What’s going on with this rollercoaster stock market?!

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We wanted to write this quick note to you to let you know that the turmoil in the markets since the beginning of the month and specifically over the past week has not gone unnoticed. We have been closely monitoring the rollercoaster ride. At this point, we believe that the current pullback does not accurately reflect the market fundamentals and strength. In addition, you will likely recall that October is historically a very volatile month, especially in years with mid-term elections.

The Nasdaq index (which predominantly tracks technology stocks), is having its worst month since November 2008. November 2008! If you remember, this was a period of time when the whole financial system was failing and coming apart at the seams. Banks were failing and massive layoffs were taking place. Contrast that economic backdrop to today. To be sure, there are some legitimate concerns that we have detailed in previous letters. This earnings season has been disappointing, global growth has been weak and China and Italy are still in the news. None of these are factors that did not exist last week, however.

We believe that this is more than likely a temporary correction, versus the start of a prolonged bear market. The process of the market finding its bottom could, however, still take some time and there could well be more pain ahead, at least in the near-term.

While understanding that this is a normal part of the cycles in financial markets is rational on one hand, we understand that it does not make it any easier to watch your account balances go down. As always, our approach is always one of conservatism and seeking to avoid large losses through diversification. If we see warning signs that any drastic steps need to be taken you can rest assured that we will take those steps, but for now, we suggest staying the course and weathering the storm.

If you would like us to review a specific investment account for you to ensure that you are appropriately allocated and protected, we would be happy to do that. Feel free to reach out anytime.

3rd Quarter Recap and 4th Quarter Outlook:

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The third quarter was the best-performing quarter for markets so far this year. Major U.S. stock indices each hit new all-time highs in September. The broad market gains were driven by strong economic data, solid earnings growth and improved clarity on global trade. Recent volatility has been blamed on rising interest rates and trade concerns.

Many positive factors have been overlooked as news headlines focus on various political firestorms and the continued uncertainty with regard to the U.S. and China trade relationship. But, in what has become a recurring theme for the 2018 market, positive economic and corporate fundamentals once again outweigh unnerving political and geopolitical headlines.

Starting with current economic growth, it’s simply the best we’ve seen in years. The final reading of second-quarter GDP showed growth above 4% annually, and according to the Atlanta Federal Reserve “GDP Now” estimates, we can expect near 4% GDP growth for the third quarter as well. For context, the last time the U.S. economy posted two consecutive quarters of annual GDP growth close to 4% was in mid-2014, and prior to that, it was late 2004!

Corporate earnings growth also remained very strong during the third quarter, as more than 80% of S&P 500 companies reported earnings above consensus expectations. According to financial data firm FactSet, that’s a record high.

Regarding global trade, concerns about the U.S. and Chinese trade relationship remain, but the third quarter also saw important resolution to numerous other trade situations. First, in July, the United States and the European Union reached a trade agreement that would prevent retaliatory tariffs and promised to investigate ways to further promote free trade between the U.S. and the E.U. Then, in August, the United States and Mexico agreed to a trade framework to replace NAFTA, and on the final day of September, Canada and the United States reached an agreement for Canada to join the existing U.S./Mexico deal, settling another potential trade dispute.

So, we started the third quarter of 2018 with four areas of trade-related concerns: The EU, Mexico, Canada and China. Positively, we begin the fourth quarter with just one area of legitimate trade concern: China. And, while the U.S./China trade relationship certainly represents a potential risk to the global economy and markets, it’s important to remember that so far in 2018, a strong U.S. economy and healthy corporate fundamentals have powered stocks higher through multiple periods of trade, political and international uncertainty—and that’s critical context to consider as we enter the final quarter of the year.

Fourth Quarter Market Outlook

Despite the recent market pullback, U.S. economic and corporate fundamentals remain very strong, and those two factors combine to provide firm support for the markets. That is an important fact to remember as those core fundamental positives have helped markets power higher in 2018 despite a return of volatility.

We fully expect continued market volatility in the fourth quarter, as investors face several potentially significant unknowns, including: US/China Trade, continued corporate earnings strength and mid-term elections.

It’s unclear how, or when, these events will be resolved, and what those implications will be for markets.

Markets always face uncertainties at the start of a new quarter, but over the long term, its core economic and corporate fundamentals that drive market returns, not the latest sensational headlines.

At Simmons Capital Group, we understand that volatility, whether it’s related to trade disputes or concerns about government policy, can be unnerving, even if it is historically typical. That’s why we remain committed to helping you navigate this ever-changing market environment, with a focused eye on ensuring we continue to make progress on achieving your long-term investment goals.

In later stages of market cycles like the one that we believe we are in, defense is often more important than offense. Attempting to avoid large losses is an important factor in achieving your long-term goals. Our years of experience in all types of markets (calm and volatile) have taught us that successful investing remains a marathon, not a sprint.

As 2018 has shown us so far, trade conflicts, political dramas and short-term market volatility are unlikely to impact a diversified approach set up to meet your long-term investment goals. Therefore, it remains critical to stay invested, remain patient, and stick to your plan.

Thank you for your ongoing confidence and trust as we navigate this changing market environment. Please feel free to contact us with any questions, comments, or to schedule a portfolio review.

Charitable Giving Awards - 2018

“Our passion is to improve the lives of others locally, regionally, and globally.  Our success is measured by how well we truly improve the lives of our clients."

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This is our 5th Annual Philanthropy Awards Season and we are anxious to see what outstanding charitable organizations you will bring to us for consideration. From your nominations, we will select two (2) organizations that will each receive a donation of $2,500 from Simmons Capital Group for this year.

Previous Winners Include: 

2014: 
ChildVoice International
City Mission of Schenectady
Many Hopes
Refugee and Immigrant Support Services if Emmaus (RISSE)
Wounded Warrior Project

2015:
Heritage Home for Woman
Masoyi Home Based Care
Feed My Starving Children (FMSC)
Koinonia Primary Care
Desert Rose

2016: 
Freedom Business Alliance
Seacoast Family Promise
Schenectady City Mission
I-Tec
Veterns Miracle Center

2017: 
Parent to Parent of NYS
South End Children’s Café
Water for Life Project administered by the Society of African Missions and Bishop Francois
Wellspring
EUMA/Erie United Methodist Alliance
 

If you would like to nominate an organization for our 2018 Awards, CLICK HERE.

Submissions are due by August 25th, and the Awards Event will take place on September 25th!

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Thank you in advance for sharing your nominations and charitable experiences.  We enjoy learning more about the many organizations that exist around the world year after year.  We look forward to working together with you on this annual giving project.
 

"Vodka & Espresso"

We recently attended the Pershing INSITE conference in Orlando Florida, where we had the opportunity to hear from some of the top strategists and economists in the world.  One of the best speakers was the Chief Strategist for JP Morgan, Dr. David Kelly.  He described the current markets using the illustration of “Vodka & Espresso”. 

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What did he mean by this? He relayed a story about some friends from Sweden who would always amaze him with how much espresso they consume during the day after a night of consuming an equally astounding amount of vodka at night.  In this analogy, the espresso is a stimulant, and the vodka is a sedative.  In the current market, he views the ‘stimulants’ as tax cuts, very strong corporate earnings and consumer strength, which all act as positive catalysts for continued growth in the stock market.  The trouble in the short term is the sedative (the vodka).  Negative factors such as tariffs, the threat of trade wars, the threat of rising interest rates and Euro-skepticism from large European countries like Italy and Spain are the dark clouds that are currently counteracting the positive stimulants in the market. 

2018 has been a year-long war between scary policy/political headlines (vodka) and strong market & economic fundamentals (espresso).  The markets have struggled to gain any momentum due to these opposing forces.  We still expect that over the next 6 months, the positive should overwhelm the negative and the market will trend upwards, but in the near-term, volatility looks set to continue until we find some resolution and clarity to some of the biggest issues.

Time will tell how this all plays out, but the reason why we need to take notice of trade negotiations is that if trade worries begin to hurt U.S. corporate earnings, then one of the most important drivers behind this stock market rally will begin to deteriorate.  This would not be good.  We remain comfortable with where your portfolio is positioned.  At the beginning of 2017, we took a fairly defensive position, in anticipation of higher volatility.  So far this year, this has proven to be a prudent approach.  We will continue to monitor these market developments and communicate any changes that we decide to implement.

Sources:

www.sevensreport.com

https://www.linkedin.com/pulse/vodka-espresso-david-kelly/ 

SSA employees asleep at the wheel when advising on widows’ benefits

Employees of the Social Security Administration have been asleep at the wheel when advising widows and widowers of the enhanced benefits that come with delaying claims to full retirement age, according to a report from the agency’s Inspector General.

According to the report, an estimated 11,123 beneficiaries were eligible for higher benefits had they delayed claims until age 70.

The misinformed filings resulted in about $131.8 million in underpayments to beneficiaries age 70 and older, and another $9.8 million in annual payments for those under age 70.

“SSA policy states its employees must explain the advantages and disadvantages of filing an application and the filing considerations so the claimant can make an informed filing decision,” the IG’s report says.

The extra funds overlooked in survivor benefits can mean the difference between living in poverty and relative comfort for many...

But the agency’s employees did not meet those obligations. “We did not find any evidence in the agency’s automated system to support the claimant’s decision to elect to file for retirement benefits, as required,” the report added.

The report also found that SSA did not have controls in place to alert employees as to when delaying benefits was in applicants’ best interest.

The findings in the report were based on a sample of 50 beneficiaries, 82% (41 individuals) of whom were eligible for a higher monthly benefit had they delayed claiming the retirement portion of their benefits until after age 70.

For the seven beneficiaries under age 70 that inadvisably claimed early in the SSA’s sample, the loss in benefits will be substantial. Upon reaching age 70, the average loss in benefits will be $5,185 annually.

When widows or widowers are entitled to benefits that exceed their individual retirement benefits, they have the option of delaying filing for the retirement portion of their benefits until age 70 in order to receive a higher monthly benefit. They can file limited claims that allow access to the widow benefit before age 70.

In one example, a beneficiary was paid retirement and widow’s benefits after filing an application in January 2011, six months before her 66th birthday.

From August 2015, when she turned 70, to September 2017, she was paid total benefits of $39,708. Had she delayed her retirement benefit until age 70, she would have been entitled to another $13,000 in benefits during that period.

“We did not find any evidence that SSA employees informed the widow about her option to delay her retirement application up to age 70 to increase her retirement benefits,” the report says.

The decision when to file for benefits belongs solely to claimants, the report notes. But SSA policy requires employees to electronically document when unfavorable filing decisions are made.

The IG recommends that the agency “take action” regarding the 41 beneficiaries in the sample that received lower benefits due to inaction from agency employees, though it did not say whether that action would include repaying benefits that were lost.

The office also recommends reviewing the remaining 13,514 beneficiaries that are potentially impacted from early filings, and exploring new controls to assure beneficiaries are informed of the option to delay retirement portions of benefits.

Source: www.benefitspro.com