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Financial Planning Association of Northeastern New York The Outlook for 2018 and 2019 (And Beyond) PowerPoint Presentation
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Financial Planning Association of Northeastern New York The Outlook for 2018 and 2019 (And Beyond)

Financial Planning Association of Northeastern New York The Outlook for 2018 and 2019 (And Beyond)

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Financial Planning Association of Northeastern New York The Outlook for 2018 and 2019 (And Beyond)

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  1. Financial Planning Association of Northeastern New York The Outlook for 2018 and 2019(And Beyond)

  2. APPROACH • IDENTIFY MEANINGFUL TRENDS IN FINANCIAL MARKETS • IDENTIFY MEANINGFUL TRENDS IN IMPORTANT MONETARY AND ECONOMIC VARIABLES • (ARE FINANCIAL MARKET TRENDS RATIONAL?)

  3. THE ANATOMY OF A CYCLE STOCK MARKET INTEREST RATES ECONOMY Source: Hugh Johnson Advisors (HJA)

  4. THE ANATOMY OF A MANIA (AND FINANCIAL CRISIS) STAGES • Investment • Speculation • Financial Distress • Revulsion

  5. “Believe me, we are in a big, fat, ugly bubble” Donald Trump September 26, 2016

  6. MANIA 2017: 1,403% 2015-2017: 4,243%

  7. SINCE ELECTION & EARLY AUGUST: S&P 500 UP 25.0% and 12.5% January 12: 2786 August 18: 2426 Source: Bloomberg News; Hugh Johnson Advisors

  8. SINCE ELECTION & EARLY AUGUST: BULL SECTORS OUTPERFORM BEAR SECTORS Source: Bloomberg News; Hugh Johnson Advisors. Bear Market Sectors Italicized

  9. MID-CAP AND SMALL-CAP STOCKS OUTPERFORM LARGE-CAP STOCKS Source: Bloomberg News; HJA

  10. LONGER-TERM INTEREST RATES HAVE INCREASED January 12: 2.55% September 8: 2.05% Source: Bloomberg News; Hugh Johnson Advisors

  11. QUALITY SPREADS HAVE NARROWED. INVESTORS HAVE BECOME MORE OPTIMISTIC. September 8: 2.22% January 12: 1.68% Source: Bloomberg News; Hugh Johnson Advisors

  12. QUALITY SPREADS HAVE NARROWED. INVESTORS HAVE BECOME MORE OPTIMISTIC. August 18: 4.03% January 12: 3.22% Source: Bloomberg News; Hugh Johnson Advisors

  13. The yield curve quantifies the probability of a recession starting 12 months from now. Getting Higher Source: Federal Reserve Bank of New York

  14. Compare the current recession probability with the recession probability at start of 2008. Source: Federal Reserve Bank of New York

  15. Important Monetary and Economic Variables The message of the financial markets is clear.Moreover, this message is confirmed by important monetary and economic numbers.

  16. Federal Reserve policy remains accommodative….but • The “real” federal funds rate, a measure of Federal Reserve interest rate policy, is -.8% and remains low. • Since August the Fed has reduced the level of “excess reserves” from $2.7 trillion to $2.1 or by $579 billion. The level of excess reserves ($2.1 trillion) remains high.

  17. As a result, total bank lending continues to expand, but has slowed. January 2016: 8.1% December 2017: 3.7% Source: Federal Reserve

  18. As a result the growth rate of the money supply has slowed. October 2016: 7.6% December 2017: 4.9% Source: Federal Reserve

  19. As a result, domestic liquidity conditions remain positive, but have “deteriorated”. This is a “meaningful” concern. September 2016: 4.6% December 2017: 0.5% Source: Bureau of Economic Analysis; Federal Reserve

  20. Leading Indicators for the economy continue to rise. Index has risen 15 successive months Source: Conference Board

  21. Real Gross Domestic Product Source: Blue Chip Economic Indicators; HJA

  22. The Top 10 in 1990 and 2016 Source: Bloomberg News

  23. Comments from Martin Feldstein After studying the methods used by the US government statistical agencies as well as extensive previous academic literature on this subject, I have concluded that, despite the various improvements to statistical methods that have been made through the years, the official data understate the changes of real output and productivity. Martin Feldstein George F. Baker Professor of Economics Harvard University Spring, 2017

  24. Employment Source: Bloomberg Monthly Survey; HJA

  25. The Unemployment Rate Source: Blue Chip Economic Indicators; HJA

  26. Hourly Earnings Source: Bureau of Labor Statistics; HJA

  27. Consumer Spending Source: Blue Chip Economic Indicators; HJA

  28. Consumer Inflation Source: Blue Chip Economic Indicators; HJA

  29. Federal Reserve Policy (Federal Funds Rate) (Current Level 1.125%) Source: Bloomberg Monthly Survey (mid point); HJA (mid point)

  30. Short-Term Interest Rates (Current Level 1.61%) Source: Bloomberg Monthly Survey; HJA

  31. Longer Term Interest Rates (Current Level 2.55%) Source: Bloomberg Monthly Survey; HJA

  32. Tax Reform (Revenue Declines; Corporate Profits Increases)

  33. Consensus Forecast for S&P 500 Operating Earnings Rising

  34. Forecast for S&P 500 Rises as Forecast for Earnings Rises

  35. The Good News and the Not-So-Good News

  36. 2018-2019 Returns

  37. Housing

  38. The Stage of Speculation Overvaluation Widespread Optimism Percentage of Small Investors Bullish 33.43%. Median 38.5%; 1 Standard Deviation 44.18% Leverage Margin Debt (Y/Y%) 17.7% Median 13.0%; 1 Standard Deviation 35.3%

  39. Oil Source: BP Statistical Review; HJA

  40. New York State will track the National Economy New York State US Source: Bureau of Labor Statistics; HJA

  41. The New York State will be 3rd among 7 New England states Source: Bureau of Labor Statistics; HJA

  42. Albany-Schenectady-Troy will be 6th among 13 Metropolitan Statistical Areas (Glens Falls 2nd) Source: Bureau of Labor Statistics; Albany-Schenectady-Troy MSA includes Albany, Montgomery, Rennselaer, Saratoga, Schenectady, Schoharie Counties

  43. Financial Planning Association of Northeastern New York The Outlook for 2018 and 2019(And Beyond)