Sand butler, at your service

The markets finished lower as investors weighed disappointing earnings and soft economic data that calls the timing of the Fed’s rate hike into question.

The Dow lost 55 points, with 15 of its 30 components advancing; the S&P 500 Index dropped 4; and the Nasdaq was down 0.5. Advancers led decliners by three to two on the NYSE and by seven to six on the Nasdaq. Treasury prices strengthened. Gold futures gained $6.40 to close at $1,095.10 an ounce. Crude oil fell $1.40 to settle at $47.12 a barrel.

For the week, the Dow added 0.73%, the S&P 500 Index climbed 1.21%, and the Nasdaq rose 0.78%.

In earnings news:

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Women, wealth, and your practice

Woman meeting with a financial advisorEither by choice or necessity, women are going to control the wealth going forward. Meg Bavaro, CIMA®, sales manager for Wells Fargo Funds Distributor, LLC, discusses best practices for attracting and serving women clients with Wayne Badorf, CFP®, CFS®, and Jon Lagerstedt.

Listen to the podcast (new window).

Wayne Badorf: Joining us today is Meg Bavaro. Meg is a sales manager and oversees a team of regional directors dedicated to forming strategic business partnerships with the financial advisors that they serve. Meg, welcome to the program.

Meg Bavaro: Thank you very much, happy to be here.

Wayne: Meg, why do you feel that this particular topic is so important for every advisor to pay attention to?

Meg: If you look at the personal wealth that’s controlled by women, which is over 51%, and then if you look at the U.S. population of women, which is over 54%, it’s either going to happen by choice or necessity, that women are going to control the wealth going forward.

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New study: Why 69% dislike “Download our app” pages

Stocks ended mixed as investors weighed modest second-quarter GDP growth and a new batch of earnings reports. The Dow slipped 5 points, with 16 of its 30 components advancing. The S&P 500 Index added less than a point, and the Nasdaq gained 17. Advancers held a slight edge over decliners on the NYSE and led by 10 to 9 on the Nasdaq. The prices of Treasuries strengthened. Gold futures slipped $4.60 to close at $1,088.70 an ounce. The price of crude oil fell 27 cents, settling at $48.52 a barrel.

In earnings news:

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The case for hedge fund strategies in a rising-rate environment

blog-reserveToday we have a guest post by Dr. Sudhir Krishnamurthi, Ronald van der Wouden, and Kenneth LaPlace from The Rock Creek Group, LP (Rock Creek). Dr. Krishnamurthi, Mr. van der Wouden, and Mr. LaPlace are portfolio managers of the Wells Fargo Advantage Alternative Strategies Fund.

As the Federal Reserve (Fed) begins to normalize monetary policy by raising interest rates, yields will rise and prices will decline. Historically, this equation has been positive for alternative investments and more challenging for some areas of fixed-income investments.

Rising yields and declining prices pose risks to fixed-income investments, especially those that are longer duration, as price moves inversely with yields, and price declines can often more than offset any increase from a higher coupon.

Conversely, hedge fund managers tend to hedge out their duration (interest-rate risk) and therefore can often limit a negative impact on performance when interest rates rise. While we have limited data in terms of rising-rate interest environments over the past two decades, every historical scenario we analyzed shows that hedge fund investments outperformed traditional fixed-income investments in past rising-rate environments.

The graph below shows the 10-year Treasury return over the past 20 years. The highlighted periods of rising yields for the U.S. Treasury indicate challenging environments for fixed-income investments. These periods often coincided with Fed rate increases or when there was anticipation of such increases.

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What’s driving stocks and bonds (podcast)

Chinese flag in front of an office buildingHere to help sort through the current stock and bond environment is John Manley, CFA, chief equity strategist, and Jim Kochan, chief fixed-income strategist, both with Wells Fargo Funds Management, LLC.

Listen to the podcast (new window).

So John, what factors are most influencing stocks right now?
John Manley: I think what is catching our attention is what’s going on in China. Obviously there’s a lot of market turmoil going on there. The markets have been boiling for a while. They’re still up year over year, which is actually kind of disturbing. But I must say that there’s a little bit of an offset here in the U.S. We looked at some of the sentiment numbers that are put out, and when you look at bullish sentiment in the U.S., it’s about as low as it’s been any time in the last three or four years. In fact you have to go back to years like 2012 and 1998 to see sentiment that was this concerned. So there are some disturbing things in the news, but I think the markets have reflected them to a certain degree.

Jim, your point of view?
Jim Kochan: Well, there are two things. John just mentioned one and that is the stock market in China because that seems to be feeding into the bond markets these past several days. And then the other major concern I suppose would be monetary policy, and we have a meeting of the Federal Open Market Committee (FOMC) this week. Nobody expects any decision on rates this week from the Fed, but there could be a hint or two that we might see something in September. This has had a rather dual effect on the bond market. On the one hand you have these events affecting the stock market; that’s created a rally in Treasuries and a selloff in high yield, and the concern about the FOMC seems to be a little bit on the back burner for now, but I wouldn’t be surprised if it becomes more important later this week and going forward.

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Windows 10 re-Starts

Microsoft has discovered proper posture involves looking at desktop, not tablet.

Microsoft has discovered proper posture involves looking at desktop, not tablet.

The Federal Open Market Committee left its interest rate and policies unchanged after its meeting today, but language in the statement indicated it was prepping for an interest-rate increase sooner rather than later.

The Dow rose 121 points, with 26 of its 30 components advancing; the S&P 500 Index gained 15; and the Nasdaq was 22 points higher. Advancers led decliners by eight to three on the NYSE and five to four on the Nasdaq. The prices of Treasuries weakened. Gold futures fell $3.60 to close at $1,092.60 an ounce, and the price of crude oil rose 81 cents to settle at $48.79 a barrel.

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FOMC paves the way for a rate hike, soon

There were few, but significant, changes to the Federal Open Market Committee’s policy statement. It reads as though the Federal Reserve (Fed) is close to waving the checkered flag on its full employment goal. This shouldn’t be too much of a surprise as Fed officials have been intimating that they think labor market slack is diminishing and will perhaps evaporate by the end of the year. Continue reading

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How Google uses free samples to nab cloud customers

Stocks rebounded as investors shifted their focus from China’s stock market struggles to U.S. companies’ positive earnings reports. Also on investors’ radars: this week’s Federal Reserve policy meeting, which wraps up tomorrow and could offer clues on when the Fed will raise rates.

The Dow jumped 189 points, with 27 of its 30 components gaining. The S&P 500 Index increased by 25 points, and the Nasdaq added 49. Advancers led decliners by five to two on the NYSE and by nine to five on the Nasdaq. The prices of Treasuries weakened. Gold futures slipped by 20 cents to close at $1,096.20 an ounce. The price of crude oil rose 59 cents, settling at $47.98 a barrel.

In earnings news:

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Investor sentiment doesn’t signal bear market—yet

Manley on the StreetThe past six months have been painful. They have been frustrating. But they have not been down. As we mentioned in an earlier blog, the S&P 500 Index actually has traded in a very narrow band since the beginning of February (around 5%), the smallest ambit I could find for that measure since at least 1950.

On the face of it, it’s not clear whether that is good or bad. Flat markets, after rising ones, can be omens of falling stock prices but not necessarily. It is true to say that all flat markets do not predict down markets, but all extended bear markets of the past 50 years have been preceded by flat markets. The technicians call the process rolling over, and we observers are left to contemplate the increased possibility of a downward move.

However, one measure of investor sentiment seems to say that we have already had that downward move, at least in spirit.

The American Association of Individual Investors (AAII) has been around for some time. Every week, for more than 25 years, it has polled its members to see if they are bullish, neutral, or bearish on the outlook for equities in the next six months. The current and historical data are available on the organization’s website.

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Driverless cars get people-less city

A solid durable-goods report in the U.S. was overshadowed by another clobbering of the Chinese stock market, and U.S. indexes closed lower.

The Dow fell 127 points, with 25 of its 30 components retreating; the S&P 500 Index declined 12; and the Nasdaq lost 48. Decliners led advancers by 8 to 3 on the NYSE and 12 to 5 on the Nasdaq. The prices of Treasuries strengthened. Gold futures gained $10.90 to close at $1,096.40 an ounce, and the price of crude oil fell 75 cents to settle at $47.39 a barrel.

In other business news:

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