WrapManager's Wealth Management Blog
When life changes, we can help you thoughtfully respond.

BlackRock Checks-In on European Risk & The Week in Review

Posted by WrapManager's Investment Policy Committee

September 27, 2018

A Check-in on European Risk

Fears of a fiscal showdown between Italy’s new government and the European Union (EU) have roiled Italian assets this year – and renewed concerns about EU cohesion. How worried are we? We see a limited risk of near-term flare-ups but are skeptical about the Italian government’s commitment to fiscal discipline and Europe’s ability to cope with the next downturn. We see better risk-return tradeoffs in non-EU assets.

Italian assets have taken a hit this year. The selloff was sparked by fears that Italy’s populist government would breach the EU’s key budget deficit limit of 3% of gross domestic product (GDP), as the two major parties in the new governing coalition had vowed to cut taxes and boost welfare spending in their campaign. Italian 10-year government bond yields spiked after the March election, while local stocks fell. See the chart above. Italian assets have recouped some losses recently, only after Rome repeatedly assured it would respect EU rules in its soon-to-be released budget. We see scope for a further recovery in Italian asset prices, but do not see them returning to pre-election levels anytime soon. Why? A number of structural factors are weighing down both Italian and European assets. This helps explain why European stocks have underperformed other global developed markets in 2018.

BlackRock's Budget Base Case

[+] Read More

Blackrock Inc market perspective Money Manager Commentary

Lord Abbett Shares Reminders on October Deadlines for Retirement Planning

September 20, 2018
If you miss or ignore any of these important, applicable dates, you could hurt your retirement finances. As summer comes to an end, don’t forget that October ushers in some critical deadlines—some of which carry penalties. To learn more about these deadlines and the dates to put on your calendar, read on. Also note that while this is not IRA-specific, October 15 is generally the last day to file an individual income tax return that’s on extension. October 1—Simple IRA Establishment This is the last date in which an employer can establish a SIMPLE IRA plan, effective for 2018. Those plans established after October 1 would not be effective until January 1, 2019, at the earliest. Notably, an exception applies for a newly established business. If you’re a new employer that started your business after October 1, you can establish a SIMPLE IRA plan for the plan year by the end of the same calendar year as soon as administratively feasible after your business came into existence. [+] Read More

Nuveen Sees Economic Growth Picking Up, Believes It Should Help Stock Prices

September 13, 2018
Trade issues may continue to cause trouble but shouldn’t derail the bull market or end the economic expansion. Investor sentiment was mixed last week. Negatives included concerns about market liquidity, sparked by the rising value of the U.S. dollar and fears of contagion from some emerging markets. Ongoing trade issues also posed a general concern, particularly fears surrounding a potential new round of U.S./Chinese tariffs. On the positive side, investors focused on strong U.S. economic data that pointed to accelerating growth. The negatives won in the end, as the S&P 500 Index fell 1% for the week, after rising during eight of the nine previous trading weeks. Liquidity Concerns Appear Overstated Some investors are growing more concerned about shrinking liquidity as the Federal Reserve raises rates and shrinks its balance sheet, the value of the dollar climbs and select emerging markets such as Turkey and Argentina experience currency crises. Of all of these factors, we are most concerned about the rising dollar. The increase is not overly problematic by itself, but we would be more worried if interest rates were higher and rising more quickly and/or if economic growth were decelerating. On balance, we recognize that market liquidity is growing more constrained and the current economic cycle and equity bull market are in their later stages. But we believe such concerns are overwrought. The global banking system remains healthy and global monetary policy is still relatively easy, which suggests that a liquidity squeeze isn’t in the cards. [+] Read More

Nuveen Sees Investors Looking Past Risks to Bid Stocks to New Highs

August 30, 2018
We see threats to equities, but we don't believe this bull market is over. Last week featured multiple negative political headlines for President Donald Trump that questioned the stability of his administration. The news was also dominated by signs of increased trade tensions between the U.S. and China, as well as statements from Federal Reserve Chair Jerome Powell that interest rate hikes were likely to continue. Despite the noise, however, investors continued moving money into stocks, causing the current bull market to become the longest in history and the S&P 500 Index to reach new record highs by the end of last week. It is natural to ask what risks will likely cause the bull market to end, as equity prices again reach new highs and the roller coaster action that has dominated markets since February appears to be over (at least for now). Rising protectionism appears to be the biggest theat. From a rational perspective, we think this risk should fade since trade restrictions are ultimately a lose-lose proposition. And the United States appears more willing to negotiate than President Trump’s tough rhetoric would indicate. Trade uncertainty remains a wildcard, but we still believe that an all-out trade war is unlikely. [+] Read More

JP Morgan Releases New Guide to the Markets for 3Q 2018

August 16, 2018
Reviewing the Guide to the Markets to Understand the Current Investment Environment J.P. Morgan's Guide to the Markets for the third quarter of 2018 is now available for your review. Inside you'll find deeper insight into the current investment environment and what the investment team at JP Morgan is keeping an eye on right now. On page 19 you'll see two charts (Real GDP & Components of GDP) that show how the economic expansion is continuing at a slow but steady pace. On page 25 you'll see a chart that displays how unemployment continues to fall, which JP Morgan believes should drive up wages. And on page 7 you'll see three charts that show how although earnings headwinds should be behind us, future growth may be muted. [+] Read More

Dorsey Wright Releases Manager Insights for Q2 2018 Review

August 9, 2018
U.S. equities continued to rise during the second quarter. Both large cap stocks (S&P 500) and small cap stocks (Russell 2000) finished the quarter in positive territory. The same can’t be said for International stocks though. There have been quite a few head winds for international equities, and that caused both developed and emerging markets stocks to perform poorly this quarter. Heading in to the start of the year, the U.S. Dollar was in an established downtrend and that was really helping push international equity prices higher. That changed in late April, and the U.S. Dollar spent May and June in a strong rally that really had a negative impact on foreign equities. Both developed markets (EAFE) and emerging markets finished down for the quarter. We are also seeing a big rotation our of Latin America, which is one of the areas that was such a strong performer last year. While this is unfolding you should expect the character of our international holdings to change and be reallocated in areas that are holding up better. A declining U.S. Dollar isn’t a prerequisite for international stocks to do well, but when there is a sharp reversal like we saw this quarter it takes everyone time to adapt to the changes. [+] Read More

Nuveen Reports Fundamentals Helping Stock Prices Push Higher

August 2, 2018
U.S. Indices Are Mixed, While Corporate Earnings Draw Headlines Investors focused last week on a moderate easing of trade tensions and a solid second quarter gross domestic product report. Corporate earnings also drew headlines, particularly troubled results that ravaged Facebook’s stock price. U.S. indices were mixed, although the S&P 500 Index posted a fourth weekly gain, rising 0.6%. The energy, industrials and financial sectors were the best-performing areas, while technology and consumer discretionary came under pressure. Highlights Strong economic growth and stellar corporate earnings continue to provide reasons for investors to bid stock prices higher. Trade tensions eased a bit last week, but uncertainty over policy is keeping financial markets in check. We expect the equity market to maintain its current trading range until trade tensions ease. [+] Read More

BlackRock Reports on China's Currency, Domestic GDP Data, and the Fed's View of the Economy

July 26, 2018
Should China's Currency Worry Markets? A slide in the Chinese yuan is sparking fears of a sharper devaluation that could rattle global markets. Are the worries justified? We see the yuan depreciating moderately in response to slower growth, financial deleveraging and escalating trade tensions. We expect China to rely mostly on fiscal and monetary tools, rather than the currency, to manage any growth slowdown in the second half. The Chinese currency posted its biggest monthly fall against the U.S. dollar on record in June - just as the trade tussle between China and the U.S. heated up. The yuan has slid 4% so far this year, with the fall accelerating since mid-June when U.S. President Donald Trump announced a 25% tariff on $50 billion of Chinese imports. See the blue line in the chart above. We do not see China resorting to a 2015-style devaluation to cushion the blow. Back then, a lack of market confidence in China’s policy framework contributed to capital flight (see the green bars), spooking global markets. Today, China has stricter capital controls in place – and improved coordination between policymakers. We believe this should give the government confidence to allow the yuan to gradually slide lower. [+] Read More

Main Management's Q2 2018 Market Recap

July 19, 2018
Volatility Softening; Rate Hikes The second quarter of 2018 saw a marked decline in volatility from the first quarter. The prevailing feeling in the US equity markets was decidedly more positive. On the whole, the economic picture in the United States improved from the first quarter. Inflation is nearing the Fed’s target of 2% for the Core Personal Consumption Expenditures reading. The manufacturing PMI readings in the U.S. show that the sector continues to expand. The labor market also remains very tight but wage growth remains below 3%. The unemployment rate fell to 3.8% in May, the lowest level in 18 years and the non-farm payrolls have averaged a gain of 207,000 jobs so far this year. On the back of this strong data, estimates for second quarter GDP range from 3-5%, up strongly from the 2.2% estimated for the first quarter. The data is indicating that first quarter was likely more of an anomaly than a trend. The Federal Open Market Committee raised rates for a 7th time in June and conveyed a more hawkish view which indicates that 2 more rate hikes are likely in store for the rest of 2018. [+] Read More

J.P. Morgan Shares Market Insights for Q3 2018

July 12, 2018
J.P. Morgan Releases the 3Q 2018 Guide to the Markets JP Morgan's Guide to the Markets for the third quarter of 2018 is now available for review. Comprised of 64 in-depth pages of charts that examine a variety of financial and economic topics, the guide illustrates: Sources of earnings per share growth Economic growth and the composition of GDP Fixed income yields and returns Global economic and earnings growth Global commercial real estate, and Local investing and global opportunities [+] Read More