“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 answer listeners’ questions. To submit your questions, visit www.yourfinancialchoices.com and click ASK LAURIE to fill out a submission form.
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.
This week, five other Valley National advisors and I
will attend Charles Schwab’s “IMPACT” investment conference in Washington,
DC. This conference provides an unparalleled
opportunity to obtain valuable information in economics, strategies, best
practices, and forecasting. I will
report in The Weekly Commentary as to what we learned.
The stock market finished solidly higher in a
volatile week, pulling off a sharp recovery Friday from Thursday’s 1% drop. The
gyrations are making it harder and harder to anticipate how the market will
react to what is ostensibly good or bad news.
The downdraft was caused by a surprise move by the
European Central Bank to cut interest rates, and news that U.S. gross domestic
product grew 2.8% in the third quarter, much higher than expected.
Confused yet? There’s more.
While an ECB rate cut might have been expected to
buoy equity investors, the market took it badly, as an indication that European
economic growth—thought to be recovering, albeit slowly—isn’t improving.
Better U.S. GDP growth, therefore, ought to be good
for stocks—except that investors fear it will prompt the Federal Reserve to
begin tapering its monthly $85 billion worth of bond buying, an easing policy
that has fueled the stock rally.
Friday the market head-faked one way and then
finished another. The Labor Department released data showing payrolls rose by
204,000 last month, far higher than the consensus of 120,000. Stocks appeared
headed lower early Friday on fears that the better jobs news, too, would bring
on Fed tapering next month, said Kim Forrest, a senior equity analyst at Fort
Pitt Capital Group,
Then investors parsed the data more closely, she
said, finding that the jobs created were of a low-quality, part-time nature,
and that folks were still dropping out of the labor force. So maybe the Fed
won’t taper next month, investors figured, sending the Dow Jones Industrial
Average to a new record high.
These frequent turnabouts suggest, says Forrest,
that “Mr. Market seems to have ADHD,” or attention deficit
hyperactivity disorder.
The Dow rose 1% on the week, or 146 points, to
15,761.78, and the Standard & Poor’s 500 index headed up 9, to 1770.61.
Bucking the trend was the Nasdaq Composite index, little changed at 3919.23.
The volatility last week doesn’t bode well for the
short term. The momentum behind the market’s lunges is strong. Whatever
happened to the day when good news was good and bad news was bad? (Source: Barrons Online)
For a number of reasons the current form of the Affordable Care
Act, aka ObamaCare, could be delayed or modified, in my opinion. Exactly how ObamaCare will be delayed or changed
is unknowable at this time. Significant
uncertainty will persist for the healthcare industry until this gets sorted
out. Healthcare and biomedical stocks
have risen substantially in the last several years in anticipation of more people
being included in the system. This
underlying assumption is in jeopardy.
For this reason I am recommending taking some profits on healthcare and
biomedical stocks by selling 50% of the position and reinvesting the proceeds
into another investment category until the cloud of uncertainty has been
removed.
Most of the time, the U.S. stock market
looks to 3 factors (call them the “pillars” that support the stock market) to
support its upward trend – let’s grade each of the pillars.
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. Zacks Investment Research says
third-quarter earnings for the 355 S&P 500 firms that reported as of Oct.
31 were up 4.5% from the same 2012 period, with 67% beating expectations.
Revenue rose 2.9%, with 49% topping forecasts.
We will maintain or grade of “A” based upon these results.
NOTE:
the above grades are unchanged from last week.
The Institute of Supply Management (“ISM”)
Manufacturing report for the month of October came in better than expected.
While economists were expecting an increase to 55.0, the actual reading came in
at 56.4. This was the highest reading since April 2011; and the fifth straight
better than expected report. The last time we had at least five consecutive
stronger than expected ISM Manufacturing reports was in the first half of 2009.
Does this mean the FED will taper its
easy monetary policy in the near future?
Probably not. The Employment component of the ISM report was
disappointingly weak. The FED is most
concerned about employment right now.
More likely than not, the FED will ignore the strength indicated by this
ISM report and keep its foot on the easy money gas pedal.
Last week, U.S. Stocks increased. Foreign Stocks and Bonds declined. During the last 12 months, STOCKS outperformed BONDS.
Returns through 11-1-2013
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
-.4
-1.4
-1.2
2.9
6.0
4.8
US Stocks-Standard & Poor’s 500
.1
25.7
26.2
16.6
15.2
7.5
Foreign Stocks- MS EAFE Developed Countries
-1.5
15.9
21.3
4.7
8.4
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 guest, Capital Blue
Sr. VP of Business Development, Aji Abraham, will discuss: “The Capital Blue Store
andhighlights of the Affordable Care Act”
Laurie and
her guest 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.
