WEEKLY UPDATE – November 26, 2018
Last week was a tough one for markets. The S&P 500 dropped 3.79% and experienced its worst results during a Thanksgiving week since 1939. While the index officially entered correction territory on Friday, it closed 10.2% below its most recent record high. Meanwhile, the Dow and NASDAQ continued the downward trend, losing 4.44%, and 4.26%, respectively. International stocks in the MSCI EAFE also declined, posting a 1.12% loss.
Reading these results may feel quite unpleasant and elicit concerns about what is ahead. As is often the case, the story behind the numbers can help us understand the complexity and what this performance means.
Why did stocks drop?
Plummeting oil prices were one of the biggest drivers behind the market’s losses, as investors worried that too much oil is available. These concerns have contributed to oil experiencing seven weeks of losses in a row and dropping more than 20% so far this month.
While oil was a key focus last week, many other details were also on investors’ minds. Major tech companies continued to struggle and posted sizable losses for the week. In addition, the markets still don’t know how the Brexit deal, political challenges in Europe, and ongoing trade tension will all work out.
Examined together, these challenges can create questions about the strength of global growth.
Will the market losses continue?
No one can predict the future, but a few data points and perspectives can help deepen understanding of the current environment. We believe the following two details are important for you to know:
1. Trading was light last week: The days before and after Thanksgiving had trading volume that was much lighter than normal, which often happens during this time period. This lower volume can exacerbate pricing trends, such as the declines we saw with oil. As a result, Friday’s performance may be less significant than it seems on the surface.
2. Black Friday shopping was strong: Brick-and-mortar stores had people lined up for discounted buys, and online purchases were 28.6% higher than in 2017. The holiday season is very important for retailers, and these initial results indicate consumer spending may remain strong through year’s end.
In the coming weeks, we will gain a clearer understanding of many market influences. President Trump and Chinese President Xi are scheduled to meet this week at the G20 summit to discuss trade. Right now, the markets may be assuming these talks won’t solve the trade tension and that an economic slowdown could be ahead. Investors may also doubt whether oil-producing countries can slow production fast enough to counter reduced demand.
Other experts believe we are experiencing a disconnect between what investors are feeling and what is truly happening in the economy. As a result, a so-called “Santa Claus” rally could occur as consumer spending continues during the holiday season.
But these perspectives are opinions, not a crystal ball. No one can say for sure how these complex scenarios will play out. Rather than rely on guesswork or headlines, we’ll continue to look for clear trends and insight that support your long-term goals. If you have questions or want to talk about your current investments and strategy, we are here for you.
Tuesday: Consumer Confidence, FHFA House Price Index
Wednesday: GDP, New Home Sales
Thursday: Pending Home Sales Index, Jobless Claims
Notes: All index returns (except S&P 500) exclude reinvested dividends, and the 5- year and 10-year returns are annualized. The total returns for the S&P 500 assume reinvestment of dividends on the last day of the month. This may account for differences between the index returns published on Morningstar.com and the index returns published elsewhere. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
QUOTE OF THE WEEK
RECIPE OF THE WEEK
Five-Spice Beef Stew
2 pounds boneless beef bottom round, trimmed and cut into 2-inch chunks
2 tablespoons canola or vegetable oil
4 cups low-sodium beef broth
4 medium shallots, quartered
3 cloves garlic, finely chopped
1 2-inch piece ginger, finely chopped
1 teaspoon Chinese five-spice powder
3 star anise pods
1 small cinnamon stick
2 tablespoons tomato paste
12 ounces medium carrots (about 3), peeled and cut into 1-inch pieces
12 ounces medium parsnips (about 3), peeled and cut into 1-inch pieces
2 small purple-topped turnips, cut into 1-inch pieces
1 (15-ounce) can crushed tomatoes
1 large bunch spinach, thick stems discarded
2 tablespoons fish sauce
1 tablespoon lime juice
Cilantro and thinly sliced red chile, for topping
1. Preheat the oven to 325°F.
2. Season the beef with a ½ teaspoon each of salt and pepper.
3. In a large, thick-walled cooking pot (Dutch oven), heat 1 tablespoon oil on medium heat.
4. Cook the beef in batches, 6-8 minutes, until browned. Then put in a bowl.
5. Mix ½ cup broth into the pot, scraping out browned bits, 1 minute. Pour juices into the bowl with the beef.
6. Turn down the heat to medium. Add 1 tablespoon oil to the pot with the shallots. Cook while occasionally stirring, until it is golden brown, 3-4 minutes.
7. Stir in garlic, ginger, five-spice powder, star anise, and cinnamon. Cook, 2 minutes.
8. Stir in tomato paste. Cook, 1 minute.
9. Put the beef and the juices in the pot with carrots, parsnips, turnips, tomatoes, and the rest of the broth (3½ cups). Boil then cover; bake until the beef is tender, 1½-2 hours.
10. Take out of the oven. Throw away the star anise and cinnamon. Mix in spinach, fish sauce, and lime juice.
11. Top with cilantro and chile. Serve.
Recipe adapted from Good Housekeeping
How Does Depreciation Deductions Impact Farmers?*
The Tax Cuts and Jobs Act changed how farmers and ranchers can deduct farming equipment for depreciation.
Depreciation deductions allow taxpaying farmers to recoup some of the costs for the use of their property and equipment.
Here are some of the changes to the tax code:
* This information is not intended to be a substitute for specific individualized tax advice. We suggest you discuss your specific tax issues with a qualified tax advisor.
Looking for Smooth Fairway Woods?
As an amateur, your struggle is not unique; it is common. However, most of your problem may lie in your head. You’re thinking about it incorrectly.So, what’s the problem, and how can you fix it?
First, you just don’t practice the fairway shot. You may practice tee shots or putts. But the fairway shot is so unpredictable.
That lack of experience and relative unfamiliarity can put you in an unstable and stressful position, which leads to overthinking the shot or trying too hard.
Landing your ball on the green requires making solid, center-face contact. Swinging full and hard to produce loft doesn’t accomplish your objective.
Relax. Swing your club easy while maintaining a smooth pace. Don’t make adjustments during the swing hoping to get ball lift. Deliberate moves in your swing usually lead to the opposite effect, which sends your ball rolling or bouncing rather than flying home.
In a nutshell, the secret to successful fairway shots is to maintain a smooth swing and a steady posture. Mentally, imagine the ball merely getting in the way of a beautiful, graceful swing. You’re swinging through the ball; you’re not trying to hit it.
Tip adapted from GolfDigest 
No Time for Working Out? Here’s How to Make Time
Busy. Busy. Busy. And no time to work out.
You know exercise is good for you, but your schedule is packed. You simply can’t find the time to do it.
There’s hope. Fitting exercise into your busy schedule is a little easier than you might think.
First up, exercise’s little secret: A short burst of exercise can deliver big dividends. (A warning: If you’re a man over 45, a woman over 55, or have health problems, consult a doctor first before proceeding on an exercise program.)
Here are some easy exercises to get you started:
You can do other simple exercises to get in shape. Make sure you maintain proper form and fluid motion.
Tips adapted from WebMD
Stop Your Cat from Killing Birds
It may seem like a throwback to ancient days in the wild, but domestic cats killing birds is a bigger problem than most of us may realize.
According to National Wildlife surveys, free-ranging household cats are killing nearly 4 billion birds and up to 22 billion mammals per year in the United States.
While the habit may seem to fit naturally into the ecological cycle, domestic cats acting on their instincts are having a negative impact on the environment. In fact, “killer” cats are leading to the potential extinction of several bird species and small mammals.
Keeping cats indoors may help resolve the problem on several fronts: It helps protect wildlife and is better for the cats. Outdoor cats are subject to predators and disease as well.
Here are some tips for a happy and healthy cat:
• Make a bird-viewing station for your cat.
• You can hide treats or purchase a cat puzzle to make it more challenging for your cats to get them.
• Get your cat a buddy. Two cats can keep each other busy or active.
• Catnip may help keep your cat happy and active.
• Indoor cat trees enable your cats to climb.
• Spaying and neutering your cats can calm their wanderlust.
Tip adapted from EarthShare
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The S&P U.S. Investment Grade Corporate Bond Index contains U.S.- and foreign-issued investment-grade corporate bonds denominated in U.S. dollars.
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The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce 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.
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