About the author

Paul Nolte

Paul Nolte has been serving families’ financial needs for over 30 years. Before joining Kingsview in 2014 as a financial advisor and a member of the investment committee, Paul managed portfolios at a private wealth advisory firm. He also served as a Lead Portfolio Manager for Banc One and National City, helping set investment policies for portfolio managers firm wide.

With his strong interest in analytics, Paul devises a financial strategy that helps clients plan for the future – not only theirs, but also for their beneficiaries. He tailors his advice for each client by integrating their life goals and personal finances while also working with their attorneys and accountants to cover all their financial needs.

Paul has also served in various capacities on the boards of the Elmhurst YMCA, DuPage Easter Seals, Elmhurst Swim Team, Elmhurst Police Pension and Elmhurst Fire Pension. You can hear him regularly on WGN and WBBM Radio in Chicago as well as quoted in various business outlets nationwide.

– Illinois Wesleyan University, BA Business 1984
– DePaul Kellstadt Graduate School of Business, MBA Finance 1992
– Chartered Financial Analyst® designation awarded 1993
– Member, CFA® Society of Chicago

POSTS BY THE AUTHOR

Nolte Notes 7.22.19

July 22, 2019

Investors continue to guess the next Fed move-quarter or half-point cut in interest rates in ten days. What is clear is the unevenness of the economic data over the past week. Retail sales remain relatively strong, indicating the consumer remains “happy” with the economy and feels comfortable spending. The regional report from the Fed’s
New York district looked pretty rosy. Finally, the weekly jobless claims remain near generational lows. The leading economic index from the Conference Board was the only real black mark on the economic data. The earnings reported last week were generally uneven as companies within the same industry sector provided wildly different reports. From the bad of Netflix and CSX to the nearly great of Microsoft, IBM and Danaher, the reports were unbalanced This does cloud the “should we cut/hold interest rates” at the next meeting. The markets reflected that back and forth as well, losing some ground on the week, but in a very quiet, seemingly apathetic way. This week brings a dearth of economic data for investors to chew on, but plenty of company reports to review to glean any information on the health of the economy. It is not easy being a central banker these days!

There wasn’t anything alarming in last week’s decline, following six straight weeks of advances it was time for a rest. As investors wait for the Fed to send up their white cloud indicating a rate cut of the expected quarter- point, the markets are likely to flounder a bit. Once the deed is done, the markets may rally on the expectation for more rate cuts at future meetings. However, even as the averages push higher, the number of stocks making new highs vs. lows is disconcerting. A month ago, 10% of stocks on the NYSE made yearly highs. Today, the markets are straining to push 6% to new yearly highs. Meanwhile, those making new lows have consistently been above 2% stretching back to mid-May. A healthy market that is rising, should not be seeing as many stocks making new lows. This is a sign that there may be something wrong beneath the surface. This can be seen too with the smaller stock index lagging the more popular SP500, which we’ll discuss below.

The talk of cutting interest rates in what seemed to be a decent economic environment scared the bond market for a bit. Yields rose as bond investors feared inflationary pressures would surely show up as a result of such a silly move by the Fed. However, after a week of fretting, interest rates once again began to drop as inflation has yet to show up in any persistent way. Commodity prices backed off last week, pushing our bond model firmly in the “lower rates ahead” camp. The model has been calling for lower rates since late November when the 10-year bond yield was nearly a full percentage point higher. Little has changed since then as rates continue to surprise investors by heading lower. Until we see persistently higher inflation and/or economic growth above 3%, interest rates are likely to be stuck in low gear for the foreseeable future.

Wall Street must have heard us complain about the dominance of the SP500, as it took a back seat to bonds, emerging markets, and broad international indices. Value and even commodity prices did better last week. While we can cheer one week, like inflation or economic growth discussed above, the performance of other asset classes needs to be persistent. The case has been made by many that growth is well ahead of value and should revert toward the long-term mean. International, especially emerging markets continues to be valued extremely cheaply vs. the US markets. If the Fed goes through with a rate cut at their next meeting, we could see the dollar decline vs. other currencies, pushing international investments higher. We could also see a larger rush into “cheaper” stocks that provide good income possibilities for investors looking for more than a 2% yield from bonds. On the other hand, investors could continue to throw caution to the wind and buy the largest US stocks and hope that they continue to deliver on growth as the world economy slows down. At some point, there will be a rebalancing back to historical trends. Well….we’re waiting!

We expect the markets to remain quiet until the Fed meeting in 10 days. Individual companies will likely move based upon their own earnings reports this week. Bond investors should continue to do well as interest rates are likely to remain stable if not fall further in the weeks ahead.

The opinions expressed in the Investment Newsletter are those of the author and is based upon information that is believed to be accurate and reliable, but are opinions and do not constitute a guarantee of present or future financial market conditions.

SVP Paul Nolte Interviewed on WGN Radio’s The Opening Bell

Steve Grzanich on WGN Radio’s The Opening Bell interviews Senior Vice President Paul Nolte on the Federal Reserve as they adjust interest rates.

Hear the full interview here : The Opening Bell

30:25

SVP Paul Nolte Interviewed on TD Ameritrade Network

Senior Vice President Paul Nolte is interviewed on TD Ameritrade Network on the markets.

5:21

SVP Paul Nolte Interviewed on TD Ameritrade Network

Senior Vice President Paul Nolte is interviewed on TD Ameritrade Network on the housing market.

7:17

Nolte Notes 7.15.19

July 15, 2019

Plenty has come into focus over the past few weeks regarding the US economy. First, the jobs report reversed some of the weakness we saw in the May data. Combined with still steady wage growth, it was an indication that the US economy is not yet rolling over. Inflation data continues to come in weak, but the core rates were a bit higher than expected. While not yet enough to worry about, inflation remains below the Fed’s 2% target as it has for much of the recovery since 2009, so nothing new here. Manufacturing and service reports showed weakness as has the trade data. Finally, the global economy due in large part to the weakness in China is slowing and is showing signs of contraction. In a time long ago and seemingly far away, the Fed would be looking at those data points and likely hold steady. However, the Fed is also interested in keeping the financial markets happy (part of the unwritten third mandate!). The equity markets are demanding a quarter-point cut in rates at the end of the month with a still healthy possibility of a half-point. Europe stands to restart their bondbuying activities as well even with over $12 trillion dollars worth of bonds yielding less than zero. Central banks are once again forcing investors into the equity markets. Eventually, this charade will end, but when is still up in the air.

As the indices crossed over new high watermarks on Friday’s close, it also marked prices that have moved well above their long-term trends. Not yet parabolic, the persistent advance has investors flocking into the markets without regard of prices paid for stocks. Earnings season will be upon us starting this week with the banking sector in focus early in the week. It will be informative to see how companies characterize their earnings in light of the continued trade tariffs in place. For the banks, the inverted yield curve could garner some discussion as well. All that said, the markets look to move higher as momentum has taken hold and now it is more about the fear of missing out (FOMO) rather than fear of losing money. The risks are building, but the timing of any decline is a guess at best. As was said a month ago, the path of least resistance is to the upside, but returns over the coming few years are likely to be paltry from this starting point.

As Chair Powell did his best to indicate the Fed was going to cut rates without saying it so flatly in front of Congress, the markets certainly understood his meaning. What is interesting though is the reaction in the bond market. If rates are indeed cut, we’d expect bond prices to rise and yields to decline. However last week was exactly the opposite as bonds had their worst two weeks since April. Investors have bought up nearly everything that sports a yield above 2%, pushing valuations on utilities and other “safe” investments to near historically high levels. Commodity prices had their best six-week stretch since late 2017/early ’18. Inflation does not look to be returning with a vengeance. The better than 5% rise in commodity prices should be watched as an early signal that things are changing in the commodity world.

Just when we thought a diversified portfolio was the ticket this year, investors have moved back to the largest stocks within the markets. The second quarter saw over one-third of the returns in the SP500 come from the five largest stocks within the index. Large-cap tech has regained the performance lead from real estate and utilities. Going lower in the market cap world, the worse the performance and sending money overseas has also lagged the SP500. Once again, the SP500 reigns as the top asset class year to date. That is not to say the returns are terrible elsewhere. No one should sniff at a 10% gain after six months in the international markets, but compared to a 20% gain in the SP500, it pales by comparison. The same is true when looking at growth stocks vs. value stocks. We saw signs that value was finally(!) taking the performance mantle from growth at the end of 2018, but that has reversed at this point of 2019. Throwing caution to the wind seems to be the best way to invest these days. The markets seem to be bending the will of the Fed and maintaining historically low interest rates to keep the party going. The hangover will be a doozy whenever it hits.

The implication from the Fed cutting rates is that things are not well in the economy. Investors are certain a rate cut will solve the ills facing the economy. However, trade is something well outside of the Fed’s purview that cutting interest rates will solve. Keep an eye on trade discussions for the next direction in stocks.

The opinions expressed in the Investment Newsletter are those of the author and is based upon information that is believed to be accurate and reliable, but are opinions and do not constitute a guarantee of present or future financial market conditions.

SVP Paul Nolte Interviewed on TD Ameritrade Network

TD Ameritrade Network interviews Senior Vice President Paul Nolte on the bond markets.

4:19