Monthly Archives: January 2015

Heads Up!

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Behind the headlines, there’s an ongoing debate as to whether the precipitous drop in oil prices is a boon or a bust for U.S. stocks. Some experts expect an uptick of demand with cash rich consumers – this will help the economy, they theorize. Other experts rebuke the strongly held view that lower gasoline prices will make Americans open their wallets wide. The global macroeconomic environment just isn’t that good, they argue.

The recent election in Greece will lead to further turmoil in Europe – additional information is provided in the Heat Map.

The global currency churning reawakened financial contagion fears.

Given such fears, it might take one and perhaps two more quarters of earnings results from the world’s big banks and energy companies before the global stock market gets comfortable.

We have said it before and we will say it again: Get used to volatility for a while.

Income Tax Update

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Do you have your tax returns prepared by Valley National? You should have received your annual tax disclosures and questionnaires via e-mail or mail earlier in the month. If you do not see them soon, you may click here to access the engagement forms online. Or call our office with any questions.

Do you want (or know someone who wants) to have your tax returns prepared by Valley National? Visit our website to access the forms to get started – valleynationalgroup.com , click on “Tax Services.” You may download PDF versions or fill the required forms out online by clicking on the link that says GET STARTED HERE.

Understanding your tax options is an integral part of informed financial choices. We look forward to helping you and your family.

The “Heat Map”

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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 is 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 has been decreased to B- (slightly above average) from B+ as the effect of a stronger dollar is felt in corporate profits.

OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in good shape ASSUMING no international crisis. We have added the heightened risk of turmoil in Europe from the recent Greek election. The Greeks, with help from Russia, may take a hard line against paying back the huge bail-out loans with which Greece is saddled. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these collectively as a 3, an increase from level 2. These risks deserve our ongoing attention.

The Numbers

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Last week, US Stocks, Foreign Stocks and Bonds all increased. During the last 12 months, STOCKS outperformed BONDS.

Returns through 1-23-2015

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

.1

1.5

 6.4

 3.2

 4.4

4.8

US Stocks-Standard & Poor’s 500

1.6

-.3

14.5

18.5

15.9

8.0

Foreign Stocks- MS EAFE Developed Countries

 2.6

  .8

 -4.2

 9.4

5.7

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”

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“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, her guest, Attorney Gladys Wiles of Snyder and Wiles, PC, will discuss: “A Potpourri of Legal Considerations for You”

Laurie and Attorney Wiles will take your calls on these topics and other inquiries this week. This show will be broadcast at the regular time. Questions may be submitted early through 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.

NEWS: Newsweek Interviews Tom Riddle

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Valley National’s founder and president, Thomas M. Riddle, was interviewed by NEWSWEEK! Not on the usual topic of financial planning, taxes or investments. Instead, the writer contacted Tom to find out what it’s like sharing a name with the infamous character from the Harry Potter books by the name of Lord Voldemort. CLICK TO READ THE ARTICLE

“We all receive email that is crazy sounding,” said Tom. “I was very suspicious when I read the email from the writer introducing himself; but, this one turned out to be legitimate. My family has had a lot of fun with this.”

 

The Markets This Week

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They’re saying that in markets ’round the world, now that Mario Draghi, the European Central Bank’s president, has announced a massive bond-buying program to help Europe shake off its economic malaise. The news spurred equity markets to rally, and helped U.S. stocks soar in a holiday-shortened week.

The beaten-down energy sector recovered somewhat, with stocks gaining 2%, even though crude oil prices fell 7% last week, to a new low of $45.59 per barrel. Tech stocks rose 3%. With the widely anticipated ECB move out of the way, investors are likely to turn their focus to fourth-quarter earnings releases.

Draghi announced that the ECB will buy €60 billion ($67 billion) a month in assets, including government bonds, beginning in March and running until September 2016, at least. This quantitative easing program, which would expand the central bank’s balance sheet by about €1.1 trillion, met market expectations. Central-bank QE policy moves support equities by depressing bond yields, making stocks more attractive.

The Dow Jones Industrial Average gained 161 points last week, or 1% to 17,672.60. The Standard & Poor’s 500 index rose 32 to 2,051.82. The Nasdaq Composite tacked on 124.70 points, or 2.7%, to 4757.88. The MSCI world stock market index jumped.

The market was already up from the previous Friday in anticipation of ECB move, notes Robert Pavlik, chief market strategist at Banyan Partners, suggesting investors felt the early January drop had driven prices down to where the bull’s “buy on dips” reflex kicked in again. There was no 10% correction in either 2014 or 2013.

(Source: Barrons Online)

Heads Up!

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Where will the stock market end 2015? I do not know; but, it is likely investors in high quality stocks will be happy at the end of 5 years. This prognostication agrees with Wharton School of Finance professor Jeremy Siegel. His research finds, over the long term, there is a pronounced tendency for periods of better-than-average to follow worse-than-average (and vice versa). Accordingly, the above par performance of the past several years suggest that over the next several, performance will run somewhat below par but still in the black.

The “Heat Map”

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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.

NOTE: There is no change from the prior week.