Don't hate me, but living in Charleston, SC, right on the Atlantic coast, my weekly Saturday ritual for about half of the year is to go to the beach Saturday morning and taking my paddle board out into the ocean. Regardless of the conditions, I probably make an attempt about 90% of the time.

Yesterday, when I tried to paddle parallel to the beach in a northerly direction, I could barely move. I made it about 50 - 75 yards in 10 minutes. Like it feels investing in the stock market these days, it was a slog, feeling like I was working really hard for very little progress.

Then I did a 180 degree turn and headed southerly--and with only three strokes of the paddle, I'd gone 100 yards.

Let's pause long enough in this week's FLiP to consider the impact of headwinds and tailwinds, because while we have a tendency to underestimate their impact and over-attribute praise and blame to individual efforts.

And, of course, our Weekly Market Update will bring you up to speed on this week's prevailing market winds as well.

In this FLiP weekly you'll find:

• Financial LIFE Planning:
  • Are you facing a headwind or tailwind?
• Weekly Market Update:
  • Heading for a hurricane?
• Quote O' the Week:
  • Seneca

Financial LIFE Planning

Are You Facing A Headwind Or A Tailwind?

Please think about it for a second: Are you facing a headwind in life right now, or is the wind at your back? Lots of times, you don't know until you do a 180 degree turn and see how it feels in the other direction.

Periodically, I ask myself these questions:

How much of whatever I've done well in life was actually just thanks to a solid tailwind? Being born into a great family? In the right zip code? Being on the right team? Having selfless friends? Working with amazing people?

How about you? Is it possible that your successes have been aided by a tailwind? If so, who is deserving of thanks?

Consider pausing for 30 seconds to consider those questions and another 30 seconds to send that person a text "thank you" that will *make their day*.

Or maybe you're feeling a powerful headwind right now, facing some of the most difficult circumstances you've ever encountered. If you feel like a failure at the moment, is it possible you're just trying to summit a mountain in roller skates?

If so, who can you ask for help? Know that few things are actually more endearing to a *good* friend than an opportunity to help a friend in need.

Regardless of your personal prevailing winds, this was a headwind week for the markets...

Weekly Market Update

Cue the sad music...

• - 1.20% .SPX (500 U.S. large companies)
• - 1.38% IWD (U.S. large value companies)
• - 0.31% IWM (U.S. small companies)
• - 0.18% IWN (U.S. small value companies)
• - 1.14% EFV (International value companies)
• - 1.03% SCZ (International small companies)
• - 1.16% VGIT (U.S. intermediate-term Treasury bonds)

Heading For A Hurricane?

Contributed by John Marske, CFP®, a Notre Dame grad and generally good guy.

“Buy the Dip” worked the last week in May. Post Memorial Day, we started worrying again. Jamie Dimon, CEO of JP Morgan, warned at a conference Wednesday morning that there were more than storm clouds on the horizon. In fact, he said “the economy is headed for a hurricane.”

The nice thing about the financial markets is you can always find a conflicting opinion. At the very same conference Brian Moynihan, CEO of Bank of America, had a chance to respond. “We’re in North Carolina,” he said. “You’ve got hurricanes that come every year.”

Moynihan made the point that the Fed’s challenge to hike rates is because of a strong underlying economy. What makes the Fed’s job tough right now is “actually a good thing — low unemployment and good wage growth and good consumer spending,” he said.

The market action the past week seemed as conflicting as both bank CEO’s. The holiday-shortened week started out harmless enough. Stocks were choppy on Tuesday, with all the major indicies recording losses of 0.4% - 0.8%. The overriding question was whether U.S. equity performance in the last week of May represented a bounce off the bottom or whether it was just a brief bear market rally. One contributor to Tuesday’s equity sell-off was a sharp rise in 10-year Treasury yields from 2.75% to 2.91%

We saw more losses on Wednesday, with all the various indicies falling between 0.5% - 0.75%. Wednesday was also the first day of June. The start of the Fed’s plan to reduce its $9 trillion balance sheet by allowing $47.5 billion to roll off each month of summer. After summer ends, the Fed plans to pick up the pace by allowing $95 billion to roll off each month.

After two days down, the market was geared for an up day on Thursday, however it was not without excitement. Thursday’s market action might have been a precursor of what to expect during the summer months with stock averages oscillating between gains and losses.

The Dow was down more than 300 points at its lows of the session. The Dow finished the day UP 435 points. The S&P 500 gained 1.8%, while both the NASDAQ and Russell 2000 indexes finished the day up more than 2%. All of the major indexes finished Thursday solidly off their lows of the year (was that the bottom?).

Going into Friday’s monthly jobs report the Dow was 8.5% higher than its lowest low. The S&P 500 was up 9.6%, and the Nasdaq Composite rallied 11.6% from their respective 52-week lows. For sentiment, the weekly American Association of Individual Investors (AAII) survey showed Bulls rise to 32% from 19.8%, Neutrals rise to 30.9% from 26.7% and Bears fall to 37.1% from 53.5%.

We started Friday with news that Elon Musk wrote a memo to Tesla executives stating he has a “super bad feeling” about the economy and needs to cut about 10% of jobs at the electric carmaker. Hours later, the May jobs report was released, indicating hiring was still going strong. The U.S. economy added more jobs than expected in May (390K), while the year-over year wage increase of 5.2% was as expected.

Ten-year treasury yields rose to 2.97% immediately following the report. The strong labor numbers reinforced the opinion the Fed will increase short-term rates by 50 basis points at both the June and July meetings. We are back in the phase where good news for the economy equates to bad news regarding interest rates. And rising rates means lower stock prices. Friday’s market gave up most of Thursday’s gains. The S&P 500 fell 1.2% on the week, while the Dow and the Nasdaq each lost nearly 1%.

But as you can see from the broader indicies listed above, the diversified portfolio was yet again buffered, with small and small/value down a fraction of their larger siblings.

Quote O' the Week

Seneca

Thanks to one of my favorite Twitter follows, Sahil Bloom, for pointing me in the direction of this classic stoic wisdom:

In the grand scheme of things, market volatility is a minor trial--but a trial nonetheless. I pray you carry a calm mind into whatever trials you may be facing this week.

Tim

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Oh, and BTW, The information in this article is for educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. That should really come from your financial advisor. I'm thrilled to work for Triad Financial Advisors, but what I write is my opinion, and not necessarily theirs.