The S&P 500 Index of U.S. Stocks has increased over 20% so far this year. Since 1991 the S&P 500 has gained 20 percent or more, excluding dividends, in a year 7 times, every instance saw a higher market 1 year later. Source: The Big Picture.
Author Archives: The Weekly Commentary
The “Heat Map”
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.
BUSINESS
PROFITABILITY: I continue to grade this factor an A (very favorable).
NOTE:
the above grades are unchanged from last week.
The Economy
Recent economic reports indicate the U.S.
economy continues to show improvement.
Retail sales were stronger than expected. Gasoline, as well as other energy costs, continued
to decline which will put more money in consumers’ pockets coming into the all
important Holiday season. The US
manufacturing sector continues to strengthen as indicated by the Purchasing
Manager Index jumping to a healthy reading of 54.2 versus an expected 52.4
On the negative side, mortgage interest
rates jumped to a 2 month high, existing home sales slid 3.2% from the previous
month, and refinancing applications declined 6.5%.
The Numbers
Last week, U.S. Stocks increased. Foreign Stocks and Bonds declined. During the last 12 months, STOCKS outperformed BONDS.
|
Returns through 11-22-2013 |
1-week |
Y-T-D |
1-Year |
3-Years |
5-Years |
10-Years |
|
Bonds- BarCap Aggregate Index |
-.1 |
-1.5 |
-1.4 |
3.0 |
5.6 |
4.6 |
|
US Stocks-Standard & Poor’s 500 |
.4 |
29.0 |
32.6 |
17.1 |
20.3 |
7.9 |
|
Foreign Stocks- MS EAFE Developed Countries |
-.1 |
16.8 |
22.9 |
5.0 |
12.4 |
4.8 |
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, due to the Thanksgiving holiday, Laurie
will replay a previous show. No phone inquiries will be available.
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
“People
with goals succeed because they know where they’re going.”
– Earl Nightingale
Personal Notes
This football
season is teaching me to avoid counting out a team too early in the
season. After Lafayette College’s
horrible 1 win, 5 loss start to this season, I had counted them “down and
out”. But, after Saturday’s upset of my
alma mater Lehigh (MBA, Class of ’77) in
the 149th playing of the rivalry, my alma mater Lafayette (BA, Class
of ’73)not only won the Patriot League but also earned a post-season berth in
the national playoffs.
And the Steelers’
season start of 4 straight losses led me to conclude too early that they had no
shot at the play-offs. But, the Steelers
went on to win 5 of the next 7 games to move into a tie for the second
“wild-card” play-off slot.
And, don’t forget
about the Eagles! Who would have guessed
4 weeks ago they would be leading their division?
The Markets This Week
With Thanksgiving and the holiday season upon us, investors are
getting comfortable. Who’s afraid of the tapering wolf? Fewer investors than
before, if last week’s equity and bond action is anything to go by.
Stock prices
finished higher for a seventh consecutive week, and the major U.S. indexes
closed at—you guessed it—record highs. Equity prices rose 0.4%, but that
includes a recovery from a nearly 1% drop at one point midweek, following
Wednesday’s release of the minutes from the October Federal Open Markets
Committee meeting.
The Fed
reiterated that economic trends would warrant a reduction in stimulus “in
coming months.” The central bank’s $85 billion monthly bond-buying program
has kept interest rates low and fueled the stock-market rally.
Both stock and
bond prices fell sharply after the release of the minutes Wednesday.
Nevertheless, by Friday’s close, equities had recovered all the ground and then
some. Meanwhile, Treasury bond prices also rose from Wednesday’s lows, though
they still fell on the week.
The Fed’s
tapering hints earlier this year elicited much worse reactions, notes Rick
Fier, a trader at Conifer Securities in New York. Wednesday, the bond market
spiked down, but the reaction was “short-lived and that suggests the
market is getting comfortable with the taper,” he says.
Michael Matousek,
head trader at U.S. Global Investors, concurs. “The big money would sell
bonds down hard if they got the idea that tapering is coming [soon].” The
bond recovery in the latter half of the week shows that “no one is in a
rush to sell bonds.”
On the week, the
Dow Jones Industrial Average gained about 0.6%, or 103 points, to 16,064.77 and
the Standard & Poor’s 500 index rose7 points to 1804.76. Both were new
highs. The Nasdaq Composite index added 0.1%, or 6, to 3991.65.
Investor
comfort—or complacency, say the bears—derives from an increasing belief that
tapering is off the table for the short time remaining in 2013, despite one
more FOMC meeting next month. And given that the holiday season is historically
an up period for equities, at this point investors might be more worried about
shopping for gifts than what stocks will do.
Matousek is
betting on tapering to begin in January 2014, and that the market’s upward
momentum will continue until then. It’s hard to see, he adds, the Fed tapering
the stimulus by the end of the year for a couple of reasons. Though U.S.
economic data remain generally positive, there’s no big number to hang the
stimulus reduction on. Perhaps more importantly, Fed Chair Ben Bernanke will
want a smooth transition to his expected successor, Janet Yellen, who, when
approved by Congress, would take over Feb. 1.
If the market is
getting inoculated, by the time tapering begins, will anyone care? (Source: Barrons Online).
Heads Up!
2013 Tax Planning – Don’t be surprised,
be prepared.
As January 1, 2014 gets closer, you need to finalize your year-end tax planning.
While new tax legislation has brought greater certainty, it also created new challenges. The number of changes made to the Tax Code and the opportunities these changes bring may seem overwhelming. However, engaging us to help with tax planning will help you to maximize your potential tax savings and minimize your tax liability.
Without planning, you may be surprised that you owe additional taxes in 2013, even with the extension of the previous decade of tax brackets. Three new taxes are in effect for 2013: the Net Investment Income surtax, the Additional Medicare Tax and a revived 39.6 percent tax bracket for higher income individuals. The 3.8-percent Net Investment Income surtax very broadly applies to individuals, estates and trusts that have certain investment income above set threshold amounts. The Additional Medicare Tax applies to wages and self-employment income above threshold amounts. Please click the link here to review our Changes in Tax Rates chart summarizing the new taxes and revived brackets and phaseouts.
With these new taxes in place, make sure you don’t lose the benefit of some generous but temporary tax incentives that are available in 2013, but may not be in 2014. Please click the link here to review our 2013 Tax Planning Checklist to help you get started on your tax planning. If your situation has changed or you need more detailed planning, please contact me for more information.
The “Heat Map”
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 continue to grade this factor an A (very favorable).
NOTE: the above grades are unchanged from last
week.