the dollar fell, and equity markets retreated. The VIX began 2018 at 10.95, the lowest first day of any year in its history, but ended the quarter above its historical average at 19.97.
Second Quarter Investment Outlook
While the markets in the first quarter may have been roiled by a former antagonist—volatility—the outlook for the rest of the year looks solid. Global growth is projected to continue, fortified by strong corporate earnings estimates—particularly for US companies where tax cuts should boost bottom lines. But changes in US monetary policy and global trade rules are on my radar as potential risks. Here is a snapshot of my outlook.
Reflections on Globalization: Part I
For much of recorded human history, we have seen waves of globalization and deglobalization.[1] Periods of globalization tend to be characterized by the emergence of either large regional hegemons or global hegemons. When these hegemons see their power wane, deglobalization occurs. Recently, globalization has come under fire. In some circles, being called a “globalist” is a slur. This new denigration of globalization should be viewed in a historical context.
Gettin’ Tighter: Financial Conditions’ Effect on Stocks
With all the focus on tariffs, trade, and the FAANG stocks; lost among those headlines is perhaps a more important fundamental reversal in financial conditions. The blowout in LIBOR-OIS is technical in nature; but higher funding costs and tighter liquidity conditions still have market implications. Volatility is not leaving the building anytime soon. The cost and availability of credit directly affects the supply and demand dynamics of the stock market.
The Secret to Fully Engaging Your Prospect
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives I’m writing this article from Sydney, Australia where I’m on a speaking tour. My wife and I are big fans of opera. Shortly after we arrived, and while still trying to adjust to a much different time zone, we attended a performance of opera arias at the iconic Sydney Opera House. During that performance, I had an insight I would like to share with you.
A Bit About Bob
We created this new section so you can get to know our CEO & Editor-in-chief Robert Huebscher, who we know and love as “Bob.” This week we’d like to tell you about one of Bob’s favorite ways to unwind after work – trivia. Can you solve Bob’s Trivia Quiz?
The Seven Skills that Make Great Leaders
Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here. Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives. I am often asked about how best to turn managers into leaders. It is hard because most are not trained to be leaders.
How Changing Firms Impacts a Broker’s Book of Business
Determining whether the firm you are leaving and the firm to which you are going are governed by the Protocol is a critical first step. Lists of signature firms can be found online; getting that information will help you plan for transitioning clients and their accounts without creating legal and financial liabilities.
Is Good Health Worth the Cost?
"The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values." — Warren Buffett During the season opening baseball game for the Seattle Mariners, the Make-a-Wish® Foundation blessed a young boy who has fought cancer at Seattle Children’s Hospital for years with a run around the bases.
A Time-Tracking Exercise for Advisors
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives There’s no shortage of apps, self-help books and life coaches that swear they can increase our productivity and profitability. But they start in the same place: by assessing your current productivity. Assessing your time usage is remarkably easy, and the essential first step to a more effective workday.
Capital Efficiency Trumps Fees in the Search for Portfolio Diversifiers
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives Returns to the simplest domestic capitalization-weighted indexes have dominated virtually all active strategies over the nine years since the global financial crisis. It’s not hard to understand why many investors have opted to eschew active strategies altogether, and instead have migrated en masse to the lowest cost index products.
Loomis Sayles Investment Outlook
At this point in the year, we believe developed and emerging economies should continue to drive solid global growth. Corporate earnings estimates for the remainder of 2018 look strong, particularly in the United States, where tax reform looks set to add to an already durable outlook. Potential risks we are monitoring include changes in Federal Reserve (Fed) policy as well as modifications to global trade rules.
Risk-Aversion Meets a Hypervalued Market
Sooner or later a crash is coming, and it may be terrific. – Roger Babson, September 5, 1929 Roger Babson’s first rule of investing was “keep speculation and investments separate.” He is remembered not only for founding Babson College in Massachusetts, but also for his speech at the National Business Conference, warning of an impending crash just two days after the 1929 peak, at the very beginning of a decline that would wipe out 89% of the value of the Dow Jones Industrial Average.
Weekly Market Summary
: Trade war rhetoric is driving US equities. This week, for the third time in the past month, the start of a sustained rally was clobbered by administration threats. Conversely, every interim recovery has come on the heels of conciliatory language. Long story short, what happens next in the equity market is very much a function of which trade posture the administration adopts next.
Factor Investing - What Went Wrong?
So-called “smart-beta” strategies hasn’t been all that smart lately – at least not for the last five years. This article will examine why, whether it was predictable and the likelihood it will work better going forward. Factor tilting, quantitative strategies that are weighted by something other than market capitalization, such as size and value, have been around for decades.
The Reasons to Embrace Risk
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives Diversifying your investments limits risk, but too much diversification limits gains while not reducing risk any further. You need to embrace risk in both public and private companies to receive the returns you desire. Charles Dickens once wrote that virtue, carried to excess, becomes vice.
Gold’s Dot Plot
The Fed dot plot, published after every Fed meeting, shows where each of the 16 members of the FOMC (Fed Open Market Committee) expect interest rates to be at the end of the various calendar years displayed, as well as the peak level of rates upon completion of the tightening cycle. From time to time, the price of gold begs to differ with the Fed’s – and by extension, the investment world’s – consensus on the course of the economic path forward.
A Generation of Interest Rate Illiterates
An entire generation of investors has been misled about interest rates: where they come from, what they mean, how they're determined. Lots of this confusion has to do with the role of central banks. Many think central banks, like the Fed, control all interest rates. This isn't true. They can only control short-term rates. It's true these can have an impact on other rates, but it doesn't mean they control the entire yield curve.
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