In The Media

FOX BUSINESS segments with Schatz:

LATEST - 05/13/2020


  • Schatz on FOX Business
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  • Schatz on FOX Business
  • Schatz on FOX Business

  • Schatz on FOX Business
  • Schatz on FOX Business
  • Schatz on FOX Business
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CNBC segments with Schatz:


  • Schatz on CNBC
  • Schatz on CNBC



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Paul Schatz: BTIG Initiates Buy Rating For Beyond Meat (BYND)
With: Nicole Petallides
Date: May 19, 2020
Publication: TD Ameritrade
Link to Article

Schatz on TD Ameritrade's The Watch List

The Watch List with Nicole Petallides offers investors a midday look at the most relevant stocks, sectors and commodities.


'Betting against the U.S. economy and consumer is a loser's game' - why one strategist sees Dow 30,000 next year and 40,000 by 2023
Author: Callum Keown
Date: May 19, 2020
Publication: MarketWatch
Link to Article

'It's a tough one, you've got these guys on TV saying all systems are go' says one Wall Street analyst

Poker Bets and the Stock Market

The Dow Jones Industrial Average DJIA, 1.40% could reach 30,000 next year before soaring to 40,000 by 2023 once the U.S. clears the "massive hurdle" of the coronavirus pandemic, according to one strategist.

Paul Schatz, the president of Heritage Capital, made the call in a first quarter note to clients, as he said the U.S. economy would recover over the longer term.

"To bet against the U.S. economy and consumer over the long-term is a loser's game," Schatz said in a first quarter note to clients.

"I firmly believe we will see Dow 30,000 in 2021 with Dow 40,000 coming by 2023. Once we get over this massive hurdle, there will be too many things working in favor to derail that train when it gets going."

While the other side of the coronavirus crisis will look different from life pre-virus, Schatz said the American "spending spirit" was unlikely to change. He also noted that the historic first quarter decline began with the "foundation of the market being fairly solid," unlike in 2018, 2011, 2008 and 2000.

"20-plus% declines have always been accompanied by termites eating away at the market beneath the surface before the house falls down - we did not see the usual termite infestation this time around," he said.

Schatz said that COVID-19 would resurface in the fall but that America would be ready this time - with tests, ventilators and medical equipment - buying time until a vaccine emerges in early 2021.

He saw a recovery in the third or fourth quarter with "back to back strong quarter of GDP growth" regaining between 50% and 80% of what was lost, while the rest would take longer as small businesses are unable to reopen and employees lose their jobs.


Economy will be 'very uneven' for at least a year: Heritage Capital's Schatz
With: Zack Guzman and Seana Smith
Date: May 15, 2020
Publication: Yahoo! Finance
Link to Article



Heritage Capital President Paul Schatz joins Yahoo Finance's On The Move to assess the state of the U.S. economy.


What is the future of flying?
With: Cheryl Casone
Date: May 13, 2020
Publication: FOX Business
Link to Article



Heritage Capital president Paul Schatz says the question is not if the airlines can survive the coronavirus pandemic, it's more a question if they should survive. He believes the government shouldn't bail out some airlines and the airlines should, instead, file for chapter 11 bankruptcy.


Advisers look past the glitter, debate gold's value as a long-term investment
Author: Jeff Benjamin
Date: May 12, 2020
Publication: Investment News
Link to Article

So far this year the precious metal has beaten the S&P 500 by 24 percentage points

Advisers who beefed up or held onto allocations to gold over the past four months are likely seeing the benefits in client portfolios. But even that extreme test doesn't solve the age-old riddle of whether gold is a short-term play, a long-term allocation, or even an asset that belongs anywhere near a responsible investment strategy.

"Gold is an all-weather asset but people have a tendency to only appreciate the diversification benefits in down markets, which is why gold gets its reputation for reducing risk is down markets," said Ryan Giannotto, director of research at GraniteShares, an ETF provider whose funds include GraniteShares Gold Trust (BAR).

Even though Giannotto clearly has a dog in the fight, he is riding high on the reality that gold has been shining brightly with a year-to-date gain of 13%, while the S&P 500 Index experienced an extremely volatile ride down 10.8%.

Giannotto and other so-called gold bugs argue that the recent outperformance of gold relative to the broader financial markets is proof that gold should be a full-time piece of any diversified portfolio.

A GraniteShares analysis of the 15-year period through December 2018 shows that an allocation of just 5% to gold improved the risk-adjusted performance of a standard 60-40 portfolio of stocks and bonds 79% of the time.

The research found that optimal risk-adjusted performance, as measured by the Sharpe ratio, can be achieved with a 60% allocation to equities, 5% to bonds, and 35% to gold.

The research focused on the measurement of relative risk in portfolios.

For example, over the 15-year period, which GraniteShares argues includes the full range of market cycles, a portfolio with a 60% allocation to the S&P 500 Index and a 40% allocation to the Bloomberg Aggregate Bond Index produced a 10% annualized gain with 10.5% annualized risk.

By adjusting the fixed-income weighting down to 25% and adding a 15% weighting in gold, the annualized return climbs to nearly 11.2% with annualized risk of 11%.

But increasing the gold allocation to 35% and cutting bonds down to 5% over the period, the annualized return is 12.8% with an annualized risk of 12.5%.

"Now we have a real reason to see materially higher gold prices, because Fed policy has made bonds effectively worthless," Giannotto said. "Bonds are facing double jeopardy right now of no income and the threat of inflation, while gold is non-correlated and the Fed can't manipulate it and can't buy it."

Dennis Nolte, vice president at Seacoast Investment Services, also believes gold should be a permanent fixture in most diversified portfolios.

"Gold acts as a currency, not a commodity, which is good since oil continues to show a deflationary trend, which is where gold shines," he said. "Deflation, not inflation, is the current worry. The market is pricing negative interest rates in the U.S., so gold will be a good holding." While advisers, economists and various market watchers speculate on where the economy is heading, those with allocations to gold have been happy so far this year.

Chris Chen, wealth strategist at Insight Financial Strategists, started adding gold to client portfolios in January, back when the stock market was still climbing toward the late February peak and most of the world was not yet focused on what would become a global COVID-19 pandemic.

"Historically gold has been a safe haven asset in times of crisis, and if we believe we are going to continue to have a volatile market, a small allocation to gold probably makes sense," he said.

The fact that the stock market has gained nearly 30% off the March 23 low doesn't give Chen any special sense of calm against the backdrop of a looming economic recession.

"The market has been on a tear in April, but the fundamentals will probably disappoint again in coming months, so I think gold is a prudent hedge right now," he said. "At some point we might get out of gold, but my clients have to remain invested and this is the kind of environment where you want some gold."

For some advisers, the diversification benefits of gold are still outweighed by the analytical roadblocks that have always dogged the precious metal.

Most of the debate centers around whether gold is a currency, a commodity, or just a heavy, shiny metal that can be used to make expensive jewelry.

"Gold has doubled in price since 1980, while the Dow is up 30-fold over that period, not counting dividends, so why should I buy gold?" said Larry Luxenberg, principal at Lexington Avenue Capital Management.

"I'm not a fan of investing in any commodities because I don't want to buy the physical commodity, the ETF, or the mining shares, because they all have problems," he said. "For short periods of time gold or any commodity can work, but the market timing is so difficult, and you have to be very lucky. Nobody knew the market was going to go down at the end of February and in a two-week stretch have seven of the 20 most volatile days in the market's history. I don't believe in having any commodities as a diversifier. If you own broadly diversified mutual funds or ETFs you're picking up some indirect commodity exposure."

The unique nature of gold as a non-income producing asset is where financial advisers have to navigate between the physical metal and the associated mining stocks, said Paul Schatz, president of Heritage Capital.

"The stocks are more volatile and aggressive, but usually more rewarding," Schatz said.

As a trading strategy, Schatz believes the physical metal and the stocks both "look tired."

"Retail investors have flowed into gold ETFs, and I think they have some pain in front of them," he said. "But whatever pullback we see, our strategy is buying weakness because gold is in a confirmed bull market with new highs coming on the way."

Meanwhile, Rob Greenman, lead adviser and partner at Vista Capital Partners, can't get beyond the inanimate object thing when it comes to gold.

"Gold doesn't produce any goods or services, there are no profits, no earnings or income, it's future rise or fall in price is purely based on the speculation of what a future buyer is willing to pay," he said. "It probably could be a temporary diversifier, but you're just taking a gamble."

Such naysaying is missing the bigger picture, according to Joseph Cavatoni, head of the World Gold Council Americas, which has been recommending increased allocations to gold for more than a year.

Cavatoni said the two fundamental drivers behind the price of gold are economic expansion and market uncertainty.

"When people get rich, they buy more jewelry," he said. "And on the opposite side, people buy gold when there is market uncertainty." Cavatoni said the World Gold Council's outlook for gold a year ago was based on increased geopolitical and financial market risks.

"That was prior to all of what we're looking at with COVID-19," he said. "The journey we've been on has been amplified substantially."


This is the "kitchen sink quarter" for every company out there: Expert
With: Zack Guzman and Seana Smith
Date: May 11, 2020
Publication: Yahoo! Finance
Link to Article



Heritage Capital President and CIO Paul Schatz joins Yahoo Finance's Zack Guzman and Seana Smith to discuss how the coronavirus is impacting the retail industry.


Markets lower as China tensions rise
With: Alexis Christoforous
Date: May 04, 2020
Publication: Yahoo! Finance
Link to Article



Yahoo Finance's Alexis Christoforous and Brian Sozzi discuss the latest market action with Heritage Capital President Paul Schatz.


Paul Schatz On Finding Opportunity Costs When Investing
With: Nicole Petallides
Date: Apr 30, 2020
Publication: TD Ameritrade
Link to Article

Schatz on TD Ameritrade's The Watch List

The Watch List with Nicole Petallides offers investors a midday look at the most relevant stocks, sectors and commodities.


Strategist predicts Dow 40,000 but warns of 'more panic days' first
With: Ines Ferre
Date: Apr 17, 2020
Publication: Yahoo! Finance
Link to Article



The stock market is up nearly 30% from its March 23 low. But that doesn't mean we're heading straight toward to new highs, says one strategist.

"While I think this rally is very impressive and it has a lot of thrust that you'd normally see at the beginning of new runs, I don't think the all clear has been sounded in the market and we're going back to new highs right now," Paul Schatz, president of Heritage Capital, tells Yahoo Finance.

He's not expecting a V-shaped economic recovery like some experts are hoping to see, and so he expects more volatility in the near-term.

"I don't think this year from let's say the March 23rd bottom to Christmas is going to be the straight up move, close your eyes and enjoy," Schatz said.

Still, he's a bullish longer term.

"I do see new highs next year, and Dow 40,000 after that," he added.

'More panic-days in the next four to six weeks'

"I would argue that stocks have come so far, so fast," Schatz said. "I would not throw new money in today. I'd be patient, pick my spot."

He's staying away from the most beaten down industries including restaurants, cruises and airlines, even though the airline industry recently received tens of billions of dollars in government aid.

"There's plenty of opportunities in companies and sectors that have not ripped already," said Schatz.

We've just started earnings season, and GDP is expected to contract painfully during the current quarter before potentially rebounding in the 3rd and 4th quarter. On Friday, Philly Fed President Patrick Harker told Yahoo Finance the economy could contract by 5% in 2020.

"The panic maybe over in grand form, but I'll argue that we're going to see more panic-days in the next four to six weeks," added Schatz.

The Dow (^DJI) and S&P 500 (^GSPC) rallied on Friday on optimism of a COVID-19 drug from Gilead and new guidelines from the federal government as states get closer to opening their economies.


Vanguard limits access to the safest money market funds
Author: Jeff Benjamin
Date: Apr 17, 2020
Publication: Investment News
Link to Article

The asset management giant closed Treasury money funds to new investors in an attempt to keep yields positive

In the latest sign of fallout from the Federal Reserve's attempts to support the economy through the COVID-19 pandemic, The Vanguard Group has closed to new investors its $39.5 billion Treasury Money Market Fund (VUSXX).

The move follows a similar decision by Fidelity Investments, which announced a soft close on three Treasury money funds at the end of March.

The closings are touted as being in the best interest of investors, and in some respects, they are, but it also protects the asset managers from having to subsidize the funds just to keep yields positive.

The money managers are hoping to avoid a repeat of what happened 12 years ago, during the financial crisis, when the Fed cut rates to zero and so much money flooded toward the safety of Treasury money funds the portfolio managers were forced to keep buying Treasuries at lower yields.

"The point here is the Treasury fund is the one most sensitive to interest rates and is going to hit 0.01% the fastest, and they don't want to start waiving fees," said Daniel Wiener, editor of The Independent Adviser for Vanguard Investors.

"They are trying to protect the yield," he added.

Fund companies that are closing Treasury money funds are still offering access to money funds with broader mandates that can buy commercial and mortgage paper.

"On the surface and at face value Vanguard believes it is acting in the best interest of shareholders and that's their job, but I also wonder if they are trying to push people into their other money market funds," said Paul Schatz, president of Heritage Capital.

"This is also something that would occur near a peak in the Treasury bond market, and that's probably the most important takeaway," he added.

Vanguard spokesperson Freddy Martino said the decision to close the Treasury fund to new investors boils down to the fact the fund is made up mostly of Treasuries and yields have been driven down.

"As new money comes in and is put to work, more Treasuries have to be purchased," he said.

Vanguard closed the fund in 2009 after the Fed cut rates to zero and didn't reopen it until 2016.

At Fidelity, the Treasury money funds were closed in 2008 and reopened in 2010.

"While all of our money market funds have managed recent inflows well, with the recent reduction in the federal funds rate and yields on Treasury securities at historic lows, Fidelity believes that limiting inflows into the Treasury money market funds will help preserve the returns of existing fund shareholders," said Fidelity spokesperson Adam Banker.

"We will reopen the funds to new investors when we determine it is appropriate," he added.

The reason Treasury funds are being singled out is because they represent the ultimate in safety, which means they will likely continue to see strong inflows until investors start to believe the economy is out of the woods.

According to Crane Data, government money funds experienced inflows of more than $790 billion last month, which more than doubles the $325 billion that flowed into the products in September 2008, the month the Reserve Primary Fund saw its net asset value per share drop below a dollar.

"It's a big deal when the funds with assets 100% guaranteed by the U.S. government, which is the safest credit in the world, aren't available for investment," said Dennis Nolte, vice president at Seacoast Investment Services.

"However, since the Treasury is now wedded to the Federal Reserve and the Fed seems to be buying all risky credit assets perhaps there isn't any risk," he added. "People are going to have to go out further on the risk spectrum with funds generally designed for liquidity and safety. And that's never insignificant."


With Tax Day Delay, Here's How To Put Your Cash To Work In The Meantime
Author: Paul Katzeff
Date: Apr 15, 2020
Publication: INVESTOR'S BUSINESS DAILY
Link to Article

Taxes are usually due April 15. But these aren't normal times. With the government's shake-up of tax rules to help the country cope with the coronavirus pandemic, you've got three extra months to meet tax deadlines in 2020.

Congress gave you three extra months to file and pay tax returns. That means July 15 is the new April 15 tax day, at least this year - giving a whole new meaning to the concept of tax deadlines in 2020.

Now the real question is: What should you do with that extra time? The answer: plenty.

Tax Deadlines 2020: Tax Strategy Opportunities

Tax strategy opportunities stem from the Coronavirus Aid, Relief and Economic Security Act. Known as the Cares Act, the new law lets you postpone filing your tax return until at least July 15.

But if July 15 is the deadline for paying taxes, the rest of the idea of tax deadlines in 2020 has taken on new meaning. The IRS said, "The Federal income tax filing due date is automatically extended from April 15 to July 15. Taxpayers can also defer federal income tax payments due on April 15 to July 15 without penalties and interest, regardless of the amount owed" in a tax bulletin.

Congress also embedded several personal finance planning gifts in the new law. To make it easier for taxpayers to hold on to their money and investments, and especially to nurture their retirement savings accounts, Congress has loosened lots of restrictions on tax-sheltered accounts, too.

More Ways To Take Advantage Of The Extra Three Months

Here are some of the new tax-strategy opportunities so you can take advantage of more lax tax deadlines in 2020. First of all, if the IRS owes you money, file immediately. Don't wait until July 15 to get your refund. "Otherwise, you are simply giving the government an interest-free loan of money that you are owed," said Colleen Carcone, director of wealth planning strategies at the giant retirement savings focused financial firm TIAA.

But if you owe money or if you're looking for other ways to score from this unusual delay, consider:
  • arrwrgt Waiting to pay. If you owe the IRS money, don't pay until July 15. The IRS is giving you a three-month loan. You don't know if you'll need the extra cash with the economy shut down. And a free loan from the IRS beats selling your investments at depressed prices to raise cash.

  • arrwrgt Banking the money. Put money you owe in taxes in a high-yield savings account for three months. The national interest rate on savings is just 0.61% annually, says Bankrate.com. But online banks like Ally are paying 1.5% or higher. Depending on how much you owe, banking money for three months can add up. If you owe the IRS $5,000, banking it for three months at 1.5% is worth nearly $20. That's a few months of Disney+. If you run a business, your tax bill might be dramatically higher and more worth your while.

  • arrwrgt Delaying even longer. If your finances are in such turmoil that you cannot file even by July 15 - and whose finances aren't at least murky now? You can request a six-month filing extension. That would give you until Oct. 15 to file. It does not delay when your payment is due.

Ways That The New Tax Deadlines In 2020 Help You Boost Retirement Savings
  • arrwrgt Taking a second chance to boost your retirement. You now have until July 15 to make a 2019 contribution to a traditional IRA or Roth IRA. This is a gift if you meant to fund your retirement but had put it off amid the coronavirus stock market crash. Stocks are cheaper now so you'll get more shares for your retirement savings dollars. If you have a SEP IRA or a Keogh plan and you get an extension for filing your return until Oct. 15, you also have until that date to make 2019 contributions to those accounts.

  • arrwrgt Doing a Roth IRA conversion. This is another opportunity made more attractive by the fact that the values of stocks and mutual funds have plummeted. That means the income tax you pay on the amount converted from a traditional IRA is much less than it was just weeks ago. But those investments will surge in value once a rally begins. And once you've held the account five years and turn age 59-1/2, all of your Roth IRA withdrawals are tax-free, says Steven Williamson, chairman of the National Association of Active Investment Managers (NAAIM) and owner of Blackstone Wealth Management.

  • arrwrgt Funding your health savings account. Seriously, do it as you have more time now thanks to the change in tax deadlines in 2020. You now have until July 15 to make a 2019 contribution to a health savings account (HSA). HSAs are powerful accounts that offer a potential for a triple-tax bonus.

  • arrwrgt Kicking your estimated tax payments down the road, too. If you're self-employed or have freelance or dividend income, you got an additional break, says Ed Slott, tax expert at IRAHelp.com. July 15 is also the delayed deadline for your first two installments of 2020 estimated tax payments. These are taxes due on income not subject to income-tax withholding rules.

Tax Deadlines 2020: More Legal Loopholes

And it gets even better. With the July 15 tax deadlines in 2020 delayed, there are other tax planning opportunities.

  • arrwrgt Don't take an RMD if you don't need cash. If you were going to be obliged by law to take a Required Minimum Distribution (RMD) from an IRA or 401(k) account this year, you're off the hook. The Cares Act waives all RMDs for 2020. This will let you avoid the tax bill on that RMD, says Paul Schatz, president of Heritage Capital. And it lets investments continue to grow tax-deferred inside your retirement account.

  • arrwrgt Take a penalty-free withdrawal if you do need cash. You can withdraw up to $100,000 from qualified IRAs and 401(k)s without paying the additional 10% penalty that normally hits people under age 59 1/2, if you've been impacted by the coronavirus, such as being diagnosed with Covid-19 or laid off due to the pandemic. You can spread the taxes out over three years.


Dow Jones At 30,000 Next Year? Paul Schatz Weighs In
With: Nicole Petallides
Date: Apr 15, 2020
Publication: TD Ameritrade
Link to Article

Schatz on TD Ameritrade's The Watch List

The Watch List with Nicole Petallides offers investors a midday look at the most relevant stocks, sectors and commodities.


Premature to think we're back to normalcy in a few months: Paul Schatz
Author: Sara Eisen
Date: Apr 14, 2020
Publication: CNBC
Link to Article



Paul Schatz, Heritage Capital, joins "Closing Bell" to discuss the state of the markets.


Markets volatile as jobless claims surge to 6.6M amid coronavirus
With: Andy Serwer and Alexis Christoforous
Date: Apr 2, 2020
Publication: Yahoo! Finance
Link to Article



Paul Schatz, Heritage Capital President, joins Yahoo Finance's Editor-in-Chief Andy Serwer, Alexis Christoforous, Brian Sozzi and Jared Blikre to discuss the latest market action.


Initial jobless claims double to 6.6M
With: Alexis Christoforous and Brian Sozzi
Date: Apr 2, 2020
Publication: Yahoo! Finance
Link to Article



Paul Schatz Heritage Capital President, joins Yahoo Finance's Alexis Christoforous and Brian Sozzi to discuss the increase in jobless claims amid the coronavirus outbreak.


Stocks Surge as JNJ Preps COVID-19 Vaccine Trials
With: Zach Guzman
Date: Mar 30, 2020
Publication: Yahoo! Finance
Link to Article



Paul Schatz Talks Trading Strategies In A Bear Market
With: Nicole Petallides
Date: Mar 24, 2020
Publication: TD Ameritrade
Link to Article

Schatz on TD Ameritrade's The Watch List

Paul Schatz Talks Trading Strategies In A Bear Market

The Watch List with Nicole Petallides offers investors a midday look at the most relevant stocks, sectors and commodities.


Coronavirus hasn't reached its peak level yet: Business expert
With: Cheryl Casone
Date: Mar 24, 2020
Publication: FOX Business
Link to Article



Heritage Capital CIO Paul Schatz and Everplus Capital LLC director of business Jason Rotman discuss smart investments and say the market is at a low due to a lack of sellers.


'We don't have time' as coronavirus outbreak worsens: Heritage Capital President
With: Brian Sozzi
Date: Mar 18, 2020
Publication: Yahoo! Finance
Link to Article



U.S. markets remain volatile as leadership continues to shut down activities. Heritage Capital President Paul Schatz joins Yahoo Finance's On The Move to discuss.


How To Protect Your Retirement From The Coronavirus Stock Market
Author: PAUL KATZEFF
Date: Mar 14, 2020
Publication: INVESTOR'S BUSINESS DAILY
Link to Article

Amid a stock market crash or correction, investors seek smart 401(k) advice to protect their retirement plans. Is it time for cashing out 401(k) assets in stocks - shifting to cash or stable bonds - so your retirement account doesn't shrink more in the coronavirus stock market?

The backdrop, of course, is the coronavirus stock market crash, or correction. The Dow industrials officially dropped to bear market status on Wednesday, trading more than 20% off their Feb. 12 high.

The financial dilemma is make-or-break for retirees and people close to retirement. Does sound 401(k) advice say it's time to try to protect your assets? Should you shift other retirement assets to safe havens?

401(k) Advice If You're Young: Stick With Stocks

Is it time for cashing out 401(k) assets held in stocks and moving to them safer holdings? That depends on your age and situation.

If you are young or have more than one or two years until retirement, your investment game plan is long-term in nature, most advisors say. You have time to bounce back from market dips and downturns.

As a result, 401(k) advice says you're better off leaving your 401(k) funds alone. You should look at your asset mix, though. Know how much of your portfolio is in stocks versus bonds. Make sure you're comfortable with the risk you're taking. But stay invested largely or exclusively in stocks and stock mutual funds. Whatever mix of stock and bond funds your investment game plan calls for based on your age, time horizon, goals and risk tolerance, stick with it.

Why Stocks Protect Your 401(k) Long Term

Why would 401(k) advice tell you to hold stocks in a stock market crash or correction? Stocks grow faster than inflation over the long haul. "Given time, stocks have always rebounded from downturns like the tech bubble, wars, the Great Recession, natural disasters, political issues," said Samantha Azzarello, global market strategist on the J.P. Morgan Asset Management Global Market Insights Strategy Team.

So, trying to anticipate daily market zigs and zags with your mutual funds in the long-term segment of your retirement portfolio is a surefire formula for slashing your investment results.

"Studies show that mutual fund investors who try to do that tend to end up selling low and buying high," Azzarello said.

401(k) Advice For Those Retiring Sooner

But what about the short-term segment of your portfolio? What if you have fewer than one to two years until needing money for specific spending goals in retirement? The best 401(k) advice in that case is different. That money should be set aside in safer investments or cash.

You should do that before a market downturn strikes - not because you own a crystal ball that foretells the future, but just as a routine step in your plan, once you get within one or two years of your expected retirement, says Matt Fleming, a senior financial advisor with Vanguard's Personal Advisor Services.

What if you didn't move money you need sooner prior to the stock market crash or correction? It's also OK to shift that segment to safe haven assets amid volatility, experts say.

Protect Your Near-Term Retirement Purchasing Power

Solid 401(k) advice gives you a plan for retirement money you need soon. Think of this segment of your portfolio for short-term needs as your "spending bucket," says Dan Keady, chief financial planning strategist at the giant retirement savings focused financial firm TIAA.

Your spending bucket should hold assets not subject to big price declines. And so much the better if those assets generate income. "If you have enough income from a traditional pension, Social Security, annuities and so on, you don't need to move money into this bucket," Keady said.

401(k) Advice: How To Use Safe Short-Term Retirement Funds

And if you do follow 401(k) advice and move money into your spending bucket, what sort of assets should you put the money into?

Cash is the most stable asset in the short-term. And high quality, short-term bonds and bond funds offer almost as much short-term stability, with potential for slightly higher yield, Azzarello says.

Several short-term mutual funds and ETFs, as described by top financial advisors, are worth considering. Data regarding yield, duration and credit rating on the funds are from Morningstar.com as of March 12.

What To Know About Safe 401(k) Options

First, some definitions to understand 401(k) advice. Bonds with shorter durations are less sensitive to changing interest rates. Bonds with a duration of two years or less are safer. They are less volatile in a changing rate environment. Duration is a measure of bond risk.

Generally, every 1% change in interest rates (up or down) will cause a bond's price to change about 1% in the opposite direction, for every year of duration.

And then there's credit risk. Bonds with higher credit ratings are safer. Securities with a credit rating of BBB- or above from Standard & Poor's are higher quality investment grade.

A bond fund may not have an effective duration or credit rating if its holdings are largely cash equivalents like one- to three-month Treasuries, issued and backed by the U.S. government, which has a AAA rating, says Steven Williamson, chairman of the National Association of Active Investment Managers (NAAIM) and owner of Blackstone Wealth Management.

DoubleLine Low Duration Bond N (DLSNX)
"For money you want to keep safe, think about a few strong low-duration bond funds," said Terri Spath, chief investment officer of Sierra Mutual Funds, whose funds hold only mutual funds run by other asset managers. "We like DoubleLine Low Duration Bond for (its) high quality holdings ... yield and low volatility - never losing even 1% in a day."
  • 30-day SEC yield: 2.49%
  • Effective duration: one year
  • Credit rating: BB

Zeo Short Duration Income I (ZEOIX)
"This is a unique short-term bond fund with higher yielding, special situation instruments," said Paul Schatz, president of Heritage Capital. "They look for short-duration higher-yielding bonds that may be mispriced or have an event or story where the odds favor a positive outcome. The fund also plays defense when appropriate."
  • 30-day SEC yield: 2.97%
  • Effective duration: 0.57 year
  • Credit rating: B

Western Asset Short-Term Bond I (SBSYX)
Schatz describes this fund as "super conservative," only investing "in very short-term, highly liquid instruments."
  • 30-day SEC yield: 1.65%
  • Effective duration: 2.22 years
  • Credit rating: BBB

iShares Short Maturity Bond ETF (NEAR)
"If an individual wants capital preservation over a short time horizon, this vehicle would be a great way to have nearly no risk while receiving more income than that of a money market or depository account," said Williamson.
  • 30-day SEC yield: 1.95%
  • Effective duration: N.A.
  • Credit rating: N.A.

Invesco Ultra Short Duration ETF (GSY)
With about 45% of its money at work in corporate bonds, this fund has longer duration than funds that have big weightings in one- to three-month Treasuries. That means slightly more risk. But the reward is higher yield, Williamson says.
  • 30-day SEC yield: 1.89%
  • Effective duration: 0.37 year
  • Credit rating: A

SPDR Bloomberg Barclays ST HY Bond ETF (SJNK)
Are you willing to take on a little more risk? This fund's bonds have longer duration than other funds recommended by our 401(k) advice experts. That makes those bonds more vulnerable to interest rate moves. Also, the portfolio's average credit rating is B, which is below investment grade. About 10% of the fund's bonds are high-yield debt from oil companies, Williamson says. But that sector provides relatively strong yields. "This is a good way to get some potential capital appreciation as well as income during this time," Williamson said.
  • 30-day SEC yield: 5.29%
  • Effective duration: 1.6 years
  • Credit rating: B

401(k) Advice Applies To Funds, Not Stocks

Retirement accounts like 401(k)s and IRAs are handled differently from taxable brokerage accounts you use to buy individual stocks. This 401(k) advice applies to how to handle the diversified portion - mutual funds and ETFs - of your portfolio.

With your individual stocks, you buy, hold, add or sell based on the rules of a time-tested strategy that tells you when to get in and out of securities.

Final 401(k) Advice: Follow The Rules

If your 401(k) does not offer safe investment choices like these, consider allocating your desired amount to a stable fund inside an IRA. And if you shift money from a 401(k), do it by way of a direct rollover. If you take a check made payable to yourself, deposit it in the IRA within 60 days so it does not become a taxable withdrawal.

"Anyone 59-1/2 years of age or older who's still employed at that company can move money like that if it's permitted by their 401(k) plan," said Vanguard's Fleming. "About 70% of plans permit that."

That sort of transfer is called an in-service withdrawal. Your plan may slap on additional limits.

"Someone who is only a few years from retirement is likely to be older than 59-1/2," Fleming said.


Stock trading halted as markets sink
With: Brian Sozzi, Alexis Christoforous, and Jared Blikre
Date: Mar 12, 2020
Publication: Yahoo! Finance
Link to Article



Yahoo Finance's Brian Sozzi, Alexis Christoforous, and Jared Blikre break down the latest market action amid coronavirus fears with Victoria Fernandez, Crossmark Global Investments Chief Market Strategist, and Paul Schatz, Heritage Capital President.


Stock futures slump on Trump's travel bans
With: Brian Sozzi and Alexis Christoforous
Date: Mar 12, 2020
Publication: Yahoo! Finance
Link to Article



Yahoo Finance's Brian Sozzi and Alexis Christoforous take a deep dive into the market action with Heritage Capital President Paul Schatz and Nuveen Chief Market Strategist Brian Nick.


Forecast survey: Expect Fed to slash interest rates near zero in 2020 to battle coronavirus fallout
With: Sarah Foster
Date: Mar 12, 2020
Publication: BankRate
Link to Article

The Federal Reserve's first emergency rate cut since the 2008 financial crisis likely won't be the last reduction this year, according to the nation's leading U.S. central banking experts.

The Fed is widely expected to trim interest rates by half a percentage point - matching the size of its unscheduled March 3 cut - when it concludes its next two-day meeting Wednesday, according to economists polled for Bankrate's March 2020 Federal Reserve Forecast survey. After that, the Fed is largely expected to cut at least one more time, respondents reported.

2020 Bankrate Feb March survey

Experts were split between two forecast ranges for the federal funds rate by year-end. A third are predicting that the fed funds rate will be in a target range between 0.25-0.5 percent by year-end, meaning just one quarter-point cut is left before hitting zero, while a third are betting rates will actually be at zero. At any rate, this means borrowing costs are expected to be at their lowest since the U.S. economy plummeted into the depths of the Great Recession.

In addition, one respondent indicated that the Fed would have to take further measures to juice the economy, mainly by growing its balance sheet through quantitative easing. Another participant indicated that the Fed wouldn't be able to end its Treasury bill purchases - a move designed to prevent funding shortfalls in financial markets - by the second quarter of this year, as it had originally planned.

What's causing the Fed to take its policy route on such a massive U-turn? It's due to the economic fallout from the coronavirus. Massive quarantines intended to stop the spread of the contagion have altered global supply chains, halted business and travel activity, while also roiling Treasury and stock markets.

"Going into 2020, the Fed was convinced the current level of policy was appropriate," says Lindsey Piegza, Ph.D., chief economist at Stifel. "Amid rising fears of the coronavirus and ample market volatility, however, come March, the Fed is likely to remove the 'appropriate' language and reiterate a commitment to act as needed to keep the economy on track."

(Note: Bankrate's survey polled nine experts for their forecasts between March 2-10. Given that the situation is evolving quickly and highly volatile, experts reported an average confidence level of 62 percent.)

Fed's main dilemma: When and how quickly should rates fall to zero?

The Fed under Chair Jerome Powell hasn't made any cuts larger than 50 basis points, meaning the March reduction that Bankrate's experts are penciling in could be classified as an aggressive move.

Still, it might be a disappointment to markets. The majority of investors are betting that officials will lower rates to zero at the March meeting, while a mere 2.2 percent are betting on a 75 basis point cut, according to CME Group's FedWatch. If those bets come true, it means the federal funds rate is expected to be in a target range of 0-0.25 percent, levels that haven't been seen since 2015.

It seems drastic, but investors might not be that far from the curve. Some Wall Street economists have joined the clarion call for zero interest rates in light of the coronavirus, including J.P. Morgan Chase's chief economist Mike Feroli and chief economist Jan Hatzius of Goldman Sachs.

Fed research suggests that, in a low-rate environment, officials should act quickly and aggressively to ward off any economic contagions. You want to "vaccinate against further ills," as Federal Reserve Bank of New York President John Williams said in a July 2018 speech.

Coronavirus derails Fed's 'make-no-move' policy stance

That economic contagion, in this case, is an actual contagion. After cutting rates three times in 2019 as an act of insurance, Fed officials kicked off the year pledging to be patient, echoing that interest rates were in an appropriate place to sustain economic growth through the election year.

But then the coronavirus came along, and it forced the Fed to act again. It's expected to shave nearly half of a percentage point off of first quarter growth, according to Bankrate's First-Quarter Economic Indicator survey. Firms such as Apple and Toyota have ceased production in China, leading to supply chain disruptions and outright shortages of products. Meanwhile, air travel is expected to face its worst year for revenue on record, amid massive restrictions and fears. President Donald Trump announced in an address to the nation Wednesday that he'd be restricting travel with Europe for 30 days.

"The Fed set a precedent last year of providing 'insurance rate cuts' rather than basing its rate cut decisions on data," says Kristina Hooper, chief global market strategist at Invesco. "There is now an expectation that the Fed will do the same this year, and it has helped that expectation by providing the 50 basis point emergency cut the other day."

But by how much the Fed decides to act is still up in the air. Williams' research suggests that the Fed might not want to wait for too long before responding. But there's an argument supporting a more conservative response as well. What happens if you give up all your available stimulus to shelter an economy from a recession, before the recession starts? Up in the air is also how much Congress is willing to respond, and of course, how quickly the U.S. economy could bounce back.

Forecasts: Expect at least one more cut, rates near zero

Similar to this diversity of viewpoints, Bankrate's Fed Forecast survey found that economists were split on where the fed funds rate would be by the end of 2020. Nearly 44 percent said the Fed would make at least one cut, while another 33 percent said the Fed would make at least two.

Two respondents said the Fed would choose to maintain rates after its March meeting. That's largely because the Fed has limited ammunition left and would prefer to hold onto its most effective form of stimulus - rate cuts - for as long as it can.

"If the economy can remain stable, the Fed would probably like to stay on hold rather than race toward zero," says Yung-Yu Ma, chief investment strategist at BMO Wealth Management. "If the economic environment deteriorates further, the Fed will cut again, but it is unlikely to follow Europe into negative interest rate territory, so the Fed knows that it is running out of room and doesn't want to expend that unless necessary."

Experts' implied predictions for the federal funds rate at year-end differed as well. Respondents were evenly split between the federal funds rate being in a target range of 0.25-0.5 percent by the end of 2020, versus 0-0.25 percent, the effective zero-lower bound.

"The downside risks to the economy are significant enough that I expect the Fed to use its remaining policy ammunition to ward off a recession," says Steven Friedman, senior economist at Mackay Shields, who formerly worked for the New York Fed, one of those respondents who is predicting rates will hit zero this year.

BankRate Survery Fed at Year End

What this means for you

The Fed's policy path moving forward means something different for everyone, whether you're a borrower, saver or retiree.

Borrowers will find that time is on their side this year, given that the Fed is expected to lower rates to some of their lowest levels ever. Over the next few months, use cheaper borrowing costs to your advantage by paying off debt, specifically high-cost credit card debt. And with the 10-year Treasury yield also at an all-time low, homeowners and would-be homebuyers can take advantage of historically low mortgage rates by either refinancing or purchasing a home now.

Savers and retirees, however, likely won't celebrate where rates are expected to head over the next 12 months. Retirees live on fixed income, which is sensitive to interest rate adjustments. Meanwhile, savers will find that their yields will likely fall even more. However, you can take solace in the fact that inflation is low for now, meaning whatever amount you decide to put away won't be massively chipped away by building price pressures.

But no one - not even officials at the Fed - expected this kind of precarious economic situation in 2020. Preparing for the unexpected should be at the top of your priority. Consider opening a high-yield savings account, which still offers rates at about 18 times the national average, to store nearly three to six months' worth of expenses for a rainy day. Opening a certificate of deposit (CD) before rates fall is another wise option, if you can afford to lock your funds away for a certain period of time.

"Looking back on my Fed forecast for 2020: 'Man plans, God laughs,'" says Paul Schatz, president and chief investment officer at Heritage Capital. "The Fed will likely go into pre-recession mode in a few weeks. For sure, Germany, Italy and the rest of Europe are either in recession now or close. China's output has fallen off a cliff. There is no way for the U.S. to escape unscathed."

Methodology

Bankrate's March 2020 Federal Reserve Forecast survey of economists and financial experts was conducted from March 2-10 via an online poll. Survey requests were emailed to potential respondents nationwide, and responses were submitted voluntarily via a website. Responding were: Richard F. Moody, SVP and chief economist, Regions Financial Corporation; Kristina Hooper, chief global market strategist, Invesco; Paul Schatz, president, Heritage Capital; Yung-Yu Ma, chief investment strategist; BMO Wealth Management; Peter Earle, research fellow, American Institute for Economic Research; Dan North, chief economist, Euler Hermes North America; Lindsey Piegza, Ph.D., chief economist, Stifel; Sal Guatieri, director and senior economist, BMO Capital Markets; and Steven Friedman, senior economist, Mackay Shields.


Paul Schatz on the coronavirus impact on world economy
Author/Anchor: Tim Lammers
Date: Mar 10, 2020
Publication: FOX 61
Link to Article





Stocks pare losses on Kudlow 'targeted stimulus' comments
With: Zack Guzman & Kristin Myer
Date: Mar 06, 2020
Publication: Yahoo! Finance
Link to Article



As the coronavirus continues to take its toll on markets, rumors are circulating that the Trump administration may assist certain sectors hit particularly hard by the virus. Heritage Capital President and CIO Paul Schatz joins Yahoo Finance's Zack Guzman, Kristin Myers, along with CapitalistBook.com author Nathan Latka, to discuss.


Coronavirus and the Stock Market
Author/Anchor: Tim Lammers
Date: Mar 05, 2020
Publication: FOX 61
Link to Article





Vanguard: Fed rate cut a 'high-risk bet'
Author: Jeff Benjamin
Date: Mar 03, 2020
Publication: Investment News
Link to Article

The fund manager's chief economist called the decision 'premature' should conditions deteriorate further

The Federal Reserve's effort to address the economic risks associated with the spread of the novel coronavirus with an emergency interest rate cut is being criticized for potentially making matters worse.

Roger Aliaga-Diaz, chief economist at The Vanguard Group, described the Fed's 50-basis point cut as, "premature given the lack of data suggesting a significant drag on the economy."

"The high uncertainty around the potential implications of the coronavirus warrant further assessment before taking action of such magnitude," Mr. Aliaga-Diaz added. "Based on the economic and virus-related data available today, we feel this is a high-risk bet. The Fed may find themselves in a difficult position should conditions deteriorate further, finding themselves required to act forcefully in the weeks ahead."

The Tuesday morning announcement by Fed Chairman Jerome Powell, representing the first emergency rate cut since the 2008 financial crisis, was described as a means of protecting the economy against the negative impacts of the fast-spreading coronavirus.

"The spread of the coronavirus has brought new challenges and risks," Mr. Powell said at a press conference following the rate-cut announcement.

The S&P 500 responded negatively to the news, spending most of the trading day down about 2%, which came on the heels of a 5% gain on Monday.

"The nature of today's announcement could send the wrong signal to market participants, including individual investors who are concerned with recent market volatility," Mr. Aliaga-Diaz said. "This also creates uncertainty around the Fed's framework for monetary policy decisions following market dislocations."

Paul Schatz, president of Heritage Capital, responded to the sudden Fed move with similar surprise.

"I don't know what Powell and his minions were thinking", he said. "The time for the cut was Sunday night (following the market's worst week in a decade). Cutting after the Dow soars 1,300 points and during the trading day makes them even more foolish than they already are. Personally, I would have either cut Sunday night or waited for another decline."


'Don't run to gold' and other advice for pandemic volatility
Author: EMILE HALLEZ
Date: Feb 25, 2020
Publication: Investment News
Link to Article

After two days of stock market drops, some clients are worried

As U.S. investors panicked Tuesday amid global reports of a wider outbreak of the coronavirus, financial advisers urged their clients to avoid reacting negatively to the market dip.

More new cases of infection were reported outside of China - including dozens of patients now in the U.S. - and the Centers for Disease Control and Prevention warned the public to prepare for widespread contagion within the U.S.

The markets tumbled. The Dow Jones Industrial Index fell nearly 900 points, or over 3%, during the day, while the S&P 500 dropped by about 3%. Those moves followed similar dips on Monday, when the Dow fell by 3.5%, closing more than 1,000 points lower than its 28,993 close on Friday, Feb. 21.

Adviser Paul Schatz, president of Heritage Capital, said he has tried to prepare clients for months for the volatility. Because of that, he heard from only a few people after the market drop.

But for anyone thinking of rebalancing, Mr. Schatz had one piece of advice. "If you weren't smart enough to take [defensive] measures on Friday or Thursday, don't react today ... Certainly don't run to gold right now," he said. "People are going to look for safe havens."

Advisers told clients to sit tight, at least until the market recovers.

"I have had a few clients reach out today," Lamar Watson, founder of Dream Financial Planning, said in an email. When taking on clients, Mr. Watson uses Riskalyze to understand their risk tolerance, and he explains how volatile the stock market can be, he said. He also encourages clients to focus on what they can control, like spending and saving, he said.

"The coronavirus would definitely fall into the uncontrollable bucket," Mr. Watson said. "I also remind them that their investments are only a small part of their overall financial picture and that this, too, will pass."

Although many clients were concerned, they were also familiar with market volatility, advisers said. Investors' memories of the market's dip in late 2018 and its swift recovery in 2019 are a plus in that regard, they said.

"Most of our clients have been relatively calm - it has been helpful to put in perspective for them what their portfolios did during 2019 and the little volatility we saw during the year," Brett Fry, wealth adviser at Forteris Wealth Management, said in an email. "It has also been helpful for our clients to see how they are relative to their goals and relative to where they were to start the year."

When clients are well-educated about volatility, they don't tend to worry after two days of market drops, Mr. Schatz said.

"I don't think people will ever get comfortable with volatility," he said. But "I'll hear from people when the [earnings] statements come out and it's a quarterly decline."

Despite this week's performance, "the bull market remains alive and well," Mr. Schatz said. "And after this decline, we will see fresh, all-time highs by summer."

The severe acute respiratory syndrome, or SARS, pandemic in 2003 showed that some market volatility should be expected, advisers noted.

"I try and prepare my clients for market movement like this no matter what the cause," Ben Lies, president and chief investment officer at Delphi Advisers, wrote in an email. "The key is to scale the impact and look at each event in historical retrospect."

Along with SARS, the outbreak of Middle East Respiratory Syndrome in 2012 is recent enough for many investors to remember. Even though MERS had a 34% mortality rate, the markets were largely unaffected, with the S&P 500 returning 13% in 2012 and 29% in 2013, Mr. Lies said. The 2003 SARS outbreak, which had a 7% mortality rate, also ultimately had no long-term negative effect on markets, with the S&P returning 26% in 2003 and 9% in 2004, he said.

By comparison, the mortality rate reported so far in connection with the coronavirus is less than 3%.

"Both SARS and MERS caused a lot of volatility in the market, but overall, markets recovered quickly and reverted back to the underlying trend," Mr. Lies said. "When you take clients through the market history, it becomes pretty clear that [the coronavirus] won't likely have significant long-term effects on their portfolio. But that doesn't mean it's not difficult and very sad for those afflicted."

Other financial professionals noted that some clients see the market dip as an opportunity.

"Several weeks ago we sent out communication to our clients letting them know that historically the market has had a short-term negative reaction to previous outbreaks and that the market quickly rallied," Leibel Sternbach, founder of Yields4U, wrote in an email. "We've been using this dip to invest our cash holdings, and our contrarian strategy has been having a field day buying beaten-up companies these last few weeks."

One adviser said he cautioned a client against being too hasty about buying during the market dip.

"I spoke to a client of mine yesterday who asked whether we should reconsider investing some of her excess cash now," said Michael Caligiuri, chief executive officer of Caligiuri Financial. Instead, he advised the client to stay on course by incrementally investing that cash over 12 months, he said.

"I also reemphasized my recommendation to consider allocating 5% to 10% of her portfolio to precious metals, as they can enhance an investors' diversification," Mr. Caligiuri said.

Even within 401(k) plans, trading was much higher than average at the start of the week.

On Monday, plan participants in Alight Solutions' defined-contribution business traded at nearly four times the average rate, with investors migrating from stock-heavy funds to fixed income, according to the company. But even with the higher level of activity, only 0.06% of total plan assets were traded, Alight reported.


Market will survive if Federal Reserve doesn't decrease interest rates: Expert
With: Charles Payne
Date: Feb 20, 2020
Publication: FOX Business
Link to Article



Heritage Capital's Paul Schatz, Wealth Enhancement Group Senior Vice President Nicole Webb and PwC partner Mitch Roschelle discuss the strong manufacturing sector and predictions for interest rate cuts.


Paul Schatz's Stock And ETF Picks: MJ, PDCO, XBI
With: Nicole Petallides
Date: Feb 19, 2020
Publication: TD Ameritrade
Link to Article

Schatz on TD Ameritrade's The Watch List

Paul Schatz's Stock And ETF Picks

The Watch List with Nicole Petallides offers investors a midday look at the most relevant stocks, sectors and commodities.


Concerns rise about negative bond yields reaching U.S.
Author: Jeff Benjamin
Date: Feb 10, 2020
Publication: Investment News
Link to Article

Market watchers say negative rates will inevitably follow the next recession

As the longest economic expansion in U.S. history continues to get older, it's only natural that speculation is building over when the next recession will hit.

But this economic cycle carries with it the unprecedented potential for something known as a negative-interest-rate policy, and some now see that as inevitable.

"If the next recession is anything but mild, the Fed will go to negative rates, which will be a complete and utter disaster," said Paul Schatz, president of Heritage Capital.

Citing as a reference point the Federal Reserve's response to the 2008 financial crisis - driving interest rates down from 5.5% to zero and then layering on $4 trillion worth of quantitative easing - Mr. Schatz expects the Fed to embrace the kind of negative-rate policy that has become common in many parts of Asia and Europe.

"They're already floating the trial balloon of negative rates," he said. "It's not going to work because it's a vortex that destroys your bond market."

As global central bankers have cut rates in a desperate attempt to stimulate economic growth, the result has been approximately $13 trillion worth of negative-yielding sovereign debt outside the United States.

Last month, in an interview with InvestmentNews, Allianz chief economic adviser Mohamed El-Erian said it is "very unlikely" the U.S. will employ negative rates because "the Fed fully understands the risks and costs. And secondly, it's very unlikely because I do not believe we're going into a recession."

In an interview for this story, Mr. El-Erian said the chance that negative rates will spread to the U.S. is limited by the effects the policies are having in Europe.

"It's highly unlikely because of increasing evidence that the experiment of negative rates in Europe is failing," he said. "The right option is to employ a comprehensive policy approach that doesn't rely on central banks. If that's not possible, there is a scope for the Fed for a lot of quantitative easing."

Mr. El-Erian added that the European central bankers who initially embraced negative rates are now divided over the policy's effectiveness.

"Going negative has been shown to encourage savings, it encourages excessive risk-taking, it allows zombie companies to stay alive and it increases the misallocation of resources across the country," he said.

Negative yields could mean investors would have to pay for the privilege of owning a bond or storing money in a savings account. While that possibility has been kicking around as a potential threat to the U.S. for a half-dozen years, the voices citing the threat are getting louder.

Michael Bazdarich, an economist at Western Asset Management Co., published a report Feb. 6 arguing that negative rates are both inevitable and technically manageable from a financial market perspective.

Like Mr. Schatz, Mr. Bazdarich doesn't believe the Fed has enough cushion, with rates currently below 2%, to avoid negative rates as a tool for fighting a recession.

Mr. Bazdarich was not available for an interview for this story, but in his paper he explained that in each recession since the 1970s, the Fed has responded by cutting short-term rates by more than five percentage points.

In the wake of the financial crisis, the Fed funds rate peaked at 2.4% in late 2018 and is currently hovering around 1.5%.

"Short-term rates are likely to stand below 2% when the next recession emerges," Mr. Bazdarich wrote. "If the Fed is to pursue rate cuts on anything approaching the scale seen in previous recessions, a move to the negative is inevitable."

The report says the Fed can either respond to slower growth by "doing nothing to help the economy weather the next recession or embark on a negative-rate policy." Mr. Bazdarich cites Asia and Europe as proof that "there is nothing in bond math requiring positive yields."

As illogical as it might seem, a negative Fed funds rate would mean commercial banks would pay other banks to borrow cash reserves from them. Mr. Bazdarich said banks will do it because it will cost them even more to hold the reserves.

The ripple effect could be punishing to anyone relying on fixed-income investments.

"Negative rates become a black hole that sucks you in and you can't get out," Mr. Schatz said. "Many bond mutual funds and pension funds have strict rules on what they must invest in. Why on Earth would anyone buy a $100 CD only to get $99 back a year later? But that's what happens when funds have to own Treasuries and those Treasuries pay negative rates."

Michael Hennessy, founder and chief executive of Harbor Crest Wealth Advisors, agreed that turning to negative rates to battle a recession could be crushing to anyone in or near retirement.

"The issuance of negative-yielding debt would hit the baby boomers the hardest, just as that cohort moves out of the workforce and into retirement," he said. "Additionally, banks would need to find creative ways to replace the income they need to generate from their deposits at the Fed. This would likely mean increased fees to consumers, and potentially even negative deposit rates to the average saver."

But, worst-case scenarios aside, Mr. Hennessy believes a recession that would lead to negative rates is not yet a real threat.

"There is increased talk, but right now I don't see a likelihood of a recession," he said. "The unemployment rate is 3.5%, the stock market is at all-time highs. There's no reason at all to go to negative rates right now."

Mr. Bazdarich writes that Fed officials are also "confident they will not need to resort to negative interest rates. However, as Mike Tyson once said, everyone has a plan until they get punched in the face. It is hard to imagine that Fed officials will not resort to any tactic available or conceivable when the economy appears to be in need of it, and it's hard to see Congress standing in the way."



Stocks shake-off coronavirus fears, impeachment trial
With: Adam Shapiro & Julie Hyman
Date: Jan 29, 2020
Publication: Yahoo! Finance
Link to Article



Despite mounting concerns regarding the coronavirus and impeachment trial, markets appear to be shrugging off concerns. Heritage Capital President Paul Schatz joins On the Move to discuss how long this can last.


Paul Schatz On Forecasting How High The Market Rally Can Go
With: Nicole Petallides
Date: Jan 29, 2020
Publication: TD Ameritrade
Link to Article

Schatz on TD Ameritrade's The Watch List

Paul Schatz On Forecasting How High The Market Rally Can Go

The Watch List with Nicole Petallides offers investors a midday look at the most relevant stocks, sectors and commodities.


Stocks close little changed, IBM leads tech shares higher
Author: Fred Imbert
Date: Jan 22, 2020
Publication: CNBC
Link to Article

Stocks ended a volatile session along the flatline on Wednesday despite strong gains from IBM that lifted the overall technology sector.

The Dow Jones Industrial Average dipped 9.77 points, or less than 0.1% to 29,186.27. Earlier in the day, the Dow was up more than 120 points. The S&P 500 eked out a small gain, closing at 3,321.75; it also reached an intraday record. The Nasdaq Composite notched an intraday all-time high as well, advancing 0.1% to 9,383.77.

IBM shares climbed 3% on the back of quarterly numbers that beat analyst expectations. The company also issued 2020 earnings guidance that topped estimates. These results put IBM "on its front foot for 2020," Nomura Instinet analyst Jeffrey Kvaal said in a note. "IBM is quickly pivoting its existing businesses toward the hybrid cloud."

So far, more than 10% of S&P 500 companies have posted their latest quarterly results. Of those companies, 75% have posted better-than-forecast earnings, FactSet data shows.

"Companies, for the most part, are putting up the numbers they need to for the market to keep moving higher," said Dan Russo, chief market strategist at Chaikin Analytics. "We're now lapping the tough earnings comparisons from last year, so investors are starting to think about earnings growth again."

Apple, meanwhile, gained 0.4% and hit an all-time high. Tesla shares jumped 4.1% as the electric car maker's market cap broke above $100 billion for the first time. Semiconductor stocks also hit an all-time high. The VanEck Vectors Semiconductor ETF (SMH) climbed 0.8% as Intel and Teradyne advanced more than 2.8% each.

However, Netflix closed 3.6% lower to offset some of those gains. Boeing also fell more than 1% to amid renewed concerns over the 737 Max.

Stocks pulled back slightly on Tuesday as worries over the spreading of the deadly coronavirus dampened investor sentiment. Those fears lingered Wednesday even after China unveiled measures to rein in the virus.

President Donald Trump also said he trusts Chinese President Xi Jinping to deal with the crisis, adding the U.S. has everything "totally under control." Trump made his comments after U.S. public health officials confirmed that the first U.S. case has been diagnosed in Washington State. However, the Centers for Disease Control and Prevention said the patient "poses little risk" to the public.

Overall, stocks are off to a strong start for the year. Through 14 sessions, the S&P 500 has closed lower just five times and is up 2.8%.

Paul Schatz, president at Heritage Capital, said the market's foundation is "rock solid," but noted investors may be getting too greedy at current levels.

"My issue is not how much we've gone up, because there is plenty of precedent for a market that grinds and creeps higher every day," he said. "The issue today is you have a historic level of bullishness and outright greed. That's my concern."


Why 'irrationally bullish' investors are getting nervous as the stock market races to uncharted territory
Author: Mark DeCambre
Date: Jan 21, 2020
Publication: MarketWatch
Link to Article

'It's a tough one, you've got these guys on TV saying all systems are go' says one Wall Street analyst

Heritage Capital - StockChart AD Line

Where is this dazzling bull market headed in the coming days and weeks?

That is the trillion-dollar question some nervous strategists, analysts and traders are wrestling with, following a relatively brisk rally for equities to kick off 2020.

So far, major indexes have checked all the boxes for the bulls. The Dow Jones Industrial Average DJIA, -0.09% traversed a milestone at 29,000, the S&P 500 index SPX, +0.11% followed with its own landmark turn above 3,300 and the Nasdaq Composite Index COMP, +0.20% is rallying like it is 1999. And that's all within the first 11 trading days of 2020, in which the Nasdaq (and the S&P 500) have closed at all-time highs more than half the time.

Another way to think about, the ferocity by which stocks have climbed in the first three weeks of this year, S&P 500 gains have already exceeded the 2020 estimates for nearly half the 18 analysts surveyed by MarketWatch.

Part of the euphoria has been stoked by the apparent detente between China and the U.S., cemented by the signing on Wednesday of the first stage of a trade resolution between Beijing and Washington. The other factor keeping equities afloat is undoubtedly a Federal Reserve that slashed interest rates thrice last year to a 1.75%-2% range and have markets under the impression that a low-rate regime is here to stay to for the foreseeable future.

"We stay irrationally bullish until peak positioning & peak liquidity incite [a] spike in bond yields & 4-8% equity correction," wrote analysts at Banc of America Securities on Friday in a weekly research report on the state of the market.

However, even bulls know that stock markets dont rally indefinitely.

"To date the market has had a long run of prosperity that makes investors nervous, because we all have good memories that what goes up must come down," Art Hogan, chief market strategist at National Securities Corporation, told MarketWatch.

And for some there is plenty of reason to believe that this year could be one replete with volatility shocks along the way?

For one, some 87% of the components of the S&P 500 are trading above their 200-day moving average, used by technical analysts to help gauge bullish and bearish long-term momentum in an asset (see chart below):

Heritage Capital - MarketWatch

"That is the highest mark since July, 2014. And July 3, 2014 was the last time there were 90%. That lasted for a day," Frank Cappelleri, executive director of equity sales and trading at Instinet, told MarketWatch on Friday.

Meanwhile, a measure of how intensely the market has been bought is showing the highest reading since January of 2018. The relative strength index, or RSI, over a rolling 14-day period was at 76.91 on Friday and had touched 78.27 on Dec. 27, marking the highest reading since Jan. 26, 2018 (see chart attached). Traditionally, the RSI, which charts the speed of price changes in an asset, oscillates between 0 and 100 and is considered overbought when it reads above 70 and oversold when below 30:

Heritage Capital - MarketWatch

Thus far gains have pushed stock prices up without the commensurate advance in corporate earnings. Indeed stocks are overvalued according to the popular measure of price-to-earnings, or P/E, which compares the price of one share of stock against one year of per-share earnings relative to recent history. By that measure, the S&P 500 is trading at 18.6 times for the coming 12 months, according to FactSet data. That is above the average ratio of 16.7 during the past five years and 14.9 over the past 10, MarketWatch's Chris Matthews reports.

Perhaps, that's why corporate earnings reports may take on added significance this week and next as the issues of Sino-American trade spats have shifted to the back burner and interest rates remain anchored lower.

So far this quarter earnings could help provide a further lift to stocks if companies manage to beat already-lowered market expectations.

MarketWatch's Tomi Kilgore reports that there's a chance earnings growth could end up better than feared, "as analysts have been more pessimistic than usual, amid uncertainty over the negative impact from U.S.-China trade tensions and slowing overseas growth." That would end an earnings recession, which S&P 500 index companies entered officially for the first time in three years back in September.

In all, 70.5% of the 9% of S&P 500 companies that have reported earnings so far have beaten expectations, according to Refinitiv, above the beat rate of 65% for a typical quarter.

This week's holiday-shortened U.S. week begins a more intense phase of fourth-quarter earnings reporting which could help determine the fate of this bull market, at least in the near term.

If quarterly results can help support this rally then investors may want to heed the advice of hedge-fund luminary David Tepper and ride "a horse that's running."

"The market we're in is one that grinds higher or steadily creeps higher, it is doesn't give investors a chance to buy pullbacks," Paul Schatz, president of Heritage Capital, told MarketWatch. He said that's one of the reasons that FOMO, or fear of missing out, seems to have taken hold on Wall Street.

How close are we to getting a pullback? Who knows?

"Indicators don't flash red when the market is at a top," writes Mark Newton, a prominent. independent technical analyst. "It's hard to go out there and really trumpet a big bearish call, which makes you wonder if its probably the right thing to be doing."

Or as Jim Carney, founder and CEO of alternative investment manager Parplus Partners, told MarketWatch: "It's a tough one, You've got these guys on TV saying all systems are go, there is no stress in the market and I can't see what the next problem is going to be on the horizon."

"But every time, it looks good something happens…it's almost frightening and that's when it gets worrying," he said.

Investors were skittish enough to help produce record flows into bonds, according to Bank of America which indicates that the past two weeks of purchases, about $40 billion, suggest an annualized pace of bond buying of around $1 trillion (see attached chart). Maybe that's why the 10-year Treasury note TMUBMUSD10Y, -0.55% yield has been anchored at a range between 1.71 and 1.95% in January.

Heritage Capital - MarketWatch

On Tuesday, Paul Tudor Jones, the legendary investor told CNBC on the sidelines of an well-attended conference in Davos, Switzerland said that "We're just in the craziest monetary-fiscal [policy] mix in history."


Helping clients understand why they aren't beating the S&P 500
Author: Jeff Benjamin
Date: Jan 16, 2020
Publication: Investment News
Link to Article

In the best of times, advisers have to remind clients about the worst of times

Big stock market gains can often mean big headaches for financial advisers when it comes to explaining to clients why their portfolio didn't keep pace with the S&P 500 Index, which gained 30% last year.

Aside from the obvious answer that most clients are not 100% allocated to a single broad market equity index, savvy financial advisers are using this time of year to reintroduce clients to the benefits and realities of diversification and individual risk-tolerance levels.

"When markets have big years people always want to know why they're not 100% in the S&P, and the answer is if your risk tolerance doesn't correlate to the S&P using that as a benchmark is a fool's errand," said Paul Schatz, president of Heritage Capital.

Mr. Schatz said no matter how well you try and educate and prepare clients, big market gains will usually draw questions and comparisons.

In most instances, his standard response is to compare the S&P's 38.5% drop in 2008 to the 16% drop of his main portfolio strategy.

"If you want to assume the risk and reward of the S&P, let's not forget that twice in the past nine years it experienced peak-to-trough declines of more than 50%," he said, citing the 50% drop between 2000 and 2002, and the 58% drop between 2007 and 2009.

"Most of the time we don't meet or beat the S&P 500 Index simply because we don't take on the volatility risk to make that happen," said Tim Holsworth, president of AHP Financial Services.

"It's almost always about the level of volatility the client said they could handle," he added. "it's all about clearly defining volatility limits and setting realistic expectations."

The risk-reward conversation is not a new one for most financial advisers, but that doesn't mean they aren't regularly revisiting it with clients, particularly after a year like 2019 when diversification beyond anything but U.S. stocks dragged down portfolio performance.

In the most basic example of a portfolio including 60% in iShares Core S&P 500 ETF (IVV) and 40% in iShares Core US Aggregate Bond ETF (AGG), the return would have been 22% last year.

If you go beyond the plain vanilla to include areas like international equities the trailing performance gets even worse.

"Investors would have been better off focusing solely on U.S stocks last year, but historically that's not the case," said Todd Rosenbluth, director of mutual fund and ETF research at CFRA.

"It's easy in hindsight to wish you had only been in equities, but the bull market will come to an end at some point and investors will be pleased they are more diversified when that time comes," he added.

Factor-based strategies

Of course, if you really want to feel bad about the way a diversified portfolio performed last year take a gander at some of the factor-based strategies that concentrate on specific slices on the high-performing S&P 500.

Indexed factor strategies focused on minimum volatility, share buybacks, quality, and high beta all returned between 32.4% and 34.4% last year.

But looking in the rearview mirror is virtually useless when it comes to investing, according to Aye Soe, global head of product management at S&P Dow Jones Indices.

"I'm not a believer in factor timing because we never know what factor is going to outperform," she said. "My message is, even though you think you know what you will get, be diversified and have exposure to all these factors because you don't know which will do better."

Dennis Nolte, vice president at Seacoast Investment Services, is a firm believer that most investors think their individual tolerance for market volatility is higher than it is, which is why he embraces a simple adage.

"If your clients are properly diversified, you're always going to be apologizing for something," he said. "But at this point, no one seems to be concerned they didn't make 30% last year. They're glad to have taken less risk and received less of a return, since most folks still seem to believe something bad is going to happen."


Paul Schatz Money Tips for 2020
Author/Anchor: Matt Scott
Date: Jan 10, 2019
Publication: FOX 61
Link to Article





Financial Forecast for 2020
With: Samantha Miller
Date: Jan 09, 2020
Publication: WTNH - NEWS 8
Link to Article



(WTNH) - From the economy to your investments, financial expert Paul Schatz, president of Heritage Capital, breaks down the financial outlook for 2020.


Gold could hit $3,000 by 2025: expert
With: Adam Shapiro & Julie Hyman
Date: Jan 08, 2020
Publication: Yahoo! Finance
Link to Article

Paul Schatz on Yahoo Finance

Gold prices pulled back on Wednesday after climbing above $1,600 for the first time in seven years as tensions between Iran and the United States simmered. Still, the commodity has been one of the best performing assets in the world and one strategist says it's only getting started.

"I think by 2025 gold will be at least $2,500 to $3,000 an ounce," Heritage Capital's Paul Schatz told Yahoo Finance's On the Move. "I don't think the rally is over in gold by any means."

Gold prices are up nearly 4% in just the first few weeks of 2020. Earlier this week, the commodity jumped as much as 2.4% after Iran attacked U.S.-led forces in Iraq in retaliation for a U.S. drone strike that killed an Iranian military commander last week.

"Gold sentiment's really hot right now-everybody loves gold," Schatz said. "I think gold's a trading vehicle. If you like gold, what do you do? You find a leverage way to play it."

Schatz has one particular pick that he calls "the big granddaddy of the industry."

"I chose Newmont (NEM)," he said. "It typically has a leverage effect, so gold goes up $2, that stock goes up 2%. That stock may go up 3%."

Newmont is a leading gold mining company with jurisdictions in North and South America, Australia and Africa. Newmont shares have gained over 24% in the past year alone.

Gold is often looked at as a flight to safety, but investors have been putting their money into the commodity despite stocks doing well.

"Be very careful with the whole flight to safety thing," Schatz said. "I always remind people, in 2008 gold initially went from $1,000 to $680 before reflating. Gold is not this great hedge against inflation that people think it is."


The reasons why the 2010's bull market may be drawing to a close
With: Adam Shapiro & Julie Hyman
Date: Jan 7, 2020
Publication: Yahoo! Finance
Link to Article

Paul Schatz on Yahoo Finance

Heritage Capital President Paul Schatz joins On the Move to explain why he thinks a market fall is on the horizon.


Hyundai and Uber are partnering to build air taxis
With: Adam Shapiro & Julie Hyman
Date: Jan 7, 2020
Publication: Yahoo! Finance
Link to Article

Paul Schatz on Yahoo Finance

At the Consumer Electronics Show Hyundai and Uber announced their partnership to create new flying taxis. Heritage Capital President Paul Schatz joins Yahoo Finance's On The Move panel to discuss.


The IRS adds a question about crypto usage on the new tax form
With: Adam Shapiro & Julie Hyman
Date: Jan 7, 2020
Publication: Yahoo! Finance
Link to Article

Paul Schatz on Yahoo Finance

Heritage Capital President Paul Schatz joins Yahoo Finance's On The Move panel to break down various financial changes going into 2020.


Paul Schatz On Assessing Investment Sentiment
With: Nicole Petallides
Date: Jan 6, 2020
Publication: TD Ameritrade
Link to Article

Schatz on TD Ameritrade's The Watch List

Paul Schatz On Assessing Investment Sentiment

The Watch List with Nicole Petallides offers investors a midday look at the most relevant stocks, sectors and commodities.


END OF THE YEAR TAX AND INVESTMENT ADVICE WITH PAUL SCHATZ
Author/Anchor: Matt Scott
Date: Dec 19, 2019
Publication: FOX 61
Link to Article





Boeing suppliers under pressure amid Max suspension
With: Brian Sozzi, Alexis Christoforous and Jared Blikre
Date: Dec 17, 2019
Publication: Yahoo! Finance
Link to Article



Yahoo Finance's Brian Sozzi, Alexis Christoforous and Jared Blikre discuss the latest market action with Heritage Capital President & CIO Paul Schatz and BNY Mellon Chief Strategist Alicia Levine on "The First Trade."


Gold is going to $2,500, $3,000 an ounce: investment expert
With: Yvette Killian - Producer
Date: Dec 11, 2019
Publication: Yahoo! Finance
Link to Article

Paul Schatz on Yahoo Finance

Wealthy people are stocking up on physical gold, as in bullion, coins and bars, according to a recent note from Goldman Sachs. As a result investors who are bullish on gold say it's the precious metal's moment to shine.

"I think gold's going to $2,500, $3,000 an ounce in the 2020s because the climate=the landscape for gold is so hugely supportive." Paul Schatz, Heritage Capital president, told Yahoo Finance's On The Move.

In a recent note Goldman Sachs presented reasons for owning gold citing recession concerns and political uncertainty as catalysts for an investor shift to gold. Over the past year, gold prices have risen nearly 20% and gold is on pace for its best year in a decade. By 2020, Goldman thinks the price of gold will reach $1,600 an ounce.

Schatz thinks Goldman's forecast is too low. "I think Goldman is way off here," he said. "$1,600 is going to be a footnote."

What's interesting this cycle is that it's not just gold ETFs and other abstract investments driving demand for gold but rather people buying actual gold bullion. "Physical gold seems to really be in... and basically it sounds like rich people are hoarding physical gold, the bullion itself," said Yahoo Finance's Myles Udland, co-anchor of The Final Round and co-author of Morning Brief. In Goldman's "view that squares with demand for vaults and everything. But I just think end of the world trades are fun, and it seems like the global rich want the actual thing," he added.

According to Schatz, "an individual investor should have 5% to 10% in some capacity in precious metals. People who don't trust the markets, don't trust paper will want to buy gold coins. Anything that they're comfortable," he said. "You want to buy gold stocks? Fine. You want to buy GLD? Fine. You want to buy gold coins? Fine."

For people who don't want to store physical gold, in the manner of bars and coins, in their basement, gold ETFs are an alternative, said Schatz. "If you want to leverage play, you play the stock ETF, " he added, highlighting it as a practical way to own gold.


AOC says 'I told you so' after Amazon moves to NYC
With: Julie Hyman and Adam Shapiro
Date: Dec 10, 2019
Publication: Yahoo! Finance
Link to Article



Amazon is opening a new office in New York, less than a year after dropping its plans for HQ2. Yahoo Finance's Adam Shapiro, Julie Hyman, Rick Newman and Heritage Capital's President Paul Schatz discuss the impact of the move.


U.S., China trade negotiators plan to delay December tariffs: RPT
With: Julie Hyman and Adam Shapiro
Date: Dec 10, 2019
Publication: Yahoo! Finance
Link to Article



U.S. and China trade negotiators are reportedly planning to delay tariffs that are set to go into effect on December 15th, but it turns out the market may have already priced it in. Paul Schatz, Heritage Capital President, joins Yahoo Finance's Adam Shapiro, Julie Hyman and Rick Newman to discuss.


Social Media's 2020 Outlook
With: Nicole Petallides
Date: Dec 9, 2019
Publication: TD Ameritrade
Link to Article

Schatz on TD Ameritrade's The Watch List

Paul Schatz And Michael Nunez On Social Media's 2020 Outlook

The Watch List with Nicole Petallides offers investors a midday look at the most relevant stocks, sectors and commodities.


Charles Schwab to buy TD Ameritrade for $26B: RPT
With: Julie Hyman and Adam Shapiro
Date: Nov 21, 2019
Publication: Yahoo! Finance
Link to Article



Charles Schwab is reportedly looking to buy TD Ameritrade for $26 billion dollars. Yahoo Finance's Adam Shapiro, Julie Hyman and Dan Roberts discuss with Caleb Silver, Investopedia Editor-in-Chief and Paul Schatz, Heritage Capital President on On The Move.


Charles Schwab, TD Ameritrade merger could be worth $5 trillion
With: Charles Payne
Date: Nov 21, 2019
Publication: FOX Business
Link to Article



Sources tell FOX Business Charles Schwab is trying to buy TD Ameritrade for $26 billion. FOX Business' Jackie DeAngelis, Point View Wealth Management David Dietze and Heritage Capital president Paul Schatz discuss the trend of 'merger mania.'


Waiting For Starbucks To Go Below 80
With: Nicole Petallides
Date: Nov 18, 2019
Publication: TG Ameritrade
Link to Article

Schatz on TD Ameritrade's The Watch List

Paul Schatz: Waiting For Starbucks To Go Below 80

The Watch List with Nicole Petallides offers investors a midday look at the most relevant stocks, sectors and commodities.


Major indexes in the red despite strong earnings reports
With: Alexis Christoforous and Brian Sozzi
Date: Nov 14, 2019
Publication: Yahoo! Finance
Link to Article



Yahoo Finance's Brian Sozzi, Alexis Christoforous and Jared Blikre discuss the latest market action with Heritage Capital's President & CIO Paul Schatz and Fross and Fross Wealth Management's Thomas Fross on The First Trade.


Shifting to value stocks just in the nick of time
Author: Jeff Benjamin
Date: Nov 11, 2019
Publication: Investment News
Link to Article

Signals are flashing that growth stocks are giving way to value strategies

Without officially admitting or denying that growth stocks' decade-long run has come to a close, some financial advisers and market watchers are giving a committed nod toward value stocks as the next train to ride.

Last week at Charles Schwab Corp.'s annual conference in San Diego, Jeffrey Kleintop, Schwab's chief global investment strategist, pegged the shift in momentum from growth to value to the inverted yield curve, which he said has historically triggered such transitions.

Mr. Kleintop, who was making the point that an inverted yield curve can signal more than just a looming recession, showed that growth and value swapped leads following each of the past three periods when the yields on longer-term bonds fell below those on shorter-term bonds.

"This is part of a longer-term trend that most investors are going to miss," he said.

Mr. Kleintop's is not the only data showing that the shift toward value is underway.

Research from CFRA chief investment strategist Sam Stovall shows that from Aug. 23 through last Friday, the S&P 500 Value Index gained 12.3%, beating its growth-stock counterpart by a margin of two-to-one.

Investors and financial advisers can be forgiven if they aren't yet fully on board because growth stocks have been overshadowing value for more than a decade.

Since the start of the year, large-cap growth mutual funds, as tracked by Morningstar, averaged a 25% gain, which compares to 21% for large-cap value funds.

Over the trailing 10 years, the growth fund category had an annualized gain of 13.3%, which compares to 10.8% for the value fund category.

"It makes perfect sense that the market will start changing toward the value side, but we've seen a growth bias for a while and so far, we haven't seen enough to change that," argued Tim Holsworth, president of AHP Financial Services.

Mr. Holsworth added that his rationale for sticking with his growth-stock overweight in part reflects "our deep love for tech and health care, which are sectors that automatically put us in the growth camp."

While advisers like Mr. Holsworth might have momentum on their side, much of the data favors value.

According to CFRA, the S&P value index is trading at a 4% discount to its average price-to-earnings ratio since 2003, while its growth index counterpart is trading at a head-turning 24% premium.

In comparing the valuations with the broader market, Mr. Stovall finds that the value index's relative price-earnings ratio is 10% below its 15-year average, while the growth index's P/E ratio is 13% above normal.

"I'm seeing it and I have already allocated into it," Vance Barse, wealth strategist and founder of Your Dedicated Fiduciary, said regarding the recent shift in momentum toward value.

Mr. Barse believes the shift is a combination of "smart money" strategies and macroeconomic factors, including three interest-rate cuts this year that make dividend-paying stocks more attractive relative to bonds.

"Historically, value has outperformed growth during recessions and bear markets," he said. "The smart money may be aiming to capture the higher dividends offered by value equities while positioning portfolios a little more defensively."

Paul Schatz, president of Heritage Capital, said there is a strong case for allocating to value in the later stages of a bull market, but he also noted that investors have been fooled in the past by similar-looking data.

"The growth-value relationship recently was as rich as at any time since the dot-com bubble peaked" in early 2000, Mr. Schatz said. "Since bottoming in 2007, growth has steadily marched higher versus value. In 2009, 2011 and 2015, pundits called the end of the growth rally, only to be proven wrong, and here we are again."

Mr. Stovall of CFRA said investors and advisers who might not appreciate the growth-value momentum shift should take some solace in knowing that the market is transitioning, "rather than cashing out altogether."


Federal Reserve cuts rates 1/4 point
With: Charles Payne
Date: Oct 30, 2019
Publication: FOX Business
Link to Article



FOX Business' Edward Lawrence reports on the Fed also signaling a pause for future rate cuts. Former Dallas Fed adviser Danielle DiMartino Booth, Bulltick Capital Markets' Kathryn Rooney Vera, former JPMorgan Chase chief economist Anthony Chan, Heritage Capital founder Paul Schatz and FOX Business' Charles Payne discuss the American economy as a whole.



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