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Thursday, December 22, 2016

There is $1.3 trillion in outstanding student debt and in a recent study published in Forbes magazine (November 14, 2016), 53% of student borrowers say they would have done things differently if they could go through the education loan process again. The cost of tuition has doubled in the last 30 years far surpassing the rate of inflation often making student loans necessary. So for all of you last minute shoppers, here is a great idea - a 529 college savings plan for a child in your life. A 529 plan allows savings to grow tax-deferred and can be withdrawn tax free to pay for higher education expenses. The U.S. market is up 11% this year and expectations are optimistic for 2017. A 529 plan sure sounds like it could be a ho ho home run! Please watch the latest global perspective on the market.

Facebook Live Event Replay with Doug & Karyn (in case you missed it)

Wednesday, December 21, 2016

Right now, inflation expectations (like forward inflation rates) are up and the economy is doing better than earlier in the year. Looking forward, fiscal policy should move to the forefront of policymaking, with the Fed counterpunching. We think the outlook for rising inflation, better growth and a Fed set to respond means that we could see 3% for the 10 year UST before 2017 is out. Historically, a rough guide for the 10-year note is parity with nominal GDP growth. We have not been at that mark for a long time. But in the past week, we can see that while inflation expectations have ratcheted up real yields (as measured by the 5*5 forward breakeven inflation rate) is up more: this is a good start back to where we traditionally have been. Looking longer term, if the Fed sticks to a 2% target for inflation, and growth returns to 2%, we could be looking at a 4+% note yield which will reflect a better macro economy with deflation risk vanquished and growth is back to more moderate rates. There are arguments against rising yields: demographics favor saving, low global yields are a bit of an anchor on the US market. We view these arguments as regulators, not brakes. - Special Guest Blogger: Tim Kearney

Facebook Live Event Replay with Doug & Karyn (in case you missed it)

Friday, December 16, 2016

When planning for retirement there are a number of expenses to plan for – housing expenses, healthcare expenses, food expenses, transportation expenses, even funeral expenses. But what about the presents?! According to a 2012 AARP survey 53% of grandparents give their grandchildren more than $250 and 25% give more than $1000 each year. Grandparents just love to spoil their grandchildren. Yes, a child’s delight is worth more than money but your budget may disagree. So add a little orange money to your retirement plan so you can spoil away. Please see page 82 of the Voya Global Perspectives™ book for some insight into retirement budgeting.

Thursday, December 15, 2016

Fed Chair Janet Yellen delivered a few lumps of coal to the market yesterday with messaging that was more hawkish than expected. Yellen raised short term rates by .25 basis points as expected but added an additional hike to the dot plot, forecasting three rate hikes in 2017. As a result, bond yields surged, the dollar strengthened and markets sold off. However, today markets resumed their post-election rally, refusing to let the Fed bah humbug their enthusiasm. Higher rates are a boost for the financial sector but a stronger dollar is the corporate earnings Grinch, as most companies sell products and services overseas. The market is letting this pass for now instead focusing on the potential for a significant improvement in economic growth under a new administration. Today’s economic releases are also helping markets – regional Philly and Empire manufacturing indices leaping, home builders sentiment soaring to an 11 year high and weekly jobless claims falling - to stay off the naughty list. Please watch the strength of the U.S. dollar vs. major currencies on page 51 of the Voya Global Perspectives™ book.

Wednesday, December 14, 2016

The contours for 2017 are quickly taking shape, starting with improved expectations. Already before the election, economic data was improving in the USA. Now that modestly better performance is being enhanced by a nice up-tick in expectations. There have been recent increases in the University of Michigan Sentiment and Expectations for the Future indices; NFIB Small Business Optimism Index and the IBT/TIPP December Economic Optimism Index. The outlet for the improved economy into the markets can come in a few ways. If growth can be sustained near 3% for a couple of years (the average of the past five years is just 2% p.a.), that will enable companies to finally expand sales rather than solely rely on cutting costs. An expansion of the top line can prompt investment as well as a response from the consumer. It’s important to remember that consumption is based on permanent changes to consumer incomes. Permanent incomes are largely driven by the ability to change jobs, see improvements in pay and permanent tax cuts. This is where Fed Governor Janet Yellen’s guidance to allow the economy to ‘run hot’ and allowing the unemployment rate to dip further comes into play. With the unemployment rate down to 4.6% wage indicators are beginning to rise already and that process should continue. - Special Guest Blogger: Tim Kearney

Tuesday, December 13, 2016

At the beginning of 2016 oil prices plunged into the twenties as the worldwide supply glut finally came face to face with slowing global demand. The demand for oil has been steadily increasing, just not as fast as supplies that were significantly boosted by fracking technology. Despite a lot of market manipulation, supply/demand price pressure eventually comes home to roost and roost it did, unnerving investors and markets. Now the price of oil has surged into the fifties based on expectations of a new production cut by OPEC, the highest price since July 2015. The OPEC countries may or may not comply. And it is unclear how fast or by how much U.S. shale producers will step up supply. But going into 2017 the price of oil may not be the supply side story as it has been in the last year. A potential uptick in global growth could increase demand more than anticipated. The potential for pro-growth policies has already unleashed the market’s animal spirits. A corresponding acceleration in actual economic growth could translate into a moderate uptick in oil prices for 2017 on top of the prices we have currently. Please keep an eye on oil rig count, which has already been moving higher on higher prices, page 72 of the Voya Global Perspectives™ book.

Friday, December 9, 2016
Wide variations in sector returns have generally been the norm; at the end of the first quarter, healthcare and consumer discretionary are leading, while utilities, energy and financials have stumbled.

So far this year all sectors in the S&P 500 are up with the exception of healthcare. As the rally rolls on, healthcare has been left behind. Investors are worried that drug prices will be cut by the new administration. Healthcare costs and specifically soaring drug prices have been in the crosshairs of many politicians this year. A study published in August by Fidelity estimates that people retiring in 2016 will spend $260,000 on healthcare in retirement and that the increase over the estimates from last year are the biggest on record. The costs increases surpass the rate of inflation and are one of those unknown variables that keep investors planning for retirement up at night. The best thing to do is start saving early to get a jump on these rising costs. Everyone likes Ramen noodles occasionally but you are going to want a little variety in your retirement menu. For 'Sector Total Returns', please see page 18 of the Voya Global Perspectives™ book.

Wednesday, December 7, 2016

The worldwide populist movement continues push against the global political system. This weekend, it was Austria and Italy. While there was some comfort taken from the Austrian presidential election, the big news of course was a resounding defeat for PM Renzi, though not as much as the “No” as the size of the “No”. This global discontent interestingly is happening as the global economy continues to improve. The November PMI reports show continued improvement. At an aggregate level, the JP Morgan Global Manufacturing PMI ticked to 52.1, the highest in two years. The PMI data are clearly showing that the global economy has picked up since the Spring 2016. Of major economic countries, only South Korea and Mexico are faring worse than in April, and only Korea has a PMI below 50. The US economy continues likewise continues to do better, and The December employment report pretty much sewed up a December FOMC hike. The stage being set by the selection of Mnuchin/Ross is for a pro-business administration, set to cut business tax rates, push tax 'amnesty' and deregulate, maybe with some personal rates cut along the way. The unemployment rate is 4.6% - but remember that Gov. Yellen has said the economy should run hot. So we have the outlook of higher inflation/stronger growth. That’s a scenario for bond yields to move higher in 2017. - Special Guest Blogger: Tim Kearney

Tuesday, December 6, 2016

The ISM non-manufacturing index soared to 57.2% in October, the highest level in a year. And the manufacturing index of 53.2% released last week was the highest in five months. We are getting spoiled with all of the good economic data lately. Yet still investors worry. While we can’t discern exactly how much of the rally is due to increased optimism, we know that this rally is built on a solid fundamental foundation of a better economy and corporate earnings growth. After many years of zigzag data, it’s nice to see most things zigging for a change. Who needs turtle doves and lords of leaping when you have good fundamentals? Please see the latest investment weekly for all of the up-to-date economic data.

Friday, December 2, 2016
Although long-term U.S. Treasuries have been winners in periods of uncertainty — including 2014 — over time, risk relates to return in a rational way, and riskier bonds have been the leaders.

In the weeks following the U.S. Presidential Election, equity markets have rallied and global bonds have suffered. Yields on the U.S. 10-year have soared over 60 basis points since the election, marking the greatest bond sell-off in seven years. This march on bonds is a result of higher inflation forecasts spurred by a number of factors including substantial fiscal policy changes expected by the Trump Administration, OPEC’s recent deal to slash production and the growing likelihood of a December rate hike. In uneasy times such as these, investors preparing for retirement may question whether their portfolio can benefit from fixed income securities. The answer is yes. Bonds provide regular income and guard against the volatility of stocks which are the driver of long term returns. Remember 2008? When equities were crying in their soup, long US Treasuries returned more than 33 percent. Retirees in particular are more concerned with downside protection than investors in the accumulation phase. A fixed income allocation can help provide the consistency and reliability they need. Please see page 26 of the Voya Global Perspectives™ book to see how global diversification of fixed income asset classes can potentially result in reliable and consistent returns and prepare you for retirement.

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