{"id":6447,"date":"2019-07-08T11:59:25","date_gmt":"2019-07-08T16:59:25","guid":{"rendered":"http:\/\/schenkelberg.investments\/?p=6447"},"modified":"2019-07-08T12:02:09","modified_gmt":"2019-07-08T17:02:09","slug":"back-to-basics","status":"publish","type":"post","link":"https:\/\/schenkelberg.investments\/?p=6447","title":{"rendered":"Back to Basics"},"content":{"rendered":"\n

Last week I took a\ngolf lesson for the first time  since\nplaying golf in college, more than 20 years ago. The instructor began with the\nbasics\u2014grip, stance and alignment. If you play golf you know that golfers\ntypically focus on a lot of items other than grip, stance and alignment. But these\n three items are the key to the basics of\ngolf. Over the years I have self-corrected my swing to the detriment of these\nbasics. However, since I have addressed these three correctly, I\u2019m gaining at\nleast 10 yards on my golf shots. This next month may be rough as I retrain my\nbody to correctly apply the basics.<\/a><\/p>\n\n\n\n

There are also\na few key basics when it comes to investing. \nThe key ones are valuation, growth opportunities and company debt\nlevels. It is very easy to get caught up in the headlines\u2014What will the Federal\nReserve do with interest rates? What is happening with trade negotiations\nbetween the U.S. and China?\u2014These items could certainly impact corporate growth\nopportunities and debt levels. In the midst of these headlines, however, it is\nimportant to revisit the basics. <\/p>\n\n\n\n

Valuation.  <\/strong><\/a>Stock prices appear\noverpriced versus current earnings trends. The chart below looks at S&P 500\nchange in trailing 12-month earnings per share (EPS) versus change in price.\nThe price change line in light blue has risen well above the trailing EPS in\ndark blue. We reviewed this chart in the newsletter six months ago.  At that time both blue lines were right on\ntop of one another, indicating that stock prices were in line with earningsgrowth. We have seen a strong rally in stock prices\nsince that time, bringing prices back to lofty levels that may indicate\novervaluation.<\/p>\n\n\n\n

Growth\nOpportunities.  <\/strong>FactSet\nprojects that earnings will drop 2.6% year-over-year in the second quarter of\n2019. If this materializes it will be the first back-to-back earnings drop\nsince 2016. Earnings growth expectations differ widely among the eleven major\nStandard & Poor\u2019s 500 sectors, with six sectors expected to grow (led by\ndefensive Utilities and Health Care) and five expected to decline (led by\nMaterials and Information Technology). <\/p>\n\n\n\n

Company Debt\nLevels. T<\/strong>he Federal Deposit Insurance Corporation (FDIC)\ntracks all loans and leases by all banks in the United States. There is\ncurrently over $10 trillion in loans and leases outstanding as of the end of\nthe first quarter. Although the value of loans and leases has been rising\nsteadily, the amount of loans not current on their payments has dropped\nsteadily since peaking in 2010. At current rates, debt does not appear to be a\nsignificant issue; however, that can change quickly if economic conditions\nweaken. <\/p>\n\n\n\n

Current investment basics indicate that caution is warranted with the stock market at the current time. Despite positive headlines, we need to focus on the basics and be prepared for potential short-term weakness. While caution is warranted, there is never a bad time to invest for the long-term. As we plan together we are focused on how your money can meet your goals. When building your financial future it\u2019s always better to save rather than spend.<\/p>\n\n\n\n

\"\"<\/figure>\n","protected":false},"excerpt":{"rendered":"

Last week I took a golf lesson for the first time  since playing golf in college, more than 20 years ago. The instructor began with the basics\u2014grip, stance and alignment. If you play golf you know that golfers typically focus on a lot of items other than grip, stance and alignment. But these  three items […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[119,123],"tags":[],"class_list":["post-6447","post","type-post","status-publish","format-standard","hentry","category-market-commentary","category-market-performance"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p7kXxe-1FZ","jetpack-related-posts":[{"id":6155,"url":"https:\/\/schenkelberg.investments\/?p=6155","url_meta":{"origin":6447,"position":0},"title":"Retirement – Dreams to Reality – Early Stage","author":"J.J. 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Schenkelberg, CFA","date":"April 3, 2024","format":false,"excerpt":"IndexFirst Quarter 2024Year\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 To-Date 2024S&P 50010.4%10.4%Dow Jones Industrial Average6.0%6.0%Russell 20005.1%5.1%\u00a0\u00a0MSCI All Country World Index ex-US5.0%5.0%\u00a0\u00a0Aggregate Bond-0.8%-0.8% Performance Source: Bespoke Investments Total Return U.S. Versus International The S&P 500, Index, an index of large U.S. companies, posted a total return of 10.4% for the First Quarter of 2024. Large U.S. stocks\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6453,"url":"https:\/\/schenkelberg.investments\/?p=6453","url_meta":{"origin":6447,"position":2},"title":"Market Update – 2019 Second Quarter","author":"J.J. Schenkelberg, CFA","date":"July 8, 2019","format":false,"excerpt":"U.S. Versus International The S&P 500, an index of large U.S. companies, posted a total return of 4.3% for the Second Quarter of 2019. U.S. stocks outperformed international for the quarter as measured by the All Country World Index ex-U.S. stocks, a representation of international stocks outside the U.S. Total\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6551,"url":"https:\/\/schenkelberg.investments\/?p=6551","url_meta":{"origin":6447,"position":3},"title":"Market Highs – Now What?","author":"J.J. Schenkelberg, CFA","date":"April 12, 2021","format":false,"excerpt":"Major stock market indices are hitting all-time high prices. There are many reasons for this continued rise in prices; some of the primary ones include: Economic recovery following the COVID related slowdown in 2020.Low interest rates drive more money toward stocks, as bonds, CDs and other income-producing assets do not\u2026","rel":"","context":"In "Financial Planning"","block_context":{"text":"Financial Planning","link":"https:\/\/schenkelberg.investments\/?cat=122"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2021\/04\/Index-Performance-041221.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":6316,"url":"https:\/\/schenkelberg.investments\/?p=6316","url_meta":{"origin":6447,"position":4},"title":"Fed Relief Rally","author":"J.J. Schenkelberg, CFA","date":"April 12, 2019","format":false,"excerpt":"Following a Christmas Eve market low, Santa Claus delivered a strong stock market rally that lasted the next three months. 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