SUREVEST BLOG

By now it is well telegraphed that COVID-19, a true black swan event, resulted in the fastest 30% sell-off ever, even exceeding the declines experienced during the Great Depression. Rather than just recap the quarter, we wanted to take this opportunity to update our clients on what our investment committee has been working on to address this decline by making sure our clients are well prepared for the inevitable recovery.

It All Starts With A Proper Strategy The U.S. markets have been extremely volatile these last few weeks, but one thing that has stayed constant is the media headlines that point out all the records that have been shattered. Here are a few examples from this week alone: “The blue-chip average surged more than 2,100…

It was only 30 days ago that markets were hitting all-time highs. On February 19th the S&P 500 posted a record close of 3386 and the U.S. equity markets were downplaying any real threat by the COVID-19 situation in China. However, that quickly changed, which led to the fastest market correction (decrease of 10% from recent all-time highs) anyone has witnessed. Now, as of Thursday’s close, the S&P 500 is down 28.5% and we find ourselves in the midst of a bear market (20%+ decrease from all-time highs).

The Corona Virus has undoubtedly caused unforeseen disruptions in our lives, and for those personally impacted by the virus, it has created tremendous angst. Our job as wealth managers though is to navigate how, if at all, this impacts our client’s long-term financial plans by relying on a time-tested and proven process to keep our clients on track.

By now most investors are aware that through Thursday’s market close, the S&P 500 is down 10.75% for the week, this puts the broad index in negative territory for 2020. Most of the selloff is blamed on the increased risk of the coronavirus; so far more than 80,000 people have been infected in about 40 countries and it has killed more than 2,700 people.

By now most investors are aware that through Thursday’s market close, the S&P 500 is down 10.75% for the week, this puts the broad index in negative territory for 2020. Most of the selloff is blamed on the increased risk of the coronavirus; so far more than 80,000 people have been infected in about 40 countries and it has killed more than 2,700 people.

Executive Summary

Year-to-date, the S&P 500 has returned mid-single digit returns, but now valuations are somewhat elevated
International market valuations are more attractive than U.S. valuations
Investors should focus on the broad international markets and in the U.S. invest in individual securities and not the major indexes

Executive Summary
• The U.S. economy continues to expand, and the fear of a recession has decreased
• U.S. GDP grew at 2.1% in the fourth quarter and 2.3% for 2019
• ISM Manufacturing and Non-Manufacturing Data also confirm the U.S. economy continues to show strength

2019 turned out to be an extremely positive year for equity markets across the world. At the beginning of the year, not many investors were optimistic regarding the prospect for equity markets, mainly because we had just come out of a bad fourth quarter in 2018 with the worst December on record. On the economic front, the data was mixed. The common belief was to expect a slowdown in the economy because the tailwind of the tax cuts were expected to fade. Neither of these consensus expectations came to fruition. In fact, the opposite happened with the S&P 500 when it closed 2019 with a gain of 28%.

Earnings Season for the fourth quarter 2019 has begun. We are analyzing the data of the broad market and the individual stocks held in our portfolios. This report will seal the 2019 earnings growth rate. The consensus is that the growth rate will equal that of 2018—in other words, no growth. Normally, we would want to see growth rates in the high single digits, but the markets have been patient with what is believed to be transitory headwinds, such as the U.S. and China trade dispute.

Happy New Year! Welcome back to the weekly Market Update. With some people still on vacation, we expect average to below average trading volume on the S&P 500. As of Thursday’s close, we have only had one trading day in 2020, but it was a positive one with the tech heavy NASDAQ leading the broader indexes, up 1.33%, followed by the Dow Jones Industrial average posting a gain of 1.16% and the S&P 500 increasing a respectable .84%.

Going back to the beginning of the year, most analyst were pessimistic thinking the markets would continue the decline that began September 20th, 2018 and ended Q4 with a negative -13.97%. However, that is not how the year turned out. Instead, the markets rallied and as of Thursday’s market close, the S&P 500 is up 27.86% YTD.

The National Bureau of Economic Research (NBER) is the institution that officially determines the peak and trough of the U.S. economic expansion. In other words, they establish when the economy enters and exits an expansion and recession.  

The Holiday Season officially kicked off last Friday with online sales reaching $7.2 billion, the second largest shopping day ever, coming second only to Cyber Monday last year[i]. The average person spent $168, an increase of 6% from last year.

By now, most investors are aware that the S&P 500 is doing phenomenal this year. As of Thursday’s close, stocks are up 25.88% Total Return (including dividends) compared to its historical annual average of about 10%. With such a strong year, investors are beginning to think the markets have gotten ahead of themselves.

This week Disney launched its much-anticipated streaming service called Disney+. This new revenue source for Disney is designed to compete with the other streaming services such as Netflix and Apple TV+. However, Disney has a stronger competitive advantage than their close rivals in this space.

We have been making the case that the U.S. economy is doing just fine and the equity market is not overvalued by conventional metrics. This week it was announced that the U.S. economy grew at an annualized pace of 1.9%, above what most economist thought. On the market side, the S&P 500 is trading at 16.7x next year’s earnings; the 25-year average is 16.22x[i]. We have positive growth in the economy and the markets are healthy, therefore we don’t think a recession is likely in the near term.

In last week’s Market Update, we discussed the importance of this earnings season. For most of the year, there have been two school of thoughts; either things are not going well in the economy and a recession is near or the growth in the U.S. economy is not great, but it is still moving forward and a recession is not imminent.

We are three weeks into the new quarter and all eyes are on earnings season. Our start of the year target price for the S&P 500 was 3100 by year end, which is about 3.4% from today’s level. The S&P has tested our price target a couple of times and has been met by resistance.

The U.S. markets closed out the 3rd quarter and posted strong year-to-date (YTD) returns. The S&P 500 closed out the quarter up 20.5% YTD (including dividends), while the Dow Jones Industrial Average posted gains of 17.5% YTD (including dividends).

In last week’s Market Update, we discussed the Fed cut and low yields. We wrote about the low and flat bond yield curve and low yields on the S&P 500, which have driven investors to stocks that have paid an attractive, reliable and increasing dividend. We also introduced the alternatives asset class; another area that we think will benefit from the current yield environment. The three main asset classes are: stocks, bonds and cash; alternative assets are everything else, such as private equity, private credit and private real estate.

Fed chair Jerome Powell and the rest of the Federal Open Market Committee members concluded their scheduled two-day meeting on Wednesday. As expected, the Fed cut their short-term interest rate target by 25 basis points to 1.75%-2.0%.

It is with a heavy heart that we announce of the passing of Surevest client, Andrew Lee. He passed away Easter Sunday April 21st 2019 at age 23. Four years earlier he was diagnosed with a rare kidney cancer, hereditary leiomyomatosis and renal cell cancer (HLRCC), which currently has no known cure. Doctors told Andrew he may only have a year to live. With this news, Andrew and his family immediately looked for any new clinical trial which might help him. Andrew was referred to The National Institute of Health where research through clinical trials is having some success for HLRCC. 
Andrew volunteered for 7 different experimental trials, sometimes being the first one to receive the new treatment. Andrew approached each clinical trial with a positive attitude. More incredible is what Andrew created during his short time; Driven To Cure.

The second quarter earnings results are wrapping up and the numbers are better than expected. At the end of the second quarter, the consensus believed earnings would decline in the S&P 500 by -2.7% (Year-over-Year)[i]. As of market close on Thursday, 96% of companies had reported their numbers and it appears the final number will not be as bad as analyst thought.

On Wednesday the bond yields inverted for the first time since 2007 causing a big down day in the markets. Traders and algorithmic programs began to sell even though the inversion happened for a brief period and closed without the inversion. The Surevest Investment Committee does not believe investors should panic as we will discuss this this week’s market update.

The U.S. equity markets started the week with a strong sell off due to China’s retaliation to President Trump’s tweet last week, which said the U.S. would put 10% tariffs on $300 billion of additional imports from China. Out of the $550 billion the U.S. imports from China, there is currently a 25% tariff on $250 billion.

The Fed concluded its fifth scheduled Federal Open Market Committee (FOMC) last Wednesday and delivered a mix message that caused a late day sell off on Wall Street.

The buzz on Wall Street for the next couple of weeks will be on earnings results. The markets are paying close attention if companies are beginning to feel the affects of the U.S. and China trade dispute. According to FactSet, at the beginning of the quarter, analyst expected earnings decline for the S&P 500 of -2.7%.

We hear about the Federal Reserve (the Fed) in the financial news all the time and we have written about the Fed in our weekly Market Updates.  Most investors realize that the Fed is important, but they are not aware of the details on how it operates.  Therefore, we thought it would be a good idea to take a step back and describe the basic structure of the Federal Reserve.

As the first six months of the year comes to an end, stocks globally have returned excellent numbers. As of Thursday’s market close, the S&P 500 is up a little more than 16.5%, while emerging markets are up 9.2% and Eurozone equities and Japanese stocks have increased 15% and 9.8% respectively.

The flight to safety continues in the bond market, pushing the U.S. 10 Year Government Bond to 2017 levels. Normally a bond rally like the one we have seen leads to a sell off in equities. However, that is not what we have seen; in fact, the S&P 500 has increased 2.17% in the last week.

While most people are fretting about market volatility and the China trade war, at Surevest, we are focusing on the things we can control and the issues that impact our client’s long-term wealth. We are just one tweet away from a 10% rally or a 10% decline in the S&P 500. Either way, looking out 5-10 years, that move will be meaningless to your ability to tap into your portfolio as a source of income to fund your lifestyle.

As the trade war with China heated up this week, investors rushed to safety with the 10-Year U.S treasury hitting its lowest level since Nov 2017 with a yield of 2.3% yesterday.

Our view remains that a trade deal eventually gets done, but not as fast as most would like. The potential for a 25% Tarif on the remaining $300 billion of Chinese imports has increased and ultimately could result in about a 0.5 to 1% hit to U.S. GDP; potentially twice that to the Chinese economy.

The trade war has been dominating headlines this week, so we wanted to share a few thoughts and insights. First, a little background… The idea behind Free Trade is we should all specialize in whatever we can do better and cheaper than anyone else and then trade to get the things others produce more efficiently.

Just last week, Wall Street was celebrating a new milestone of fresh market highs, but the high quickly came to an end following a weekend tweet. The possibility of a trade war has been on investor’s radar for about a year, but the market has mostly been discounting the risk. The consensus is that the current administration and China have been playing hard ball, but that they would reach an agreement.

It was an eventful week on Wall Street with new records set as the S&P 500 topped its previous September highs.  The major index closed at 2945 for the first time in history this last Tuesday.  Among the reasons for the optimism is a better than expected earnings season so far. 

With the NFL draft upon us, I thought it appropriate to write this quick note to the NFL hopefuls and draft prospects who eagerly wait to hear their name and have a chance to play on Sundays.  For most of you young men, the journey has been a long one.  You have been involved with football since you were a kid, endured grueling training and practices at both the high school and college levels and now it is time to reap the fruits of your labor.  More appropriately to get a taste of the fame, financial security and lifestyle afforded to those who play at a high level in the League.

It’s been an uneventful week on Wall Street, with the S&P 500 trading flat through Thursday’s market close. On the fixed income side, the U.S. 10-Year Treasury is trading just below a 2.5% yield.

It was not too long ago that the markets were talking about rising yields and the competition bonds would be for stocks. It was not too long ago that the markets were talking about rising yields and the competition bonds would be for stocks. While yields were on the rise, the narrative was subjectively doubtfully on the outlook of investors taking on equity risk for only an incrementally higher expected return.

What a way to start the new year; the major world equity markets finished the first three months with strong returns. The tech heavy NASDAQ Composite Index led the way with a return of 16.49% for Q1 2019, followed by the S&P 500 at 13.07% and the Dow Jones Industrial Average came in with a gain of 11.15%. The rest of the world was not far behind, the MSCI All World Index ex US had a positive return of just over 9.5% and the MSCI Emerging Markets Index had a respectable 9.54% increase.

Lyft has been one amazing investment-For Private Equity that is. Look no further than Sand Hill Rd. tech monster, Andreessen Horowitz. The $60 million investment they made in 2013 could pay off at about 1.6 billion tomorrow.

The U.S. markets had a strong week, with the S&P 500 up more than 2 percent and hitting a four-month high. For now, the markets are more at ease with some of the worries about Brexit and the China trade talks.

Robert Luna, Surevest CEO & Chief Investment Strategist, and Breanne Polonia, Wealth Advisor & Women’s Wealth Transition Specialist, hosted a private event in San Diego to discuss the latest economic and market news. 

In the short run, a pullback is likely, but we would view that as an opportunity to put cash to work. The S&P 500 has started out strong in 2019, up 10.45% on the year. The move has been rapid. Normally when you hit technical resistance such as a 200-day moving average, people naturally look for an excuse to take profits.

Robert Luna, CEO and Chief Investment Strategist at Surevest, was flown out to New York to share his insights on the markets and earnings season. So far, this year is off to a great start, with the U.S. markets up mid-to-high single digits. Does the economic data support the current market increase and are valuations in line with what should be expected this year?

The Federal Reserve concluded its first meeting in 2019 and kept its target between 2.25 and 2.5 percent.  Over the last year, the Fed and the markets have been battling over the path of interest rate hikes.  On one side, the Fed has cited strong economic growth and made its case for three hikes in 2019, but the market had another opinion.

The first month of the year is turning out very different than the last month. We still have 5 trading sessions in the month, but so far it is looking promising for the U.S. markets. The S&P 500 has returned 6.25% as of early trading on Friday morning, while the Dow Jones Industrial Average is up 6.29% and the tech heavy NASDAQ has increased the most at 7.53% for the same time period.

Earnings season is upon us once again, and the US markets have reacted favorably so far. The broader US indexes were up for the week as of Thursday’s market close; led by the NASDAQ Composite with a return of 2.59%, followed by the S&P 500 and the Dow Jones Industrial Average at 2.07% and 1.92% respectively.

We are into the third week of the new year, so there has understandably been a lot of talk about setting and keeping to those New Year’s resolutions. Each year, many of us strive to achieve a healthier lifestyle, which can present its own challenges since many of us are living our lives on the go. One of the resolutions that I aspire to achieve this year is to feed my family healthier meals. Of course, that is easier said than done, especially when you have picky eaters to feed.

The pessimistic narrative on the Fed and China that drove the market to new lows a couple weeks back has changed to a more optimistic tone. This new tone has created a sharp bounce from the lows we witnessed on December 26th.

If you are like many tax-conscious individuals, you are probably making contributions to a retirement account. For those contributing to an IRA, there is still time to make 2018 contributions to your Traditional, SEP-IRA, or Roth IRA account. The deadline to make these contributions ends on April 15th, 2019 for traditional and Roth IRA’s. However, for those contributing to a SEP-IRA, the contributions are due before the individual files their taxes, which for those who are filing an extension, can be as late as October 15th.

Happy New Year everyone! It’s that time of year when inspiration is abundant and optimism is high. No more overpriced coffee in the morning! No more slacking on those gym visits! I’m with you on all of that, but I wanted to spend some time talking, on a small home office and small business level, on how we can improve on our bad IT cyber-security habits.

Once the dust settles, just like every other market correction, investors will look back and say I should have bought that stock when it was trading so low. Luckily for our clients, we are looking to be opportunistic on your behalf.  In our view we are getting close to levels where we should see some support and we think another 6-8% downside would be a gift for buyers. Surprisingly of the hundreds of clients we have, we have heard from less than a handful during this volatility.

California Wildfire Relief

It has been another eventful week in the U.S. and global equity markets.  As the year ends, it appears we may not be getting the much-anticipated Santa Claus rally.  On the contrary, this year for the holiday’s the market has brought us uncertainty.  However, we see the volatility as an opportunity to find good investments that are now trading at a discount to their levels from a few months back.

Market volatility continues in the U.S. equity markets this week.  The broader indexes saw a spike higher on Monday after optimism on a potential U.S. and China trade deal, but all the gains were given up on Tuesday when the market lost hope the dinner between President Trump and President Xi Jinping would lead to a productive negotiation between the two nations.

Former Surevest Intern Earns His “Mouse Ears”

This week we will discuss the third and final pillar of Surevest’s investment philosophy—a rules-based decision-making process.

Meet Jenny, our new Client Services Associate, who joined the Surevest team this October.

Over the last few Market Outlooks, we have been discussing Surevest’s investment philosophy that are underpinned by three pillars. This week we will be focusing on the second pillar: Data Driven Approach. 

In last week’s Market Update we introduced the three pillars that drive Surevest’s investment philosophy.  Now we will dive into a little more detail on pillar one.

Halloween fun

Halloween fun

Earlier this week the investment committee at Surevest sent out a note to our clients.  The goal was to answer questions that investors had considering the increase in market volatility and decrease in price of the major U.S. indices. The media outlets thrive when things begin to move in the market because they make for…

As a problem solver, I wanted to figure how to fix it but after a few days I realized just how big the problem really is. How can a community change with so much corruption, vulnerability to natural disasters, low literacy rates, and almost 80% of the country’s wealth is owned by five families?

As a problem solver, I wanted to figure how to fix it but after a few days I realized just how big the problem really is. How can a community change with so much corruption, vulnerability to natural disasters, low literacy rates, and almost 80% of the country’s wealth is owned by five families?

On CNBC Closing Bell, Robert commented on the importance of not forgetting how valuations play a significant part in the outcome of an investment.  “I’m always afraid to say despite valuations, I think valuations matter a lot” said Robert when discussing the earnings report for Microsoft. 

Over the last week, the U.S. equity markets have experienced an increase in volatility. The VIX, which is known as the “fear index” spiked up from 12 to about 25 in a very short period.  CNBC Asia, turned to Robert Luna, Surevest CEO & Chief Investment Strategist for answers. 

Over the last 22 months, we have sent our son emails describing his first experience at Disneyland, his first steps and the first word he uttered.  We have found this to be fun for us and we hope to share that email address with Andy when he is older. 

. Cable service seems to have lost its stranglehold on the American public and has become the new Kodak. So, is everyone jumping on the cord cutting and taking out their cable boxes? Is this now a world ruled by the Roku, Apple TV, or Fire stick? Or is it smoke and mirrors?

There was a lot of hoopla around the new USMCA trade deal announced this week. We believe the political capital is worth more than the deal however.

In Arizona, having an Alternative Fuel vehicle allows you not only access to the carpool lane during restricted times, it also means a reduced annual car registration fee to just $30!

U.S. Markets are sitting close to historical highs driven by good economic data.  U.S. real GDP for the second quarter is at 4.2% on a seasonally adjusted annual basis, job numbers are strong, and inflation seems to continue to be in check. 

The Vault is one of the most user-friendly items The Nest has to offer. Clients find this very useful as far as keeping all their personal, business and Surevest related documents in one place. Yes, you can even upload your passport, driver’s license and social security card.

Today, I want to share another tax effective strategy for donating which is available for charitable individuals of all ages (not just over the age 70 ½), and that strategy involves gifting highly appreciated securities to charity instead of cash.

The most important story this week impacting your money is the 10-year Treasury breaking above 3%.

This week contained an anniversary that forever changed the course of history. On Tuesday we remembered the 17th anniversary of the terrorist attack on U.S. soil.  In memory of those affected by the event, we dedicate this writing. Flashbulb memories are described as a recollection of an event so vividly that one can recall it…

In January the tax reform made a dramatic increase to the standard deduction, while also limiting some of the things you can itemize. So for those over age 70 ½ may feel the impact of their required minimum distributions (RMDs) a little more this year. If you are taking RMDs but don’t really want or need the money, a qualified charitable distribution (QCD) may be good way to distribute the minimum required amount out of the IRA, avoid the penalty, and satisfy your charitable intents.

Another record was set on Wall Street this week when  Amazon (AMZN) became the second company in the world to breach the $1 trillion market capitalization mark. Sorting through old media clips, I came across a bold prediction made by Robert Luna, Surevest CEO and Chief Investment Strategist.

The Emerging Markets have received a lot of attention lately. This week, the country of India was presented with an investment endorsement from Warren Buffett’s Berkshire Hathaway (BRKA). 

In 1982 the chances of having twins was three per 1,000 births. I’m one of those three. The number of babies born with Down syndrome each year? One in 6,000. My little sister, Diane, is one them. The number of living kidney donations estimated to be completed in 2018? Nearly 6,000. We are one of them.

For the past couple of months, I was here at Surevest, as an intern – this was my third summer in a row working with the team.

A new record has been set on Wall Street despite fears of a yield curve inversion, emerging market distress and negative political news for the U.S.

The U.S. equity markets have had mixed results over the last five business days due to the volatile ride of the Turkish Lira currency crisis.

If you decide to use some of your wealth to make the world around you a better place, then you must also decide on a vehicle for making your charitable donations.

The broader U.S. equity indexes were in positive territory over the last 5 business days.  The S&P 500 price return was 1.14%, while the Dow Jones Industrial Average had a gain of .99% and the NASDAQ Composite Index had a small increase of .41%.

The world central banks were busy this week. The Federal Reserve, the Bank of England, the European Central Bank and the Bank of Japan announced their latest views of the health of their respective economies.

Surevest would like to help two of our clients, Tom and Cathy Brock, welcome their new grandson, Graham Jefferson, to the family. Congratulations on your first grandchild, Tom and Cathy!

This week, we wanted to share the story of Surevest clients Dr. Jennifer Hall and Dr. David Mount, two retired University of Arizona molecular and cellular biology professors that found an innovative solution to a problem that many Arizonans face in the summer – a high water bill.

Caroline Ciocca, president and CEO of Make-A-Wish® Southern Nevada, and a client of Surevest, shared with us a unique partnership they have with Las Vegas-based Allegiant Air.

After 3 long months, on March 26, 2018, I passed an exam administered by the College of Financial Planning which granted me the Financial Paraplanner Qualified Professional™ (FPQP™) designation.

This week, we wanted to share the story of Surevest client, Don Headley, MD, a former surgeon at St. Joseph’s Hospital in Phoenix.

This Father’s Day I decided to start a new tradition by planning an annual “Daddy Daughter” trip. My daughter Bella turned 10 this year…boy time flies!

This coming Tuesday, August 7th, is National Night Out, an annual community-building event that has been taking place in participating cities since 1984.

A couple weeks ago, I enjoyed one of the best vacations of my life.  We were celebrating my parents’ 80th birthdays.

For the last 10 years, I have been sponsoring young children through Compassion International, and this past year, I decided to sponsor a new child in Haiti, Watson Don, through the Chanje Movement. When I signed up to sponsor Watson at the women’s conference at my church, they mentioned that I could go on a mission trip with them to meet him in person. I have always wanted to serve on a mission trip, but I never seemed to find the right opportunity.

As I sit here after the Vancouver half marathon, tired, achy, and sore, I am still in disbelief and incredibly thankful for the journey that it took to be able to complete something like this.

Surevest CEO and Chief Investment Strategist, Robert J. Luna, shares our Equity Barbell approach to today’s market.

With a fully valued market, monetary policy headwinds and trade tensions, we are expecting to see a very similar second half of 2018 to what we witnessed in the first. We are expecting increased volatility with the major averages not straying too far from their current price levels.

Well, it is definitely a lot of work, but it is also a lot of fun! There is never a dull moment in our house and I enjoy each new stage my four-year-old boys go through more than the last. The first two years were by far the toughest due to the sleep deprivation in year one and then trying to keep two bruise-prone toddlers safe in year two.

“Who here wants to learn about making money?” This is the opening line that our very own Senior Wealth Advisor, Peter Burnham, CFP®, has used over the last three years when teaching underprivileged high school students in Washington, D.C. about the basics of money and investing.

As we prepare for the 4th of July festivities, I wanted to share what has been my favorite 4th of July destination since I was a kid. The Balboa Peninsula in Newport Beach, CA.

Located in Boca Park Fashion Village in Las Vegas, NV Surevest clients, Seifu Haile and Messert Zeleke run Bistro Blends of Napa Valley Inc.

As the week comes to an end, there are two items that are worth noting. The first is regarding our economy and continuing escalation of global tariffs. The second is a sector rotation shift that has been identified in U.S. markets.

Director of Trading and Research, Luis Galdamez, recently celebrated a graduation for his wife, Denise who, received her Bachelor’s of Science in Nursing degree from California State University Dominguez Hills.