Real estate values have bounced back providing Americans with more
purchasing power. That is an important
development which supports a stronger economy ahead.
According to the Federal Reserve Bank, the value of Americans’ equity in their real estate peaked at $10.3 trillion as of 12/31/07, fell to
$6.3 trillion by 12/31/11, and
then climbed back to $10.0 trillion
as of 12/31/13.
What makes Valley National different?
As a start Valley National Advisers is a Registered Investment Advisor
firm (“RIA”). An RIA forms a close
relationship with you – one that is responsive, attentive and personal. Our advice is based on what’s best for you –
there is no other agenda. The portfolio
management fees are typically based on a percentage of assets managed. As your portfolio grows the RIA makes higher
fees so both you and the RIA are pulling the wagon the same direction.
For more information, let’s look at the three words in “Registered
Investment Advisor” for more meaning:
REGISTERED: Yes, with the Securities
Exchange Commission. We have a fiduciary
duty to act in your best interest.
INVESTMENT: Not only do we invest
your money, but we also help you plan your entire financial picture – such as
your retirement, or children’s education or estate planning.
ADVISOR: We are on your side, ready
to offer the advice and guidance you need.
And we are Independent – no one in a distant corporate headquarters is influencing
us to give you the wrong advice.
While
it is exceptionally difficult to forecast stock markets dips and bounces, I
believe it pays to keep an eye on the reality of the current situation. When I assess the points below, I feel confident that investors owning the
stock of great companies will be rewarded in the future:
The fact that the market made up its nearly 6% January
swoon in the absence of a clear catalyst is at least a good sign that the
market drop was, more likely than not, an ordinary correction.
The IRS is at it again. The IRS changed the format for 1099’s (investment
account transactions) and many 1099 providers discovered the change too late to
make the January 31st deadline for mailing the 1099’s. Many providers received an extension of time
to provide them until February 15. You
should be receiving these “late” 1099’s this week.
Additionally, the IRS was late to release the final
version of several forms needed by tax prep software companies and tax
preparers. And, the IRS was late in
opening its doors to permit taxpayers to actually file their income tax
returns.
Additionally, many investors have added Master Limited
Partnerships (MLP’s) to their portfolio.
The investment returns for these MLP’s are NOT reported on the 1099’s. Instead MLP earnings are reported on Schedule
K-1 which is issued in early March (normally).
We recommend NOT waiting for your
K-1’s before giving your income tax information to us to prepare your income
tax return. We prefer to get started
as soon as possible and we will download your K-1 information for you, as soon
as it is available.
THE FOLLOWING IS REPEATED FROM LAST WEEK FOR
EMPHASIS:
The Asian Financial crisis of
1997 – 1998 helped to cause some extraordinary volatility in the US markets in
1997 and 1998. Here is a look at price movements on the S&P:
2/18/97-4/1/97
– 9.6%
8/6/97-8/29/97
– 6.3%
10/7/97-10/27/97
-10.8%
12/5/97-12/24/97
– 5.48%
1/5/98-1/9/98
– 5.05%
7/17/98-10/8/98
-19.0%
Surprisingly, the stock market’s return for the two
years 1997 – 1998 were very attractive, even with the above volatility:
1997 S&P 500 (including dividends) +33%
1998 S&P 500 (including dividends) +28%
Bottom Line
Based upon what we know at this time, we recommend
you “Stay the Course”. We may see additional volatility in 2014.
Although unnerving and panic creating, it is important to keep our investment
disciplines and review past episodes to ease your concerns. We note that
economic indicators across the developed world continue to show improvement. As graded below, the U.S. consumer is
spending a healthy amount, the FED continues to be accommodative, and corporate
earnings remain strong which should support continued increases in the US stock
markets for the long run. Our investment models are more heavily weighted
toward developed economies which arguably have preferable risk/reward
characteristics vs. that of emerging economies.
The Asian Financial crisis of 1997 – 1998 helped to cause some extraordinary volatility in the US markets in 1997 and 1998. Here is a look at price movements on the S&P:
2/18/97-4/1/97 – 9.6%
8/6/97-8/29/97 – 6.3%
10/7/97-10/27/97 -10.8%
12/5/97-12/24/97 – 5.48%
1/5/98-1/9/98 – 5.05%
7/17/98-10/8/98 -19.0%
Surprisingly, the stock market’s return for the two years 1997 – 1998 were very attractive, even with the above volatility:
1997 S&P 500 (including dividends) +33%
1998 S&P 500 (including dividends) +28%
Bottom Line
Based upon what we know at this time, we recommend you “Stay the Course”. We may see additional volatility in 2014. Although unnerving and panic creating, it is important to keep our investment disciplines and review past episodes to ease your concerns. We note that economic indicators across the developed world continue to show improvement. As graded below, the U.S. consumer is spending a healthy amount, the FED continues to be accommodative, and corporate earnings remain strong which should support continued increases in the US stock markets for the long run. Our investment models are more heavily weighted toward developed economies which arguably have preferable risk/reward characteristics vs. that of emerging economies.
For those folks who have your
tax returns prepared through Valley National Services, you should have received
your annual tax disclosures and questionnaires in the mail or via an email to
complete electronically. For those who would like to complete them online
or missed the email, please go through our website www.valleynationalgroup.com , click “Tax Services” on the home page and then follow
the link to “Complete
your Tax Preparation forms online: GET STARTED HERE” in the middle of the page.
And to that group of people who prepare your returns yourselves or use another
service, we welcome you to try us out this year. Understanding your tax
options is an integral part of informed financial choices.
Only
2 Days of Trading Remaining in 2013:
Consider Selling Those Stocks and Mutual Funds That Have a Loss. “Taking your losses” is a good tax planning
strategy (this does not apply to IRAs, TSAs, 401ks, and other pension
accounts).
The
IRS permits you to take losses to the extent you have capital gains, plus $3,000.
NOTE: We anticipate that many mutual funds will
declare and pay a capital gain distribution in December. Taking losses will eliminate the negative
effect of these capital gains dividends in many cases.
Most Consumers (people) are feeling
wealthier. And, here’s why.
Home prices, on average in the U.S., are
on their way back. According to the
Office of Federal Housing Enterprise Oversight, home prices have now reached
the level they first reached in 2005.
Home prices have some room to move to reach the “high water” level of
2007; but, solid progress is being made.
The stock market’s 2013 gain has added
$3.8 trillion to investors’ account values.
The Federal Reserve Bank in 2013 has
added almost $1 trillion to the financial system (through quantitative easing).
People should spend more when one of two
things is true: (1) when people actually are wealthier; or (2) when people
perceive themselves to be wealthier.
Spending helps the economy to improve.
An improving economy helps increase stock market and real estate
prices. This circular, reinforcing
system is the basis of the U.S. economic engine which has been kick-started by
the FED and is warming up.