“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. This week, Laurie will discuss: “Breaking down your own, personal, balance sheet.” 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/Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville/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.
Author Archives: The Weekly Commentary
Personal Notes
I am almost afraid to say my favorite baseball team is in first place. After all, they let me down miserably last year in the second half after leading at the All-Star break. And, the prior year they collapsed in the last two months to end with a losing record. And, the year before that they lost again. All told, 21 years in a row. Yes, my favorite baseball team has set a professional sports team record of 21 losing seasons in a row. But, this year will be different – the Pittsburgh Pirates will break through for a winning record and contend for the division title.
The Markets This Week
Stocks rose smartly last week, by more than 1.5% in a broad rally, despite soft gross domestic product news that caused shares to drop on Friday. First-quarter earnings reports came in, for the most part, as projected. The Commerce Department said that real GDP had risen at a 2.5% annual clip in the first quarter. That was up from 0.4% in the fourth quarter, but weaker than the 3% consensus estimate. The Dow Jones Industrial Average closed at 14,712.55, up 1.1%, or 165 points, on the week, while the S&P 500 added 27 With May nearly upon us, John Leo Manley, the chief equity strategist for Wells Fargo Funds, is already thinking of the summer and likens the market to a beach ball under water. “When you push it down, it just bobs up.” What’s behind that bob? Monetary easing by central banks around the world in general and the Federal Reserve’s quantitative bond buying in particular, he says. Investors must realize two things, Manley avers: ”First, the Fed isn’t going to stop soon, and secondly, no one is going to In a scenario in which the Fed keeps the pedal to the metal, Manley favors large-cap stocks over small-caps. More specifically, he adds that although he still likes the health-care sector, “it’s beginning to look a little long in the tooth now” after a 19% rally this year. “I’d start to focus on large tech stocks more. They look cheap.” This week, investors have a plethora of news to look forward to, including a Fed meeting topped off by April nonfarm payroll numbers. Given the surprise of the unsatisfying March payroll figures one month ago, notes Douglas Cote, chief market strategist at ING Investment Management, the market will look to see if that disappointing data was a one-time event. Speaking of summer, the market is approaching its traditionally weak season. According to Robin Carpenter, who heads up research firm Carpenter Analytix, from 1972 through 2012, the S&P had an average price gain of 6.8% in the seven months After the rip-roaring 11% start to 2013, that shouldn’t stop investors from enjoying the summer, should it? (Source: Barrons Online).
points to end at 1582.24. Friday, the S&P fell 0.2%. The Nasdaq Composite index picked up 73 points and rose 2.3% last week, to 3,279.26.
be able to say soon that the Fed’s easing won’t work.” So the market goes up just when bears are able to push it down, as happened the previous week.
from October through April. In the other five months, the S&P had a cumulative loss of 1.62%.
The Numbers
Last week, U.S. Stocks, Foreign stocks and Bonds all increased. 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 4-19-2013 1-week Y-T-D 1-Year 3-Years 5-Years 10-Years Bonds- BarCap Aggregate Index 0.2 .9 3.9 5.7 5.9 5.1 US Stocks-Standard & Poor’s 500 1.8 11.6 15.6 11.7 4.8 8.0 Foreign Stocks- MS EAFE Developed Countries 3.5 7.8 14.3 2.7 -4.1 6.5
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.
The “Heat Map”
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 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 grade this factor a B+ (favorable). The first group of earnings report have been released and the results are mixed – some of beat the estimates and some have fallen short. It is too early to change the grade.
NOTE: the above grades remain unchanged from last week.
Heads UP!
When is the best time to convert some or all of your IRA to a Roth IRA(be mindful the growth of a Roth IRA is tax free if you meet fairly easy IRS requirements and Roth IRA’s have no Required Minimum Distribution)? The answer for most is straightforward – convert your IRA to a Roth IRA when your income tax rate is low. Here are several situations where Valley National has aggressively recommended a conversion of an IRA to a Roth IRA: The taxpayer suffered a business loss or casualty loss during the year, thus reducing their income. The taxpayer incurred If one of the above fits your circumstance, please contact me at your earliest convenience to discuss further. NOTE: The information is general and not meant as a recommendation for your unique circumstances. Tax laws are tricky and the smallest deviation could result in a different recommendation. Contact your advisor at Valley National before proceeding.
unusually large medical bills, charitable contributions, or other itemized deductions. The taxpayer retired at age 59, 60, or 61 and their income dropped and their Social Security had not yet started.
The Economy
According to the Fed’s Beige book released last week, “economic activity expanded at a moderate pace” recently with housing leading the way. That is reflected in the data released.
Housing starts were at the highest level since June 2008. The monthly increase was a related to a surge in multi-family starts (there is significant month-to-month variability in multi-family starts), however single family starts were up 28.7% year-over-year, a strong increase too. And even with the recent increase in starts, housing starts – especially single family starts – are still low, and we will probably see continued growth over the next few years. Since residential investment is usually the best leading indicator for the economy, this suggests the economy will continue to grow over the next couple of years.
Of course manufacturing is seeing more sluggish growth (as reflected in the Empire State and Philly Fed manufacturing surveys for April). And initial weekly unemployment claims have increased recently – perhaps related to the sequestration budget cuts.
But overall the data suggests continued growth (Source: Calculated Risk).
Facts That Make A Difference
We frequently hear of the burden governmental regulations place on business operations. It’s true. For an excellent example, consider that the Consumer Financial Protection Bureau (the bureau created from Dodd-Frank legislation) in January, 2013 issued a document of 804 pages to define the term “qualified mortgage”. Simply put, a qualified mortgage is where the home borrower’s monthly debt payments cannot exceed 43% of monthly before tax income.
The Numbers
Last week, U.S. Stocks and Foreign stocks decreased. Bonds were little changed. 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 4-19-2013 | 1-week | Y-T-D | 1-Year | 3-Years | 5-Years | 10-Years |
Bonds- BarCap Aggregate Index | 0.1 | .7 | 5.8 | 5.1 | ||
US Stocks-Standard & Poor’s 500 | -2.1 | 9.7 | 11.5 | 4.6 | 7.8 | |
Foreign Stocks- MS EAFE Developed Countries | -2.6 | 4.2 | 11.2 | 1.6 | -4.6 | 6.1 |
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.
Motivational Quote of the Week
“The thing always happens that you really believe in; and the belief in a thing makes it happen.” – Frank Lloyd Wright