LAST WEEK’S HIGHLIGHTS
1. The equity market rebounded after a few down weeks. President Trump’s comments again moved markets. On the positive side, he discussed tax reform and on the negative, he would call for a government shutdown if funds were not allocated to the border wall. The DJIA was up 0.6%, the S&P improved 0.7% and the NASDAQ advanced 0.8%. Telecommunications (+2.0%) and basic materials (+1.7%) were best sector performers.
2. The dollar continued to back track. The euro reached a 1.192 one year high vs the dollar after neither Fed Reserve Chair Janet Yellen did not discuss monetary policy and European Union’s Draghi did not talk down Euro strength at the Jackson Hole conference.
3. Corporate credit spreads were unchanged in a light trading week. New supply was lower than average and front loaded.
4. The municipal market was unchanged for the week. Primary calendar is light with a $2b California general obligation bond the largest offering.
5. Geopolitics. US added sanctions to Venezuela in order to further the Maduro government.

THIS WEEK’S EXPECTATIONS
1. Economic data. Heavy week with July personal income (exp. 0.4% from 0.0%), July personal consumption (exp. 0.3% from 0.1%) and August non-farm payrolls (exp. +178,000 from +209,000) and unemployment rate (exp. 4.3% from 4.3%) in the forefront.
2. Tax reform. Discussion will be on businesses (eliminate deduction for net interest expenses, expensing of capital investments) and individuals (itemize deductions on mortgages, charities, etc).
3. Will debt ceiling continue to be a distraction?
4. Gulf Coast Hurricane Harvey-how much effect will it have on the residents, property and industry (most notably the energy sector).

LAST WEEK’S HIGHLIGHTS
1. The equity market suffered across the board losses. President Trump’s comments on the Charlotte protests resulting in unconfirmed rumors of administration officials resigning received the most attention. On top of that was another terrorist van attack in Spain and conflicting opinions from the Federal Reserve minutes concerning inflation and interest rate hikes/balance sheet reductions. The DJIA was off 0.8%, the S&P and NASDAQ were down 0.6%. Retail stocks continue to take a hit from the Amazon threat to their business.
2. More political and business officials publicly disagreeing with Pres. Trump’s behavior. This will make it more difficult to pass tax and regulation legislation.
3. Geopolitics. The North Korea/USA war of words slipped to the backround. This looked good for markets until the next Trump fiasco and European terrorist attacks took center stage.

THIS WEEK’S EXPECTATIONS
1. Economic data. Another very light week. Only July new and existing home sales; and July durable goods are on tap.
2. Dog days of August. Congress is recess. However, when they return the debt ceiling, the budget and tax reform will be discussed and hopefully solved.
3. Potential outsized moves to news. Many market participants are on vacation so a lack market liquidity could move equity markets if something unexpected arises.

LAST WEEK’S HIGHLIGHTS
1. The equity market suffered across the board losses. The biggest driver was the USA/North Korea problem. North Korea missile test trials combined with President Trump’s comments (fire and fury, locked and loaded) gave a reason for the market weakness. The DJIA was off 1.1%, the S&P down 1.4% and Nasdaq dropped 1.5%. The South Korea market plummeted 3.2%. There was a flight to safe havens as Treasury bonds were up in all maturities.
2. Economic data was weaker than expected. July CPI (Consumer Price Index) inched up only 1.7%, below the 2% inflation level desired for the Federal Reserve to raise short-term interest rates and/or decrease their balance sheet. Although the Fed would like to raise short -term rates by end of year the federal funds futures market indicates less than a 30% chance in 2017. The reduced odds of intervention due to weak CPI actually stabilizes equities on Friday after Thursday’s retreat.
3. The weak dollar. The dollar weighted index fell 0.5%. After rising for the past 5 years, the dollar is off 11% vs the euro, 7% vs yen, and 5% vs British pound in 2017. The reduced chance of Fed tightening is contributing to the back up. Still, the 2.19% yield on the 10 year Treasury bond is much higher than that of Germany, Britain or Japan.

THIS WEEK’S EXPECTATIONS
1. Economic data. Very light week. Only July retail sales (expected +0.4% from 0.4) and capacity utilization (exp. 75.7 from 76.6) are released.
2. Geopolitics. How will North Korea situation plays out and how the markets will react. Will North Korea actually fire missiles beyond Japan and how will USA or Japan respond.

Last Week’s Highlights
1 . Again, little general movements in equities overall. Second quarter earnings season has been positive but there has been a holding pattern as investors await reaction of Federal Reserve balance sheet normalization and tax reform. For a second week, DJIA (+1.2% to a record 22,092) was the best performer versus S&P 500 (+0.2%) and Nasdaq (-0.4). Utilities (+1.3%), financials (1.2%) fared well while energy (-1.2) was weak. The rotation to large cap multi-nationals and financials from small cap and tech continues. The Dow , which contains only 30 stocks, was especially aided by sharp positive moves in Apple and 3M.
2. Economic data was mixed. July non-farm payrolls were strong (209k vs +180 expectation) and the unemployment rate dropped to 4.3% (from 4.4%). In addition labor participation rate inched up (62.9%). However, hourly earnings were only up 0.3% MOM and 2.5% YOY. The questions are how can a tight job market have such low increases in pay and will the Fed focus more on low unemployment data or low inflation in its decision to raise short term interest in 2017. The federal funds futures market indicates only a 40% chance in 2017.
3. Continued disfunction in Washington D.C. President Trump’s approval ratings have reached a new low and some Republican legislators are more comfortable thwarting his plans (i.e. health care). New Chief of Staff John Kelly is trying to bring some stability to the administration quickly removing Anthony Scaramucci and trying to institute a proper chain of communication to the White House.

Last Week’s Highlights

1. Little movement in equities overall. In a slight reversal of year’s fortunes, Dow Jones Industrials were up 1% while the S&P 500 and Nasdaq were unchanged. Underperformers for 2017, Telecom (+6.5% week over week), energy (1.9%) and financials (+0.3). Caterpillar and Boeing posted higher than expected earnings leading the way. Technology stock were off 0.9%.
2. The Federal Reserve left short term interest rates unchanged. Although the Fed noted recent weakness in inflation, they are expected to reduce the balance sheet (sell holdings back to market) and are expected to raise short-term in December.
3. Continued dis function in Washington DC. President Trump replaced Reince Priebus with John Kelly as Chief of Staff. The President is still trying to push out Attorney General Sessions and replace Press Secretary Spicer last week.

This Week’s Expectations

1. Economic data. On Tuesday, June personal income (exp. +0.2%) and consumption (exp. +o.2%). On Friday, July non-farm pay roll will be announced. Expectation is +180,000.
2. Corporate earnings continue to be announced this week. The most anticipated is Apple. Last week’s tech numbers (Facebook, Amazon, Alphabet) were good but stock movements were mixed.
3. What happens with tax reform. The Republican controlled Senate and House are expected to pivot after they could not agree on Health Care reform.
4. Weak dollar. In past few weeks, the dollar has faded which helps commodity prices but raises costs to companies.

 

A reddit user, DanGliesack, recently explained the Panama Papers in a way that breaks it down, but makes it simple to understand. In his analogy, the offshore accounts in question are piggy banks, and everyone wants them hidden in one particular kid’s closet for a variety of different reasons. In the video below, you will see just what the papers mean in simple terms and why it’s such a big deal.

Let’s Put This in Perspective

The Panama Papers have not yet brought U.S. perpetrators to light, but based on what has been found so far, what could the U.S. do with all the money that is being funneled offshore?

• Help Poor FamiliesWith all the untaxed dollars, the U.S. could essentially form a plan to give families, under a certain financial threshold, a tax break greater than what is offered now – per child. This would be an enormous help to families that are struggling to make ends meet for their family. This extra money would lead to a better way of life for the youth of our country.

• Feed the PoorLate last year the amount of money put into food stamps was around $45 million. With the money being ushered out of the country, we would easily be able to afford to provide families with the food they need and should have access to. The money used to feed the poor would only be a drop in the bucket on the amount of taxes the U.S. would collect from offshore accounts if they were inline with what we have seen come out of the Panama Papers so far.

• Add Preschool as a RightFor just about $90 million, the government can instill a group of high-quality preschool programs that would provide a tidal wave of great things down the line. By providing all children with preschool access we would see generations going into the workforce with skills to earn more and in turn making our economy even stronger.

• Less DebtThe tax that could potentially be collected from these offshore accounts would help to close the deficit we have in our country and put us in a better spot overall. Closing our deficit would free up money to improve various other government programs – in the end helping the quality of life for all americans.

• No more potholes!With the sudden influx of money to the government, there would be more of it to fix our roads, bridges, and other government funded travel projects. By strengthening our physical infrastructure, the revenue going to the contractors completing the work would further enhance our economy. It’s a win win!

Millennials have a tumultuous relationship with the job market – or at least that’s what our parents think. Most of the older generations have plenty to say about millennials, but do they actually have the facts to back it up? Contrary to popular belief, young professionals are the most confident generation in terms of reaching financial goals. Specialists also say that we are in a better place for retirement than most expect. Finally, the careers we choose end up being the right moves in the long run and not just for our wallets.

Financial Goals

According to a recent Inc.com article, Millennials are mentally in a better position than most in terms of reaching their financial goals. Between generations, the most widely sought after goal is the feeling of financially “making it.” By this they mean, mostly, that they are out of debt. Over three-quarters of Millennials stated that they feel they have the financial tools to get themselves out of debt. Young professionals were also the most competitive between their peers to have a strong desire for “making it” first.

Retirement

Young people are in a better position than most of our parents will have us believe – in terms of retirement. There are a few factors as to why, but the biggest is time itself. Due to our age, we are mathematically in a better position than our parents when it comes to saving. Having time on our side allows interest to build and the freedom to come up with strategies that work for us.

Additionally, we have Roth IRAs at our disposal. Until 1997 the Roth IRA did not exist, so we can get a long term use out of it that our parents never had access to. When using a Roth IRA, our investment growth is free from taxes, stretching our dollars even further.

It’s All About the Ambiance

Most of us also have another thing on our minds, which actually helps us in the long run. Young professionals on average place more weight in the quality of our work life rather than how much money we can make. This may seem counterproductive, but if you think about it, the quality of work life is just as important. The important thing to remember is that by looking for jobs with more potential for growth and opportunity to work on meaningful projects will actually catapult careers and make us more money in turn. We are an ambitious generation. That means it’s okay to want to bring our dogs to work and have a “cool” office. If it aids productivity, what’s so wrong with that?