Monthly Archives: January 2013

Weekly Market Commentary 01/28/2013

Weekly Commentary

January 28, 2013

The Markets

They say that optimism is catching. The performance of markets across the globe last week certainly supported the idea.

During the second week of January, there was reason for optimism about the housing market as data showed that housing starts exceeded economists’ expectations and home construction appeared to be on the rebound. Last week, the National Association of Realtors disclosed that very low mortgage rates, falling unemployment, and one of the most affordable housing markets on record helped make 2012 the best year for home sales since 2007.

In addition, earnings season – the period of each quarter during which public corporations announce their quarterly earnings to the public – moved into high gear. Generally solid corporate earnings drive markets higher. This helped the Standard & Poor’s 500 Index close above 1,500 for the first time in more than five years.

Across the pond, the European Central Bank announced that banks plan to repay 137 billion Euros next week much earlier than many had expected. Markets interpreted the news as a sign that European financial systems may be on the mend. Global stock markets gained strength and the Euro reached its highest level in nearly a year against the U.S. dollar. Interest rates in Italy and Spain, some of the weaker links in the Eurozone economy in recent years, fell significantly during the week offering further evidence that investors’ optimism and appetite for risk was on the rise.

Data as of 1/25/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

1.1%

5.4%

13.3%

11.1%

2.5%

5.9%

10-year Treasury Note (Yield Only)

2.0

N/A

2.0

3.6

3.6

3.9

Gold (per ounce)

-1.7

-2.0

0.6

14.9

12.6

16.2

DJ-UBS Commodity Index

-0.6

1.1

-3.4

1.3

-5.6

2.0

DJ Equity All REIT TR Index

1.3

5.0

18.5

21.5

7.4

12.9

Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not applicable.

Traditional or roth retirement plan contributions? A provision of the American Taxpayer Relief Act of 2012 (ATRA) allows many people with savings in workplace retirement plans to make “in-plan Roth conversions.” They can move savings from traditional, before-tax 401(k), 403(b), or 457 plan accounts to Roth plan accounts without a distributable event (such as death, disability, or reaching age 59½) as long as the employer offers both options.

Traditional contributions

In general, traditional contributions to retirement plan accounts are made with before-tax dollars so they reduce current income. Any earnings in these accounts grow tax-deferred until assets are withdrawn. Generally, that’s at retirement. Distributions from Traditional accounts generally are taxed as ordinary income.

Roth contributions

Contributions to Roth retirement plan accounts are different. They are made with after-tax dollars so they do not reduce taxable income today. Any earnings in Roth accounts grow tax-free. Distributions from a Roth account are tax-free and penalty-free as long as the five-year participation period requirement is met and the distribution is taken for a qualified purpose, such as reaching age 59½ or becoming disabled.

How do I decide whether a conversion is right for me?

The decision about whether to convert a Traditional workplace retirement plan account to a Roth workplace retirement plan account should be based on criteria that are similar to the criteria used when deciding whether to convert a Traditional IRA to a Roth IRA. These include:

  • Tax brackets now and in the future: If you think you’ll be in a higher tax bracket during retirement than you’re in today, then a Roth conversion may make sense.
  • Assets available to pay the taxes due: When you convert from a Traditional to a Roth plan account, you will owe taxes on the assets you convert. If you have non-retirement savings available to pay these taxes, a Roth conversion may be a good choice.
  • Legacy and estate planning goals: If a Roth 401(k) account offers estate planning opportunities that suit your needs, conversion may be a good choice.
  • Income needs during retirement: If having a source of tax-free income to supplement taxable income during retirement could boost retirement income, then a Roth conversion may make sense.

Source: Investment News

It’s important to recognize a retirement plan conversion is different from an IRA conversion. Plan conversions do not allow a do-over while IRA conversions can be revoked for a certain period of time. If you have any questions about this topic, please give us a call.

Weekly Focus – Think About It

Optimism is the faith that leads to achievement. Nothing can be done without hope and confidence.

Helen Keller, the first deaf and blind person to earn a Bachelor of Arts degree

Best regards, 

Margie Shard, CFP®

President & Wealth Advisor

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

Securities offered through LPL Financial, Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.                          

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at 1537 N. Leroy St., Ste D, Fenton , Michigan 48430.

Sources:

http://www.bloomberg.com/news/2013-01-17/housing-starts-in-u-s-jump-more-than-forecast-to-four-year-high.html

http://money.cnn.com/2013/01/22/news/economy/home-sales/index.html

http://www.investopedia.com/terms/e/earningsseason.asp#ixzz2JBuexZ5D

http://www.reuters.com/article/2013/01/25/us-markets-global-idUSBRE88901C20130125

http://finance.yahoo.com/news/investors-lose-fear-black-swan-135545839.html

http://www.americanbenefitscouncil.org/documents2012/BBR2013-001_fiscalcliff010213.pdf

http://www.irs.gov/Retirement-Plans/401%28k%29-Plans

http://www.irs.gov/Retirement-Plans/Designated-Roth-Accounts

http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-on-Designated-Roth-Accounts#distns

http://www.investmentnews.com/article/20130120/REG/301209973

http://www.reuters.com/article/2013/01/24/us-column-miller-rothconversion-idUSBRE90N0P520130124

http://www.brainyquote.com/quotes/keywords/optimism.html#FQwzy4q6AqAgy1vy.99

 

Weekly Market Commentary 01/22/2013

Weekly Commentary

January 22, 2013

The Markets

Investors appeared to be as optimistic as a newly-engaged couple last week. Strong housing data, a positive labor report, temporary easing of debt ceiling pressures, and some stronger-than-expected earnings results helped the Standard & Poor’s 500 and the Dow Jones Industrials indices close at five-year highs.

Commerce Department data showed housing starts climbed by 12.1 percent in December, on an annualized basis, exceeding economists’ expectations. Home construction is expected to continue to rebound, as long as mortgage rates remain low, and experts anticipate sales of new and existing homes will show improvement this week. This continued improvement in the housing market may have contributed to a more positive investor outlook.

The possibility of a debt ceiling compromise also encouraged markets higher. Unlike down-to-the-wire fiscal cliff negotiations, which caused investors to hold back at the end of 2012, discussions of temporary debt ceiling extensions by House Republicans soothed investors’ concerns.

Several companies, including several high-profile Wall Street banks, reported strong results last week, and several companies reported earnings that beat lowered expectations. This helped drive bank, transportation, and housing indices to historic or multi-year highs. Since the Transportation sector includes many highly cyclical and economically sensitive stocks, which tend to underperform when investors anticipate recession, this was seen as positive news for the economy.

According to Barron’s, a secular bull market begins when both transportation companies and the Dow Jones Industrial Average hit new highs. The Dow Jones Transportation Average reached a new high last week, but the Industrials index remains 4 percent below its highest close which was reached back in October 2007. Are we headed for a bull market? Only time will tell.

Data as of 1/18/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

0.9%

4.2%

13.6%

9.0%

2.3%

5.3%

10-year Treasury Note (Yield Only)

1.8

N/A

1.9

3.7

3.7

4.0

Gold (per ounce)

1.9

-0.3

2.5

14.2

13.9

16.8

DJ-UBS Commodity Index

2.1

1.7

0.2

0.7

-5.5

2.0

DJ Equity All REIT TR Index

1.2

3.6

20.7

18.6

8.9

12.6

Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not applicable.

What’s the difference between America’s deficit and its debt, and how do they relate to the debt ceiling? The terms deficit, debt, and debt ceiling are likely to be bandied about by politicians and the media frequently in coming months. It’s important for all Americans to understand these terms. 

The deficit

America’s deficit is its annual budget shortfall. Any year the government’s spending exceeds its revenue (the amount of money taken in through taxes and other means), it has a deficit. When the government spends less than it takes in, it is called a surplus. Deficits are controversial and have been for many years. Keynesian economics states deficits can be used to stimulate economies and help countries rise out of recession. Other experts argue governments should not incur deficits because the money paid in interest could be better spent elsewhere.

The debt

The national debt is the full amount the American government owes – all of its deficits and surpluses added together. If the government runs at a deficit of $10 million for five years, then its debt will be $50 million. Every year that a country runs at a deficit, its debt increases.

The debt ceiling

When a government runs at a deficit, it must borrow money to keep operating. The U.S. government generally borrows by selling securities such as Treasury bills, notes, bonds, and savings bonds. The amount it can borrow this way is limited by the debt ceiling, which was established under the Second Liberty Bond Act of 1917.

The United States hit its current debt ceiling, which is about $16.4 trillion, on December 31, 2012.  Before it can issue additional debt, Congress will need to raise the debt ceiling. This may make the debt ceiling a popular topic in political conversation during the next few months!  

Weekly Focus – Think About It

Compromise:  n. Such an adjustment of conflicting interests as gives each adversary the satisfaction of thinking he has got what he ought not to have, and is deprived of nothing except what was justly his due.

–Ambrose Bierce, American journalist

Best regards,

Margie Shard, CFP

President & Wealth Advisor

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

Securities offered through LPL Financial, Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.                    

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at 1537 N. Leroy St., Ste D, Fenton, Michigan 48430.

Sources:

http://www.reuters.com/article/2013/01/19/us-usa-stocks-weekahead-idUSBRE90H1E020130119

http://www.reuters.com/article/2013/01/18/us-markets-stocks-idUSBRE90D0CG20130118

http://www.bloomberg.com/news/2013-01-18/u-s-stock-futures-little-changed-before-earnings-data.html

http://www.bloomberg.com/news/2013-01-17/housing-starts-in-u-s-jump-more-than-forecast-to-four-year-high.html

http://www.foxbusiness.com/personal-finance/2013/01/17/housing-market-in-2013-what-to-expect/

http://www.reuters.com/article/2013/01/18/us-markets-stocks-idUSBRE90D0CG20130118

http://online.barrons.com/article/SB50001424052748703596604578235570771013936.html?mod=BOL_twm_coll

http://www.investinganswers.com/financial-dictionary/economics/deficit-1077

http://www.investopedia.com/terms/f/federaldebt.asp#axzz2Iima3vBz

http://www.investopedia.com/terms/d/debt-ceiling.asp#axzz2Iima3vBz

http://thehill.com/blogs/on-the-money/economy/274591-us-to-hit-164t-debt-limit-on-dec-31

http://www.brainyquote.com/quotes/keywords/compromise.html

 

Weekly Market Commentary 01/14/2013

Weekly Commentary

January 14, 2013

The Markets

Why were investors turning to stocks? Was it the generally strong performance of stock market indices during 2012 or something else? Theories were abundant. Some speculated that the surge signaled:

  • Renewed confidence in the American economy
  • Relief that capital gains and dividend taxes remained constant for middle income Americans
  • Faith in the ability of the American government to get things done
  • Lack of attractive investment alternatives as the average yield on high-yield bonds fell below 6% for the first time ever

There also was much discussion during the week about the contradictory messages coming from the Federal Reserve. The Evan’s Rule, which was named after the head of the Chicago Federal Reserve Bank, was established late in 2012. It ties interest rate guidance to employment and inflation targets rather than calendar dates; a change many had interpreted to mean that monetary policy would remain accommodative into 2014.

Interest rates are just one tool the Fed has been using to encourage economic growth. It also has been engaging in quantitative easing (QE) which is purchasing Treasuries on the open market to inject capital into the economy and encourage growth. Last week’s Federal Open Market Committee meeting notes indicated there was discussion among Fed members about ending quantitative easing earlier than expected, possibly before 2014.

So, which is it? Will policy remain accommodative or will it start to tighten? We may not know for sure for some time. The good news, according to Barron’s, is that tightening monetary policy would not be all bad news. “The end of quantitative easing would mean that the Fed sees sustainable economic growth in the U.S. – and globally.”

Data as of 1/11/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

0.4%

3.2%

13.9%

8.7%

1.0%

4.7%

DJ Global ex US (Foreign Stocks)

1.0

3.0

19.0

4.3

-0.9

10.6

10-year Treasury Note (Yield Only)

1.9

NA

1.9

3.8

3.8

4.1

Gold (per ounce)

0.6

-2.1

1.4

12.9

13.2

16.7

DJ-UBS Commodity Index

0.6

-0.4

-3.2

-0.8

-6.1

2.0

DJ Equity All REIT TR Index

0.7

2.4

20.6

18.7

7.8

12.2

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  N/A means not applicable.

Sage investment advice… Almost two decades ago, the CFA Institute published an article that included a letter from a father who was a financial professional to his daughter. His missive included some timeless and practical advice about investing. Among the thoughts he shared with his daughter were the following principles for investing:

  • A fool and his money are soon parted. Pay close attention to financial matters because investment capital is a perishable commodity when not managed properly.
  • There is no free lunch. Risk and return are interrelated. Generally, the greater the risk, the greater the potential return and vice versa.
  • Know thyself. Be honest in assessing your risk tolerance because it’s easy to underestimate the stress of a high-risk portfolio when markets move south.
  • Don’t put all your eggs in one basket. Diversification helps determine potential rates of return and manage exposure to risk. Make sure you have a well-diversified and well-allocated portfolio.
  • Take the long view. Make a plan and stay with it. Don’t let short-term market fluctuation or media-fueled frenzies cause you to panic. Investment decisions should result from a rational trade-off of risk and return. Unfortunately, those decisions often reflect fear and anxiety about current events.
  • Remember the value of common sense. Investing is not a competitive sport. It should be an effort to achieve a pre-determined financial goal within a specific risk-tolerance framework. No system works all of the time and you should not expect it to.

Sound financial advice may prove particularly important during 2013. During the fourth quarter of 2012, markets were volatile as Congress argued fiscal cliff issues. The solution – The American Taxpayer Relief Act of 2012 – resolved matters related to taxation, but left spending issues to be hammered out in the future. As a result, we may see additional volatility during the first few months of this year. If you begin to experience fear and anxiety when listening to news reports or checking market performance, just review the principles above!

Weekly Focus – Think About It

If you want to be successful, it’s just this simple. Know what you are doing. Love what you are doing. And believe in what you are doing.

–Will Rogers, humorist and social commentator

Best regards,

Margie Shard, CFP®

President & Wealth Advisor

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

Securities offered through LPL Financial Member FINRA/SIPC.

* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.                

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. 

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Past performance does not guarantee future results.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject line, or write us at 1537 N. Leroy St., Ste D, Fenton, Michigan 48430

Sources:

http://finance.yahoo.com/news/analysis-big-flows-u-stocks-120819805.html

http://www.reuters.com/article/2013/01/11/us-investing-fundflows-lipper-idUSBRE90A0VP20130111

http://www.washingtonpost.com/business/fiscal-cliff-deal-helps-fuel-biggest-weekly-flow-of-cash-into-stock-mutual-funds-since-2001/2013/01/11/c1c24f3e-5c12-11e2-b8b2-0d18a64c8dfa_story.html

http://www.businessinsider.com/upcoming-federal-reserve-speeches-schedule-2013-1#ixzz2HsZsmVUP

http://www.investopedia.com/terms/a/accomodativemonetarypolicy.asp#ixzz2HseAL1ne

http://online.barrons.com/article/SB50001424052748703792204578219750527526218.html?mod=BOL_twm_col

http://www.cfainstitute.org/about/investor/Documents/managing_your_portfolio.pdf

http://www.brainyquote.com/quotes/quotes/w/willrogers393804.html#lQdmqobl2KE0FLMk.99