Fisher Investments Editorial Staff
Personal Finance, Taxes

Year-End Guide 2016: Things to Consider Before the Ball Drops

By, 12/02/2016
Ratings294.258621


Reviewing these today might help you save money later. Photo by yuriz/Getty Images.

For many, the holiday season means getting together with family and friends. But as the new year approaches, consider spending some quality time with your tax adviser as well—some simple moves may save you a bundle.[i] We’ve compiled a few items below that may make 2017’s tax season a bit cheerier.[ii]

Take Your RMD

Fisher Investments Editorial Staff
GDP, Corporate Earnings

Golly Gee Whiz Willikers, It’s Q3 GDP!

By, 12/02/2016
Ratings224.181818

Coming off the Thanksgiving weekend (perhaps with some new gizmos and gadgets from Black Friday), investors were treated with more positive news on Tuesday: The US economy grew a little quicker than initially projected—and the advance estimate was already the fastest rate in two years! So proclaimed the Bureau of Economic Analysis (BEA) in its second estimate of Q3 GDP. While this says nothing about America’s near-term prospects, it does provide further evidence the economy stands on solid ground.     

The second estimate of Q3 GDP was revised to 3.2% annualized, slightly higher than the advance estimate’s 2.9%. Personal consumption expenditures (consumer spending), which comprise approximately two-thirds of economic output, was revised up from 2.1% to 2.8%. On the not-as-positive front, business investment was shaved down from 1.2% to 0.1%. Real estate investment was revised up from the initial estimate’s -6.2%, but still negative (-4.4%).

Exhibit 1: Advance vs. Second Estimates of Q3 2016 GDP and Select Components 

Fisher Investments Editorial Staff
MarketMinder Minute, Media Hype/Myths

Black Friday's Overstated Importance

By, 11/30/2016
Ratings173.705882

This MarketMinder Minute evaluates the overstated importance of Black Friday.

Fisher Investments Editorial Staff
Commodities, Into Perspective

Coal’s Trump Card a Bust

By, 11/25/2016
Ratings1304.342308

Coal country has struggled in recent years: A just-released report by the International Energy Agency notes that firms in various stages of bankruptcy control over half of US production. The sector employs just 50,000 people now, down from over 250,000 in 1980. The bulk of the losses are concentrated in Appalachian states like West Virginia and Kentucky, where mining hours are plummeting and local budgets are squeezed. Given this backdrop, it isn’t surprising coal became a political issue in 2016’s race, particularly since many claim the Obama Administration declared war on coal through a series of Environmental Protection Agency (EPA) emissions-trimming rules. Whatever you think of this argument, President-elect Trump garnered broad support in America’s industrial heartland[i] in part by promising to roll back restrictions and bring back jobs. Coal, therefore, is frequently cast as a “winner” in his election, which may lead some to wonder whether now isn’t a buying opportunity in this old economy mainstay. But while a lighter regulatory hand may be a small boon for the industry, cheaper and more plentiful natural gas poses a threat even a coal-friendly president can’t fix.

This is a tale of two energy sources. As coal firms around the world shut down, wade through bankruptcy or require state support, natural gas continues to benefit from the American shale boom. Coal used to be America’s most abundant source of domestic energy—enjoying a cost advantage that kept it fueling power plants, whether folks like the associated emissions or not. But natural gas production has risen massively since the Financial Crisis, and prices are down 60% since 2008, to the point that coal’s historical cost advantage is essentially gone. As a result, natural gas is gaining US market share at coal’s expense—and the trend started years before the EPA’s actions. Most coal-producing states were already on track to exceed the new standards when they were issued, thanks to natural gas’s ongoing ascent. That’s right—the EPA fired a dud in its alleged “war on coal.”[ii]

Exhibit 1: US Primary Energy Consumption by Fuel Source, 1960 – 2016

Fisher Investments Editorial Staff
Into Perspective, The Big Picture

11 Reasons to Be Grateful This Thanksgiving

By, 11/23/2016
Ratings783.833333

With Turkey Day looming, your friendly MarketMinder editorial staff is in a thankful mood. As eventful—and at times, difficult—as 2016 has been, there are lots of positives, too. Here are 11[i] things investors can be thankful for.

The Election Is Over

Whatever your feelings about President-elect Donald Trump, we are thankful election coverage is finally over. Besides the contentious presidential election, state and local elections—and their accompanying talk and hyperbole—are done, which is itself worthy of thanks.[ii] Even for politics aficionados, the sheer amount of noise has likely been a bit much. However, don’t expect the media to quiet down. Though election advertising and campaign-trail mudslinging is over, the media has already started attacking the president-elect, and the critiques will probably only intensify. It is likely we will see a much more aggressively anti-administration media than in the last eight years, so those hoping for quiet will have to look elsewhere.

Fisher Investments Editorial Staff
Into Perspective

Don’t Chase Heat: Defensive Sector Edition

By, 11/23/2016
Ratings563.919643

During early 2016’s volatility, many flocked to the perceived safer shores of Consumer Staples, Telecom and Utilities stocks—defensive sectors that tend to be less subject to the whims of the global economy. After all, you are going to need deodorant and toilet paper whether the economy is booming or destined to bust.[i] So, given the fears of renewed recession that were so prevalent then, these three sectors unsurprisingly built up huge outperformance early on. But with the benefit of hindsight, it’s clear this was a headfake. Investors who chased big returns in seemingly “safer” stocks have officially been taught a harsh lesson.

In the year’s first six weeks—the correction out of the gate—Staples, Utilities and Telecom massively outperformed the MSCI World. Exhibit 1 shows this, plotting each MSCI World sectors’ return with net dividends from 12/31/2015 through 2/11/2016, the correction’s low.

Exhibit 1: Defensive Sectors’ Early Outperformance Was Big

Ken Liu
US Economy, GDP

Don’t Fret Low Productivity

By, 11/18/2016
Ratings414.02439

What ails the US economy? No one can say exactly, but many arguments boil down to a lack of productivity growth. Many call it the great economic scourge of our time, consigning America (and maybe the world) to permanently low growth[i] and weak stock returns. In reality, however, productivity simply isn’t predictive—not of stocks, economic growth or future productivity.

First, some background. Labor productivity is value-added output per hour. If you totaled all hours worked every year and then multiplied the result by productivity, you would get GDP. Or, flip it around: If you divided GDP by total hours worked, you get productivity. Higher productivity theoretically allows folks’ incomes and living standards to rise without their working more hours, while weak productivity supposedly means stagnant wages, since companies would have to protect margins.

Adding up hours worked is relatively straightforward, but measuring output is fuzzier. Government statisticians simply limit themselves to tallying up the value of monetary transactions (i.e., sales and investment).[ii] The problem isn’t so much with the concept of GDP itself—it does what it’s supposed to do—but how it’s (mis)used and (mis)interpreted. For example, it isn’t a measure of well-being. It also excludes a lot of work, as non-market activity and non-transactional output like, um, MarketMinder articles, don’t count, even if they make you happy. As a statistic, it is built for the industrial era, not the technology/services-driven economy.

Fisher Investments Editorial Staff
Media Hype/Myths

Looking for Some Retail Therapy?

By, 11/17/2016
Ratings363.75

Tis the season … to shop till you drop? The Black Friday shopping rush has begun, with advertisements bombarding airways and inboxes. Accompanying the bells and whistles, retailers are also forecasting whether consumers will feel naughty or nice the day after Thanksgiving—and what this bodes for the industry. However, we remind investors not to get caught up in any short timeframe: What matters more is the longer-term trend, which currently looks fine.

Given Black Friday’s reputation as the year’s biggest shopping bonanza, retail experts go crazy trying to forecast customers’ behavior. This year, some wonder if events like the presidential election will hurt spending. Yet for all the hype, one day doesn’t determine the industry’s health. Plus, Black Friday is no longer a one-day phenomenon, as US holiday shopping is now more marathon than sprint[i]folks even plan for the best days (plural) to buy certain products.

Moreover, from a global perspective, America’s Black Friday isn’t the only big “one-day” retail event around, either. The UK imported Black Friday relatively recently, and it’s already a big deal for our friends across the Atlantic. In China, shoppers recently participated in “Singles’ Day” on November 11.[ii] Started as a lighthearted way to celebrate single life, it is now a huge commercialized production promoted by Western celebrities. This year, Singles’ Day generated an astounding $17.8 billion in sales, according to an estimate of China’s biggest online retailer, blowing away 2015’s $14.3 billion. Or, as one analyst pointed out, China’s 11/11 online sales exceed Brazil’s total projected 2016 e-commerce sales. Note, we aren’t saying this is predictive—again, no single day[iii] indicates future trends. But a mega shopping frenzy is inconsistent with the ever-feared hard landing. If China were truly in trouble, it seems unlikely young folks would fork over nearly $18 billion in one day. Similarly, if political events or aging expansions really endangered consumers in the US and UK—as some have argued—retailers wouldn’t be gearing up for a shop-till-you-drop mania, and industry experts wouldn’t be anticipating a pickup in holiday shopping from last year.

Fisher Investments Editorial Staff
Into Perspective, The Global View

A Post-Election Economic Palate Cleanser

By, 11/14/2016
Ratings643.570313

Political news continues hogging investors’ attention, keeping recent economic data under the radar. We think that’s a shame, because data are fun and—most importantly—economic drivers probably matter more for stocks globally than the political leadership of a country that contributes just 25% of world GDP. So here is a rundown of the latest and greatest economic haps. Overall, stocks’ economic backing remains solid.

China Grows Again

China’s economy got off to a fine start in Q4, extending the major trends from summer and last month—robust government infrastructure and investment spending and an ongoing housing recovery helped shore up activity. Private investment remains weak, but high public fixed investment shows the government remains committed to supporting growth as needed. Lending and broad money supply also continue expanding apace.

Fisher Investments Editorial Staff
Politics

Topsy-Turvy Politics Aren’t Just Made in America

By, 11/14/2016
Ratings264.25

America elected its next president last Tuesday. That’s a yuuuge deal.[i] Outside the US, meanwhile, other nations face their own political trials and tribulations. Some are “politics as usual,” while others are downright scary—reminders that a lot is happening beyond our shores, both in developed nations and Emerging Markets (EM). For investors, it is vital to tune out the noise and focus on what—if anything—is actually changing. Despite the chaos, the rule of law is still alive and well in developed countries, and besides some tiresome theatrics, those governments are mostly gridlocked—an underappreciated bullish political driver. Emerging Nations are (as usual) iffier, but the issues seem isolated.

Brexit Goes to Court

The London High Court ruled in early November that Parliament must weigh in before Britain can trigger Article 50 of the Lisbon Treaty—the formal mechanism that kicks off the two-year period for EU exit negotiations. This wrinkle has prompted speculation Brexit may not happen, but that’s premature. This (and related cases) now go to the UK’s Supreme Court, and even if the London ruling holds, it seems unlikely Parliament goes against the people’s will.

Fisher Investments Editorial Staff
Media Hype/Myths, Politics, Behavioral Finance

When Not to Trade

By, 11/14/2016
Ratings744.331081

Editor’s Note: Our political commentary is nonpartisan and non-ideological by design as political bias is a dangerous investing error. We favor no political party or candidate and assess politics solely for potential market impact.

On Tuesday night, most TV networks flipped between two visuals: the electoral map, and plunging S&P 500 futures markets. For extra flavor, some threw in the freefalling Mexican peso, sharp dives in foreign stock markets and rising gold prices (allegedly a safe haven during times of crisis).[i] The media seized on these snapshot trends and the obvious conclusion: Investors were fleeing to safety, and those who didn’t join them would suffer steep losses Wednesday and beyond. Yet within a few hours of markets’ opening, that theory was bunk. Most of those moves reversed, and stocks finished the day up. Volatility could very well resurge, but for now, consider this crucial lesson: Don’t trade around major news events expecting markets to respond a certain way to the outcome.

The following charts detail some of foreign markets’ (and gold’s) hourly moves on November 8 – 9. They show Tuesday evening’s fears of a sustained decline were overwrought—after just a few hours, the trends garnering so much attention had disappeared. S&P 500 futures pared many of their losses before the opening bell on November 9. The index itself did open lower, but by day’s end, it was up. Foreign markets lost ground as the votes were counted, but they, too, bounced back swiftly.

Elisabeth Dellinger
Politics, Into Perspective

Beltway Politics Don’t Always Trump Local

By, 11/11/2016
Ratings1104.104546


The old Macy’s at Cupertino’s mostly dead Vallco mall, on its last day of existence—the subject of one of many key ballot measures nationwide Tuesday. Photo by Elisabeth Dellinger.

As always, our political commentary is non-partisan and non-ideological by design, and we analyze politics solely for potential market impact. We favor no party, candidate or ballot initiative, and we believe political bias invites investing errors.

So a real estate developer-turned-reality TV showman with weird hair, a loud mouth and a penchant for 3 AM tweeting will be America’s next President. Some, including many in the investing class, fear this spells societal and economic doom, a dark age where globalization reverses and America turns inward. Others are more optimistic, hoping the bizarritude and rhetoric were only a front; that real and metaphorical walls won’t rise; that a divided electorate will knit back together and international treaties will stay in force—while taxes and regulations take a more business-friendly turn. Yes, investors have all manner of opinions about President-elect Trump, both good and bad. This column isn’t about any of that. Stocks don’t do personalities or sociology. Rather, it’s about this simple fact: Whatever your opinion of the man and his platform, he alone isn’t likely to have much influence on America’s economy. Presidents have limited power, which is why they always scrap big campaign pledges. Plus, America has a decentralized government. Taxes aside, most of the policies that impact everyday commerce (and probably your life) are state and local measures, not federal. Markets do care about presidential politics, but they aren’t the be-all, end-all.

Todd Bliman
Globalization

Is Globalization in Retreat?

By, 11/10/2016
Ratings794.088608

Will these connections soon be broken? Image by 3alexd/iStock.

A common theme in 2016: Protectionism is rising, with potentially devastating consequences for the world economy. Some cite rising trade barriers and protectionist measures around the world. Brexit, to others, was a vote against the global economy. Floundering multilateral trade deals, many argue, show the tide has turned against trade between nations. And now, on top of it all, Donald Trump—a candidate who preached ditching the Trans-Pacific Partnership (TPP) and renegotiating the North American Free-Trade Agreement (NAFTA)—has won the US presidency. Hence, many fear the world’s increasingly global supply chain is about to break apart, rocking the world economy and stocks. But before you presume protectionism is destined to rise, let’s consider what’s talk and what’s action; what is known, and what is a mere projection of politicized rhetoric.  

Fisher Investments Editorial Staff
Politics

The Voters Have Spoken

By, 11/09/2016
Ratings2423.694215

Photo by Scott Olsen/Getty Images.

Editors’ Note: Our political commentary is nonpartisan and non-ideological by design as political bias is a dangerous investing error. We favor no political party or candidate and assess politics solely for potential market impact.

The voters spoke, and while the final few precincts are trickling in, Hillary Clinton has conceded the race and Donald Trump will be America’s next President. The Republicans will keep both houses of Congress, losing only a handful of seats. S&P 500 futures plunged as the news developed, but later cut losses. In our view, you should stay cool: Short-term volatility is normal, and this too should pass. Looking forward, markets move most on the gap between reality and expectations. People fear Trump’s campaign pledges, but politicians’ promises rarely become reality. As Trump does less than people fear, we expect markets to get plenty of relief. In our view, a less-bad-than-feared Trump should be a positive surprise for stocks in 2017.

Subscribe

Get a weekly roundup of our market insights.Sign up for the MarketMinder email newsletter. Learn more.

Recent Commentary

Fisher Investments Editorial Staff
Personal Finance

Year-End Guide 2016: Things to Consider Before the Ball Drops

By, 12/02/2016
Ratings294.258621

A year-end to-do list with a particular focus on taxes.

read more
Fisher Investments Editorial Staff
GDP

Golly Gee Whiz Willikers, It’s Q3 GDP!

By, 12/02/2016
Ratings224.181818

We looked at the second estimate of Q3 US GDP so you didn’t have to.

read more
Fisher Investments Editorial Staff
MarketMinder Minute

Black Friday's Overstated Importance

By, 11/30/2016
Ratings173.705882

This MarketMinder Minute evaluates the overstated importance of Black Friday.

read more
Fisher Investments Editorial Staff
Commodities

Coal’s Trump Card a Bust

By, 11/25/2016
Ratings1304.342308

The new administration wants to save American coal—but natural gas may stand in the way.

read more
Fisher Investments Editorial Staff
Into Perspective

11 Reasons to Be Grateful This Thanksgiving

By, 11/23/2016
Ratings783.833333

For investors, scoop a healthy portion of these positive tidbits to go along with your turkey this Thanksgiving.

read more

Global Market Update

Market Wrap-Up, Thursday, December 1, 2016

Below is a market summary as of market close Thursday, December 1, 2016:

  • Global Equities: MSCI World (-0.2%)
  • US Equities: S&P 500 (-0.3%)
  • UK Equities: MSCI UK (+0.6%)
  • Best Country: Norway (+1.6%)
  • Worst Country: Belgium (-2.5%)
  • Best Sector: Energy (+1.3%)
  • Worst Sector: Information Technology (-2.1%)

Bond Yields: 10-year US Treasury yields rose 0.06 percentage point to 2.45%.

 

Editors' Note: Tracking Stock and Bond Indexes

 

Source: Factset. Unless otherwise specified, all country returns are based on the MSCI index in US dollars for the country or region and include net dividends. S&P 500 returns are presented including gross dividends. Sector returns are the MSCI World constituent sectors in USD including net dividends.