Longer life expectancy and the likelihood of more years spent in retirement are realities now facing the baby boom generation, and most likely, the generations that follow. The Treasury Department and IRS realize this is a major concern for many and have recently passed new regulations.
The new regulations allow individuals to purchase a deferred income annuity which can be excluded from RMD calculations AND distributions don’t have to start until your Age 85. Of course, the annuity must be properly setup and certain conditions must be met, but Qualified Longevity Income Contracts (or QLACs) can be an important option to help plan for retirement and ensure you have a regular stream of income. Contact us for more information.
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: This grade an A (very favorable) due to the favorable effect of lower gasoline and heating oil prices.
THE FED AND ITS POLICIES: We 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: This factor’s grade is a B+ (above average).
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in good shape ASSUMING no international crisis. We have added the risk of an EBOLA pandemic to the “powder keg” in the Middle East to the situations to be watched. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these collectively as a 2. Risks continue to lurk, and they deserve our ongoing attention.
Last week,US Stocks and Foreign Stocks increased and Bonds declined. During the last 12 months, STOCKS outperformed BONDS.
Returns through 12-12-2014
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
-.3
5.8
5.7
2.6
4.2
4.7
US Stocks-Standard & Poor’s 500
3.4
14.3
16.8
22.4
15.6
7.9
Foreign Stocks- MS EAFE Developed Countries
.9
-4.6
-1.4
12.6
6.0
4.9
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, the station will run a pre-recorded show on a financial planning topic. The live broadcast will return on January 7th.
No live calls will be taken this week. This show will be broadcast at the regular time. Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie. 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.
Wow. Stock prices jumped 3% in another volatile week that nearly erased the previous week’s 3.5% thrashing. Anxiety diminished over the possible financial contagion from collapsing ruble and oil prices, and investors were encouraged by the Federal Reserve’s stance on interest rates.
Last week, the Dow Jones Industrial Average jumped 524 points or 3% to 17,804.80. The Standard & Poor’s 500 index gained 68 to 2,070.65, while the Nasdaq Composite index added 112 points, or 2.4%, to 4765.38. The Russell 2000 index of small-caps soared 3.8% to 1195.94.
Wall Street began its ascent before Fed Chair Janet Yellen began her news conference Wednesday afternoon in the U.S. Investor concerns had mounted in recent weeks over the sharp plunges in both oil and the Russian ruble, which fell 16% in just two days last week.
Banks could get hit hard if Russia were to default on its loans or if oil companies would not be able to meet debt payments. By the time American investors came to their desks that Wednesday the ruble and oil rose, and such fears receded—for now. That set the stage for Fed-inspired bigger gains, says Mark Luschini, chief investment strategist at Janney Montgomery Scott.
The Fed’s statement appeared to appease nervousness about the expected fed-funds rate hike next year. The words “considerable time” were effectively dropped from the statement, and officials can now be “patient.” The FOMC’s median projection for the likely appropriate funds rate at year-end 2015 dropped to 1.12% from 1.37%.
Luschini is surprised that the market interpreted the statement so “dovishly,” and we agree. Yellen was clear that the Fed will begin to raise rates in 2015 and very likely around midyear. James O’Sullivan, chief economist of High Frequency Economics, wrote after the Fed meeting: “The ‘patient’ wording is reminiscent of the change in language in 2004—five months before tightening began.”
The rally “shows that the market is pretty powerful and you have to respect it,” says Richard Weeks, a partner at Hightower Advisors. The small-cap rise last week was healthy too, he says. But, he adds, roiling currency and oil markets “suggest some big forces have been unleashed, forces that will take a long time to reach equilibrium.”
Investors should be wary of the volatile days of recent weeks. It’s hard to understand the race back into stocks that just a few days ago were deemed too expensive by investors.
The remarkable aspect to the rally is that in the past 48 hours the negative catalysts that sparked investor caution over the past couple of weeks “have not passed. They have arguably intensified,” says JonesTrading chief market strategist Mike O’Rourke.
