State of the Market and Economy Report

2018: State of the Market and Economy Report

We are halfway through January, and this week the Ty J. Young, Inc.  Annual “2018 State of the Market and Economy Report” will be released as a “LIVE ONLINE EVENT.”  If you registered for the event on 1/18/18 and watched it online, or you watched it after-the-fact as a recording by request, then you heard the CEO’s talking points on (I) the index annuity industry, (II) the market and the economy, and (III) what to do for 2018.

I. State of the Industry

Despite the unprecedented upward surge in the stock market, more and more people are choosing principal protection products, such as the index annuity, for their portfolio.  Whether they (A) are moving some of their winnings over the last several years off the table; or, (B) they rightly fear that markets eventually change directions, and better to be safe with some, or all, of their money than sorry. They are now realizing we are in a mature bull market, and that at some point they need protection for their portfolio.

The Index Annuity industry, therefore, is showing strong and robust numbers given the market environment:

  1. $96.9 billion in annuity business in 2016 … over $100 billion in 2017.
  2. A.M. Best – the insurance rating agency – shows some of the strongest numbers recorded for the leading insurance carriers in the industry.
  3. Index annuity business has increased 4% or more each of the last 5 years.

 

II. State of the Market and the Economy

This beaten horse has long been dead – but the news is so good it bears repeating

The Stock Market has been going up for years since the 2008 banking collapse, but nothing like the first year of the Trump Administration:

11/22/16                              –              Dow 19,000         –             2 weeks after the election

1/25/17                                –              Dow 20,000

3/1/17                                   –              Dow 21,000

8/2/17                                   –              Dow 22,000

10/18/17                              –              Dow 23,000

11/30/17                              –              Dow 24,000

1/4/18                                   –              Dow 25,000

1/16/18                                –              Dow 26,000         –              Although it may have slipped back below 26K by the time we went to print.

  1. It is the GOAT of all bull markets: the Jordan, the Bird, the Andretti, the Brady, it’s Babe Ruth … by the numbers, it is the GREATEST OF ALL TIME!
  2. It has seen a 340% gain since 2009. Bigger than the 267% gain from 1946-52 … Bigger than the 229% gain from 1982-87 … Bigger than the 302% gain from 1993-2000.
  3. And it is not just the Stock market screaming upward, it has also been US GDP and the American economy! A) GDP is up; B) Imports up; C) Exports up; D) Earnings up; E) Revenue up; F) Employment up; G) Regulations down; H) The Tax Reform Act will lower your tax bill … don’t you just want to say, “It’s Morning in America” again!

 

III.       What to do for 2018?

With such great economic data, the market is just calling for you to put more money in … right?

Maybe, but as we are seeing with index annuity premium each year, not just our clients but nationally, people are intuitively realizing they need a safe option for a large portion of their portfolio – one where you go participate in the gains of the market, but none of the losses.

There are “3 Unique Investing Strategies” to help you achieve your portfolio protection plan:

  1. Buying Low and Selling High. This seems obvious, but it is unique because hardly anyone ever does it.  Most get caught in the “irrational exuberance” of the market – the herd mentality that drives you to keep buying even though the market has been going up for some time.  A good index annuity has out-performed the market in the last 10 and 20-year periods – isn’t it time to take some profits off the table while you are still … profitable?
  2.  Applying the ‘Rule of 100’ to your money. Most people are out of cash, they are FULLY invested in this bull market.  Many are buying bitcoin, watching the talking heads and looking for the next run up to Dow 35,000.  Hedging, asset allocation, even diversification … forget it, let’s roll the dice!   The second unique” strategy returns to fundamental principles of safety, with a reasonable rate of return.  That means applying the “Rule of 100” to your portfolio.  It’s a tried and true formula that is only unique because, like ‘buying low and selling high,’ no one ever does it anymore.  Whatever your age is, subtract from 100, and that is the percentage of your portfolio you should have in safer investment vehicles.  CD’s, Treasury bonds are safe, but the one with best historic average rate of return in the GIC – the “Guaranteed Insurance Contract” – known as the Index Annuity.
  3. Taking advantage of the ‘Bonus-on-Bonus’. The third and final unique strategy for 2018 is for existing Index Annuity account holders, and that is getting the “Bonus-on-Bonus!”  This strategy is simple – a client takes their available 10% penalty-free withdrawal from their index annuity and opens a new account with it, one which offers a bonus when funded.  That means an extra 4-5-7 even potentially a 10% bonus on your money (depending on the type of account opened).  The tried and true is always the best bet:  safe, simple, with a reasonable rate of return.

 2018 has started with the market and the economy continuing their flight to the moon.  Now is the time for unique strategies that are the safe, simple way to grow your money, with a reasonable rate of return.

Call 877-912-1919 to speak with our expert advisors at no cost or obligation!

Bull Market May Never End

Bull Market May Never End

One constant for the last 7 to 8 years has been the ever-increasing value in the U.S. stock market.  There have been hiccups along the way, but since the Dow hit bottom in March 2009, the market has been screaming to new heights every year.

The Trump election seems to have made it soar upward faster than ever before.  Just consider the data:

**Record high’s weekly, in some cases daily!**

11/22/16              –              Dow 19,000

1/25/17                –              Dow 20,000

3/1/17                  –              Dow 21,000

8/2/17                  –              Dow 22,000

10/18/17              –              Dow 23,000

11/30/17              –              Dow 24,000

By every measurable standard, this is the greatest bull market of all time!  It is the Tom Brady, Michael Jordan and Babe Ruth of money!  It is “The GOAT!”

We know this just by comparison. Consider these past bull markets:

1946-52                –              267% gain on the S&P

1982-87                –              229% gain on the S&P

1993-2000            –              302% gain on the S&P

2009-2017            –              330% gain on the S&P

Here are the reasons why the market continues its record-setting run, and some reasons why it may finally be ready to correct.

Top 3 Reasons the Market Remains in BULL Territory:

  1. The ‘Trump-Bump’. The Trump-Bump has many factors, some of which includes massive deregulation and the expectation of fundamental tax reform.  The tax reform bill has reached the conference committee between the House and the Senate, and seems poised for passage.  It’s best features include lower, flatter rates; cutting business tax rates; increasing child tax credits; and, eliminating loopholes.  It should be an economic boon for the country.
  2. The Rise of the ‘Non-Fundamentals’. The “Old Fundamentals” of Wall Street that analysts used to look for market trends included P/E ratios, the consumer price index, the rate of inflation, jobs reports, unemployment, and housing starts, among others.  All of these and more were, and some still are, important in trying to figure out the direction of the market.  But we developed the list of “NON-FUNDAMENTALS.”  They are more important now today than perhaps the old Wall Street numbers game and they consist of the big three: (1) Sentiment, (2) Safety, and (3) Strength.  Public SENTIMENTthe public BELIEVES in the economic-friendly changes Trump has promised. SAFETY – our system is “safer” than our global competitors.  Why?  We have the deepest capital markets, innovation, and the rule of law. And, STRENGTH –  despite the last 8 years and the drag on capitalism, the U.S. remains the strongest nation on Earth.  The dollar remains the world’s reserve currency (for now).  And keeping your money in U.S. markets is a smarter bet than China, Europe and elsewhere.
  3. The ‘old’ fundamentals aren’t doing so bad, either. Last quarter 70+% of corporations posted reported earnings EXCEEDING analysts’ expectations. Profits are up. Revenue is up. GDP is above 3% for 2 straight quarters and heading towards the best year in over a decade. Inflation is elevated from 1.9% to 2.2% this past month, but not a runaway problem like the early 1980s. Housing starts and sales are far and away back to pre-2008 levels in terms of pricing and market health and standard measurements of job growth and the unemployment rate are steady.

 

What are the reasons we could see a correction?  Most analysts have been shocked we have not seen a correction at some point over the last 8 years. History and reason dictate one should be coming soon.

What Risks to a Market Correction Could Bring the “Bear” Out from the Woods?

  1. What goes up MUST come down … right? History dictates we must have a correction.  This market has been supported by 8 years of money printing … 8 years of Fed Reserve easy money interest rates … 8 years of quantitative easing … This was artificial stimulation. Therefore, we have been due for a correction for some time.  Even a 5% correction will be a 1200-point drop on the Dow.
  2. The fundamentals don’t support a “forever” bull market. Some market fundamentals look good.  Others?  Not so much.  Consider:  Labor participation rate lowest in decades at 62.7%. Individual investor accounts cash holdings at an all-time low.  This means investors are “all-in” with no more cash to put into the market. Fewer companies in Dow, no diversity in stock purchases.  In 1997, there were 7300+ companies traded on the Dow, today there are 3600 and dropping.  Longtime analyst Mark Hurlburt has stated this means “…Harder for your money-guy to construct a broad-based, diversified portfolio that can perform better than broad-market index fund.”
  3. Geopolitical risks – the ‘known’ ‘unknowns.’ A)  China – you cannot trust their numbers or their markets in a communist state B)  Russia – what will the Russians do next in Eastern Europe or the Middle East C)  Europe – Europe’s most important player, Germany, has an election crisis and the continent is devoid of leadership D)  Middle East – this one requires no explanation E)  North Korea – this one also requires no explanation.

Those are just a few.

Analyzing the market for the last 8 years has been pretty simple – you just sat back and watched it go up, up, up.  The problem with a long bull market is that you can’t predict when the correction is coming, and the longer the bull runs, the deeper the bear strikes.  Losses will match or exceed gains when it turns south, and that can come at the worst possible time.  The smart money puts at least some of those gains into safe investment vehicles, in order to prevent a 2008-styled portfolio apocalypse.

Help us help you by calling now! Every single day, our advisors help people protect and grow their money. Speak with your Ty J. Young Inc. advisor today for no cost and no obligation. 877-912-1919.

Business Leaders Begin to Worry

Business Leaders Begin to Worry

Behind the record-setting bull market was the belief that the Trump agenda would reduce the regulatory state, pass tax reform, and create a pro-business climate that drives stocks upward well into the future.

Those expectations are beginning to change… there is fear the agenda may not be enacted.

Although Congress’s tax reform plan was met mostly with praise from conservative circles this week, that has not changed the growing fears in the business community.  As reported by Marketwatch.com, the CFO Signals™ Survey is showing a dramatic shift to pessimism by the leaders of companies in the U.S., Canada, and Mexico with revenue exceeding $1 billion per annum.

Overall, the data reflected a 15% drop from 44% optimism to 29% optimistic in the last quarter regarding future revenue.  In the manufacturing sector, the decline was even steeper, going from 52% optimism to 22% optimistic.  These were some of the largest shifts downward in the survey’s history.

The big risks to the economy we have listed many times before, but with each passing month, they are now apparently impacting the leaders of our nation’s largest corporations.  They include but are not limited to:

I. What market risks have American business leaders growing more pessimistic?

  1. Geo-political risk. This is repetitive, but obviously the growing verbal tit-for-tat between President Trump and North Korea has increased the risks of war in the Pacific Theater. Even without war, the increased costs of insurance, of changing distribution points and shipping, are already affecting the bottom line costs of global supply lines.  That, in turn, will raise the costs for consumers.
  2. Stalled Trump agenda. While most blame the incompetent Republicans in the Congress, assigning blame most agree is a fruitless exercise for business leaders.  The bottom line (which affects their bottom line) is there is little visible hope for meaningful tax reform on the horizon. If we get something, will it be too watered down to have the dramatic impact on the economy that they were hoping for?  The odds are something may pass by late 2018, but that is just window dressing for the economy.  While high corporate taxes are always passed on to the consumer, they still drag down sales, since the consumer buys less of something that costs more.  Lowering the corporate tax rate had been a high priority… CEO’s can now only hope they see some meaningful reductions.  Regulatory burdens have been lifted, but not broadly based – mostly helping just the energy sector.  The hopes of repealing Obamacare have been dashed.  The expected surge in GDP that would come from free market legislation has instead become the realization that little, if any, of a pro-growth agenda may pass.
  3. Trump’s unpredictable responses to a changing environment. Does frustration with Chinese inaction on North Korea lead to a trade war?  Do relations with European countries affect trade or our commitment to NATO?  Does debate over a border wall upend trade with Mexico?  The “Trump Factor” – so positive for the business climate from the election until recently – now appears to be an issue of uncertainty, and business leaders loathe uncertainty.
  4. Capital markets negatively impacted. So far a weakening dollar has driven foreign money into U.S. equity markets, and there has not been a dollar liquidity issue.  But many fear continued Fed tightening (which may now be ahead of the inflation curve) and foreign competition that is highly motivated to diversify out of dollar holdings, will lead to a disruption in capital liquidity.

But shouldn’t there be cause for some optimism?  If a bill can get out of Congress, Trump will sign it, and the Congress has an incentive to do something positive before the 2018 elections.

II. What are the reasons for optimism in the market and economy?

  1. Geo-political risk has always been with us. The entire Middle East collapsed on President Obama’s watch, which temporarily drove gas prices up on multiple occasions during the last Administration. While there were dips along the way, the market has remained elevated for some time.  The Trump Factor and the degree of risk with North Korea are substantial, but so was the Russian invasion of Crimea.  Perhaps the risk wasn’t as great since the entire planet knew President Obama would not do anything about it, but nonetheless, we certainly have known that calamity could strike the country and our markets at any given time.
  2. Congress could actually do something right. They should be highly motivated to take action – since the midterm elections could be nasty if they don’t have something to show their constituents.  While media debate can provide the impression that the country is split on Obamacare, that is not the case in most Congressional districts held by Republicans, where the expectation of repeal was a clear majority.  Tax reform is near Biblical canon for the Republican Party, and to have talked about but not passed any serious tax legislation by 2018 seems impossible to fathom.  Bottom line, CEO concerns are real, but it seems almost impossible to imagine Republicans won’t pass something from the Trump agenda before the 2018 election.
  3. Trump’s unpredictability helps, not hurts, potential market and GDP gains. The public elected Trump as a disruptor, and wanted him to disrupt the Swamp in DC.  When he tweets or seems to create a furor that the mainstream media then attacks him for it – it gives comfort to 40-50% of the public that he is doing what they sent him to do.  In a deep sense of irony, the chaos created by Trump often encourages a large sector of the public in their daily routine, and that keeps them buying, selling, and engaging as they would in the marketplace.  Could he spark a trade war?  Of course, but most of the public knows what CEO’s ignore – any trade war can be damaging, but the US never loses in a trade war, everyone wants, and needs, to trade with us.
  4. Capital Markets will be just fine. Forward guidance from in-house analysis teams such as Putnam Investments shows no risk to liquidity or capital markets.  Fear over such disruption is usually unfounded, capital flows for the dollar benefit the US in either direction.  The liquidity fears relate to a system-wide collapse in 2008, which such risks are out there, but then every asset class will have collapsed, and there would be no safe haven (unless, of course, you invested in index annuities, which allowed our clients to safely avoid the 08 collapse).

CEO pessimism in the U.S. stock market and the U.S. economy is based upon well-founded fears, and you should consider safer investment allocation given those fears. There are good reasons to have comfort in our current state of affairs despite the chaotic social order we see on television.  However, at the same time, the market cannot go up forever.  At some point, genuine fear is proven correct.  Some of the most informed investors are further diversifying their retirement money to achieve greater levels of safety and volatility protection while still maintaining reasonable rates of return.  That is often achieved through diversifying into non-traditional safe money assets like the index annuity. Call 877-912-1919 to speak with one of our qualified financial advisors to learn more!