Last week, U.S. Stocks increased, Foreign Stocks
decreased, and Bonds were unchanged. 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 8-23-2013
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
0.0
-3.2
-2.5
2.5
4.9
4.7
US Stocks-Standard & Poor’s 500
.5
18.3
21.3
18.5
7.6
7.5
Foreign Stocks- MS EAFE Developed Countries
-.6
9.4
17.3
6.9
-.4
5.1
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
will discuss:
“Health Care general
concepts and the Affordable Care Act”
Laurie 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 websit www.yourfinancialchoices.com and visit www.wdiy.org.
“And while there will be time enough to
debate our continuing differences, now is the time to recognize that that which
unites us is greater than that which divides us. While we yet hold and do not
yield our opposing beliefs, there is a higher duty than the one we owe to
political party. This is America and we put country before party.”
What great weather
we had here in Pennsylvania for the weekend.
Perhaps, the last one before Fall.
After all, Labor Day weekend is next weekend. Speaking of “Labor Day,” I read how the
meaning of “Labor Day” has changed over the years.
Labor Day has been celebrated on the
first Monday in September in the United States since the 1880s. The form that
the observance and celebration of Labor Day should take was outlined in the
first proposal of the holiday — a street parade to exhibit to the public
“the strength and esprit de corps of the trade and labor
organizations” of the community, followed by a festival for the recreation
and amusement of the workers and their families. This became the pattern for
the celebrations of Labor Day. Speeches by prominent men and women were
introduced later, as more emphasis was placed upon the economic and civic
significance of the holiday. Still later, by a resolution of the American
Federation of Labor convention of 1909, the Sunday preceding Labor Day was
adopted as Labor Sunday and dedicated to the spiritual and educational aspects
of the labor movement.
Today Labor Day is often regarded
simply as a day of rest and, compared to the May 1 Labor Day celebrations in
most countries. Parades, speeches or
political demonstrations are more low-key, although especially in election
years, events held by labor organizations often feature political themes and
appearances by candidates for office. Forms of celebration include picnics,
barbecues, fireworks displays, water sports, and public art events. Families
with school-age children take it as the last chance to travel before the end of
the summer.
Some teenagers and young adults view it as the last weekend for parties
before returning to school. However, of late, schools have begun
well before Labor Day. In addition,
Labor Day marks the beginning of the season for the National Football League
and NCAA College Football. The NCAA usually plays their first games the weekend
of Labor Day, with the NFL playing their first game the Thursday following
Labor Day.
Stocks finished the week generally mixed in light
trading, with mega-caps lagging the market. Traders mostly shrugged off a
technical glitch at the Nasdaq, which halted that exchange for three hours
Thursday.
The market traded down Wednesday ahead of the
release of the minutes from the U.S. Federal Reserve’s July policy-setting
meeting, and middling rallies on Thursday and Friday weren’t enough to overcome
the earlier losses among the big caps.
With
few macroeconomic data releases and little new in the way of policy hints out
of the Fed, investors switched their focus mainly to corporate news from
companies like Microsoft (ticker:
MSFT) and retailer Abercrombie (ANF).
The Dow Jones Industrial Average managed to climb
back above 15,000 Friday, to close at 15,010.51, down 71 points, or 0.5%, on
the week. The S&P 500 index inched up eight points to 1663.50. The Nasdaq
Composite index gained 1.5%, or 55 points, to 3657.79. The small-cap Russell
2000 index jumped 14 points, or 1.4%, to 1038.24.
The
market’s negative reaction to the Fed minutes was surprising, says Liz Ann
Sonders, chief investment strategist at Charles Schwab, because it wasn’t
particularly “new news.” However, the drops are more understandable
in light of high bullish sentiment among investors coming into the week.
As a contrary short-term indicator, she says
sentiment remains “too frothy,” even if it has cooled. The Schwab
strategist is cautious about the near term and expects more of a pullback and
volatility. “I’d like to see a further reversal of sentiment” before
getting more positive, she adds.
Investors might be obliging. Last week, individuals
pulled $12.3 billion out of equity exchange-traded funds, the first outflow in
eight weeks and the largest in five years, according to a report Friday from
Bank of America Merrill Lynch chief investment strategist Michael Hartnett.
Next week might be quiet, but in September there are
going to be headwinds in the form of a Fed policy meeting on the 17th and 18th,
in a month when many expect the central bank to begin tapering its quantitative
easing, notes Jack Ablin, chief investment officer of BMO Private Bank.
Then there are critical German elections on the
22nd, and the ninth month has historically been a tough period for stocks, he
notes (Source: Barrons Online).
Last week the stock market suffered its worst decline since May 2012 – a period of 15 months. Interestingly, the stock market has rebounded after each sell off in 2011 and 2012. The worst day in 2011’s stock market was followed by an advance of 22% during the following 6 months. The worst day in 2012’s stock market was followed by an advance of 12.1% during the following 6 months.
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.
BUSINESS PROFITABILITY: I graded this factor an A (very favorable).
You could not tell from the stock market’s poor showing last week, but the economic news was positive, not negative. Housing data was better than expected and the jobs data was strong. Perhaps, the data was too strong – too much of a good thing may mean the FED is more likely to tighten its monetary policy.
Last week, U.S. Stocks, Foreign Stocks, and Bonds all decreased. 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 8-16-2013
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
-1.1
3.3
-1.8
2.5
5.0
4.8
US Stocks-Standard & Poor’s 500
-2.0
17.7
19.6
17.8
7.4
7.4
Foreign Stocks- MS EAFE Developed Countries
-.1
10.1
19.0
6.6
-.4
5.1
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 will discuss:
“Education planning – 2013 education credits, using 529 college savings plans and paying for college.”
Laurie 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.comand visit www.wdiy.org.
