Stearns Financial Poolside Chat – April 15, 2017

Welcome to the Stearns Financial Poolside Chat.

The National Federation of Independent Business (NFIB) Small Business Optimism Index edged down 0.6 points in March – its second straight decline following a record surge in optimism at the start of the year. The gauge of how small business owners feel about future prospects is still close to its highest reading since December 2004. Despite some shaken confidence in the ability of Congress and the President to get business friendly policies (including tax reform) enacted, small business respondents remain hopeful.

While taxes and government regulations were less of a problem than a year ago, they continue to top the list of small businesses’ most important problems.

U.S. citizens in general seem to be more shaken than small business owners by gridlock in Washington. The contrast in these two charts is striking.

NFIB
Source: FactSet, National Federation of Independent Business (NFIB), as of February 28, 2017.

Gallup
Source: Gallup Presidential Approval Center, as of April 1, 2017.

Key Points to Consider

  • The Conference Board expects that “solid job growth will continue through the spring,” and described the labor market as “healthy and tight.” Weaker job growth in the latest Employment Report may have been caused by weather related construction issues.

    The SHRM/LINE Survey showed a mixed employment outlook for April. Manufacturing payrolls are expected to increase from a year ago and services payrolls are expected to decline. Manufacturing HR professionals planning to hire more workers this month was the highest since May 2014 and the second highest on record, according to Ned Davis research.

  • International stocks continue to do better than U.S. stocks. The massive amount of global central bank stimulus since the Great Recession is showing up in recovering overseas economies and markets. According to BCA Research, in spite of still-high global policy uncertainty, the sum of the Citi Global Economic and Inflation Surprise Indexes is just off the highest level in the 14-year history of the survey.

    Will outperformance by international stocks continue? Probably not in our view in the short run if pro-growth measures get enacted by the U.S. Congress – or if trade war rhetoric gets out of hand. Longer term, we’re becoming more enthusiastic about international prospects. We provide more detail on this topic in the upcoming SFG Investment Podcast.

Frequently Asked Questions

Q: One of my friends has been having fun and making some money trading penny stocks. She says it’s been easy to make money and she loves the research aspect. How risky is it?

A: Penny stocks are, like the name implies, low cost stocks where you could buy a stock for 75 cents per share and then hopefully see a big move up and eventually sell for a profit, doubling or more your money. That’s the promise. The reality is entirely different. Penny stocks are notorious for being manipulated by unscrupulous traders. Recently, the Securities and Exchange Commission charged 27 people with misleading stock promotion scams on somewhat reputable internet sites like SeekingAlpha and TheStreet. These sites had already been criticized for allowing less than top notch stock analysis to be published by, in many cases, average (or worse) former stock analysts.

An entertaining 2013 movie on the true story of the rise and fall of the infamous penny stock trader/scammer Jordan Belfort (well played by Leonardo DiCaprio) is The Wolf of Wall Street.

Is trading penny stocks safer than gambling money in Las Vegas? At least in Vegas there are some games where the odds are closer to 50/50 and you have a chance to win if you get lucky. Playing the penny stock game long enough will likely lead to losses.

Summary

The U.S. economic news remains positive and SFG believes conditions are good for modestly accelerating growth regardless of whether Trumponomics initiatives are enacted by Congress.

Overseas economies are looking more promising and SFG continues to consider our balance in different risk categories between U.S. and overseas stocks.

Given outsized investment opportunities in select areas and larger than normal political and geo-political threats, we continue to like diversification with a strong emphasis on high quality investment themes.

Dennis, Glenn, John & PJ
(the SFG Investment Committee)


STEARNS FINANCIAL GROUP (Triad office)
324 W. Wendover Avenue, Suite 204
Greensboro, NC 27408
Telephone: 336-230-1811/ nationwide 800-881-7374

STEARNS FINANCIAL GROUP (Triangle office)
1450 Raleigh Road, Suite 105
Chapel Hill, NC 27517
Telephone: 919-636-3634/ nationwide 800-881-7374

E-mail: StearnsFinancial@StearnsFinancial.com
Website: www.StearnsFinancial.com

Stearns Financial Group has been selected by the Financial Times as one of their “Top 300” Registered Investment Advisors for 2016 – the third consecutive year SFG has achieved this ranking.

Past performance is no guarantee of future results. This material is not financial advice or an offer to sell any product. This report is for informational purposes only. The statements contained herein are solely based upon the opinions of Stearns Financial Group and the data available at the time of publication of this report, and there is no assurance that any predicted results will actually occur. The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment. Stearns Financial Group reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. This report contains no recommendations to buy or sell any specific securities and should not be considered investment advice of any kind. In making an investment decision, individuals should utilize other information sources and the advice of their investment advisor. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness. Stearns Financial Group is a registered investment advisor. More information about the advisor, including its investment strategies and objectives, are fully described in the firm’s Form ADV Part 2, which is available by calling (336) 230-1811, or can be found by visiting www.stearnsfinancial.com .
The Financial Times Top 300 list is not indicative of future performance. Individual account experience may vary. The Financial Times Top 300 Registered Investment Advisors is an independent listing produced by the Financial Times. The FT 300 is based on data gathered from RIA firms, regulatory disclosures, and the FT’s research. As identified by the FT, the listing reflected each practice’s performance in six primary areas, including assets under management, asset growth, compliance record, years in existence, credentials and accessibility. Neither the RIA firms nor their employees pay a fee to The Financial Times in exchange for inclusion in the FT 300.  SFG-17-58