September 2018 Market Update

Last month, trade and tariff discussions dominated the headlines. For the month of August, the S&P 500 increased 3.26%, as the FTSE All World Ex-U.S. Index was flat. Year to date through August 31st, the S&P 500 was up 9.94% and the FTSE All World Ex-U.S. Index declined -1.53%. Aside from market performance, investors focused on strong U.S. economic data which points to accelerating growth.

Total nonfarm payroll employment increased by 201,000 in August, and the unemployment rate was unchanged at 3.9%, the BLS reported. Real gross domestic product (GDP) increased at an annual rate of 4.2% in the second quarter of 2018 according to the 2nd estimate by the BEA. The August ISM Manufacturing Index rose from 58.1 to 61.3, which was the strongest number since May of 2004. Consumer spending is positive, as increases in disposable income from the tax cuts take effect. Going forward, growth should continue to be strong for the next few quarters before slowing in the second half of 2019, due to higher interest rates and a fading fiscal stimulus.

Inflation has generally been rising, with headline CPI up 2.9% year over year and core inflation up 2.4% year over year. The Fed has raised its target for the federal funds rate and raised economic growth and inflation forecasts at its most recent meeting. We believe that there may be two more rate hikes in 2018 and at least two more in 2019.

The Case for Global Diversification

Though global economic growth is strong, international markets have not performed well this year, as mentioned above. We believe this is due to Trump’s ongoing tariff and trade policies, as well as a strengthening U.S. dollar. Though this can be worrisome for investors, it’s important to note that international investments are an important part of a well-diversified, long-term portfolio.

By diversifying a portfolio by asset class and geographic region, one may lower risk and potentially increase returns, especially in volatile markets. A globally diversified portfolio tends to perform better over time than a non-diversified portfolio and allows investors to capture returns when they occur.

Consider the return of the S&P 500 Index during “The Lost Decade,” between January 1, 2000 and December 31, 2009. Over those 10 years, the S&P 500 Index had a cumulative total return (including dividends and interest) of -9.1%. When comparing this return to the returns from an international index, international indexes performed better. For example, the FTSE All World Ex Us Index had an annualized return of 41.56% and the MSCI All World Ex US had an annualized return of 17.47% between January 1, 2000 and December 31, 2009. We advocate that broad diversification becomes even more important in times of uncertainty because it helps to reduce country, stock and/or issue-specific risk and increases the consistency of outcomes relative to concentrated portfolios. Over the long term, an allocation to international can be an essential component of an investment plan.

Currently, P/E valuations are lower for international and emerging markets relative to U.S. P/E valuations, which indicates an area of opportunity, especially in a bear market. Finding the right mix of different investments that allows investors to pursue their financial goals and stay disciplined is a key tenet of investing.

If you are a client and would like further detail on these topics or anything else, please don’t hesitate to call or email us. If you are not a client but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or visit www.callancapital.com.

 

Important Disclosures:

Data are as of September 11, 2018

Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. Indexes are unmanaged.

The FTSE All-World ex US Index is one of a number of indexes designed to help investors benchmark their international investments. The index comprises Large and Mid cap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

The MSCI World ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets (DM) countries*–excluding the United States. With 1,016 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at adviserinfo.sec.gov.

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services.

The views expressed are those of Callan Capital, LLC. They are subject to change at any time.

The Economy Continues to Heat Up

During the last month, investors watched as the economy continued “heating up.” For the month of July, the S&P 500 Index was up 3.72% and the FTSE All World Ex-U.S. Index increased 2.24%. Year to date through July 31st, the S&P 500 gained 6.47% and the FTSE All World Ex-U.S. declined -1.53%. Despite many geo-political headlines swirling, the U.S. economy is on strong footing, according to the leading economic indicators.

Real GDP increased at an annual rate of 4.1% in the second quarter of 2018 and 2.2% in the first quarter of 2018. Total non-farm payroll employment rose by 157,000 in July, and the unemployment rate decreased to 3.9%, the U.S. Bureau of Labor Statistics reported in early August. Consumers are earning and spending more, as increases in disposable income from the tax cuts take effect.

The Federal Reserve did not raise rates as of their latest meeting on July 31st and August 1st. They are happy with the ongoing monetary tightening, pointed to economic strength, highlighted higher inflation and cited robust labor market conditions. We expect monetary tightening to continue with 1 -2 more rates hikes this year. Investors have been following blazing headlines about tariffs, but most of the news is talk of what could happen vs. actual policy action. Fortunately, the U.S. is in a good position, as we don’t import much as compared to other countries who depend on the U.S. for imported goods. This has fueled tensions, and we are watching this “trade war” closely. A growing trade deficit and potentially slowing U.S. growth could cause the dollar to fall.

We believe that the economy is heading into a slower phase and will experience a “cool down”. The cooling down could happen due to the lack of supply of workers in the U.S.  and the dissipation of the fiscal stimulus plan. Recession risks increase approaching 2020, as interest rates and fiscal debt levels rise.

Internationally, growth remains solid and we continue to see areas of opportunity. We are keeping an eye on the trade spat between multiple countries and the U.S., as there could be a potential negative impact on international markets. We are also monitoring the situation in Turkey – as trade war tensions increase, the lira has plummeted, and this could have a potentially large impact on the emerging economy and banks who are invested in Turkish assets. The Bank of England (BOE) and the Bank of Japan (BOJ) both held meetings in July, and while the BOE raised rates, the BOJ did not.

If you are a client and would like further detail on these topics or anything else, please don’t hesitate to call or email us. If you are not a client but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or visit www.callancapital.com.

 

Data are as of August 8th, 2018

Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. Indexes are unmanaged.

The FTSE All-World ex US Index is one of a number of indexes designed to help investors benchmark their international investments. The index comprises Large and Mid-cap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at adviserinfo.sec.gov.

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services.

The views expressed are those of Callan Capital, LLC. They are subject to change at any time.

Economy Gets Green Light Halfway Through 2018

Halfway through 2018, the economy is performing well – economic indicators are strong, consumer spending is solid, corporate earnings are exceptional and the Fed continues to take steps to tighten policy. Year to date through June 30th, the S&P Index increased 2.6% and the FTSE All World Ex-US Index decreased -3.7%. For the quarter, the S&P 500 Index was up 3.4% and the FTSE All World Ex-Us Index declined -2.58%. Going forward, investors are keeping an eye on the yield curve, the potential escalation of a trade war and an economic slowdown.

 

Capital Markets Review

January 1, 2018 – June 30, 2018 index returns[1]:

 

S&P 500 (U.S. Large Cap): 2.6%

Russell 2000 (U.S. Small Cap): 7.7%

MSCI EAFE (Developed International Markets): -2.4%

MSCI EME (Emerging Markets): -6.5%

Barclays Capital Aggregate (U.S. Fixed Income): -1.6%

Barclays Global High Yield Index: -2.5%

Bloomberg Commodity Index: 0.0%

 

U.S. Economy

The U.S. economy is in its 10th year of a bull market and is still strong. We believe this “heating up” of the economy is short lived and we should see a “cool down” in late 2019.  Total nonfarm payroll employment increased by 213,000 in June, and the unemployment rate rose to 4.0%, according to the U.S. Bureau of Labor Statistics. Though the unemployment rate rose, we do not see this as a negative, as there were 601,000 people who entered the labor force. Real gross domestic product (GDP) increased at an annual rate of 2.0% in the first quarter of 2018, according to the third estimate released by the Bureau of Economic Analysis.  In June, the ISM manufacturing index increased to 60.2, from 58.7, which is close to the 14-year high of 60.8 in February. This increase is a signal that strength in the U.S. economy is offsetting investor uncertainty on trade policy. The ISM non-manufacturing index rose to a 13-year high in June, from 58.6 to 59.1, which points to strong domestic demand.

The yield on the 10-year U.S. Treasury rose in 2018, and we expect it to rise more this year. Inflation should rise slightly, but we are currently above the Fed’s inflation target. Many investors also wonder whether the yield curve may invert and what that means for the economy. An inverted yield curve is an environment where long-term debt instruments have a lower yield than short-term debt instruments. The yield curve is more likely to invert with each rate hike (typically 25 basis points each). In the past, an inverted yield curve has been a reliable indicator of recession, since it indicates that the Fed may cut rates in the future.

As mentioned above, we believe the economy will cool down in 2019 – because of continued rate hikes by the Federal Reserve, a slowdown in fiscal stimulus, and a lack of supply of workers. The Fed will likely continue to tighten policy with 4-5 more rate hikes in 2018 and 2019, which will slow the economy. As fiscal stimulus efforts (like the Tax Cuts and Jobs Act of 2017) pour into the economy, the federal deficit continues to grow. When the fiscal stimulus slows, then the deficit stops growing, indicating a slowdown. Finally, we have a lack of supply of workers in the U.S., which will affect job growth. The population of 18-64-year-old workers and both illegal and legal immigration are decreasing.

 

Global Economy

Global manufacturing remains strong, with many regions experiencing double digit earnings growth. In the eurozone, economic growth and earnings are solid and credit growth is rising. We see political risks in Italy and within Brexit negotiations that will need to be monitored going forward. In the Asia Pacific region, growth looks favorable and earnings expectations are upgraded. However, risks remain in the region such as trade tensions and a rise in the U.S. dollar[2].

As seen above, international returns have lagged U.S. returns this year, which is a marked difference from 2017, where international returns outperformed U.S. returns. We believe that there is still space for growth in international markets due to earnings growth and lower valuations relative to U.S. equities. We also see room for economic growth in emerging markets. Specifically, the middle class in emerging markets has grown exponentially and is now contributing to those economies in meaningful ways.

Investors have watched blazing headlines on tariffs, and it’s important to remember that there is a large difference in what’s being discussed in the media, and what has actually been enacted. The amount and number of tariffs are still low. The impact of tariffs is manageable and the economy can withstand them.

 

Economy and Our View

The U.S. economy is benefiting in 2018 from fiscal stimulus, but the rewards could be short-term. Eventually, we feel that the increases in our federal deficit resulting from the tax cuts and increased spending will hinder growth in future years. Though uncomfortable for investors to think about, the economy may slow and there is an increased probability of a recession in the next few years. It’s important to remember that a recession doesn’t mean Armageddon, and the next recession will likely be much milder than the 2008 financial crisis, which was a black swan type of event. The performance dips from market corrections or recessions are manageable in a balanced and globally diversified portfolio, which is what Callan Capital strives to build for clients. In addition, it’s important to remember that recessions are difficult to predict, so a long-term perspective is important.

We continue to monitor the global economy and seek opportunities to invest in certain sectors and geographic regions given the current market environment. In our view, a long-term investment horizon, asset allocation, diversification and discipline remain crucial to portfolio success. If you are a client and would like further detail on these topics or anything else, please call or email us. If you are not a client, but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or www.callancapital.com.

[1] JP Morgan, Guide to the Markets, June 30, 2018, www.jpmorgan.com

[2] Global Market Outlook, Russell Investments, June 30, 2018. https://russellinvestments.com/us/global-market-outlook

Important Disclosures:

Data are as of July 10, 2018

Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. Indexes are unmanaged.

The FTSE All-World ex US Index is one of a number of indexes designed to help investors benchmark their international investments. The index comprises Large and Mid cap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

Russell 2000 Index: An index measuring the performance approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 serves as a benchmark for small-cap stocks in the United States.

EAFE Index: An index created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in international index has been in existence for more than 30 years.

EME Index: An index created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in global emerging markets.  It is a float-adjusted market capitalization index that consists of indices in 21 emerging economies.

Barclays Capital Aggregate Bond Index:  An index maintained by Barclays Capital, which took over the index business of the now defunct Lehman Brothers, and is often used to represent investment grade bonds being traded in United States.  It is an unmanaged index considered representative of fixed-rate, noninvestment-grade debt of companies in the US, developed markets and emerging markets.

The Bloomberg Barclays Global High Yield Index: The Bloomberg Barclays Global High Yield Index is a multi-currency flagship measure of the global high yield debt market. The index represents the union of the US High Yield, the Pan-European High Yield, and Emerging Markets (EM) Hard Currency High Yield Indices. The high yield and emerging markets sub-components are mutually exclusive.

Bloomberg Commodity Index:  A broadly diversified commodity price index distributed by Bloomberg Indexes.  It tracks prices of futures contracts on physical commodities on the commodity markets. The index is designed to minimize concentration in any one commodity or sector. It currently has 22 commodity futures in seven sectors.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at adviserinfo.sec.gov.

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services.

The views expressed are those of Callan Capital, LLC. They are subject to change at any time.

June 2018 Market Update

During the last month, investors navigated concerns of rising interest rates and inflation while they watched trade tariffs and the U.S. – North Korea summit unfold. For the month of May, the S&P 500 increased 2.41%, as the FTSE All World Ex-U.S. Index decreased -2.12%. Year to date through May 31st, the S&P 500 was up 2.02% and the FTSE All World Ex-U.S. declined -1.70%. Despite lukewarm market performance, we are in the 2nd longest economic expansion in history, just shy of 9 years long. Despite many geo-political headlines swirling, the U.S. economy is on strong footing.

Total nonfarm payroll employment increased by 223,000 in May, and the unemployment rate decreased to 3.8%, the lowest level since 1969. Real gross domestic product (GDP) increased at an annual rate of 2.3% in the first quarter of 2018. Consumer spending is positive, as increases in disposable income from the tax cuts take effect.

Headline inflation increased to a six-year high of 2.8% in May, which is due to the rally in energy prices, and another monthly gain in core CPI. The Fed raised rates 25 basis points on June 13th, and we expect a total of 4 rate hikes in 2018, as inflation trends higher.

We believe that the economy is heading into a slower phase, especially into 2019, as some of the shorter-term stimulus dissipates. Recession risks increase approaching 2020, as interest rates and fiscal debt levels rise.

Internationally, global economic growth has slowed slightly and global PMI shows some weakness due to some bad weather in the EU and Japan and trade tensions.The Bank of Japan is taking its time with raising rates, in contrast to the Fed’s activity at home. Though the path is still uncertain, the meeting between President Trump and Kim Jong-un has eased tensions between North Korea and the U.S. Denuclearization of the Korean Peninsula could be imminent.

If you are a client and would like further detail on these topics or anything else, please don’t hesitate to call or email us. If you are not a client, but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or visit www.callancapital.com.

 

Data are as of June 13th, 2018

Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. Indexes are unmanaged.

The FTSE All-World ex US Index is one of a number of indexes designed to help investors benchmark their international investments. The index comprises Large and Mid-cap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at adviserinfo.sec.gov.

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services.

The views expressed are those of Callan Capital, LLC. They are subject to change at any time.

May 2018 Market Update

Volatility and mediocre returns continued in the month of April as investors navigated concerns of rising interest rates and inflation. For the month of April, the S&P 500 slightly declined -.38%, as the FTSE All World Ex-U.S. Index increased 1.76%. Year to date through April 30th, the S&P 500 and the FTSE All World Ex-U.S. were both flat, returning .38% and .43% respectively. Despite lukewarm market performance, we are in the 2nd longest economic expansion in history, just shy of 9 years long.

Total non-farm payroll employment increased by 164,000 in April and the unemployment rate decreased to 3.9%, the U.S. Bureau of Labor Statistics reported. Real gross domestic product (GDP) increased at an annual rate of 2.3% in the first quarter of 2018, according to the advance estimate released by the Bureau of Economic Analysis.

Core inflation reached 1.9% in March, and we believe it may rise further in 2018, most likely over the Fed’s 2% target. We do believe that the Fed will continue raising rates in 2018. The yield on the 10-year Treasury is also rising and we feel that the rise will continue – which could impact mortgage rates, the U.S. dollar and the yield curve.

Despite strong economic numbers, we believe that the economy is heading into a slower phase, especially into 2019, as some of the shorter-term stimulus dissipates. Recession risks increase approaching 2020, as interest rates and fiscal debt levels rise.

Internationally, most economies are growing, though not booming, and we expect this trend to continue. The global aggregate manufacturing purchasing managers’ index reached a six-year high going into 2018. The Eurozone is growing particularly fast, because of an undervalued currency and rising consumer confidence. Though the path is still uncertain, tensions between North Korea and the U.S. seem to be easing.

We know that market volatility, especially after long periods of relatively calm growth, can be unnerving, and we encourage you to talk to us about your current allocation. If you are a client and would like further detail on these topics or anything else, please don’t hesitate to call or email us. If you are not a client, but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or visit www.callancapital.com.

 

Data are as of May 7th, 2018

Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. Indexes are unmanaged.

The FTSE All-World ex US Index is one of a number of indexes designed to help investors benchmark their international investments. The index comprises Large and Mid-cap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at adviserinfo.sec.gov.

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services.

The views expressed are those of Callan Capital, LLC. They are subject to change at any time.

April 2018 Market Update

In the first quarter of 2018, volatility returned to the markets after two years of relative calm. Though the economy is on strong footing, indexes for the quarter returned mixed results. For the quarter, the S&P 500 decreased -.8% and the FTSE All World Ex-Us Index declined -1.31%. Investors watched as technology company troubles, tariffs, potential trade wars and inflation concerns dominated the headlines. Going forward, we expect GDP growth to accelerate in the short term, unemployment to decrease, interest rates to rise and inflation to increase slightly as the Tax Cuts and Jobs Act of 2017 continues to take effect.

 

Capital Markets Review

January 1, 2018 – March 31, 2018 index returns[1]:

 

S&P 500 (U.S. Large Cap): -.8%

Russell 2000 (U.S. Small Cap): -.1%

MSCI EAFE (Developed International Markets): -1.4%

MSCI EME (Emerging Markets): 1.5%

Barclays Capital Aggregate (U.S. Fixed Income): -1.5%

Barclays Global High Yield Index: -.4%

Bloomberg Commodity Index: -.4%

 

U.S. Economy

The U.S. economy is in its 10th year of a bull market.  In the fourth quarter of 2017, GDP increased at an annual rate of 2.9%, according to the third estimate released by the Bureau of Economic Analysis. Total nonfarm payroll employment increased by 103,000 in March, and the unemployment rate was unchanged at 4.1%, according to the U.S. Bureau of Labor Statistics.

The small fall in the ISM non-manufacturing index to 58.8 in March, from 59.5, leaves it close to a 13-year high and suggests that the slowdown in GDP growth in the first quarter was temporary. We believe the Federal Reserve, with new Fed Chair Jerome Powell, will likely raise rates a few times in 2018 as the global economy continues to improve.  The yield on the 10-year U.S. Treasury rose in 2018, and we expect it to rise more in 2018 – to perhaps 3.0% or higher – as inflation picks up.

The U.S. dollar is down, which can be attributed to the widening U.S. budget and deficit, and a decline in the U.S. dollar as an international reserve currency. Escalating trade tensions, kicked off by Trump’s decision to impose tariffs on steel and aluminum imports, could affect willingness of America’s trade partners to hold USD assets[2].

 

Global Economy

Globally, growth and manufacturing is strong. In the eurozone, GDP growth and earnings are solid. Consumer confidence is strong, credit growth is rising and corporate earnings are supported by revenue growth and margins. International equities have continued to perform well, and we believe there is still opportunity in this area. As mentioned in prior communications, we increased international exposure in 2015, and our portfolios have benefited.

In the Asia Pacific region, we believe there will be solid growth and low inflation in 2018. The risk of a slowdown in China remains, yet the Chinese government has a GDP growth target of 6.5% in 2018. In Japan, there is positive consumer and investment outlook and consumption spending[3].

 

Volatility and Our View

We expect the U.S. economy in 2018 to benefit from the Tax Cuts and Jobs Act of 2017, but the benefits could be short-term. Eventually, we feel that the increases in our federal deficit resulting from the tax cuts and increased spending will hinder growth in future years. The Congressional Budget Office expects the deficit to grow to $1 trillion by 2010.

Though uncomfortable for everyone, volatility is normal – even the volatility we saw in the first quarter. We don’t expect the markets to return to their historic calm in 2017. Dips in the market can’t be predicted, yet they can be expected. Instead of reacting emotionally, investors can work with their advisor to stick to a financial plan and goals, and ride out the volatility. Timing the market can be a dangerous habit, and very hard to do. Though markets can have bad days, weeks, months or years, investors are less likely to suffer losses over longer periods. The financial markets have rewarded long-term, globally diversified investors.

We continue to monitor the global economy and seek opportunities to invest in certain sectors and geographic regions given the current market environment. In our view, a long-term investment horizon, asset allocation, diversification and discipline remain crucial to portfolio success. If you are a client and would like further detail on these topics or anything else, please call or email us. If you are not a client, but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or www.callancapital.com.

 

[1] JP Morgan, Guide to the Markets, March 31, 2018, www.jpmorgan.com

[2] 2018 Global Market Outlook, Russell Investments. Q2, 2018.

[3] 2018 Global Market Outlook, Russell Investments. Q2, 2018.

Important Disclosures:

Data are as of April 11, 2018

Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. Indexes are unmanaged.

The FTSE All-World ex US Index is one of a number of indexes designed to help investors benchmark their international investments. The index comprises Large and Mid cap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

Russell 2000 Index: An index measuring the performance approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 serves as a benchmark for small-cap stocks in the United States.

EAFE Index: An index created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in international index has been in existence for more than 30 years.

EME Index: An index created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in global emerging markets.  It is a float-adjusted market capitalization index that consists of indices in 21 emerging economies.

Barclays Capital Aggregate Bond Index:  An index maintained by Barclays Capital, which took over the index business of the now defunct Lehman Brothers, and is often used to represent investment grade bonds being traded in United States.  It is an unmanaged index considered representative of fixed-rate, noninvestment-grade debt of companies in the US, developed markets and emerging markets.

The Bloomberg Barclays Global High Yield Index: The Bloomberg Barclays Global High Yield Index is a multi-currency flagship measure of the global high yield debt market. The index represents the union of the US High Yield, the Pan-European High Yield, and Emerging Markets (EM) Hard Currency High Yield Indices. The high yield and emerging markets sub-components are mutually exclusive.

Bloomberg Commodity Index:  A broadly diversified commodity price index distributed by Bloomberg Indexes.  It tracks prices of futures contracts on physical commodities on the commodity markets. The index is designed to minimize concentration in any one commodity or sector. It currently has 22 commodity futures in seven sectors.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at adviserinfo.sec.gov.

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services.

The views expressed are those of Callan Capital, LLC. They are subject to change at any time.

 

March 2018 Market Update – Volatility Continues

The financial markets continued to decline in the month of February after two years of relatively low volatility. For the month of February, the S&P 500 declined -3.89% and the FTSE All World Ex-U.S. Index decreased -4.61%. For the year ending February 28th, the S&P 500 increased 1.50% and the FTSE All World Ex-U.S. was flat at .53%.

In the first few months of 2018, we experienced continued global growth, strong corporate fundamentals and tailwinds from the tax reform bill. Inflation is still low, but we believe it will increase slightly. The impact of the Tax Cuts and Jobs Act of 2017 will continue to help the economy in 2018 which should move long-term interest rates higher and force the Fed to continue raising short-term rates. We believe that the Fed may raise rates several more times this year with faster economic growth and inflation rising. In fact, Fed Chair Jerome Powell testified before congress last month, insinuating that the economic outlook was good, and he was inclined to raise rates this year.

President Trump confirmed speculation that he would place tariffs on steel and aluminum imports, despite objections from his policy advisors. The tariff announcement could be negative for financial markets if there is any retaliatory action from other countries, and in general, these tariffs could cause price increases for certain goods.

Real GDP increased at an annual rate of 2.5% in the fourth quarter of 2017, according to the second   estimate by the Bureau of Economic Analysis. Total nonfarm payroll employment increased by 313,000 in February, and the unemployment rate was unchanged at 4.1%. The Conference Board’s consumer confidence measure surged to a 17-year high of 130.8 in February, from 124.3. This underscores that household confidence and sentiment is strong, as consumers are seeing more in their paychecks from the tax cuts, despite increased market volatility. The ISM manufacturing index rose in February to 60.8, from 59.1, bringing it to a 13-year high.

Internationally, most economies are growing and we expect this trend to continue. The Bank of Japan and the European Central Bank held meetings this week and are expected to wind down their quantitative easing programs, which is a positive sign for a stable economy.

We know that market volatility, especially after long periods of relatively calm growth, can be unnerving, and we encourage you to talk to us about your current allocation. If you are a client and would like further detail on these topics or anything else, please don’t hesitate to call or email us. If you are not a client, but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or visit www.callancapital.com.

 

Data are as of March 12, 2018

Past performance does not guarantee future results.

Diversification does not guarantee investment returns and does not eliminate the risk of loss.

The S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. This world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 Index focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. An investor cannot invest directly in an index. Indexes are unmanaged.

The FTSE All-World ex US Index is one of a number of indexes designed to help investors benchmark their international investments. The index comprises Large and Mid cap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at adviserinfo.sec.gov.

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services.

The views expressed are those of Callan Capital, LLC. They are subject to change at any time..

 

February 2018 Market Update

After almost two years of low volatility, investors have been reminded that stock prices do fluctuate in value.  U.S. stocks last week suffered their largest weekly drop in roughly two years and the sell-off continued Monday with the largest drop since 2011.  Globally, the trends were the same with the Stoxx Europe 600 posting its worst week in nearly two years.  After today’s 4% decline, the Dow Jones Industrial average is still up over 20% in the past year.

Rising wages might be causing this sell off as it could be a precursor to future inflation.  Rising inflation could prompt central banks to tighten monetary policy faster than expected.  The last time we witnessed a correction of this magnitude was in 2016 when the stock market sold off 10% prior to rebounding.  It is important to be reminded that over the last 36 calendar years stock prices have been positive in 29 of those years with corrections in almost every year averaging 13.8%.

So far in 2018, we have experienced continued global growth, strong corporate fundamentals and tailwinds from the tax reform bill.  Inflation is still very low but we are beginning to see some early signs of potential Inflation in the future. The U.S. dollar is down, which pushes up oil and import prices.  We believe the impact of the Tax Cuts and Jobs Act of 2017 will continue to help the economy in 2018 which should move long term interest rates higher and force the Fed to continue raising short term rates.  U.S corporate earnings continue to rise.  With about half of the S&P 500 companies who have reported fourth quarter earnings, 80% have beaten analyst revenue expectations which is the highest since the third quarter of 2008.  The new tax plan should help boost profits in the quarters ahead.

Real GDP increased at an annual rate of 2.6% in the fourth quarter of 2017.  In January, the unemployment rate was 4.1% for the fourth consecutive month and total nonfarm payroll employment rose by 200,000 workers.  The Conference Board consumer confidence number increased to 125.4 from 123.1 in January, suggesting that consumer confidence started the year on a strong note. Though the ISM manufacturing index declined in January from 59.3 to 59.1, it is still well above historical averages and consistent with high GDP growth.

Internationally, most economies are growing and we expect this trend to continue.  Europe which is the largest representation within our international portfolio is experiencing 2.7% year-over-year growth, which is faster than the U.S.  In addition, manufacturing is growing at its fastest pace since 2011.

Using history as a guide, we were overdue for a correction in stock prices and declines of this magnitude are not uncommon.  We believe that the economic trends of 2017 are largely intact as we move into 2018.  We continue to believe that a long-term perspective and a diversified portfolio will benefit investors.  If you are a client and would like further detail on these topics or anything else, please don’t hesitate to call or email us.  If you are not a client, but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or visit www.callancapital.com.

 *Sources: https://www.instituteforsupplymanagement.org/ISMReport/MfgROB.cfm?SSO=1

https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-the-markets/viewer 

Past performance does not guarantee future results, which may vary. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at adviserinfo.sec.gov.

Callan Capital does not provide individual tax or legal advice, nor does it provide financing services. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. Callan Capital outsources to lending and financial institutions that directly provide our clients with, securities based financing, residential and commercial financing and cash management services.

S&P 500®: Standard & Poor’s (S&P) 500® Index. The S&P 500® Index is an unmanaged, capitalization – weighted index designed to measure the performance of the broad US economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Dow Jones Industrial Average, is a stock market index of thirty major companies.

The STOXX Europe 600, also called STOXX 600, SXXP, is a stock index of European stocks designed by STOXX Ltd.. This index has a fixed number of 600 components, among them large companies capitalized among 17 European countries, covering approximately 90% of the free-float market capitalization of the European stock market (not limited to the Eurozone). The countries that make up the index are Austria, Belgium, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.[1]

January 2018 Market Update

In 2017, investors relished in solid economic growth, combined with abnormally high market returns, low unemployment and low market volatility. For the year, the S&P 500 increased 21.8% and the FTSE All World Ex-Us Index was up 24.40%. Investors watched as the Trump administration completed its first year in office, hurricanes ravaged parts of the country, and a tax reform bill was passed. In 2018, we expect GDP growth to accelerate, unemployment to decrease, interest rates to rise and inflation to increase slightly as the Tax Cuts and Jobs Act of 2017 takes effect.

 

Capital Markets Review

January 1, 2017 – December 31, 2017 index returns[1]:

 

S&P 500 (U.S. Large Cap): 21.8%

Russell 2000 (U.S. Small Cap): 14.6%

MSCI EAFE (Developed International Markets): 25.6%

MSCI EME (Emerging Markets): 37.8%

Barclays Capital Aggregate (U.S. Fixed Income): 3.5%

Barclays Global High Yield Index: 10.4%

Bloomberg Commodity Index: 1.7%

 

U.S. Economy

The U.S. economy has been steadily expanding for 9 years.  In the third quarter of 2017, real GDP increased at an annual rate of 3.1%. Total nonfarm payroll employment increased by 148,000 in December, and the unemployment rate was unchanged at 4.1%. In December, the ISM Manufacturing Index rose to 59.7, from 58.2, leaving it close to a 13-year high. We believe the Federal Reserve, with new Fed Chair Jerome Powell, will likely raise rates a few times in 2018 as the global economy continues to improve. The Fed estimates about 2.5% growth in 2018, which we believe is conservative.

In 2017, most major currencies appreciated against the U.S. dollar, which has a positive impact for investors with international investments. The yield on the 10-year Treasury is 2.5%, and we expect this to rise, however at a slower rate than short term interest rates. As a result, the yield curve will likely flatten.

Right before Christmas, President Trump passed the Tax Cut and Jobs Act of 2017, which gives various tax cuts to individuals and corporations in addition to other tax related changes. For a comprehensive review of the changes, and implications for the economy, portfolios, please see the Callan Capital Guide: Tax Cuts and Jobs Act of 2017.

 

Global Economy

Globally, growth and manufacturing is strong. In the eurozone, GDP growth and earnings are solid. Both reflation and rejecting the populist movement have been instrumental in sustaining the recovery that is ongoing. We see this as a tailwind to eurozone financial markets and international returns. We are keeping an eye on Brexit negotiations and the elections in Italy in the first quarter of 2018. As mentioned in prior communications, we increased international exposure in 2015, and our portfolios have benefited.

The Asia Pacific region had a good year, with solid growth and Chinese demand. We see a need to be cautious with China, as they are dealing with high debt levels. Hopefully, they will be able to de-lever by gradually tightening credit. However, China has a goal of doubling GDP per capita, and moving towards a consumption led economy, which will benefit many countries in the region[2].

 

What to Expect in 2018

We expect the U.S. economy in 2018 to benefit from the Tax Cuts and Jobs Act of 2017, but the benefits could be short term. Eventually, we feel that the increases in our federal deficit resulting from the tax cuts and increased spending will hinder growth in future years.

In 2018, we see unemployment decreasing to below 4% for the first time in 50 years and a boost in profits and earnings for corporations around the globe. It will be interesting to see how companies deal with tax cut savings, and where they allocate their funds.

This economic backdrop bodes well for stocks and is typically a headwind for fixed income given higher interest rates.  We feel much of this story is priced into the stock market and expect more muted returns and higher volatility as we move into the later stages of our U.S. recovery.  We are more optimistic about the opportunities overseas given the relative valuations.

Market performance in 2017 reminds investors that it is important to align with an investment philosophy based on discipline and diversification, rather than timing and prediction. To be able to predict the market, investors would have to both accurately forecast events and how markets will react to those events.  We believe that this is risky, and not possible on a consistent basis.

We continue to monitor the global economy and seek opportunities to invest in certain sectors and geographic regions given the current market environment. In our view, a long-term investment horizon, asset allocation, diversification and discipline remain crucial to portfolio success. If you are a client and would like further detail on these topics or anything else, please call or email us. If you are not a client, but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or www.callancapital.com.

 

[1] JP Morgan, Guide to the Markets, December 31, 2017, www.jpmorgan.com

[2] 2018 Global Market Outlook, Russell Investments. January 2018.

 

Important Index Descriptions and Disclaimers

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS

INDEX DESCRIPTIONS:

The following descriptions, while believed to be accurate, are in some cases abbreviated versions of more detailed or comprehensive definitions available from the sponsors or originators of the respective indices. Anyone interested in such further details is free to consult each such sponsor’s or originator’s website.

The past performance of an index is not a guarantee of future results. Each index reflects an unmanaged universe of securities without any deduction for advisory fees or other expenses that would reduce actual returns, as well as the reinvestment of all income and dividends. An actual investment in the securities included in the index would require an investor to incur transaction costs, which would lower the performance results. Indices are not actively managed and investors cannot invest directly in the indices.

S&P 500®: Standard & Poor’s (S&P) 500® Index. The S&P 500® Index is an unmanaged, capitalization – weighted index designed to measure the performance of the broad US economy through changes in the aggregate market value of 500 stocks representing all major industries.

Russell 2000 Index: An index measuring the performance approximately 2,000 small-cap companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 serves as a benchmark for small-cap stocks in the United States.

EAFE Index: An index created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in international index has been in existence for more than 30 years.

EME Index: An index created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in global emerging markets. It is a float-adjusted market capitalization index that consists of indices in 21 emerging economies.

Barclays Capital Aggregate Bond Index: An index maintained by Barclays Capital, which took over the index business of the now defunct Lehman Brothers, and is often used to represent investment grade bonds being traded in United States. It is an unmanaged index considered representative of fixed-rate, noninvestment-grade debt of companies in the US, developed markets and emerging markets.

Barclays Global High Yield Index: An index maintained by Barclays Capital.

Bloomberg Commodity Index: A broadly diversifiedcommodity price index distributed by Bloomberg Indexes.  It tracks prices of futures contracts on physical commodities on the commodity markets. The index is designed to minimize concentration in any one commodity or sector. It currently has 22 commodity futures in seven sectors.

DISCLAIMERS:

Nothing contained herein is intended constitutes accounting, legal, tax advice or investment recommendations, or the recommendation of or an offer to sell, or the solicitation of an offer to buy or invest in any investment product, vehicle, service or instrument.  Callan Capital does not provide individual tax or legal advice. Clients should review planned financial transactions and wealth transfer strategies with their own tax and legal advisors. For more information, please refer to our most recent Form ADV Part 2A which may be found at adviserinfo.sec.gov.

Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without previous notice. All information presented herein is considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect to any error or omission is accepted.  This information should not be relied upon by you in evaluating the merits of investing in any securities or products mentioned herein.  In addition the Investor should make an independent assessment of the legal, regulatory, tax, credit and accounting and determine, together with their own professional advisers, if any of the investments mentioned herein are suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation and investors may not get back the full amount invested. Both past performance and yield may not be a reliable guide to future performance. The information presented herein is for the strict use of the recipient and it is not for dissemination to any other third parties without the explicit consent of Callan Capital LLC.

Markets Continue to Climb – December 2017 Market Update

In the month of November, the Dow Jones and S&P 500 Indexes hit all-time highs, and economic indicators were strong. For the month of November, the S&P 500 Index returned 3.07% and the FTSE All World Ex-US Index was flat. Year-to-date ending November 30th, the S&P 500 Index climbed 20.94% and the FTSE All World Ex-US Index increased 23.24%.

Real GDP increased at an annual rate of 3.3% in the third quarter of 2017 according to the second estimate released by the Bureau of Economic Analysis. In November, total nonfarm payroll employment increased by 228,000, and the unemployment rate was unchanged at 4.1%, according to the U.S. Bureau of Labor Statistics.

The headline ISM Manufacturing index declined to 58.2 in November, from 58.7 in October, and a 7-year high of 60.8 in September. The small decline of the index still leaves it at a high level consistent with good GDP growth. The depreciation in the dollar in 2017 and the strength of demand means the outlook for the manufacturing sector remains positive . The University of Michigan consumer confidence index declined to 96.8 in December, from 98.5, yet the index remains at a high level consistent with stronger real consumption growth.

President Trump’s proposed tax reform bill was passed by the Senate and the House, and though different versions of the bill still need to be worked out, we may see a version of the package in place by early 2018. We don’t know yet what will become law, but the package could provide a modest boost to economic growth and inflation in the short term. The senate also held hearings to confirm Jerome Powell as the new Fed Chair, which were uneventful. There are indications for another few rate hikes in 2018, and Powell is expected to have much of the same outlook as Janet Yellen.

In Europe, growth and GDP remain solid. In November, the IHS Markit Eurozone Purchasing Managers’ Index was the highest in 17 years. As mentioned in prior communications, we feel that countries outside the U.S. have attractive relative valuations and fundamentals that warrant a higher than normal weight in a portfolio.

We continue to believe that a long-term perspective and a diversified portfolio will benefit investors. If you are a client and would like further detail on these topics or anything else, please don’t hesitate to call or email us. If you are not a client, but would like more information on Callan Capital’s wealth management services, please contact us at (858) 551-3800 or visit www.callancapital.com.

 

Past performance does not guarantee future results, which may vary. This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. For more information regarding Callan Capital, please refer to our most recent Form ADV Part 2A which may be found at www.adviserinfo.sec.gov.

S&P 500®: Standard & Poor’s (S&P) 500® Index. The S&P 500® Index is an unmanaged, capitalization – weighted index designed to measure the performance of the broad US economy through changes in the aggregate market value of 500 stocks representing all major industries.
The FTSE All-World ex US Index comprises Large and Midcap stocks providing coverage of Developed and Emerging Markets excluding the US. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization.