Most of the time, the U.S. stock market looks to 3 factors to support its upward trend – let’s grade each of the CONSUMER SPENDING: I grade this factor a C (neutral). THE FED AND ITS POLICIES: I grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices. BUSINESS PROFITABILITY: I grade this factor a B+ (favorable). This grade is in danger of being reduced. During the last 10 days, several of the largest U.S. companies reported disappointing earnings, a trend the stock market has overlooked.
factors:
Monthly Archives: April 2013
The Economy
There was some disappointing data released last week. First quarter real GDP only increased at a 2.5% annual rate, durable goods orders fell more than expected, and most of the manufacturing data (regional surveys, flash Purchasing Managers Index) were weak. However, some of the underlying GDP details were decent (but not great). Final demand increased in Q1 as personal consumption expenditures (PCE) increased at a 3.2% annual rate (up from 1.8% in Q4 2012), and residential investment (RI) increased at a 12.6% annual rate (down from 17.6% in Q4). This was the strongest private domestic contribution (PCE and RI) since Q4 2010, and the 2nd strongest quarter since the recession began. Unfortunately I expect PCE to slow over the next couple of quarters due to a combination of the payroll tax increase and the sequester budget cuts. There was also some good news. The new home sales report for March indicated an ongoing recovery for housing, and the existing home sales report suggested an improving market (more conventional sales, fewer distressed sales). Also on housing, LPS reported that the number of non-current mortgages fell below 5 million for the first time since 2008. Other good news included a drop in initial weekly unemployment claims, and increasing demand for architectural design services. This is a leading indicator for commercial real estate. (Source: Calculated Risk).
Heads UP!
Looking for extra money? Sure. Who isn’t? Well, there might be some held by those that you did business with in the past. Some of these companies must turn over the money you left behind to the state. And, the state has a responsibility to turn it over to you after you ask for it. This money is referred to as unclaimed property. Check here for money that state could be holding for you: For Pennsylvania, click: http://www.patreasury.gov/unclaimed/ For national database, click: http://www.unclaimed.org/
Motivational Quote of the Week
“The pessimist sees difficulty in every opportunity. The optimist sees opportunity in every difficulty.” – Winston Churchill
“Your Financial Choices”
“Your Financial Choices” The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP. This week, Laurie will discuss: “Breaking down your own, personal, balance sheet.” Laurie will take your calls on this topic and other inquiries this week. This show will be broadcast at the regular time. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton/Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville/Macungie area – or listen to it online from anywhere on the internet. For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.
Personal Notes
I am almost afraid to say my favorite baseball team is in first place. After all, they let me down miserably last year in the second half after leading at the All-Star break. And, the prior year they collapsed in the last two months to end with a losing record. And, the year before that they lost again. All told, 21 years in a row. Yes, my favorite baseball team has set a professional sports team record of 21 losing seasons in a row. But, this year will be different – the Pittsburgh Pirates will break through for a winning record and contend for the division title.
The Markets This Week
Stocks rose smartly last week, by more than 1.5% in a broad rally, despite soft gross domestic product news that caused shares to drop on Friday. First-quarter earnings reports came in, for the most part, as projected. The Commerce Department said that real GDP had risen at a 2.5% annual clip in the first quarter. That was up from 0.4% in the fourth quarter, but weaker than the 3% consensus estimate. The Dow Jones Industrial Average closed at 14,712.55, up 1.1%, or 165 points, on the week, while the S&P 500 added 27 With May nearly upon us, John Leo Manley, the chief equity strategist for Wells Fargo Funds, is already thinking of the summer and likens the market to a beach ball under water. “When you push it down, it just bobs up.” What’s behind that bob? Monetary easing by central banks around the world in general and the Federal Reserve’s quantitative bond buying in particular, he says. Investors must realize two things, Manley avers: ”First, the Fed isn’t going to stop soon, and secondly, no one is going to In a scenario in which the Fed keeps the pedal to the metal, Manley favors large-cap stocks over small-caps. More specifically, he adds that although he still likes the health-care sector, “it’s beginning to look a little long in the tooth now” after a 19% rally this year. “I’d start to focus on large tech stocks more. They look cheap.” This week, investors have a plethora of news to look forward to, including a Fed meeting topped off by April nonfarm payroll numbers. Given the surprise of the unsatisfying March payroll figures one month ago, notes Douglas Cote, chief market strategist at ING Investment Management, the market will look to see if that disappointing data was a one-time event. Speaking of summer, the market is approaching its traditionally weak season. According to Robin Carpenter, who heads up research firm Carpenter Analytix, from 1972 through 2012, the S&P had an average price gain of 6.8% in the seven months After the rip-roaring 11% start to 2013, that shouldn’t stop investors from enjoying the summer, should it? (Source: Barrons Online).
points to end at 1582.24. Friday, the S&P fell 0.2%. The Nasdaq Composite index picked up 73 points and rose 2.3% last week, to 3,279.26.
be able to say soon that the Fed’s easing won’t work.” So the market goes up just when bears are able to push it down, as happened the previous week.
from October through April. In the other five months, the S&P had a cumulative loss of 1.62%.
The Numbers
Last week, U.S. Stocks, Foreign stocks and Bonds all increased. During the last 12 months, STOCKS outperformed BONDS. LAST WEEK -Here is a look the cause of the volatility created this week by hedge funds, institutions, and those we call “traders”. Returns through 4-19-2013 1-week Y-T-D 1-Year 3-Years 5-Years 10-Years Bonds- BarCap Aggregate Index 0.2 .9 3.9 5.7 5.9 5.1 US Stocks-Standard & Poor’s 500 1.8 11.6 15.6 11.7 4.8 8.0 Foreign Stocks- MS EAFE Developed Countries 3.5 7.8 14.3 2.7 -4.1 6.5
Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.
The “Heat Map”
Most of the time, the U.S. stock market looks to 3 factors to support its upward trend – let’s grade each of the factors:
CONSUMER SPENDING: I grade this factor a C (neutral).
THE FED AND ITS POLICIES: I grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices.
BUSINESS PROFITABILITY: I grade this factor a B+ (favorable). The first group of earnings report have been released and the results are mixed – some of beat the estimates and some have fallen short. It is too early to change the grade.
NOTE: the above grades remain unchanged from last week.
Heads UP!
When is the best time to convert some or all of your IRA to a Roth IRA(be mindful the growth of a Roth IRA is tax free if you meet fairly easy IRS requirements and Roth IRA’s have no Required Minimum Distribution)? The answer for most is straightforward – convert your IRA to a Roth IRA when your income tax rate is low. Here are several situations where Valley National has aggressively recommended a conversion of an IRA to a Roth IRA: The taxpayer suffered a business loss or casualty loss during the year, thus reducing their income. The taxpayer incurred If one of the above fits your circumstance, please contact me at your earliest convenience to discuss further. NOTE: The information is general and not meant as a recommendation for your unique circumstances. Tax laws are tricky and the smallest deviation could result in a different recommendation. Contact your advisor at Valley National before proceeding.
unusually large medical bills, charitable contributions, or other itemized deductions. The taxpayer retired at age 59, 60, or 61 and their income dropped and their Social Security had not yet started.