Summer 2017 Newsletter: Mid Year Update

Reginald A.T. Armstrong • The Armstrong Report


The Economy

The economy overall seems to be improving. 1st quarter GDP, which initially came in at 0.7%, was revised up to 1.4%. 2nd quarter, according to the Atlanta Federal Reserve Bank, is tracking for a 2.7% print. LPL Financial’s Research department expects the balance of the year to come in around 2.5% growth. This is not gangbusters, but is an improvement from the tepid 2% we have seen for several years. While the odds of a recession in the next six months appear low, keep your eye on the yield curve. Until the last week of June, the curve had been flattening (meaning the difference between short-term rates and long-term rates was smaller) quite a bit. An inverted yield curve (short-term rates are higher than long-term rates) has accurately predicted the last seven recessions and tends to occur near the top of the equity markets for that cycle.

The Markets

The markets had a very good first half, especially for US large company stocks and for foreign stocks. From a psychological viewpoint, we seem to be entering the euphoric part of the market cycle which is near the end of a bull market. As Sir John Templeton remarked, “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” A few observations: the top five stocks in the NASDAQ 100 index make up 42% of the index, investor margin debt is at all-time highs, market valuation metrics are at all-time highs, investor cash allocations are at all-time lows, and volatility is at all-time lows. The markets appear priced for perfection with investors thinking nothing can go wrong. History teaches that investors will likely be disappointed, to say the least.

The Firm

In the second quarter, I attended a conference in San Diego intended to review tools and concepts to assist high net worth clients. I also attended the Advisory Leader’s Forum, which was at Duke University this year. We were even put through basketball drills! In the upcoming quarter, four of our associates will travel to Boston to attend LPL’s national conference. In addition, we expect to launch our new website and a new tool to help make setting appointments easier. Leslie, by the way, celebrates 15 years with our firm this September

Personal

On a personal note, our second grandchild was born on May 2. Sophia Pamela Colker came in at nine pounds! Her mother Jacqueline, father Greg, and sister Eleanor are ecstatic and doing well.

Thank you for your continued trust.

Summer 2017 Newsletter: Mid Year Update
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