You could not tell from the stock market’s poor showing last week, but the economic news was positive, not negative. Housing data was better than expected and the jobs data was strong. Perhaps, the data was too strong – too much of a good thing may mean the FED is more likely to tighten its monetary policy.
Monthly Archives: August 2013
The Numbers
Last week, U.S. Stocks, Foreign Stocks, and Bonds all decreased. During the last 12 months, STOCKS outperformed BONDS. Returns through 8-16-2013 1-week Y-T-D 1-Year 3-Years 5-Years 10-Years Bonds- BarCap Aggregate Index -1.1 3.3 -1.8 2.5 5.0 4.8 US Stocks-Standard & Poor’s 500 -2.0 17.7 19.6 17.8 7.4 7.4 Foreign Stocks- MS EAFE Developed Countries -.1 10.1 19.0 6.6 -.4 5.1
LAST WEEK -Here is a look the cause of the volatility created this week by hedge funds, institutions, and those we call “traders”.
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.
“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, AEP. This week Laurie will discuss: “Education planning – 2013 education credits, using 529 college savings plans and paying for college.” 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 and Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville and 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.
Motivational Quote of the Week
“Continuous improvement is better than delayed perfection.” – Mark Twain
Personal Notes
My birthday occurred about 2 weeks ago. I reached an important milestone age – 62 having plenty of company since 15 million baby-boomer Americans turn 62 annually. I reckoned there has to be benefits other than Social Security (which I intend to defer to age 66) for turning 62, and I found many. Click here for a great article: http://voices.yahoo.com/advantages-turning-age-62-6460500.html
PS: I have no plans to retire. I thoroughly enjoy what I am doing which is why I am still on top of the world.
The Markets This Week
Investors were itching to sell stock last week, and they found just enough reasons to pull the trigger.
Nothing terrible happened in the markets or the economy, and yet stocks fell more than they have in 14 months. In fact, it wouldn’t have been that surprising if stocks had risen this week: The government released strong data on jobs and solid housing numbers. But increased fears of Fed tapering and weak reports from retailers helped spur selling momentum.
For the week the Dow fell 344.04 points, or 2.23%, to 15,081.47. The Standard & Poor’s 500 fell 35.59 points to close at 1655.83, and the Nasdaq Composite dropped 57.33 points, or 1.57%, to close at 3602.78.
Treasury notes slumped, with the 10-year yield rising 0.246 percentage point to 2.827%, its largest jump since June.
How quiet was the news cycle this week? Some of the hottest chatter came out of Paducah, Ky., population 25,024. James Bullard, president of the St. Louis Fed and a voting member of the FOMC, said in a speech there on Wednesday that he was “concerned about low inflation.” He added that he hasn’t come to a conclusion on the taper and that a reduction in bond purchases could start very slowly, if at all; stocks fell nonetheless.
The selling accelerated on Thursday, as earnings reports from Wal-Mart Stores (ticker: WMT) and Cisco Systems (CSCO) both disappointed the Street. Also on Thursday, the government said that jobless claims fell to 320,000, and the four-week average fell to its lowest level since November 2007. Apparently, investors remain in “good is bad” mode, seeing positive economic news as a harbinger for a less-accommodative Fed policy. Real estate also presented a conundrum: Housing stocks spiked on solid housing-starts numbers, but real-estate investment trusts fell. Investors are likely weighing whether they should take a risk on REITs when Treasuries are starting to offer stronger returns.
Given the improvement in the labor market, the Fed’s plan to taper bond purchases does look more certain, said Brad McMillan, chief investment officer at Commonwealth Financial Network. As the market comes to grips with the plan, the S&P could give up about 5% to 6% from its peak, as much as it did in the last taper-induced selloff, McMillan predicted. The S&P 500 is now down about 3% from the peak.
“The notion of the Fed starting to taper after the September meeting is becoming pretty well founded,” he said (Source: Barrons Online).
Heads Up!
According to the Society of Actuaries, An average American couple retiring at age 65 today would need a present value lump sum of $293,000 to cover future health insurance premiums and out-of-pocket medical expenses over the remainder of their lives, i.e., expenses not paid by Medicare. For more information, click : http://www.soa.org/Research/Research-Projects/Pension/research-post-retirement-needs-and-risks.aspx
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 continue to 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 graded this factor an A (very favorable). 55% of companies reporting 2nd quarter earnings have beaten estimates ( the historical average is 53%).
The Economy
Those hoping for good economic news last week were rewarded. U.S. jobless claims four-week average falls to lowest level since November 2007. All 13 manufacturing categories increased in June — this is has not happened since 1992. The trade deficit narrows to $34.2B in June, narrowest it has been since 2009.
And, there was a lack of bad economic news during the week.
The Numbers
Last week, Bonds and Foreign Stocks increased, and U.S. Stocks decreased. 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 8-9-2013 1-week Y-T-D 1-Year 3-Years 5-Years 10-Years Bonds- BarCap Aggregate Index .1 -2.2 -1.3 3.2 5.2 4.8 US Stocks-Standard & Poor’s 500 -1.0 20.1 23.3 17.0 7.8 7.8 Foreign Stocks- MS EAFE Developed Countries .3 10.2 19.7 5.0 -.9 5.4
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.