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Jeff Karp and Jeff Kendall, Karp Financial Strategies

Posted in Jeffrey Karp, Jeffrey Kendall, Permission Granted

S&P Is Not GDP

S&P Is Not GDPU.S. economic growth has been subpar — right around 2% — during much of the ongoing economic expansion. Yet, the S&P 500 has returned nearly 230% cumulatively since the bear market low on March 9, 2009. How did that happen and is it justified?

Before trying to answer to those questions, it is worth pointing out that this situation is not all that unusual. In fact, since 1950, the S&P 500 median return is 13% (average is 12%) when real gross domestic product (GDP) grows less than 3%, with the S&P generating a positive return 68% of the time. However, a good portion of those returns come during recessions — historically, the best time to buy stocks is at recession troughs. But even if we take those periods in and around recessions out of the equation and look at annual returns when GDP growth is between 1–3%, the median (and average) S&P 500 return is a respectable 7–8%. Stocks tend to like average (or slightly below average) growth, which is not strong enough to generate worrisome inflation. Continue reading.

Posted in Economics, Karp Financial Strategies Weekly Commentary, Market Forecast, Weekly Commentary | Tagged , ,

Corporate Calm

Corporate Calm 1-322677The stock market’s recent gains have gone a long way toward restoring calm in the marketplace. The rebound — 5% off the S&P 500 low on October 15, 2014 — has been driven by a combination of factors, including some better economic data, prospects for more support from central banks, old fashioned bargain hunting, and perhaps most importantly, generally solid earnings results. The market’s concerns have not fully been alleviated, but progress has been made.

We would argue that the market’s biggest concern right now is slower global growth, particularly in Europe where the Eurozone is potentially on the verge of another recession. Slowing growth in China also remains a concern, though less so. To help assess these growth concerns, we turn to corporate America to try to gauge the potential impact these slowing economies might have on corporate revenues and profits. This week, we look at what some of the most global U.S. corporations have told us about the global economic environment thus far during earnings season. Read More.

Posted in Economics, Karp Financial Strategies Weekly Commentary, Market Forecast, Weekly Commentary

Where Do We Go From Here? Strategies for Moving Forward After a Market Correction

Strategies for Moving Forward After a Market CorrectionStart the celebration, the market correction of September/October 2014 is officially over. Or is it? Wouldn’t it be great if there were specific dates that could be identified as the beginning and end of downtrends in the stock market? Wouldn’t it REALLY be great if we had those dates before they happened?

While common sense says that an investor (unless you are a day trader) must apply a long term view, general behavior has the average investor connected to every short term up or down of any significance.

So let’s look at the recent short term numbers for this recent “correction.” Continue reading

Posted in Investment, Jeffrey Karp, Market Forecast, Personal Finance, Retirement Planning | Tagged , , ,

Oil Hits the Skids

Oil Hits the SkidsThe S&P 500 fell 1% last week (October 13 – 17, 2014) in volatile trading, leading market participants and media pundits to speculate on how far the stock market slide—now just over 6% from the September 18, 2014, closing high — might go. In last week’s Weekly Market Commentary, “Pullback Perspective,” we cited the economic backdrop, central bank support, and valuations as reasons the pullback was unlikely to turn into a bear market (a 20% decline). This week we turn to an area that has already entered bear market territory and discuss our outlook for oil and the energy sector.

Why Does Oil Matter?
Oil has a significant impact on several key sectors of the economy: continue reading

Posted in Karp Financial Strategies Weekly Commentary, Weekly Commentary | Tagged , ,

Pullback Perspective

Pullback PerspectiveThis latest stock market pullback has provided an unwelcome reminder that stocks do not always go up in a straight line. Even within powerful bull markets such as this one, pullbacks of 5 – 10% have been quite common and do not mean the bull market is nearing an end. In this week’s commentary, we attempt to put the pullback into perspective. We look beyond this latest bout of volatility and share our thoughts on the current bull market, compare it with prior bull markets at this stage, and discuss why we do not think it’s coming to an end.

Pullbacks Don’t Mean the End of the Bull Market

Pullbacks such as this one, which has reached 5%, have been normal.  Sometimes stocks get ahead of themselves. When they do, investor concerns can be magnified and profit taking might take stocks down more than might be justified by the fundamental news. We see this latest pullback as normal within the context of an ongoing and powerful bull market and do not see its causes (European and Chinese growth concerns, the rise of Islamic State militants, Ebola, the Russia-Ukraine conflict, etc.) as justifying something much bigger. Continue Reading.

Posted in Karp Financial Strategies Weekly Commentary, Market Forecast, Weekly Commentary

Earnings Preview: Welcomed Opportunity to Focus on the Micro

TEarnings Previewhe global headlines are certainly not uplifting these days: Russia-Ukraine, Iraq, Syria, Hong Kong, Ebola, etc. All of these challenges are sources of investor anxiety that have led to bouts of selling pressure on the U.S. stock market in recent weeks. The good news is that even with the sell-off in September through early October 2014, the S&P 500 has not experienced a drawdown of more than 4% since spring 2014, thanks to positive underlying fundamentals.

Earnings season is here and may counteract the negative headlines with another dose of positive fundamental news. Four times a year, financial markets focus on what matters most to stocks: earnings. Over the last four years, nearly 90% of S&P 500 returns have come in or around earnings season, as measured by the pre-announcement season — two weeks before Alcoa reports — through the first four weeks of results. (Alcoa marks the unofficial start of earnings season each quarter because the company is typically the first high-profile firm to report after calendar quarter end.) We expect the third quarter of 2014 could produce another good earnings season, which we believe may positively impact stocks. Read More.

Posted in Economics, International Economics, Karp Financial Strategies Weekly Commentary, Market Forecast, Weekly Commentary

Grading on a Curve (the Yield Curve, That Is)

Grading on a CurveKids are back in school and have started taking tests. Some of those tests are graded on a curve, meaning that students are graded based on their score relative to the rest of the class. In terms of stock market indicators, one that gets an A+ and ranks at the top of its class is another type of curve — the yield curve. In fact, this indicator receives a perfect score (seven for seven) in signaling recessions over the past 50 years.

The goal for all investors is to find indicators to help anticipate big down moves, and the yield curve has been about as good as it gets on that score. One of the Five Forecasters featured in our Mid-Year Outlook 2014: The Investor’s Almanac Field Notes, the yield curve passes the test as an indicator that has consistently signaled increasing fragility of the U.S. economy and a transition to the late stage of the economic cycle, an oncoming recession, and ensuing market downturn. Read more.

Posted in Economics, Investment, Karp Financial Strategies Weekly Commentary, Market Forecast, Weekly Commentary | Tagged , ,

Jason Ray’s Inspiring Gift

Jaso Ray Ramses Organ Donation The path to financial freedom may be paved with a great investment portfolio, but the unexpected may call for some smoothing out. The mission of my last post was to raise awareness about life insurance and the importance of including contingency planning in every financial plan. The timing of things can be funny, as I recently had the opportunity to be a sponsor of the Jason Ray Foundation Annual Charitable Event.

Jason accomplished a lot in a life shortened by a tragic car accident (read his story here), but his legacy will live on because of his decision, at the age of just sixteen, to become an organ donor. Why would a sixteen year old worry about being an organ donor?

Continue reading

Posted in Jeffrey Karp, Life Insurance, Permission Granted, Personal Finance | Tagged , , , ,

Take Time for Yourself

Time Management Personal FinanceI am not sure about you, but my life is busy. Between working, taking the kids to soccer practice, doing yard work, taking care of the house, and if I am lucky maybe even having a date night, who has time to plan, much less think about the future? It’s all about now; planning can come later.

Planning is a big part of my professional life; as a CERTIFIED FINANCIAL PLANNER®, I create financial plans to help clients pursue their dreams. I know first-hand as someone with a full-time career, who is married, and is the father of three boys (and don’t forget my dog Jake)…life is crazy. Even I find it hard to plan all the time (though I will say that my wife appreciated my planning ahead for our 10 year wedding anniversary this past April, when she was shocked to get her present, a trip to England and Scotland for 9 days… with no kids or the dog). If you can relate, odds are you part of Generation-X. We are stuck right in the thick of it. Retirement is too far way to even start thinking about, and those care-free days of post-college life are in the past.

Continue reading

Posted in Jeffrey Kendall, Personal Finance, Retirement Planning