Monthly Archives: May 2013

Shard Financial Weekly Market Commentary

Weekly Market Commentary
May 30, 2013
 
The Markets
 
Like guests feeling the first rain drops at a Memorial Day barbeque, markets responded uncertainly to Federal Reserve Board Chairman Ben Bernanke’s congressional testimony and the newly released Federal Open Market Committee (FOMC) minutes last week.
 
Generally, both Bernanke’s comments and the FOMC minutes reiterated what the Fed has been saying for some time. According to FOMC minutes, quantitative easing – the Fed’s purchase of $40 billion of mortgage-backed securities and $45 billion of longer-term Treasury securities each month – will continue “until the outlook for the labor market has improved substantially in a context of price stability.” The minutes also suggested the Fed’s other method for stimulating the economy – low interest rates – “will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.”
 
Initially, stock market investors responded positively to these messages. On Wednesday morning, both the Dow Jones Industrial Average and the Standard & Poor’s 500 Indices gained more than 1 percent. By afternoon, the indices had lost more than 1 percent each. By week’s end, the indices had experienced their first weekly losses since late April.
 
Uncertainty about the future of quantitative easing affected bond and gold markets, as well. By Friday, the yield on benchmark 10-year U.S. Treasury note had risen above 2 percent, reaching its highest level in two months. Gold prices firmed during the week.
 
Fed policymakers will meet twice before Labor Day – in mid-June and late-July. The minutes of those meetings will be released three weeks after each meeting. If markets respond as they did last week, investors may experience a bumpy ride this summer.
 
 

Data as of 5/24/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

-1.1%

15.7%

25.0%

15.4%

3.6%

5.7%

10-year Treasury Note (Yield Only)

2.0

N/A

1.8

3.2

3.8

3.4

Gold (per ounce)

1.6

-18.0

-11.4

5.4

8.9

14.1

DJ-UBS Commodity Index

0.2

-5.1

-0.3

2.1

-9.5

1.1

DJ Equity All REIT TR Index

-3.6

14.0

24.8

20.8

7.0

11.9

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.
 
the taxman cometh.If your ears are burning, it may be because the people who run state and federal governments have been discussing where to find revenue to fill budget shortfalls. Currently, the solutions they’re pursuing focus primarily on U.S.-based companies.
 
As corporate profits have increased, the tax strategies employed by U.S.-based multinational corporations have come under Internal Revenue Service scrutiny. According to The Economist, America’s corporate profits are at an all-time high. Yet, corporate contributions to Uncle Sam’s coffers have been far lower than they were in the past. In 1947, corporate profits were about 10 percent of Gross Domestic Product (GDP) and corporate taxes were about 4 percent. Last year, corporate profits were about 12 percent of GDP and corporate taxes less than 2 percent.
 
The United States government recently called a U.S.-based multinational to task because it had employed “a complex web of offshore entities to pay little or no tax on tens of billions of dollars it had earned outside America.” The company responded to the inquiry by pointing out it paid billions of dollars in American taxes during fiscal 2012 and was probably one of the biggest corporate taxpayers in the country.
 
Internet retailers and catalogue companies also are becoming part of the hunt for tax revenue. Under current law, states cannot compel out-of-state retailers to collect the sales and use taxes owed by residents and businesses. It is up to individuals to declare and pay those taxes. The National Conference of State Legislatures estimates the inability to have Internet businesses collect taxes resulted in about $23 billion in lost tax revenue during 2012. In an effort to help states collect these taxes, Congress created the Marketplace Fairness Act. If it becomes law, states that adopt a simplified tax code will be able to enforce sales and use tax collection by Internet retailers and catalogue companies. The Act was passed by the Senate early in May.
 
Weekly Focus – Think About It
 
“Adversity is the diamond dust Heaven polishes its jewels with.”
Thomas Carlyle, Scottish philosopher
 
Best regards,
 
Margie Shard, CFP®
 
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 Services, 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 Shard Financial Weekly Market Commentary please reply to this e-mail with    “Unsubscribe” in the subject line, or write us at 1537 N Leroy Street, Fenton MI  48430.
 
Sources:
http://www.economist.com/blogs/freeexchange/2013/05/week-american-monetary-policy
http://news.yahoo.com/column-many-interpretations-ben-bernanke-164318124.html
http://www.federalreserve.gov/newsevents/press/monetary/20130501a.htm
http://www.reuters.com/article/2013/05/27/usa-stocks-weekahead-idUSL2N0E80JW20130527
http://www.miamiherald.com/2013/05/24/3415072/how-the-dow-jones-industrial-average.html
http://www.reuters.com/article/2013/05/27/markets-precious-idUSL3N0E809S20130527
http://www.reuters.com/article/2013/05/26/us-usa-fed-summer-idUSBRE94P07T20130526
http://www.economist.com/blogs/graphicdetail/2013/05/daily-chart-14
http://www.economist.com/blogs/schumpeter/2013/05/apples-tax-arrangements
http://www.ncsl.org/issues-research/budget/collecting-ecommerce-taxes-an-interactive-map.aspx
http://www.forbes.com/sites/davidmarotta/2013/05/12/marketplace-fairness-act-adds-automation-to-tax-confusion/
http://www.prnewswire.com/news-releases/senate-passes-marketplace-fairness-act-208385131.html
http://www.brainyquote.com/quotes/authors/t/thomas_carlyle.html

 

Weekly Market Commentary

The Markets

Much like elementary school children trying to capture the attention of someone they have a crush on, the American economy sent lots of mixed signals last week.  

Conflicting reports emerged about consumer sentiment during the week. The Conference Board, a non-profit research organization, reported consumers remained somewhat pessimistic about the direction of the economy. In contrast, the University of Michigan’s consumer sentiment survey rose to a six-year high, according to ABC News. The Index moved from 76.4 in April to 83.7 in May indicating consumers are feeling more confident about the economy.

On the employment front, more people filed first-time unemployment claims last week than had filed the week before; however, claims remained well below the levels experienced from mid-2008 to 2011. Additionally, data shows during the past six months the average length of unemployment has dropped, the number of hours worked has risen, and earnings have increased.

Messages from the Federal Reserve were more consistent than economic data. Members of the Philadelphia, Dallas, and San Francisco Federal Reserve Banks suggested it may be time to begin slowing quantitative easing. Currently, the Federal Reserve’s quantitative easing efforts have it buying about $85 billion of Treasuries and mortgage-backed securities each month as it works to support the economy. According to reports, quantitative easing could slow to a stop during 2013. Fed comments helped push yields on 10-year Treasuries higher for the week.

Stock markets remained undaunted by uncertain economic conditions and the prospect that quantitative easing may end soon. The Dow Jones Industrial Average and the Standard & Poor’s 500 Indices surged to new highs last week. Markets rallied across the pond, as well, with some major European stock indices reaching levels last seen five or more years ago, according to Reuters.


Data as of 5/17/13
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor’s 500 (Domestic Stocks)
2.1%
16.9%
27.8%
13.6%
3.2%
6.1%
10-year Treasury Note (Yield Only)
2.0
N/A
1.7
3.5
3.8
3.5
Gold (per ounce)
-4.1
-19.2
-11.9
3.5
8.6
14.3
DJ-UBS Commodity Index
-0.2
-5.3
-2.5
1.7
-9.3
1.1
DJ Equity All REIT TR Index
1.9
18.2
31.8
19.2
7.1
12.6
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.
 

Heuristic is just another name for a shortcut. When academics look to psychology and economics to explain why people make financial decisions the way they do, it’s called behavioral finance. This field of study describes a phenomenon called “heuristics.” In general, a heuristic is a mental shortcut that lets someone solve a problem using a rule of thumb.

Heuristics may be handy, but they may not take you exactly where you mean to go. For example, consider some of the shortcuts investors have developed to predict the direction of the stock market. You may have heard of the:

  • Hemline Index: In 1926, George Taylor suggested the length of women’s skirts was a useful market predictor. Short hemlines were a positive predictor while long hemlines were a negative predictor. Taylor later became Professor of Industrial Relations at Wharton and became known as the father of American Arbitration.
 
  • Super Bowl Indicator: Washington and Lee professor George Kester introduced the idea the Super Bowl winner could predict market performance. His theory was the market would move higher for the year when an original National Football League team won the Super Bowl and lower when an original American Football League team won.
 
  • Presidential Election Cycle Theory: The idea behind this gem is the stock market follows a predictable pattern during each American President’s term. The year after an election produces the weakest stock market performance while the third year offers the strongest.
 

Anyone who remembers The Chicago Daily Tribune’s headline, Dewey Beats Truman, or CNN and Fox News’ headlines indicating the Supreme Court struck down the individual mandate, knows predicting the future can be challenging. In general, it’s a good idea to remember that the drivers of market performance tend to be economic factors, investor sentiment, and company fundamentals.

 
Weekly Focus – Think About It
 

“The pursuit of truth and beauty is a sphere of activity in which we are permitted to remain children all our lives.”

Albert Einstein, theoretical physicist

 

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:

Margie Shard, CFP® attends Denver CO Business Leaders Forum

FENTON, MI (5-17-13) — Margie Shard, CFP ® of Shard Financial Services, Inc., a financial services firm in Fenton, MI was selected to attend LPL Financial’s Business Leaders Forum May 15-17 at the Grand Hyatt in Denver, CO. Only the broker/dealer’s top performing advisors were selected to attend.

The two-and-a-half day event included a tailored curriculum to help advisors deliver the best possible service to their clients. Some of the key themes of the conference were asset management, business operations and business development. This fits in line with LPL Financial and Shard Financial’s commitment to continued education.

“If you aren’t learning in this business, then you are falling behind,” President and Wealth Advisor Margie Shard said. “In something fast-paced like the financial sector, you have to stay on top of current trends or you won’t be able to serve your clients effectively. They expect us to be experts, and we pride ourselves in our financial expertise.”

Shard’s professional experience has been on display, as she was invited to speak on two panels during the national conference. The “Top Advisor Human Capital Panel” was focused on how a great financial team is cultivated and the other, “Keys to My Success” was a result of Shard Financial’s recent growth, especially in a niche market, women and finance. “Speaking on two panels at the conference was really an amazing opportunity,” Shard said. “Having the chance to talk about our industry’s best practices in front of my colleagues was quite an honor for me.”

About Shard Financial Services Inc.
Shard Financial Services Inc. is an independent financial advisory located in Fenton, MI. President & Wealth Advisor Margie Shard is a Certified Financial Planner™Professional and a LPL Registered Principal. While serving a diverse array of clients, Margie and her team have found special interest from women and couples, helping to guide them through major life events. For more information visit www.shardfinancial.com.

About LPL Financial
LPL Financial, a wholly owned subsidiary of LPL Investment Holdings Inc. (NASDAQ: LPLA), is the nation’s largest independent broker-dealer (as reported by Financial Planning magazine, June 1996–2012, based on total revenue), a top RIA custodian and a leading independent consultant to retirement plans. LPL Financial offers proprietary technology, comprehensive clearing and compliance services, practice management programs and training, and independent research to over 12,900 financial advisors and approximately 680 financial institutions. In addition, LPL Financial supports more than 4,400 financial advisors licensed with insurance companies by providing customized clearing, advisory platforms and technology solutions. LPL Financial and its affiliates have approximately 2,700 employees with headquarters in Boston, Charlotte and San Diego. For more information, please visit www.lpl.com.

Member FINRA/SIPC

* As reported by Financial Planning magazine, June 1996–2012, based on total revenue.
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