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Strategic Insights

Volume 7, Edition 30 | August 27 - August 31, 2018

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Put Your Portfolio to Work

Doug_Walters Doug Walters | Articles

Read Time: 4:30 min

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Labor Day weekend is a perfect opportunity to remind investors of the importance of keeping the stock market working for you.

Market Review

Contributed by Doug Walters

Labor Day is upon us, and U.S. equities celebrated with positive returns on the week as trade and tariff talks appear to be progressing. Wealth creation often takes hard work, but on this Labor Day weekend, we reiterate the importance of letting your investments do some of that labor for you.

Laboring to Keep Up

With U.S. unemployment under 4%, stocks up well over 300% from their 2008 lows, and the economy seemingly robust, there is plenty to be thankful for this Labor Day. However, those for whom Labor Day was initially crafted to celebrate, the industrial laborer, have had less for which to cheer.

Over the past ten years, production wages have barely kept pace with inflation, despite a tight labor market. Over the same period, management wages have increased about 6% per year. While the stock market has been buoyant, many Americans do not own stock, particularly those with lower income. The wealthiest 10% own roughly 85% of all equities. Part of this lack of ownership is merely due to having lower available savings, but sadly the combination of the collapse of the Tech Bubble in 2001 and the Financial Crisis in 2008 also scared many would-be investors away. Those who exited during either of these market shocks have missed out on an incredible run in equities.

While Strategic may not have the answer to the widening income gap, one of the ways a wealth advisor can add value is being there to talk investors off the ledge during the market’s darkest hours. Often these difficult times prove to be an opportunity of a lifetime for long-term investors. Jumping in and out of the market out of fear and overconfidence is one of the most common investor mistakes. Staying invested through the ups and downs of the market is the hallmark of intelligent long-term investing.

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Strategy Update

Contributed by Max Berkovich , Aleksey Marchenko

STRATEGIC ASSET ALLOCATION

Slicing up the Market

U.S. equity markets confidently edge higher this week with growth stocks in the lead. Bond markets stood still, looking for direction from the Federal Reserve. With the second-quarter earnings season ending, some sectors are significantly ahead of the pack…

  • The Technology sector is leading the pack, up over 20% year-to-date. Most of the performance is driven by Apple (AAPL), Microsoft (MSFT), Google (GOOG, GOOGL), and Visa (V).
  • Consumer Discretionary is the second best performing sector this year, driven by a strong rebound in retail, tight inventory, and strong consumer demand.
  • The top lagging sectors are Consumer Staples and Telecommunications, each down over 5%.

STRATEGIC GROWTH

Pruning a Tree

The technology sector was the leader on the week, while Industrials and Materials were the laggards. Ulta Beauty, Inc.’s (ULTA) downbeat guidance was supplemented with a “needle moving” partnership with Kylie Jenner which helped salvage the week for the Discretionary sector from impairment caused by…

  • DollarTree, Inc. (DLTR) reported a mostly in-line 2nd quarter. Same-store sales grew by 1.9%, with DollarTree stores growing by 3.8%, while the Family Dollar unit had flat sales. Margins compressed as well in the quarter. Investors were spooked by tariff related concerns that forced the company to prune its guidance for the full year from $5.10 per share on the high end of the range to $5.05. The company stated that an anti-dumping duty on ribbon from China would lead to a $0.04 per share charge in the 4th quarter.

STRATEGIC EQUITY INCOME

More from the Orchard

The Telecom sector was the laggard, while Technology was the leader thanks to…

  • As if reaching a milestone valuation of $1 Trillion was not enough, Apple Inc. (AAPL) continues to provide investors with more good news. The company made a small acquisition of Akonia Holographics, a start-up working on lenses for augmented reality. Terms of the deal have yet to be disclosed. The company received another boost as famed investor Warren Buffett disclosed he is still a buyer of the stock. Most importantly, the company will announce three new iPhones and the Series 4 iWatch on September 12th. The new phone model is rumored to be called the XS. DigiTimes expects new phones shipped to range between 70 to 75 million units by year-end.

The Week Ahead

Contributed by Aleksey Marchenko

Investor LENS Will Focus on Jobs Next Week

Labor Day will be observed this Monday. Both equity and fixed income markets will be closed.

  • Our office will be closed on Monday as well.
  • It will also be the last day of the Great New York State Fair in Syracuse, NY. See our The Great Fair Trade issue for more on the fair.

Economic releases next week include the Manufacturing ISM Report, U.S. Services Purchasing Managers Index (PMI), Construction Spending, Vehicle Sales and Factory Orders.

Non-farm payroll will be reported on Friday.

  • Analysts predict the economy to add another 190,000 jobs in August.

Speeches from Federal Reserve member Charles Evans and FOMC members John Williams, Neel Kashkari, Raphael Bostic and Loretta Mester will provide opinions on the economy and the direction of U.S. monetary policy.

About Strategic

Founded in 1979, Strategic is a leading investment and wealth management firm managing and advising on client assets over $1 billion.

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