What’s On Our Minds:

The low-price nature of ETFs is again grabbing headlines, as BlackRock lowered the fees of many of their most popular funds even further. The move has drawn comparisons to Walmart: no frills, bare bones, low to no service, and commensurately low prices.

By and large, the move is generally seen as good for retail investors. Indexing provides a way for those with little capital and knowledge to start investing. At the same time, ETFs provide a good option for 401(k) plans whose participants are concerned with fees’ impact on performance.

What’s not to like, then? Issues arise when the investor is in a position when things like diversification, asset classes, and long-term planning start to matter.

A long-term plan for someone who wishes to retire comfortably is no simple matter. Simply investing one’s nest egg in the S&P 500 is appropriate for almost no retiree. Instead, decisions have to be made about not only the allocation between stocks and bonds, but also between small-/mid-/large-cap stocks, international investments, etc.

It is also important to get input on non-liquid holdings and how it affects your overall portfolio. For example, a financial adviser might tell a client who owns his or her $1 million home outright that more risk is appropriate in his or her portfolio than the client who just took out a mortgage on that same house.

The bottom line is that there is a place for Walmart investing, just as there are times when we all might stop by Walmart. However, for a custom fit, excellent service, and the perfect style, the discerning investor might prefer a Saks Fifth Avenue approach.

Hudson’s Bay owns Saks Fifth Avenue

Walmart

Last Week’s Highlights:

As investors were waiting for third quarter earnings season to kick off, most were focused on economic data last week.  Even though September vehicle sales and manufacturing data was better than expected, an unfortunate jobs report caused stocks to fall modestly last week.  The jobs report was not horrible. It showed that the US economy added 156,000 jobs in September which was a slightly shy of expectations. Job growth has been decent over the last 12 months and the US has added 2.4 million jobs.  Job growth is slowing down a bit as we have averaged 169,000 over the past 6 months but 238,000 job per month in the preceding 6-month period.  Even though the job number missed expectations by a bit, it was not big enough of a miss to derail any of the Fed’s plans to potentially raise rates one more time this year.

Hurricane Matthew battered coastal areas in the south east through the weekend.  Market wise, there’s been increases in roof supply companies’ stocks and volatility in some insurance companies’ stocks.  Hopefully folks in the affected areas are able to clean up quickly and get back to everyday life soon.

Looking Ahead:

Over the past few weeks, it has seemed like investors have been fixated on economic data, the presidential election, and controversies at Wells Fargo and EpiPen maker Mylan.  Now, earnings reports will reenter the fray on Tuesday when aluminum manufacturer Alocoa releases its third quarter report at the closing bell.  Also on the earnings calendar this week, CSX will report on Wednesday, Progressive on Thursday, and some of the big banks, JPMorgan and Wells Fargo on Friday.

Fed-speak will continue to be a factor this week with speeches from Chicago Fed President Charles Evans on Monday morning, New York Fed President William Dudley and Kansas City President Esther George on Wednesday, and Philadelphia President Patrick Harper delivering a Q&A on Thursday. Also, Janet Yellen will address Both Fed’s 60^th Economic Conference on Friday. With uncertainly around interest rate policy moving forward, investors will be picking apart these speeches for any hints on future moves.