The Markets – The S&P 500 index finished August +3.03% bringing the year-to-date return to +8.50%. The Dow was +2.16% for the month bringing it to positive territory year-to-date at +5.10%. The bright spot in the markets is the NASDAQ which finished the month +5.71% and year-to-date +17.20%, according to the Wall Street Journal.
On August 21st the news broke that Michael Cohen, President Trump’s long time personal attorney, reached a plea deal for various violations of federal campaign finance laws and almost simultaneously Paul Manafort, Trump’s former campaign chair, was found guilty on several counts of bank fraud and tax evasion. How much did Trump know? How much will this affect his ability to govern through things like the trade deals? How much will this affect the mid-term elections? Will this lead to impeachment proceedings by the House of Representatives if they capture the house in mid-term elections? Who knows? We reserve the right to be smarter later. For now, only time will tell.
The CEO of one of the major banking centers stated “I didn’t vote for him, so I can enjoy the strong economy and favorable market outlook and not feel guilty”. Regardless of strong U.S. economic growth and the favorable market outlook of the banker, many remain wary of stocks. We attribute current modest valuations to investors’ concerns over rising interest rates, higher energy costs, tightening credit, trade wars, the afore mentioned political and criminal investigations, and the Russian efforts to influence out 2016 Presidential election.
Our economy’s growth rate recently accelerated to 4.2%, nearly twice its growth 21 months ago; our nation’s unemployment rate remains near historical lows at 4.0%, we don’t have enough skilled labor to fill open positions; American workers’ wage growth is accelerating; corporate earnings growth is strong; corporate capital spending is improving; the supply of publicly owned shares is shrinking due to corporate share repurchases; and publicly owned businesses are valued at an historically moderate 16.1 times earnings per share multiple that may soon become 15 times if stocks don’t begin to rise faster.
Keep in mind, that although markets seemingly have been on a tremendous run since the 2009 lows, they did take a breather here and there, and the average annualized rate of return since then is about 5.4% versus an average rate of return of 7% annualized since 1960.
During the latest earnings reports, 62% of the companies reported earnings and revenue that beat analysts’ forecasts, according to S&P Global Market Intelligence. In the absence of bad news, the trend upward in the markets should continue.
We decided to end this month’s WCM Marketwatch with some of our favorite financial quotes and quips: can you guess who is attributed with the ‘wisdom’ espoused?
- The most important attribute to predict if an individual investor will be successful is; Thirty Years’ Experience
<li?I believe in being different, questioning myself continually, about the fundamental premises of my investments
- Concentration not diversification is the way to make serious money and diversification is the way to protect
- Price is what you pay, value is what you get
- Be fearful when others are greedy and greedy only when others are fearful
- Cash is king
- I’m more interested in return of capital than return on capital
- An investment in knowledge pays the best interest
- Investing, what is comfortable is rarely profitable
- Invest in yourself, your career is the engine of your wealth
- It’s not how much money you make, it’s how much you keep
- Financial peace isn’t the acquisition of stuff. It’s leaning to live on less than you make
- The four most dangerous words in investing: “this time it’s different”
- You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re
not ready, you won’t do well in the markets
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