Quote of the Week

 “We must operate with partial knowledge, and be provisionally content with probabilities.” – Will Durant

Technical Corner 

The pace of corporate earnings growth has downshifted from green last year to yellow in 2019. After the rise of 24% in 2018, the strongest in nine years and the third best year in the past three decades was thanks in part to the boost from the corporate tax cuts. Earnings growth this year is expected to be a modest 2.6%. This deceleration in profit growth should not be dismissed. With U.S. stocks already trading at very high valuations, earnings growth will need to do most of the heavy lifting for market gains to continue to climb. It is up in the air whether this drop in corporate earnings growth will cause the stock market to drop in value.

If earnings continue on this downward path, the markets could be susceptible to downward surprises. Eventually, it is corporate earnings that drive the stock market. Remember the “Lemonade Stand” from Investing 101.

The big news this week will be coming from the Fed. It is anticipated that the Fed will cut interest rates on Wednesday. The U.S. economy is slowing, as illustrated by the drop in GDP from 3.1% in the first quarter to 2.1% in the second quarter. The rest of the global economy is experiencing negative growth, meaning the rest of the world is already in recession.

I don’t think the expected Fed cut will make much of a difference in the trend of the U.S. economy, but it may give the markets a “sugar high” in the short run. The problem is that companies are not investing in themselves (Capex) because they are uncertain what the future will bring due to the uncertainty of the tariffs and the potential loss in demand.

Sue’s Thoughts

My husband recently retired. Even though he talked about it for quite a while, it still caught me off guard. Maybe I thought he’d change his mind because he’s younger than my boss, Larry and our business manager, Tom, both of whom still enjoy working.  However, now that it’s official by six weeks, I guess my spouse’s retirement is a reality!

Some added bonuses to having a “house husband” is that he is learning how to cook. He loves using an Instant Pot. He is also learning how to do the laundry, clean floors, and he runs errands.  However, what he does best is daydream about travel!

When he mentioned a cruise, my interest suddenly piqued!  He is also looking further through the calendar pages and making plans months into the future. I feel best when we meticulously plan, so travel insurance has been a hot topic.  The following article offers a lot to consider.

Travel Insurance

Soon you’ll be on your way, taking that trip you’ve looked forward to for ages–but suppose something happens. If you get sick, lose your suitcase, or have to cut your trip short, will any of your existing insurance policies cover your expenses or reimburse you for your losses? If not, you might want to purchase travel insurance, which is available from insurance companies, travel agents, tour operators, and cruise lines.

If you can’t make it after all or have to cut it short–trip cancellation/interruption insurance

You’re ready to go, but the cruise line has gone under financially. Or perhaps you’ve arrived at your hotel only to be handed a telegram informing you that Uncle George is seriously ill and you must return home immediately. If your trip is canceled or cut short, will you be able to get any of your money back?

Trip cancellation/interruption insurance protects you if you must cancel your travel plans before you leave or cut your trip short due to an unforeseen event. Covered contingencies can include bad weather, the financial failure of a service provider such as a cruise line or a travel agency, your illness or that of a family member while on the trip, or an illness or death at home. But coverage varies widely from policy to policy, so check the exclusion section carefully. Your definition of an unforeseen event may differ from that of the insurance provider. For example, some companies don’t recognize a recurrence of your pre-existing medical condition as unforeseeable.

Under the policy, you’ll be reimbursed for your nonrefundable prepaid expenses, such as tour deposits, airline tickets, or hotel rooms. To determine what the insurance covers, you may need to check the terms of your travel agreements and find out what guarantees are offered by the carrier, travel agent, or tour operator.

Cruise lines, for instance, may refund most of your money if you cancel several weeks before your scheduled departure, but they’ll give you less or none back if you cancel a few days before you’re supposed to leave. In that case, you’d get nothing back unless you purchased trip cancellation/interruption insurance.

Trip cancellation/interruption insurance is different from cancellation waivers offered by cruise lines and tour operators. These waivers are not insurance; they’re simply company guarantees that your money will be refunded under certain circumstances. They usually won’t cover your last-minute cancellation and they won’t protect you if the company goes out of business.

If that fever isn’t just excitement–short-term supplemental health insurance

Your individual or group health insurance policy typically covers you if you’re traveling within the United States. Still, it’s a good idea to check with your insurance provider before you travel so that you fully understand the coverage conditions. If you’re traveling overseas, beware–your health insurance policy may not cover you at all. Even if it does, it may not provide the same benefits overseas that it does in the United States. Check the limitations of your policy carefully, and call your insurer’s customer service department if you have questions.

If your health insurance doesn’t provide you with adequate coverage while you’re traveling, consider purchasing a short-term supplemental health insurance policy from an insurance company, travel agent, tour operator, or cruise line. These policies often combine accident and/or sickness coverage with medical evacuation coverage, which pays all or part of the cost of getting you back to the United States if you’re traveling overseas (something most basic health insurance policies won’t cover).

The terms of supplemental health policies vary widely, so before purchasing this insurance, ask to see a copy of the policy and get the answers to the following questions:

  • Does the plan pay the cost of medical care needed for sickness, accidents, or both?
  • What procedures must you follow to see a doctor or go to the hospital?
  • Will you have to get approval before you receive care?
  • Does the policy pay for care upfront, or will you have to pay and wait to be reimbursed?
  • What are the deductible, co-payments, and/or coinsurance costs?
  • What exclusions and restrictions apply?
  • What is the maximum amount of coverage under the policy?
  • Are translator services available?
If you lose your shirt–baggage insurance

Baggage insurance reimburses you if your personal belongings are lost, stolen, or damaged while you’re traveling. Before you purchase it, however, find out if you already have adequate protection. For instance, airlines may be liable for damage caused by their negligence, and they’re liable for lost or stolen baggage after check-in, up to their stated limit per passenger. Some credit card companies and travel agents also provide supplemental baggage insurance at no charge to you. Your homeowners or renters policy may protect your personal belongings against theft when you travel, as well.

Purchasing baggage insurance may be appropriate when you want 24-hour protection, not just protection after your bags are checked in with an airline. Baggage insurance may also offer higher liability limits than those offered by an airline. However, check the policy’s fine print. If you carry expensive items, you may not be fully reimbursed if they’re lost or stolen, and benefit limits may apply to certain items like electronics (e.g., laptop computers) or jewelry. You also may not be reimbursed for anything covered under another policy; if your bags are lost or damaged by an airline, you may need to seek reimbursement from the airline first.

If you lose more than that–accidental death and dismemberment insurance

Accidental death and dismemberment insurance (AD & D) is inexpensive coverage that compensates you if you lose a limb or an eye, or that compensates your beneficiary if you die in an accident. You can purchase this coverage as a separate policy, as a rider to an existing policy, or as part of a travel insurance policy. You may also receive this coverage as a “free” benefit when you purchase airline, train, or bus tickets using your credit card. AD & D policies usually cover, up to certain limits, medical expenses associated with an accident.

Before you purchase this coverage, make sure you don’t have duplicate coverage elsewhere. You may already have AD & D coverage if you have adequate life insurance, or through a group insurance plan sponsored by your employer or credit card company.

Copyright 2019 Broadridge Investor Communication Solutions, Inc

By the Numbers

REAL ESTATE SHIFT – Over the 12 years from 6/30/04 to 6/30/16, the number of “renter” households in the United States increased by +11.2 million to 43.9 million, while the number of “owner” households increased by just +1.0 million to 74.4 million. However, over the last 3 years from 6/30/16 to 6/30/19, the number of “renter” households in the United States was flat, remaining at 43.9 million, while the number of “owner” households increased by +4.1 million to 78.5 million (source: Census Bureau).   – Michael A. Higley, BTN 07-29-2019

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These are the opinions of Larry Lof and Stephanie Mayoral and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

The S&P 500 is an index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.

Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

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