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Lang Financial Group, Inc. & LFG Advisory Services - Cincinnati, Ohio

Inflation and Your Portfolio The Real Cost of a Vacation Home Should You Ever Retire?

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At Lang Financial Group, we believe that life mandates a strong financial plan. It is our goal to help individuals, families and businesses develop customized plans that will provide financial security through retirement.  In order to reach that goal, we have a put together a comprehensive set of services for creation, monitoring and revision.

Our independent unbiased approach will help us assess where you would like to go, so we can determine the best way to help you get there. Once your plans are designed and implemented we believe in an ongoing relationship to help you navigate your financial future.  Providing you with the highest level of service is our primary commitment as we work together through the years.

In this era of specialization Lang Financial Group is a team of qualified professions who have experience in the following areas:

  • Employer Sponsored Retirement Plans
  • Financial Planning
  • Investment Management
  • Insurance
  • Business Succession Planning
  • Employee Benefit Solutions

Monthly Investment Review - May 01, 2018

Stocks were roughly flat in April, as the S&P 500 index gained 0.3% during the month, while the Dow and the Nasdaq were virtually unchanged.  For the first four months of the year, stock market indices have been roughly flat.  Year-to-date, the S&P 500 has declined by 1.0%, from 2674 at year-end 2017 to 2648 at the end of April, while the Nasdaq has shown a small gain of 2.4%.  Bond prices declined moderately in April as the yield on the benchmark ten-year Treasury bond rose to the 3.0% range. 

The main factors affecting the financial markets in April included geopolitical developments involving China, North Korea and Iran, as well as rising interest rates and strong earnings reports in the U.S.  

Worries about a trade war with China contributed to market volatility in early April, as the Trump administration said it was considering more tariffs on Chinese imports, and China threatened to retaliate with tariffs on U.S. agricultural products.  However markets were relieved when China stated that it would open its markets to more U.S. imports.  In late April, Treasury Secretary Mnuchin and other top members of the President’s economic team traveled to China for trade discussions, leading to hope for progress on the trade issues.  

Throughout April, historic developments unfolded on the Korean peninsula.  Under pressure from China and facing tough economic sanctions, North Korean leader Kim Jong Un stated that he has stopped all missile tests and will shut down a nuclear weapons testing site.  North Korea indicated a willingness to change policy and denuclearize the Korean peninsula.  In late April the leaders of North and South Korea met in a historic summit meeting in Panmunjom, and agreed that they would be willing to bring a formal end to the Korean War.  All this has paved the way for the upcoming meeting between President Trump and the North Korean leader which should take place in May or June.  

Middle East tensions rose in early April when Syria used poison gas on civilians, leading to a military strike by the U.S., Britain and France on Syria’s chemical weapons facilities.  The broader issue that is now becoming an issue for the markets is the status of the Iran nuclear deal.  President Trump has indicated that he wants to pull out of the deal and renegotiate a new one.  By contrast, many in Europe want to keep the current agreement in place.  France’s President Macron and Germany’s Chancellor Merkel visited the White House In late April, arguing for preserving the Iran deal, or modifying it to provide for more inspections of nuclear sites.  On April 24th the Dow dropped by more than 400 points amid worries over the situation, as Iran threatened major consequences if the U.S. abandons the deal.     

Meanwhile, the U.S. economy remained fairly strong.  In late April the government released its preliminary report on first quarter gross domestic product (GDP), which showed an economic growth rate of 2.3% for the first three months of 2018.  The data revealed a slowdown in personal spending during the quarter, but this may have been affected by bad weather and winter storms.  The weakness in consumer spending was offset by strength in business capital spending.  Economist Kevin Hassett, Chairman of the President’s Council of Economic Advisors, said the increased capital spending shows that the recent tax cuts are working, and the trend of higher capital spending is expected to accelerate for rest of year.  Thus the Council of Economic Advisors continues to forecast GDP growth of 3.0% or more for 2018 as a whole.  

Corporate earnings for the first quarter of 2018 were reported throughout April.  In general, first quarter earnings reports have been strong, with nearly 80% of companies reporting earnings above expectations.  

However, the stock market as a whole did not make significant gains despite the good earnings news.  One of the main reasons was concern about rising interest rates.  As seen in the chart below, bond yields trended higher in April, with the yield on the benchmark ten-year Treasury bond rising from 2.74% to over 3.0%, before pulling back a bit at the end of the month. 

Rising Interest Rates Have Become A Problem for the Stock Market

Bond yields have been rising not just because of the stronger economy, but because of the large supply of new bonds coming into the market, as the government continues to run very large budget deficits approaching a trillion dollars annually.  Although bond yields remain low by historical standards, the current uptrend represents a major change from the low interest rate environment of the past six or seven years, a period in which yields generally stayed in a range of only 1.50% - 2.50%.  Thus the 3.0% level for bond yields is psychologically important, and some economists argue that yields could now be heading toward 4.0% or higher.   History shows that environments of rising interest rates are bad for the stock market.  

In conclusion, stock market indices have remained flat over the past few months, as good news on the economy and earnings has been offset by a number of major uncertainties and risk factors which continue to hang over investor psychology.  These include the risk of higher inflation, a tighter Federal Reserve policy, and the threat of rising long-term interest rates.  Investors remain concerned about tariffs and the risk of a trade war with China.  In addition, although progress has been made with regard to North Korea, the status of the Iran nuclear deal has now become a worrisome issue.  Thus in our view the market outlook remains mixed, as investors await more clarity on these issues.

The views depicted herein are for information purposes only and are not necessarily those of Cetera Advisor Networks LLC. They should not be considered specific advice or recommendations for any individual. Certain statements contained herein are forward-looking in nature. There is no guarantee that the events described will come to pass.

All investing involves risk, including the possible loss of principal.  There is no assurance that any investment strategy will be successful. Indices are unmanaged and cannot be invested into directly. Past performance is not indicative of future results.

The return and principal value of bonds fluctuate with changes in market conditions. If bonds are not held to maturity, they may be worth more or less than their original value.

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