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September – 2017 Newsletter

September – 2017 Newsletter

Sep 19, 2017
MarketWatch 2017, Newsletters

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Index Month / Year to Date


Dow Jones +1.89%/+13.36%
S&P 500 +1.73%/+12.53%
NASDAQ +0.94%/+20.67
10-yr Treasury yield was 2.16% at the end of August and 2.33% at the end of September

Source: Bloomberg.com

Markets:

Gains in technology stocks drove the S&P 500 to another record high on the last day of trading in September, although the Dow fell slightly. While it was another relatively calm month for the markets, we did see signs of nervousness creep in over everything from escalating tensions with North Korea to another Federal Reserve meeting.

For the most part, though, big investors continued clinging to their optimism over Donald Trump’s tax plan and his ability to push it through Congress. This optimism has been tenacious ever since the election, creating what seems to be a “froth” (of about 20 percent) on top of what was already an overvalued market. As we’ve pointed out previously, sustaining that froth may now depend on the approval of Trump’s tax plan, or at least the part of it that aims to cut the corporate tax rate from 35 percent to 20 percent.

“For the market, the most important thing is tax cuts for the corporations,” said First Standard National economist Peter Cardillo. “But, any disappointment going forward would certainly take the wind out of this market as it has rallied on hopes of cuts.”1

As we’ve also pointed out many times in recent months, there are a number of other factors that could potentially “take the wind” out of this rally or even usher in the next major market correction. If Trump’s tax plan is approved, for example, many economists are convinced it will add to our already mammoth national debt, which surpassed the $20 trillion milestone in September.2

North Korea is another possible tipping point should the war of words between Trump and Kim Jong-un escalate to military action. Another important point is the potential market impact of the Fed’s efforts to “unwind” quantitative easing and drive up long-term interest rates by selling back the $4.5 trillion in U.S. treasuries it purchased. The process is scheduled to begin this month, and it may have the potential to deflate the markets regardless of whether the Fed’s efforts succeed or fail.

Last month, we likened the stock market to a floating balloon in search of a pin to land on, and none of those “pins” have since disappeared. Thus, this is probably not only a good time for investors already focused on safety and income to stay the course, but also a good time for those who haven’t yet reduced their market risk to do so while they can still “sell high.”

1 “US STOCKS-Technology Stocks Drive S&P to Record High,” Yahoo Finance, last modified September 29, 2017

2 John Bat, “National Debt Hits Historic $20 Trillion Mark,” CBS News, last modified September 11, 2017


Disclaimer:
You are advised to give independent consideration to, and conduct independent investigation with regards to, the information above in accordance with your individual investment objectives. Use of the Information is at the reader’s risk, is strictly intended for informational purposes in conjunction with the recipient’s due diligence, and should not be construed as a solicitation by Sound Income Strategies, LLC. Past performance will never indicate or guarantee future behavior. Sound Income Strategies, LLC does not represent or warrant that the contents of the document are suitable for you from compliance, regulatory, legal, or any other perspective. We shall have no responsibility or liability for your use or non-use of the document or any portion thereof. Sound Income Strategies, LLC is registered as an investment advisor under the Investment Advisors Act of 1940 and is regulated by the SEC. Sound Income Strategies, LLC and its affiliates may only transact business or render personalized investment advice in those states and jurisdictions where we are registered or otherwise qualified to do so.
Sep 19, 2017 Categories: MarketWatch 2017, Newsletters
August – 2017 Newsletter
October – 2017 Newsletter

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