Markets hate uncertainty – and that may create opportunities.

Last week, investors experienced another bout of election jitters, and the Standard & Poor’s 500 (S&P 500) Index fell for the ninth straight session.

The CBOE Volatility Index (VIX), a.k.a. the fear gauge, which measures the expected volatility of the S&P 500 during the next 30 days, was up more than 40 percent for the week. The shift in the VIX reflected investors’ concerns about stock market performance after the election. Many think the next four weeks will offer a rough ride.

That may prove to be the case; however, all of the election hoopla and hyperbole has obscured some positive news. So far, the third quarter earnings season has been going well. According to FactSet, 85 percent of companies in the S&P 500 Index have reported earnings and the blended earnings growth rate for the Index is 2.7 percent. That means the S&P 500 Index is on track to experience its first quarter of earnings growth after five quarters of falling earnings.

A savvy portfolio manager or investor might wonder whether any of the companies with improving earnings have seen their share values decline because of election volatility and take time to evaluate whether any of those companies have become more attractive investments as a result.

If you’re too worried about the future of America to think about investment opportunities, it may help to remember the President of the United States doesn’t govern alone. An expert cited by Barron’s offered this insight:

“Regardless of who wins the White House…the new president will probably be playing between “the 40-yard lines” of the political gridiron against a Congress with at least one chamber controlled by the opposition. If both houses are held by the opposing party, the action probably could be stymied between “the 47-yard lines” – likely beyond even field-goal range to score any policy points.”

No matter how moving the election rhetoric, the next President may have a hard time getting much done.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

will the u.s. presidential election move the stock market? Elections often produce market volatility because markets hate uncertainty, and there is nothing certain about the outcome of the U.S. election. Election-induced volatility, however, often is relatively short-lived.

Remember, the downturn that followed the British vote to leave the European Union? Globally, markets lost about $3 trillion in two days following the late June vote. By the Fourth of July, many markets had recovered lost ground and made new gains, according to Financial Times.

So, what may happen after U.S. elections? Here are some thoughts:

“In the event of a very narrow Clinton win, it is all but guaranteed that Trump would claim the election had been “rigged” and would challenge the result via the courts. Civil disorder is also possible. Under those circumstances, the infamous 2000 election suggests that the uncertainty could persist for at least a month and could weigh heavily on the stock market during that time. It was not until December 12, more than a month after polling day, that a Supreme Court ruling effectively handed the 2000 election to George W. Bush.”

--Paul Ashworth, Capital Economics, cited by Barron’s

“After the silly season is over on November 8, about half the country will be elated and nearly half will be scared. And, both groups, research shows, are likely to tweak their investments accordingly. That’s when things really get risky. The key to your success this year is understanding that your emotional reaction to the election – not who actually wins it – is what truly matters.”

--Taylor Teppler, Time.com/Money

“Successful investors understand that markets are always moving, and there’s really no way to avoid the volatility that can come from uncertainty – even when it’s caused by a contentious political campaign. The trick is to create a portfolio that includes a diverse mix of assets and is based on your investing time frame and risk tolerance.”

--Schwab Survey: Investors Who Plan Don’t Fear Election Volatility

Markets may get bouncy following the election. That doesn’t change your long-term financial goals. If a portfolio review would help settle your election jitters, you may want to contact your financial professional.

Weekly Focus – Think About It

“The thing about democracy, beloveds, is that it is not neat, orderly, or quiet. It requires a certain relish for confusion.”

--Molly Ivins, American newspaper columnist

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * 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. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! 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. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.

It’s almost over…

During July 2016, Pew Research reported almost 60 percent of Americans were suffering from election fatigue. They weren’t uninterested in the election. They were just worn out by never-ending news coverage that focused on candidates’ comments, personal lives, and standing in the polls rather than their moral character, experience, and stance on issues.

Last week, U.S. election news overshadowed positive economic data causing U.S. stocks to lose value as investors shifted assets into safe havens. Early on Friday, the Bureau of Economic Analysis released gross domestic product data, which reflects the value of all goods and services produced in the United States during the period. Initial estimates suggest the U.S. economy grew at an annual rate of 2.9 percent in the third quarter of 2016, an improvement on second quarter’s 1.4 percent growth. Consumer spending continued to be the primary driver of growth in the United States.

Markets moved higher on the news, only to retreat when the Federal Bureau of Investigation said it is looking at new evidence in the Clinton email investigation. Financial Times wrote:

“Mr. Trump, Mrs. Clinton’s Republican challenger, had fallen dramatically in the polls in recent weeks: market strategists said this had eased uncertainty given the real estate businessman’s controversial views on trade and immigration. However, the news of the new probe – just 11 days before the presidential election – has sparked fresh tumult.”

Financial Times indicated the CBOE Volatility Index (VIX), a.k.a. the fear index, moved higher on Friday. The index measures the anticipated volatility of the Standard & Poor’s 500 Index over the next 30 days. In addition, U.S. Treasury yields, which had been increasing on rumors the European Central Bank might begin to taper its quantitative easing program, dipped lower.

The next few weeks are likely to be bumpy for investors. During times like these, it’s critical to keep your eye on your long-term financial objectives. We’ve weathered volatile times before, and we will get through them again.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.  Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

Ooooh! Some States’ estate taxes are scary! Most Americans aren’t too concerned about federal estate taxes. After all, 99.8 percent won’t have estates large enough to be subject to the tax. For 2016, the estate tax threshold is $5.45 million (double that amount for a married couple) and it is expected to be $5.49 million in 2017 (barring any changes to the tax code).

At the state level, it’s a different story. Kiplinger’s explained:

“However, state estate taxes, which kick in for estates valued at only $1.5 million or less in several states, could take a big bite out of your legacy. Your home and retirement accounts will be counted when your estate is valued for tax purposes, and proceeds from your life insurance could be counted, too, depending on how the policy is owned and who gets the money.”

The Tax Foundation reports, in all, 15 states and the District of Columbia have estate taxes. They included:

·         Connecticut ($2 million exemption and 7.2 percent to 12 percent estate tax rates)

·         Delaware ($5.4 million exemption and 0.8 percent to 16 percent estate tax rates)

·         Hawaii ($5.4 million exemption and 0.8 percent to 16 percent estate tax rates)

·         Illinois ($4 million exemption and 0.8 percent to 16 percent estate tax rates)

·         Maine ($2 million exemption and 8 percent to 12 percent estate tax rates)

·         Maryland ($1.5 million exemption and 16 percent estate tax rate)

·         Massachusetts ($1 million exemption and 0.8 percent to 16 percent estate tax rates)

·         Minnesota ($1.4 million exemption and 9 percent to 16 percent estate tax rates)

·         New Jersey ($675,000 exemption and 0.8 percent to 16 percent estate tax rates)

·         New York ($3.1 million exemption and 3.1 percent to 16 percent estate tax rates)

·         Oregon ($1 million exemption and 0.8 percent to 16 percent estate tax rates)

·         Rhode Island ($1.5 million exemption and 0.8 percent to 16 percent estate tax rates)

·         Tennessee ($5 million exemption and 5.5 percent to 9.5 percent estate tax rates)

·         Vermont ($2.75 million exemption and 0.8 percent to 16 percent estate tax rates)

·         Washington ($2.1 million exemption and 10 percent to 20 percent estate tax rates)

·         Washington DC ($1 million exemption and 0.8 percent to 16 percent estate tax rates)

While not all have estate taxes, Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania all have inheritance taxes. If you haven’t given much thought to estate planning, contact your financial professional. They can possibly help you find ways to minimize the taxes your estate and your heirs may owe.

Weekly Focus – Think About It

“Success is not final; failure is not fatal: It is the courage to continue that counts.”

--Winston S. Churchill, Former British Prime Minister

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * 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.* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! 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. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.

“Verrrry interesting.”

Arte Johnson’s catch phrase from Rowan & Martin’s Laugh-In may not have described U.S. stock markets last week, but there were some interesting economic, cyber-security, and consumer developments around the world.

Major U.S. stock indices finished the week slightly higher. Experts, cited by Barron’s, suggested markets seemed tired and were waiting for clarity around the U.S. election outcome, Federal Reserve rate increase, and corporate quarterly earnings.

Across the pond, opposition from Wallonia (a dairy-producing region of Belgium) killed trade negotiations between the European Union and Canada. The New York Times suggested the collapse of trade talks could signal a new chapter in modern history:

“Liberalized trade has amplified economic growth, but the spoils have been largely monopolized by wealthy and corporate interests. Recriminations over the resulting economic inequalities are now so ferocious that modern history has been altered: The phase of globalization that began with the ending of World War II is essentially over.”

Another modern development – the Internet Everything (think unsecured DVRs, CCTV cameras, baby monitors, home routers, and other unsecured devices) – may have helped facilitate a cyber attack on an Internet performance management company last Friday. The hack disrupted access to some major websites. Financial Times explained cyber criminals infected the devices without the owners’ knowledge.

Finally, we learned food doesn’t have to be gold-foiled to be outrageously expensive. AdWeek wrote:

“…To go along with the supposed epicurean majesty of its beverage, St. Erik's Brewery created a very high-class snack – potato chips featuring rare Nordic ingredients and sold in a pack of five for a whopping $56.”

The first 100 boxes sold out in a week!

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

an unusual career opportunity. Do you have a friend or family member who prioritizes blogging, tweeting, or posting videos above doing homework, attending family dinners, or going out? It’s possible they’ve recognized an economic opportunity you haven’t considered: social media marketing.

Many social media influencers are celebrities, and they’re paid well for including brands and products in their posts. A celebrity with 100,000 followers may receive $2,000 to $12,500 – depending on the social media platform – to mention a product or service. If they reach one million followers, that amount increases to $20,000 to $125,000.

Celebrities are not the only “influencers.” In fact, non-celebrities carry more weight with some consumers. A survey from CollectiveBias found:

“…30 percent of consumers are more likely to purchase a product endorsed by a non-celebrity blogger than a celebrity. Of that number, 70 percent of 18 to 34 year-olds had the highest preference for “peer” endorsement.”

Clearly, peer endorsements are valuable, too. Inc. suggested the going rate for social media influencers is $25 to $75 per thousand followers, and some people earn much more:

“…It's been reported that beauty guru [name removed] earns $3 million a year. Comedy duo [name removed] rakes in $8.5 million annually. And the richest influencer of them all, [name removed], earns a cool $12 million dollars a year.”

Wielding influence online remains a relatively new industry and pay often depends on how valuable the influencer perceives his or her endorsement to be.

Weekly Focus – Think About It

“Success is often achieved by those who don't know that failure is inevitable.”

--Coco Chanel, Businesswoman and fashion designer

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * 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. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! 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. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.

‘Tis the season!

Third quarter earnings season, that is.

Every quarter, companies report earnings to let investors know how profitable the companies were during the quarter. When profits grow, a company’s share price may move higher. When profits decline, a company’s share price may move lower.

For five consecutive quarters, the Standard & Poor’s 500 Index (S&P 500) has been in an earnings recession – the earnings for the companies in the index have declined every quarter. Another earnings decline is expected for the third quarter. As of September 30, analysts estimated a -2.0 percent earnings decline for the third quarter, according to FactSet.

A negative estimate doesn’t necessarily mean all S&P 500 companies will do poorly. Certain sectors of the market have been performing a lot worse than others. Of the 11 sectors in the S&P 500, only three – Energy, Industrials, and Telecommunication Services – were expected to have negative earnings. For example, on September 30, estimates suggested the Energy sector would experience a year-over-year earnings decline of -67.2 percent, while Utilities would see earnings growth of +5.3 percent.

Only 7 percent of S&P 500 companies have shared third quarter earnings so far. Through last week, Energy sector earnings were weaker than expected (-72.5 percent) and Utilities earnings were stronger (+6.1 percent). FactSet detailed S&P 500 companies’ performance through Friday:

“…76 percent have reported actual EPS [earnings per share] above the mean EPS estimate, 3 percent have reported actual EPS equal to the mean EPS estimate, and 21 percent have reported actual EPS below the mean EPS estimate. The percentage of companies reporting EPS above the mean EPS estimate is above the 1-year (70 percent) average and above the 5-year (67 percent) average.”

Fourth quarter offers a brighter earnings outlook. S&P 500 companies are expected to see profits increase. Analysts’ current estimates suggest earnings will be up 5.3 percent during the period.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.  Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

maybe more americans should study communications. Parents aren’t all that comfortable talking with their children about certain topics. The T. Rowe Price 2016 Parents, Kids & Money Survey found that sex and death are at the top of the list, followed closely by family finances. That’s right: family finances. Parents are more comfortable talking about terrorism, drugs, and bullying than they are talking about money!

A shortage of conversation may be at the root of some financial misunderstandings. For instance, when it comes to paying for college, 62 percent of children (ages 8 to 14) expect their parents to cover the entire cost of any college the child chooses. Yet, just 12 percent of parents said they would be able to pay the full cost of college. In addition, 67 percent of children said their parents are setting money aside so they can attend college. However, only 58 percent of parents reported they are saving money to pay for their children’s college.

The disconnect between children’s expectations and parents’ reality may explain why 16 percent of parent respondents said they had used retirement savings to pay for college expenses and 11 percent expect to do so.

Remarkably, college isn’t the only non-retirement expense where parents have spent their retirement savings. Funds earmarked for retirement have been used to pay for vacations (17 percent), holidays (15 percent), day-to-day expenses (13 percent), and weddings (8 percent).

Communication is critical. If you haven’t talked with your children about money, it may be a good time to start. There are a lot of resources available to help you. Give your financial professional a call for advice in this area of your portfolio.

Additionally, if you have been using retirement assets for other purposes, it may be time to implement and adhere to a financial plan. Doing so may help you arrive at retirement with enough money to live comfortably.

Weekly Focus – Think About It

“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”

--Warren Buffett, CEO of Berkshire Hathaway 

* Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. * Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * 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. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! 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. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal. 

Was it good news or wasn’t it?

The U.S. unemployment rate ticked higher last week. The September jobs report showed the United States added 156,000 new jobs in September. That was 16,000 fewer than economists were expecting and 11,000 fewer than were added in August, according to Barron’s.

That doesn’t sound like good news, does it?

On the other hand, the report showed more people are working and looking for jobs. Also, wages increased so people are earning more. The Wall Street Journal wrote:

“The report – marked by a slight uptick in the unemployment rate to 5 percent – largely fit the narrative Fed Chairwoman Janet Yellen laid out for the labor market after the central bank’s September policy meeting. People are rejoining the labor force in search of work. Many of them are finding jobs, but not all…Ms. Yellen sees the return of workers to the job search process as a healthy sign.”

That sounds like good news, right?

The jobs report seemed to support the conclusion of The New York Times that there are two economic realities in the United States, “…healthy hiring and falling unemployment on the one hand, millions of economically sidelined Americans on the other…”

Uncertainty surrounding the jobs report caused U.S. stock markets to fall last week.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.  Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

is IT a cyclical rotation? Economic growth may not be predictable, but it tends to follow a pattern that is known as a business or economic cycle. Periods of recession (when the economy contracts) are followed by periods of growth (when the economy expands).

Some companies and market sectors tend to perform better during economic expansions. They’re known as cyclical companies, and they make goods or deliver services – entertainment, automobiles, vacations, and so on – that people want to buy when they’re feeling prosperous. Generally, people feel prosperous during periods of economic expansion. Other companies are called ‘defensive.’ They offer goods or services – food, beverages, personal products, and so on – that people need regardless of their wealth or economic conditions.

In recent months, we’ve seen what may be a rotation from defensive market sectors into cyclical ones. Financial Times explained the shift in U.S. markets:

“The shift signals investors are worrying about high prices for the defensive, dividend-paying stocks that were in heavy demand in the first half as worries over the outlook for the global economy dominated…Indications of a potential rate increase this year and hopes that economic growth was improving were making unloved, cyclical parts of the market look more attractive.”

If you look at returns for the first three quarters of the year, cyclical stocks and defensive stocks delivered almost the same performance. Through September 30, 2016, the MSCI ACWI Cyclical Sectors Index was up 4.8 percent and the MSCI ACWI Defensive Sectors Index was up 4.7 percent. The trend appears when you look at the numbers during the third quarter. During July, August, and September, cyclical sectors were up 8.2 percent and defensive sectors were down 0.7 percent!

It appears to be a cyclical rotation.

Weekly Focus – Think About It

“We know what we are, but know not what we may be.”

--William Shakespeare, British playwright

*Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. * Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. *The MSCI all Country World Index is an unmanaged, free float- adjusted, market capitalization-weighted index composed of stocks of companies located in countries throughout the world.  It is designed to measure equity market performance in global developed and emerging markets.  The index includes reinvestment of dividends, net of foreign withholding taxes. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * 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. * Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! 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. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.