Pension Plan lump sum payments, also known as “cashouts,” will decline in
2014 due to higher interest rates. The
decrease in the lump sum in 2014 could be substantial. You may be able to avoid the decrease by
rolling over the lump sum payment in 2013, if you are eligible.
One company, Lubrizol, has estimated the change between rolling over the
lump sum in 2013 versus waiting until 2014:
the decrease varies between 20% for an age 50 participant to a 7%
decrease for age 65.
RECOMMENDATION: those who are evaluating whether to roll over
their pension lump sum payments, in general, are advised to take the lump sum
in 2013 instead of waiting. To make sure
this action is right for you, please contact your advisor.
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. And, the FED announced on
9/18/2013 it intends to continue the highly accommodative policy to stimulate
the economy.
BUSINESS PROFITABILITY: I graded this factor an A (very favorable). NOTE: 3rd
Quarter profit reporting season continues this upcoming week. So far this quarter, the results are
mixed. We will continue to monitor the
results carefully.
NOTE: the above grades are unchanged from last
week.
The
political wrangling ended before the start of the all important holiday
shopping season and prior to causing severe harm to the US economy. Gasoline prices declined as well as mortgage
interest rates. The Chinese economy
accelerated for the first time in three quarters. All-in-all a good week.
Last week, U.S. Stocks and 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 10-18-2013
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
0.6
-1.4
-.9
2.9
5.9
4.8
US Stocks-Standard & Poor’s 500
2.4
24.4
22.4
16.2
15.7
7.5
Foreign Stocks- MS EAFE Developed Countries
2.8
17.1
20.1
4.8
8.3
4.7
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” 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 and her guests, Russell Wild, MBA and author of “Bond
Investing for Dummies” and Kevin Brosius CFP and Financial Advisor, will
discuss: “Investing
in Bonds.”
Laurie and her guests 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.
The sport of baseball invented the word “IF.” The Pittsburgh Pirates’ season ended with a
loss to the St. Louis Cardinals in their 5 game series, 3 games to 2. The Pirates actually lead the series 2 games
to 1; and, IF the Card’s Matt
Holliday had not hit a 2 run homer, the Pirates would have won the game 1 – 0
and the series. IF the Pirates
would have beaten the Cards, maybe it would be the Pirates playing in The World
Series instead of the Cards.
Maybe the federal government should
shut down more often.
Stocks soared 2%-3% after the warring
parties in Washington, D.C., hammered out an 11th-hour deal Wednesday,
temporarily funding the budget and raising the Treasury’s debt ceiling, which
allowed the government to reopen its doors. Never mind that markets will likely
face a similar threat again around early February, since the deal is simply a
provisional patch-up.
For
a little while, anyway, investors won’t have to worry much about D.C., and
that’s something to be thankful for. Markets will get back to parsing
third-quarter earnings reports, which will move to the forefront for the next
few weeks, until the retail selling season begins on Thanksgiving.
Positive quarterly profit-report
surprises released late in the week from well-known names like Google (ticker: GOOG), Morgan Stanley (MS), and General Electric (GE) helped push
the market forward. They were more than enough to make up for
weaker-than-expected results from Goldman
Sachs Group (GS), and IBM (IBM).
The latter two, down 1% and 7%, respectively, restrained the Dow Jones
Industrial Average, as their relatively high-priced stocks make them among the
most influential in the index.
Nevertheless, the Dow rose 163 points
on the week, or 1%, to 15,399.65. The S&P 500 index, meanwhile, jumped 41
to 1744.50, setting a new all-time closing high in the process, which the Dow
was unable to do. The Nasdaq Composite index soared over 3%, or 122 points, to
3914.28, and is up a whopping 30% on the year. That’s its highest close since
Sept. 8, 2000.
In the context of the Federal
Reserve’s continuing easy-money policy and low interest rates, restrained
inflation, and decent earnings growth, the path of least resistance is up, says
Michael Purves, chief global strategist at Weeden. “The market looks a lot
like 2012 now, with strong Fed support and slow grinding growth,” he adds.
Indeed, the Fed is “highly
unlikely” to initiate any tapering—that is, reining in its monthly
bond-buying fiscal stimulus—at its end-of-October meeting, says Peter
Jankovskis, co-CIO at Oakbrook Investments.
While the market rose Thursday after
the debt-ceiling deal, Friday’s rise came on good old-fashioned earnings
surprises, he says. Getting the focus away from Washington and back on
corporate earnings is a positive, he adds.
Even so, the bull is beginning to show
its age, he adds. While earnings growth is decent, “companies are
struggling with revenue growth,” which ultimately is expressed in future
profits, Jankovskis says.
If the market does surge higher,
Purves says, investors will have to grapple with a bull whose characteristics
are becoming riskier. Continued inflows of money into equities will push the
market higher, but this is a bull where the price-to-earnings (P/E) ratio is
higher and the earnings growth rate lower than many of its predecessors (Source: Barrons Online).
