Market Update: Feb 25th, 2020

Dear clients and friends,

The Last couple of days in the financial markets have certainly been interesting!  The major US indices are down about 6% over the last two days, putting them back to where they were in December.  The cause of the fall is fear over the coronavirus.

At first glance, this seems like a ridiculous reaction to a virus that has currently only infected 14 people in the United States.  Of those 14 people, 12 of them caught the disease in China and then travelled back to the US.  The other two people live with the people who brought it back from China.  There have been no deaths in caused by this virus in the United States.  I am sure you have seen the comparison to influenza which in the current flu season has infected over 30 million people in the US and killed tens of thousands in the last six months according to CDC data from February 15th.  So if that doesn’t concern us, why would a handful of cases of the coronavirus cause such a huge reaction in the stock market?

I see two possible answers.  The first answer is that it is purely an overreaction caused by media sensationalism.  If you recall back over the last ten years or so, you can recall other times that some disease from abroad was going to cause the end of the world according to the media.  Remember the bird flu, swine flu, SARS?  They all fizzled out and became relatively non-events, despite the fear that was generated at the time.  If that is the case, the markets should come to their senses very shortly.

The second answer to why the stock market is reacting so strongly is that people are panicking so much that even if the coronavirus has hit its peak and settles down from here, the economic consequences will be widespread.  Cities are shutting down, conferences are being cancelled, 13,000 flights per day are not happening because of this virus.  If you see a dozen cases of the flu, nothing happens, if you get a dozen cases of the coronavirus a city shuts down.  If governments continue to react this way, the economic impact could be astronomical.

Unfortunately, there is no way to know if governments and their people will continue to panic and shut things down at the first whiff of coronavirus.  I believe that it’s an overreaction, at least in first world countries and I doubt that this virus will end of being the plague that the media would have you believe.

In terms of your portfolios, I would advise a wait and see approach.  As I said, the markets have  lost a couple months of gains, so it’s certainly not something we should panic about right now.  We did a bit of selling in December to take profits.  We are not yet advising buying the dip as the wrong news could send the market lower.  We are waiting for a further decline before we plan on starting to buy.  If that never materializes, that is fine.  Keep in mind, we have brought your overall risk level down a bit as corporate profit growth slowed, so we are in a good position to buy if we do see a larger decline in the next few weeks or months.

As always if you have more questions or concerns, or want to talk about you particular situation, don’t hesitate to contact us.

Sincerely,

Alex Parrs

Ironwood Recap – Week of Feb 17th, 2020

Ironwood Market Recap

This was a bit of a disappointing week for the markets with both the Dow Jones and the S+P losing over one percent.  The 10 year Treasury bond fell to 1.47%, showing a rise in bond prices.

A decline in manufacturing caused by the coronavirus shutting down Chinese markets was the main cause of the decline.

Economically the numbers were a little weak this week, with the January PPI coming in much higher than expected, and housing starts and building permits both coming in lower than expected.  Hopefully the PPI settles back out, and the spike was likely caused by troubles with Chinese imports.

Next week, we get some real estate numbers such as the Case Schiller home price index and personal income and consumer spending which should give us a good read on confidence and inflation, two things we are watching closely.

~ Alex

Exposing the Hidden Caveats in High Dividend Investments.

Have you ever seen investments that sounded “too good to be true”…

…but your friend couldn’t stop raving about them?

We see it all the time.

Someone claiming they’re getting a 10 or 20% dividend, when that couldn’t be further from the truth.

Here’s the kind of the dividends you can actually expect in today’s economy.

Like always, if you’re facing retirement and need a second opinion learn  what makes us different.  We’ll audit your entire strategy and help you determine how to approach and execute your retirement income strategy.

And if you want a further dive into retirement income planning then check out our new training.

Ironwood Recap – Week of Feb 10th, 2020

Ironwood Market Recap

The markets had a second good week in a row with The S+P gaining about 1.5% and the Dow gaining about 1%.  The 10 year Treasury bond was little changed at 1.59%.  The coronavirus concerns seem to be fading a bit into the background as the issue seems to be mostly contained within China and there are few cases of it spreading in the US.

The January Consumer price index and CPI came in low, showing inflation is still being held at bay.  Retail sales for January were in line with expectations and consumer sentiment for Feb is higher than the previous period, all pointing to an economy that is chugging along nicely.

Next week we get some housing data and the PPI along with other leading economic indicators.

~ Alex

Exposing the Hidden Risks in Private REITS. Should you invest?

One of the biggest risks people take without knowing the risk is investing in Private REIT’s.
 
The attractions are easy to see…
 
…high payouts, glossy outlooks and low volatility.
 
But these investments come with HIGH risks and it’s time to expose them.

Like always, if you’re facing retirement and need a second opinion learn  what makes us different.  We’ll audit your entire strategy and help you determine how to approach and execute your retirement income strategy.

And if you want a further dive into retirement income planning then check out our new training.

Ironwood Recap – Week of Feb 3rd, 2020

Ironwood Market Recap

This was a very good week for the markets as they made up last week’s decline and then some.  Both the Dow and the S+P were up roughly 3% for the week, even with a disappointing Friday.  The yield on the 10 year Treasury rose 5 basis points to 1.58%.  The market mover this week seemed to be the slowing of the spread of the Coronavirus and hints of a possible treatment.

On an economic front, the January employment report was about 50% better than expected as was nonfarm payrolls.  Average hourly earnings and unit labor costs both grew at a slower than expected rate, keeping our hopes for low inflation alive.

Next week we get the Q4 household debt numbers as well as the January CPI and retail sales.  So far the economy looks like it’s in very good territory and hopefully that continues!

~ Alex

How much income can you withdraw out of your portfolio safely?

Need help figuring out which income percentage you can take in retirement? This video covers the main discussion points you’ll need to have in order to figure that out.

Like always, if you’re facing retirement and need a second opinion learn  what makes us different.  We’ll audit your entire strategy and help you determine how to approach and execute your retirement income strategy.

And if you want a further dive into retirement income planning then check out our new training.

Ironwood Recap – Week of Jan 27th, 2020

Ironwood Market Recap

This was a tough week for the markets, with both the S+P and the Dow losing over 2%. The ten year Treasury Bond yield fell to 1.52%, a drop of over 15 basis points for the week. The major news of the week was the potential lost economic output from the Coronavirus as many manufacturers and importers are having difficulty getting Chinese manufactured items. On a side note, Brexit happened, and no one really noticed. The Fed meeting did not significantly impact the market and there was no major policy change.

Economically, There were a few good surprises this week, with durable goods orders for December beating estimates handily. Pending home sales really disappointed, while Q4 GDP was higher than expected. Manufacturing in the Midwest slumped, which contributed to the Friday decline. This was likely due at least in part to Boeing. Earnings were mixed, with a couple bright spots such as Amazon.

Next week we start to see how the January economy went with January unemployment data coming out as well as some manufacturing data. Earnings season continues with several hundred companies expected to report next week.

~ Alex Parrs