As people around the world wonder if innovation at Apple stopped with Steve Jobs, we wanted to share with you a snapshot of the genius’s life.
Source: Funders and Founders
How Bill Gates Started – Infographic
Bill Gates’s father was a lawyer. A very successful one. His mother a teacher. Reading business magazines in middle school, Bill Jr. had a different dream – to open a company. You could say that’s how he started – with a childish dream. Many kids have dreams, though. How was he different?
Source: Funders and Founders
7 Tips On How To Be More Productive from Elon Musk
Elon Musk gets a lot done.
The 46-year-old entrepreneur and CEO is revolutionizing the spaceflight industry with SpaceX, transforming the world of the electric car at Tesla, and pushing neuroscience and transportation forward at Neuralink and the Boring Company.
As SpaceX COO Gwynne Shotwell said at the 2018 TED Conference, Musk’s goals are a lot to keep up with.
“When Elon says something, you have to pause and not blurt out ‘Well, that’s impossible,'” she said. “You zip it, you think about it, and you find ways to get it done.”
Recently, Musk reportedly announced to Tesla employees that he wants to adopt a 24/7 shift schedule to get production for Tesla’s Model 3 electric car on track. In an email obtained by Jalopnik, Musk explained a number of changes in the works for Tesla.
He’s asking for quite a lot, so at the end of that email, he offered employees a list of his own productivity recommendations. From those tips, it’s clear that Musk is clearly not a fan of meetings, bureaucracy, hierarchy, or any system that impedes immediate communication. He prefers people apply common sense to the task at hand.
He also told employees that if they had any ideas for making work at Tesla better and more efficient, they should let him know.
Here are the seven productivity tips Musk offered in the letter, in his own words.
1. Large-format meetings waste people’s time.
“Excessive meetings are the blight of big companies and almost always get worse over time. Please get [rid] of all large meetings, unless you’re certain they are providing value to the whole audience, in which case keep them very short.”
2. Meetings should be infrequent unless a matter is urgent.
“Also get rid of frequent meetings, unless you are dealing with an extremely urgent matter. Meeting frequency should drop rapidly once the urgent matter is resolved.”
3. If you don’t need to be in a meeting, leave.
“Walk out of a meeting or drop off a call as soon as it is obvious you aren’t adding value. It is not rude to leave, it is rude to make someone stay and waste their time.”
4. Avoid confusing jargon.
“Don’t use acronyms or nonsense words for objects, software, or processes at Tesla. In general, anything that requires an explanation inhibits communication. We don’t want people to have to memorize a glossary just to function at Tesla.”
5. Don’t let hierarchical structures make things less efficient.
“Communication should travel via the shortest path necessary to get the job done, not through the ‘chain of command’. Any manager who attempts to enforce chain of command communication will soon find themselves working elsewhere.”
6. If you need to get in touch with someone, do so directly.
“A major source of issues is poor communication between depts. The way to solve this is allow free flow of information between all levels. If, in order to get something done between depts, an individual contributor has to talk to their manager, who talks to a director, who talks to a VP, who talks to another VP, who talks to a director, who talks to a manager, who talks to someone doing the actual work, then super dumb things will happen. It must be ok for people to talk directly and just make the right thing happen.”
7. Don’t waste time following silly rules.
“In general, always pick common sense as your guide. If following a ‘company rule’ is obviously ridiculous in a particular situation, such that it would make for a great Dilbert cartoon, then the rule should change.”
Written By: Kevin Loria
Source: Business Insider
How Mark Zuckerberg Started – Infographic
At the young age of 10, Mark was already bored with school. His father noticed and introduced him to the computer. Together they wrote a program that connected the computer at home with the computer at his father’s office. And the rest, as they say, is history.
Source: Funders and Founders
Market Update: June 26, 2017
Last Week’s Market Activity
- After closing once again at record levels last Monday, the Dow and the S&P 500 Index battled a wave of sector rotation for the balance of the week, finishing higher by the slightest of margins.
- It was the 2nd consecutive weekly gain for the S&P 500, as increases in healthcare (+3.7%) and technology (+2.3%) offset weakness in the energy (-2.9%), financials (-1.8%), and utilities (-1.8%) sectors. Positive news on drug development and potential changes to the Affordable Care Act drove healthcare higher, while continued weakness in WTI crude oil ($43.00; -4.0% for the week) pressured the energy sector.
- The yield on the 10-year Treasury fell to 2.14%, its second lowest close of 2017, pressuring the U.S. dollar, which edged down -0.2% on Friday.
Overnight & This Morning
- Asian stocks rose for a third day, led by technology companies. The MSCI Asia Pacific Index rose +2.0% and equity markets in China and Hong Kong had gains approaching 1.0%. In Japan, The Nikkei managed to climb despite a report from the Bank of International Settlements warning of dollar denominated risk on bank balance sheets.
- European stocks rebounded from three weeks of losses. German business confidence hit a record in June, but Italy had to bail out two banks totaling $19 billion.
- Commodities – WTI crude oil rose, trimming its biggest monthly decline in one year. Gold extended its decline to the lowest level in almost six weeks.
- U.S. stock futures are up slightly as the dollar climbed and Treasury yields jumped after several Federal Reserve officials suggested further rate increases.
Key Insights
- Mixed signals. The financial markets are sending mixed signals, trading within a tight range in an extended expansion. The debate now centers on if the U.S. economy can continue to exhibit growth in output and profits (signal from stocks) or it may slip into a recession (signal from Treasuries). Our view is that though the growth rate in manufacturing may have peaked, we expect Purchasing Manager Indexes (PMI) to remain in expansion territory. While auto sales may be down ~5.0% from last year, the rise in household formation suggests pent up demand remains in the housing market. Finally, with solid employment levels and improving wages, consumption is well-positioned to support growth and any clarity on regulation, infrastructure, and tax plans could provide an additional boost.
- Brexit. Friday marked the 1st anniversary of the controversial Brexit vote, which called for the U.K. to leave the European Union (EU). To mark the occasion, the pound sterling rose +0.2% to $1.27, paring its weekly decline, and the FTSE 100 Index fell -0.2% on Friday. While the U.K. is the largest importer of the EU countries, the FTSE 100 is largely comprised of exporters, with 2/3rds of its revenue generated overseas. This helps explain why the approximately 15.0% drop in the pound sterling was accompanied by a rise of a similar magnitude (+17.0%) in the FTSE 100 over the past year.
Macro Notes
- Technicals continue to look strong. One of the strongest aspects of this equity bull market has been that the technicals have and continue to support higher prices. This week we take a closer look at the global bull market and why broad participation suggests it still has legs.
- 41 weeks and counting. The S&P 500 has now gone 41 straight weeks without closing lower by 2% or more, but that’s not even the most surprising point.
Monday
- Durable Goods Orders (May)
- Chicago Fed National Activity Report (May)
- Cap Goods Shipments and Orders (May)
- Dallas Fed Mfg. Report (Jun)
- ECB: Draghi
- BOE: Carney
- BOJ: Kuroda
Tuesday
- Conference Board Consumer Confidence (Jun)
- Richmond Fed Mfg. Report (Jun)
- Italy: Mfg. & Consumer Confidence
Wednesday
- Advance Report on Goods Trade Balance (May)
- Wholesale Inventories (May)
- Pending Home Sales (May)
- France: Consumer Confidence (Jun)
- Eurozone: Money Supply (May)
- Itally: PPI & CPI (Jun)
- Bank of Canada: Poloz
- Japan: Retail Sales (May)
Thursday
- GDP (Q1)
- Germany: CPI (Jun)
- Eurozone: Consumer Confidence (Jun)
- BOJ: Harada
- Japan: National CPI (May)
- Japan: Industrial Production (May)
- China: Mfg. & Non-Mfg. PMI (Jun)
Friday
- Personal Income (May)
- Consumer Spending (May)
- Chicago PMI (May)
- Core Inflation (May)
- UK: GDP (Q1)
- France: CPI (Jun)
- Germany: Unemployment Change (Jun)
- Eurozone: CPI (Jun)
- Canada: GDP (Apr)
- Japan: Vehicle Production (May)
- Japan: Housing Starts (May)
- Japan: Construction Orders (May)
Important Disclosures: Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.
Market Update: June 19, 2017
Last Week’s Market Activity
- Stocks little changed Friday. Intra-market moves were in focus, particularly ~3% difference between energy (+1.7%) and consumer staples (-1.0%)
- Consumer staples slide. Grocers weighed after Amazon-Whole Foods acquisition proposal announced.
- European markets rose on news that Greece would receive next tranche of aid, ebbing political risk. MSCI EAFE +1.1% Friday.
- Treasuries yields down to 2.16% after housing starts, building permits, consumer sentiment miss estimates.
- Mixed week for broad averages. Dow (+0.5%), S&P 500 (+0.1%), Russell 2000 (-1.0%). Industrials (+1.7%) topped sector rankings, technology (-1.1%) fell most.
Overnight & This Morning
- U.S. following Europe higher on market-friendly outcome French election, which strengthened Macron’s mandate for economic reforms.
- WTI crude oil ($45.11/bbl.) holding Friday’s gains after -2.4% last week.
- European markets applaud French election outcome. European Stoxx 600 Index +0.9% midday, led by Paris’ CAC (+1.2%); Brexit talks underway in Brussels.
- Asian markets also higher. MSCI Asia Pacific Index+0.6%, China up on pending MSCI decision (expected Tuesday) to include country’s shares in its global indexes. Nikkei +0.6%, Hang Seng +1.2%, Shanghai Composite +0.7%.
- Treasuries down, 10-year yield up slightly to 2.18%
Key Insights
- Our 2017 S&P 500 Index forecast is not a bearish call. Some have raised the question, why own stocks here if the S&P 500 is already at our year-end target return for the year of 6-9%? First, we expect cyclical sectors and smaller cap stocks to fare better than the S&P 500 in the second half; second, we believe dips will provide opportunities for gains; and third, fiscal policy is a wildcard that could potentially push stocks ahead of our forecast.
- Earnings estimates have stayed resilient. Estimates have held firm over the past month and still reflect near 10% earnings growth over the next 12 months. We expect earnings gains to support stocks in the second half of the year. Policy has the potential to drive additional earnings gains in 2018 that may begin to be priced in during late 2017, offering upside potential to our forecast.
Macro Notes
- Beware the ides of June? As we’ve noted before, the second half of June tends to see some seasonal equity weakness. Breaking it down further, last week was option expiration for the month of June and the week after this event (this week) has historically been very weak. In fact, going back 14 years this week has been higher only once for the S&P 500, and that was in 2013. Going back to 2000, this week has been higher only three times, making it the least likely week of the year to be higher.
Tuesday
- Germany: PPI (May)
- BOJ: Minutes of Apr 26-27 Meeting
- China: Conference Board China LEI (May)
Wednesday
- Existing Home Sales (May)
- BOJ: Kuroda & Iwata
- Japan: All Industry Activity (Apr)
- Japan: Machine Tool Orders (May)
Thursday
- LEI (May)
- Eurozone: Consumer Confidence (Jun)
- Japan: Nikkei Japan Mfg. PMI (Jun)
Friday
- Markit Mfg. & Services PMI (Jun)
- New Home Sales (May)
- France: GDP (Q1)
- France: Markit France Mfg. & Services PMI (Jun)
- Germany: Markit Germany Mfg. Services PMI (Jun)
- Eurozone: Markit Eurozone Mfg. & Services PMI (Jun)
- Russia: GDP (Q1)
- Canada: CPI (May)
Important Disclosure: Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.
14 Things Ridiculously Successful People Do Every Day
Having close access to ultra-successful people can yield some pretty incredible information about who they really are, what makes them tick, and, most importantly, what makes them so successful and productive.
“Whenever you see a successful person, you only see the public glories, never the private sacrifices to reach them.” – Vaibhav Shah
Kevin Kruse is one such person. He recently interviewed over 200 ultra-successful people, including 7 billionaires, 13 Olympians, and a host of accomplished entrepreneurs. One of his most revealing sources of information came from their answers to a simple open-ended question:
“What is your number one secret to productivity?”
In analyzing their responses, Kruse coded the answers to yield some fascinating suggestions. What follows are some of my favorites from Kevin’s findings.
1. They focus on minutes, not hours. Most people default to hour and half-hour blocks on their calendar; highly successful people know that there are 1,440 minutes in every day and that there is nothing more valuable than time. Money can be lost and made again, but time spent can never be reclaimed. As legendary Olympic gymnast Shannon Miller told Kevin, “To this day, I keep a schedule that is almost minute by minute.” You must master your minutes to master your life.
2. They focus on only one thing. Ultra-productive people know what their “Most Important Task” is and work on it for one to two hours each morning, without interruptions. What task will have the biggest impact on reaching your goals? What accomplishment will get you promoted at work? That’s what you should dedicate your mornings to every day.
3. They don’t use to-do lists. Throw away your to-do list; instead schedule everything on your calendar. It turns out that only 41% of items on to-do lists ever get done. All those undone items lead to stress and insomnia because of the Zeigarnik effect, which, in essence, means that uncompleted tasks will stay on your mind until you finish them. Highly productive people put everything on their calendar and then work and live by that calendar.
4. They beat procrastination with time travel. Your future self can’t be trusted. That’s because we are time inconsistent. We buy veggies today because we think we’ll eat healthy salads all week; then we throw out green rotting mush in the future. Successful people figure out what they can do now to make certain their future selves will do the right thing. Anticipate how you will self-sabotage in the future, and come up with a solution today to defeat your future self.
5. They make it home for dinner. Kevin first learned this one from Intel’s Andy Grove, who said, “There is always more to be done, more that should be done, always more than can be done.” Highly successful people know what they value in life. Yes, work, but also what else they value. There is no right answer, but for many, these other values include family time, exercise, and giving back. They consciously allocate their 1,440 minutes a day to each area they value (i.e., they put them on their calendar), and then they stick to that schedule.
6. They use a notebook. Richard Branson has said on more than one occasion that he wouldn’t have been able to build Virgin without a simple notebook, which he takes with him wherever he goes. In one interview, Greek shipping magnate Aristotle Onassis said, “Always carry a notebook. Write everything down. That is a million dollar lesson they don’t teach you in business school!” Ultra-productive people free their minds by writing everything down as the thoughts come to them.
7. They process e-mails only a few times a day. Ultra-productive people don’t “check” their e-mail throughout the day. They don’t respond to each vibration or ding to see who has intruded into their inbox. Instead, like everything else, they schedule time to process their e-mails quickly and efficiently. For some, that’s only once a day; for others, it’s morning, noon, and night.
8. They avoid meetings at all costs. When Kevin asked Mark Cuban to give his best productivity advice, he quickly responded, “Never take meetings unless someone is writing a check.” Meetings are notorious time killers. They start late, have the wrong people in them, meander around their topics, and run long. You should get out of meetings whenever you can and hold fewer of them yourself. If you do run a meeting, keep it short and to the point.
9. They say “no” to almost everything. Billionaire Warren Buffet once said, “The difference between successful people and very successful people is that very successful people say ‘no’ to almost everything.” And James Altucher colorfully gave Kevin this tip: “If something is not a ‘Hell Yeah!’ then it’s a no.” Remember, you only have 1,440 minutes in a day. Don’t give them away easily.
10. They follow the 80/20 rule. Known as the Pareto Principle, in most cases, 80% of results come from only 20% of activities. Ultra-productive people know which activities drive the greatest results. Focus on those and ignore the rest.
11. They delegate almost everything. Ultra-productive people don’t ask, “How can I do this task?” Instead, they ask, “How can this task get done?” They take the I out of it as much as possible. Ultra-productive people don’t have control issues, and they are not micro-managers. In many cases, good enough is, well, good enough.
12. They touch things only once. How many times have you opened a piece of regular mail–a bill perhaps–and then put it down, only to deal with it again later? How often do you read an e-mail and then close it and leave it in your inbox to deal with later? Highly successful people try to “touch it once.” If it takes less than five or ten minutes–whatever it is–they deal with it right then and there. It reduces stress, since it won’t be in the back of their minds, and it is more efficient, since they won’t have to re-read or re-evaluate the item again in the future.
13. They practice a consistent morning routine. Kevin’s single greatest surprise while interviewing over 200 highly successful people was how many of them wanted to share their morning ritual with him. While he heard about a wide variety of habits, most nurtured their bodies in the morning with water, a healthy breakfast, and light exercise, and they nurtured their minds with meditation or prayer, inspirational reading, or journaling.
14. Energy is everything. You can’t make more minutes in the day, but you can increase your energy to increase your attention, focus, and productivity. Highly successful people don’t skip meals, sleep, or breaks in the pursuit of more, more, more. Instead, they view food as fuel, sleep as recovery, and breaks as opportunities to recharge in order to get even more done.
Bringing It All Together
You might not be an entrepreneur, an Olympian, or a billionaire (or even want to be), but their secrets just might help you to get more done in less time and assist you to stop feeling so overworked and overwhelmed.
Written By: Travis Bradberry
Source: Inc.
Market Update: June 12, 2017
Last Week’s Market Activity
- Nasdaq tumbled 1.8% Friday, its biggest one-day drop since June 2016. Tech weakness, attributed to crowded investor positioning, outsized 2017 gains, and cautious sell side commentary, powered substantial value outperformance relative to growth. Dow, Russell 2000 gained (0.4%), while S&P 500 ended flat.
- Energy (+2.5%) led Friday’s market action, followed by financials (+1.9%);both benefited from tech outflows.
- Treasuries fell modestly, helping banks (10-year Treasury yield ended at 2.20%).
- Dollar and WTI crude oil up, COMEX gold down.Dollar rise dragged gold down 0.6% to >$1270. Oil gained 0.4% to ~$46/bbl, boosting the energy sector attempted recovery from inventory-driven losses earlier in the week. Copper rose for the third straight session.
- Muted reaction to U.K. election as pound sold off (which eroded U.K. returns for U.S. investors) but U.K. stocks in local currency generally shrugged off surprise election result.
- Mixed week. Friday’s rotation was evident in weekly performance with Dow (+0.3%), Russell 2000 (+1.2%) faring well, S&P 500 down slightly (-0.3%), Nasdaq down sharply (-1.6%). Despite the week’s big political stories, broadest equity market averages didn’t move much.
Overnight & This Morning
- S&P 500 down as Friday’s technology sell-off carries over into morning trading.
- Technology weakness weighed on Asian markets:Nikkei slipped 0.5%, Shanghai Composite lost 0.6%, Hang Sang fell 1.24%. Spillover into Europe as well. Core European markets down nearly 1% in midday trading.
- Treasuries unchanged, dollar is lower vs. euro and yen; Gold is little changed.
- Oil rebound (+1.6%) follows Friday’s gains as the commodity struggles to maintain support in the mid $40s.
- More European election results. French President Macron’s party set for a big parliamentary majority following Sunday’s first-round vote. Regional Italian elections saw anti-euro 5-Star Movement underperform. In the U.K. we’re watching the formation of political alliances to determine potential Brexit/trade impact.
- Trump administration’s focus this week to be on apprenticeships, jobs following last week’s infrastructure push.
- Financial regulation also making headlines as Dodd-Frank revamp accelerates and parts of the DOL’s Fiduciary Rule go into effect. Look for easing of regulatory burden on smaller financial institutions, positive for regional banks.
Key Insights
- Reflation rotation? Friday’s sharp moves (technology down and financials, energy and small caps up) appeared to be rotation from areas that have been working to those that haven’t given the broad averages did not move much. Technology was a source of funds for energy, financials, and small cap purchases, areas that tend to benefit from stronger economic growth, higher interest rates and inflation. We still favor the technology sector and, for those currently underweight the sector, we would view further weakness as a potential opportunity to add exposure.
- We expect a rate hike on Wednesday and will be watching closely for clues about the Federal Reserve’s (Fed) rate path for the rest of 2017. Market participants will scrutinize the Fed statement and press conference for any changes to economic growth or inflation outlooks, and any additional details regarding balance sheet normalization. We remain on the fence about whether we get another hike in 2017 after the presumed move this week but, regardless, we see modest additional return potential for both stocks and bonds over the balance of the year.
- Market warning to Fed? The fact that markets are pricing in a flatter trajectory of rate hikes moving forward, and that even relatively short-term two-year Treasury yields are flat compared to levels seen in the aftermath of the Fed’s March meeting, may be the market’s way of warning the Fed that, with inflation expectations broadly contained, being too aggressive with rate hikes in the near term may harm growth.
Macro Notes
- Big drop for tech. Technology dragged the Nasdaq down 1.8% for its third worst day of the year and its worst week year to date (-1.5%). What made this big drop unique was it came the day after setting a new all-time high. Other than a 2.6% drop in May, you have to go back to March 2000 the last time there was a larger drop from an all-time high for the Nasdaq.
- When does the June swoon happen? We noted at the start of the month that June has historically been a weak month for equities and over the past 10 years only January has been worse for the S&P 500 Index. Taking a closer look at the monthly performance though shows it is usually the second half of June that tends to see most of the weakness. With the Fed and Bank of Japan on tap for meetings this week, could it be time for some volatility?
Monday
- Monthly Budget Statement (May)
- Japan: Machine Orders (Apr)
Tuesday
- PPI (May)
- UK: CPI & PPI (May)
- UK: Retail Price Index (May)
- Germany: ZEW Survey (June)
- China: Industrial Production
Wednesday
- CPI (May)
- Retail Sales (May)
- FOMC Rate Decision (June 14)
- Yellen Press Conference
- Germany: CPI (May)
- Eurozone: Industrial Production (Apr)
- UK: Jobless Claims (May)
- UK: Unemployment Rate (Apr)
- New Zealand: GDP (Q1)
- Japan: Industrial Production and Capacity Utilization (Apr)
Thursday
- Empire State Mfg. Report (June)
- Philadelphia Fed Mfg. Report (June)
- Industrial Production and Capacity Utilization (May)
- US Treasury International and Capacity Utilization (May)
- US Foreign Net Transactions (Apr)
- BOJ: Policy Balance Rate and 10-Yr Yield Target
- Bank of England: Bank Rate Decision
Friday
- Housing Starts (May)
- Building Permits (May)
- Eurozone: New Car Registration (May)
- Eurozone: CPI (May)
- Russia: GDP (Q1)
- Bank of Russia: Key Rate Decision
- China: New Loan Growth and Money Supply (May)
Important Disclosures: Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.
Market Update: June 5, 2017
Last Week’s Market Activity
- Solid Friday and holiday-shortened week for stocks… and more record highs. S&P 500 gained +0.36% on Friday, +0.96% for the week to end at a record high (2439.07). Nasdaq led major averages Friday (+0.94%) and for the week (+1.54%). Small caps beat mid and large (Russell indexes).
- Tech drove Friday’s gains, led by semis and software. Financials hit by lower rates and yield curve flattening post jobs miss. Energy was the biggest decliner on falling oil prices.
- Weaker dollar helped COMEX gold Friday (+0.8%) but not WTI crude oil (-1.4%)
- 10-year yield dipped 0.06% to 2.15%, lowest closing level of 2017 and lowest since just after the election
- Friday miss on U.S. nonfarm payrolls unlikely to sway Fed next week (details below)
- Defensive tilt to weekly performance. Telecom topped weekly sector rankings, followed by healthcare. Oil fell > 4%; 10-year Treasury yield dropped 0.10%.
Overnight & This Morning
- Stocks in Asia mostly lower amid relatively light news
- In Europe, shares down (Euro Stoxx 600 -0.2%), continuing Friday slide
- Weak sentiment after more terrorist attacks in London over the weekend
- Euro up 0.3% to $1.12
- Commodities – Mostly lower, led by weakness in industrial metals and energy, with WTI oil near $47/bbl. COMEX gold (0.3%) adding to Friday’s gains at $1283, copper (-0.7%)
- U.S. stock, Treasury yields up slightly.
- U.S. dollar mixed vs major currencies
Key Insights
- Goldilocks environment. Steady but not booming job gains and inflation leveling off suggests economy is not too hot, not too cold. Wage gains are benign-average hourly earnings +2.5% YoY in Friday’s May jobs report. We’ve seen a mixed set of data recently: soft Q1 GDP, Q2 tracking near +3%, and earnings looking good. The Fed Beige Book cited most Fed districts continue to expand at a modest or moderate pace. Sounds like Goldilocks.
- Any concern that the Fed may be behind the curve are misplaced, at least for now. The market is only pricing in a 44% chance of another rate hike in 2017 (after one in June), and just one hike in 2018.
- An expensive stock market can stay expensive. The 17.7 times forward price-to-earnings (P/E) multiple, where it stood in early 2015, is more reasonable than the trailing PE (20.7) for the S&P 500 but is still at the high end of the historical range. We reiterate valuations are not good predictors of near-term stock market moves, an important message for clients.
Macro Notes
- Jobs miss doesn’t mean Fed pause. The economy added 138K new jobs in May, well below consensus expectations of 185K, with additional downward revisions for March and April; unemployment rate edged lower to 4.3% from 4.4% on lower labor participation rate. The report may give the Fed some pause, but given the overall backdrop a June hike remains far more likely than not.
- The China Caixin Manufacturing PMI index was below 50 when reported last week, but overnight the services PMI was 52.8, much better than last month’s 51.5. The overall composite number of 51.5 suggests a continued, but slowing, expansion in the Chinese economy. We expect the government to continue to try to reduce leverage in the economy, but not to engage in any major reforms until after the Communist Party meeting this fall.
- Politics and central banks highlight the week ahead. Politics and central banks highlight the coming week, with Thursday, June 8 of particular importance as it brings the U.K. general election, the European Central Bank (ECB) meeting, and testimony of former FBI Director James Comey. Data of note in the U.S. includes durable goods and Services Institute for Supply Management (ISM). Overseas, Eurozone and Japan Gross Domestic Product (GDP), and Chinese inflation and money supply data are due out.
Monday
- Nonfarm Productivty (Q1)
- Unit Labor Costs (Q1)
- ISM Non-Mfg. Composite (May)
- Factory Orders (Apr)
- Durable Goods Orders (Apr)
- Cap Goods Shipments & Orders (Apr)
- UK: Markit/CIPS UK Services PMI
Tuesday
- Eurozone: Markit Eurozone Services PMI (May)
Wednesday
- Eurozone: GDP (Q1)
- Japan: GDP (Q1)
- Japan: Current Account Balance (Apr)
- Japan: Trade Balance (Apr)
Thursday
- Germany: Industrial Production (Apr)
- UK: General Election, 2017
- ECB: Draghi
- Japan: Machine Tool Orders (May)
- China: CPI & PPI (May)
Friday
- Wholesale Sales & Inventories (Apr)
- France: Industrial Production (Apr)
- UK: Industrial Production (Apr)
- UK: Trade Balance (Apr)
- China: Money Supply and New Yuan Loans (May)
Important Disclosures: Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC
Market Update: May 30, 2017
Last Week’s Market Activity
- S&P 500 Index and the Nasdaq closed at new record highs last Friday; seventh consecutive gain for S&P 500 and 20th record close year to date.
- The combination of positive sentiment and low volatility suggests stocks may continue to absorb challenging headlines. Investors weathered potential risks from last week’s news, including: fallout from Comey firing, growing investigation into Administration/Russia ties, White House’s 2018 budget proposal, terrorist bombing in Manchester, Moody’s China debt downgrade, CBO’s score for AHCA, and minutes from last Federal Open Market Committee (FOMC) meeting suggesting higher interest rates ahead.
- Markets also handled disappointing economic reports, specifically weakness in new home sales, durable goods orders; instead focusing on longer-term trends such as positive global data (Germany, Japan), upward revision to U.S. gross domestic product (GDP) in the 1st quarter.
- Orders for durable goods fell in April, but good news in the details. Drop (-0.7%) in orders bested expectations (-1.0%) and March revision was strong (details below).
- Orders ex-transportation showed a similar pattern. Nondefense capital goods shipments ex-air, a proxy for business spending, fell slightly (-0.1%) but better than forecast, following four consecutive monthly gains.
- For the week, stocks rose +1.5% to +2.0%, powered higher by the unusual combination of utilities and technology sectors, each up >2.0%. Investors likely hedging their bets, counting on growth prospects of technology, but not necessarily buying into Fed’s rate outlook as “bond proxy” utilities sector rose.
- Weakness in energy (-2.0%) as markets appeared to have already priced in extension to OPEC production cuts, but investors wanted deeper cuts and pushed WTI crude oil down by >1.5% last week (after rising for three weeks) to ~$49.00/bbl.
- Action in U.S. Treasury market also points toward less Fed activity after expected June hike, with 10-Year Treasury yield hovering in the 2.25% range, on track for fourth straight monthly gain.
- U.S. dollar firmed slightly (+0.1%) on the heels of solid GDP revision.
- Stocks in Europe basically flat Friday; euro & pound sterling weakened as Conservatives’ lead over Labour has narrowed considerably in recent weeks.
Emerging markets stocks +2.0% on the week, maintaining year to date leadership globally.
Overnight & This Morning
- Stocks in Asia little changed amid shortage of overseas leads.
- Yen strengthened for a third day against the U.S. dollar (USD/JPY -0.3% to 110.9)
- In Europe, shares down fractionally (Euro Stoxx 600 -0.1%); bank stocks, weakness in business & consumer confidence weighing
- European Central Bank (ECB) Head Draghi was critical of U.S. trade proposals in speech to European Parliament yesterday. He also reaffirmed commitment to maintaining ECB stimulus, placing pressure on the euro.
- Euro down -0.1% to $1.11
- Commodities – Mostly lower, led by weakness in precious metals and agriculture, with WTI oil holding below $50.00/bbl. COMEX gold (-0.2%) to $1265 and copper (-0.6%).
- U.S. stock, Treasury yields down slightly in muted, post-holiday trading.
- U.S. dollar weak vs. yen but stronger vs. euro and other major currencies
- U.S. Personal Income and Spending for April met expectations after two consecutive shortfalls. Inflation metrics in this report are. Its preferred measure of price growth, the Core PCE deflator, key inflation metric for the Federal Reserve, at 1.7% from 1.6%.
Key Insights
- The trend for business spending/capital investment is improving. After years of hoarding cash, paying yield, and buying back shares, the business cycle has returned with upward shifts in pricing and U.S. monetary policy. Businesses can no longer simply attempt to maintain market share, but rather, they must grow market share as the recovery/expansion enters its ninth year.
- While personal consumption is still the primary driver of U.S. economic growth, we believe the rate of growth in the coming quarters/years will be driven by capital investment, which is taking up a larger portion of GDP contribution (details below).
- 1Q earnings per share (EPS) (+15% year over year) faced the easiest comparisons and we look for remainder of 2017 quarterly EPS gains to hover in the mid-high single digit range. These are smaller percentage gains than what we’ve become accustomed to these past couple of quarters, but still indicative of sustained, late cycle growth accompanied by still low interest rates and inflation (details below).
- We recognize current trading range is of concern. Despite the flattening yield curve, which could partly be the result of global sovereign credit valuations, there appears to be little stress evident in the credit markets (details below).
Fixed Income Notes
- Despite equity markets at/near record levels, bond market continues to hang in there. Constant maturity 10-year Treasury note up four consecutive months, Barclays Aggregate (+2.0%) and Barclays High Yield (+4.0%) providing positive returns year to date.
- After 1.35% low last June, 10-year Treasury yield surged to 2.65% in late February/early March of this year. Since then, several factors have conspired to push yields lower, despite Fed’s plans to raise interest rates (see below). First, failure of the first vote on ACA repeal placed a great deal of uncertainty on likelihood of President Trump’s pro-growth policy agenda being fully enacted. Second, weak Q1 GDP enabled flattening of the yield curve. Third, some are projecting higher short-term borrowing costs will curb lending and growth, making it tougher for Fed to sustain 2.0% inflation target. Fourth (less sinister) reason has to do with relative valuation. With Fed moving in a different direction from ECB and BOJ, those sovereign bonds trading at very expensive valuations, increasing attractiveness of U.S. government bonds.
- This can be a blessing and a curse: curse is that a bid for U.S. Treasuries from global investors helps mask our spending profligacy. The blessing is global investors appear confident slow growth with low inflation likely to be sustained in U.S., without signs of excessive upside, or downside risks.
- As a result, we continue to look for the U.S. benchmark Treasury yield to trade within the 2.25% to 2.75% range in the second half of 2017.
- Corporate credit spreads (high yield & investment grade) remain narrow, credit default swaps (CDS) also held steady. If these critical market signposts (10-year Treasury yield, credit spreads, CDS) hold steady, financial markets likely to continue narrow trading range
- Geopolitics may periodically cause near term uncertainty, but like equity markets, next catalyst likely move the bond market will be clarity on U.S. fiscal policy
Macro Notes
- S&P 500 currently at another record level, 2415, but technicals suggest move to 2450-2475 within reach in coming months.
- Bullish catalyst is necessary, could come in the form of: sustainable EPS growth, > expected GDP in Q2/Q3, less aggressive Fed in 2H17, corporate tax cuts, tax reform, global GDP etc.
- Unfortunately, move of this magnitude highly dependent on fiscal policy changes, where uncertainty narrows trading ranges until clarity emerges.
- Fundamentally, move toward this level can be justified, but anything above it would need more clarity on 2018 EPS increases, largely due to combination of repatriation tax holiday/reduction in corporate tax rate.
- Assuming $130.00 in S&P 500 operating EPS this year, stocks currently trading ~18.5x calendar 2017; a move >2450 would take market price-to-earnings ratio (P/E) >19x.
- Tax reform may be too big to achieve in current political environment, but corporate tax cuts still possible; if implemented, 2018 EPS could be >$140.00, which would bring target ranges for index 2500 to 2550 in 12 to 18 months
- U.S. Q1 Real GDP revised higher from +0.7% to +1.2%, helped by a more positive picture of business investment, which had already posted a strong quarter, and a slightly better picture of consumer spending. The improvement alleviates some concerns of Q1 weakness and increases the likelihood of a Fed rate hike in June. Looking at Q2 GDP, prospects are for much stronger growth, and could be in the +3.0%, as pent up demand in cap-ex, housing, and an inventory rebuild from Q1 weakness propels GDP higher.
- Though components of the durable goods report (airlines, transportation) can be volatile, the trend over the past year for orders (business investment) is still up approximately +5.0% year over year, despite last month’s weakness
- A host of European economic data was released overnight, generally showing that the economic recovery continues, but at a somewhat slower pace than expected. The highlighted number was German inflation, running at 1.4%, below forecast and previous readings of 2%, which is also the ECB target rate. This data reduces some pressure on the ECB to alter its current monetary policy.
- Politics continue to foil plans for European certainty. Just three weeks ago, the election of a Conservative government in the U.K. was seen as both a certainty and a boost for Prime Minister Theresa May. In the past few weeks, a Conservative victory, while still likely according to the polls, is now less certain. The British pound has also weakened, not coincidentally. In addition, there have been renewed calls for an early election, as soon as September 2017, as opposed to the 2018 election now expected. An early election would likely focus directly on the EU and the euro.
- Corporate Beige Book supports strong earnings outlook. Much like first quarter earnings results and management guidance, our measure of corporate sentiment based on our analysis of earnings conference call transcripts was better than we expected. We saw a sharp increase in strong and positive words over the prior quarter, with no change in weak and negative words. Wwe believe the positive tone from management teams supports a favorable earnings outlook in the quarters ahead.
- New highs and no volatility, more of the same. The S&P 500 Index closed at another new high on Friday, making it seven consecutive higher closes. It hasn’t been up eight days in a row since July 2013 and the previous two seven day win streaks ended at seven days. It also gained 1.4% for the week, avoiding its first three week losing streak since before Brexit. Last, the incredible lack of volatility continued, as the S&P 500 Index traded in a range of only 0.19% on Friday, the smallest daily range since March 1996 and the smallest daily range while also closing at a new all-time high since August 1991.
- June is a busy month for central banks. Summer is nearly here and historically that has meant lower volume, but potential market volatility. As we turn the calendar to June, the three big events this month are all from central banks: as the Fed, the ECB, and the BOJ all have meetings to decide interest rate policy. These events, along with a few others, could make for an eventful month in June.
Monday
- Memorial Day Holiday
- Eurozone: Money Supply (Apr)
- Japan: Jobless Rate (Apr)
Tuesday
- PCE (Apr)
- Conference Board Consumer Confidence (May)
- France: GDP (Q1)
- Germany: CPI (May)
- Eurozone: Consumer Confidence (May)
- Japan: Industrial Production (Apr)
- China: Mfg. & Non-Mfg. PMI (May)
Wednesday
- Chicago Area PMI (May)
- Beige Book
- France: CPI (May)
- Germany: Unemployment Change (May)
- Eurozone: Unemployment Rate (Apr)
- Italy: CPI (May)
- Eurozone: CPI (May)
- India: GDP (Q1)
- Canada: GDP (Mar)
- Japan: Nikkei Japan Mfg. PMI (May)
- China: Caixin China Mfg. PMI (May)
- Japan: Capital Spending (Q1)
Thursday
- ADP Employment (May)
- Non-Farm Productivity (Q1)
- Initial Jobless Claims (May 27)
- Markit Mfg. PMI (May)
- ISM (May)
- Eurozone: Markit Eurozone Mfg. PMI (May)
- Italy: GDP (Q1)
- Brazil: GDP (Q1)
- South Korea: GDP (Q1)
- Canada: Markit Canada Mfg. PMI (May)
- Japan: Vehicle Sales (May)
Friday
- Change in Nonfarm, Private & Mfg. Payrolls (May)
- Unemployment Rate (May)
- Trade Balance (Apr)
- Eurozone: PPI (Apr)
Important Disclosures: Past performance is no guarantee of future results. The economic forecasts set forth in the presentation may not develop as predicted. The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks. Treasury Inflation-Protected Securities (TIPS) are subject to interest rate risk and opportunity risk. If interest rates rise, the value of your bond on the secondary market will likely fall. In periods of no or low inflation, other investments, including other Treasury bonds, may perform better. Bank loans are loans issued by below investment-grade companies for short-term funding purposes with higher yield than short-term debt and involve risk. Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments. Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards. High-yield/junk bonds are not investment-grade securities, involve substantial risks, and generally should be part of the diversified portfolio of sophisticated investors. Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply. Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained. Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged. This research material has been prepared by LPL Financial LLC.
