Schwartz
Financial Weekly Commentary
March
31, 2014
The Markets
Whether it’s good
news or bad news, it is often surprising how investors and markets react. Last
week, Russia annexed Crimea and the Standard & Poor’s 500 Index gained
about 1.4 percent.
This week, U.S. investors
had the chance to bask in the glow of some good news: jobs growth was healthy,
consumer spending improved modestly, consumer confidence numbers were better than
expected, and fourth quarter’s U.S. gross domestic product (GDP) growth number was
revised upward. How did U.S. markets respond? Only the Dow Jones Industrial
Average finished the week in positive territory.
What offset the
good domestic news?
First, there was
some not-so-good domestic news. Several banks, including a leading global bank,
failed the Federal Reserve’s stress test causing share prices in the banking
sector to fall.
Next, there was
some global news that proved to be unsettling for American investors. According
to Barron’s, U.S. markets had a
strong negative response to comments made by President Obama after a summit meeting
with top European Union (EU) officials. Reuters
quoted the President as saying, “If Russia continues on its current course,
however, the isolation will deepen, sanctions will increase, and there will be
more consequences for the Russian economy.”
The President also said
NATO would increase its presence in Eastern European member states that share
borders with Russia and Ukraine. The upcoming Group of Eight summit meeting was
cancelled and a G-7 meeting – excluding Russia – was scheduled for June in
Brussels.
Investors and stock
markets in other countries were far more sanguine about world events, and most
finished the week higher. As reported by Econoday, “Investors were cheered by
talk of Chinese stimulus and encouraging U.S. economic data… Equities advanced
thanks to renewed chatter about monetary stimulus from the European Central
Bank.”
Data as of
3/28/14
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
-0.5%
|
0.5%
|
18.4%
|
12.3%
|
18.7%
|
5.2%
|
|
10-year
Treasury Note (Yield Only)
|
2.7
|
NA
|
1.9
|
3.5
|
2.7
|
3.5
|
|
Gold
(per ounce)
|
-3.1
|
7.8
|
-19.0
|
-3.0
|
6.9
|
11.9
|
|
DJ-UBS
Commodity Index
|
1.4
|
7.2
|
-2.0
|
-6.8
|
4.7
|
-0.9
|
|
DJ Equity
All REIT TR Index
|
0.4
|
8.1
|
2.7
|
11.1
|
29.8
|
8.4
|
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 does the future hold? If you’re wondering
about reality television, National Public
Radio says it may be virtual reality goggles that let viewers feel as
though they are part of a show or let them interact with shows. If you’re
asking about astronomy, it could be finding a planet that’s ten times larger than
earth orbiting our sun. Of course, if you’re curious about global economic
growth, it’s almost as exciting – experts indicate we can expect relatively
steady growth.
The Economist asked a group of economists to predict GDP growth for 2015. GDP is “the
monetary value of all the finished goods and services produced within a
country's borders in a specific time period.” For the most part, they predicted
2015 will be better for developed nations than 2014.
“Only
the economies of Britain and Japan are expected to expand at slower rates in
2015. But for those European countries that have suffered deep recessions,
notably Italy and Spain, growth is likely to remain sluggish over the two year
period.”
The
story in emerging countries is improving, too. According to Price Waterhouse Coopers, economic
fundamentals (such as labor force growth and potential for capital investment
and productivity improvement) in emerging countries look good over the longer
term.
The
International Monetary Fund, which has
more robust projections for growth than The
Economist’s economists, expects to see improvement in emerging markets. Growth
is projected to increase to 5.1 percent this year and 5.4 percent in 2015. Eastern
Europe and Latin America aren’t expected to grow much faster than the United
States in 2015. However, growth in developing Asia is expected to reach 6.8
percent. One exception to the rule is China where growth is forecast to slow
from 7.5 percent in 2014 to 7.3 percent in 2015. Even for an economy with
slowing growth, those are some pretty good numbers.
Weekly Focus – Think
About It
“The
fact that an opinion has been widely held is no evidence whatever that it is
not utterly absurd.”
--Bertrand Russell, British philosopher
Value
vs. Growth Investing (3/28/14)
|
-0.76
|
1.07
|
-0.36
|
1.49
|
21.21
|
14.85
|
21.14
|
|
|
-0.39
|
0.86
|
0.07
|
1.25
|
20.63
|
14.91
|
19.61
|
|
|
-0.13
|
2.22
|
1.54
|
2.45
|
21.62
|
17.19
|
21.13
|
|
|
-1.69
|
-0.70
|
-3.05
|
-0.19
|
22.61
|
15.38
|
20.41
|
|
|
0.74
|
1.18
|
2.05
|
1.58
|
17.80
|
12.25
|
17.30
|
|
|
-1.43
|
2.21
|
-1.44
|
2.77
|
23.11
|
14.90
|
25.06
|
|
|
-0.72
|
3.65
|
-0.70
|
4.17
|
21.55
|
15.85
|
25.98
|
|
|
-2.62
|
0.71
|
-3.77
|
1.27
|
21.84
|
12.45
|
23.10
|
|
|
-0.80
|
2.45
|
0.47
|
3.06
|
26.09
|
16.44
|
26.11
|
|
|
-2.68
|
0.05
|
-1.84
|
0.38
|
21.81
|
13.84
|
25.57
|
|
|
-2.50
|
1.50
|
-0.73
|
1.77
|
22.09
|
12.86
|
25.05
|
|
|
-3.84
|
-2.83
|
-4.49
|
-2.44
|
23.50
|
13.53
|
24.09
|
|
|
-1.73
|
1.44
|
-0.34
|
1.75
|
19.93
|
15.19
|
27.64
|
|
|
-0.42
|
2.44
|
0.93
|
2.74
|
21.57
|
16.64
|
22.41
|
|
|
-2.02
|
-0.56
|
-3.29
|
-0.04
|
22.50
|
14.66
|
21.26
|
|
|
0.25
|
1.45
|
1.56
|
1.89
|
19.64
|
13.30
|
19.76
|
©2004 Morningstar, Inc. All Rights Reserved.
The information contained herein: (1) is proprietary to Morningstar; (2) is not
warranted to be accurate, complete or timely. Morningstar is not responsible
for any damages or losses arising from any use of this information and has not
granted its consent to be considered or deemed an “expert” under the Securities
Act of 1933. Past performance is no guarantee of future results. Indices are unmanaged and while these indices
can be invested in directly, this is neither a recommendation nor an offer to
purchase. This can only be done by
prospectus and should be on the recommendation of a licensed professional.
Office Notes:
Important Tax Birthdays
The “Happy Birthday” song is traditionally
sung to celebrate the anniversary of someone’s birth. In 1998, the Guinness
Book of World Records proclaimed that very song as the most recognized song in
the English language, followed by “For He’s A Jolly Good Fellow.” Its roots can
be traced back to a song entitled, “Good Morning to All” which was written and
composed by American sisters and kindergarten teachers, Patty and Mildred Hill
in 1893.
Throughout the years, many other versions and
styles of the “Happy Birthday” song were created. One of the most famous
versions of this song was sung by Marilyn Monroe to then U.S. President John F.
Kennedy in May 1962. Another famous version of the song was sung by John Lennon
and Paul McCartney. They shifted the melody to a traditional rock song and
increased its complexity and style on their unforgettable double album, “The
Beatles” (commonly referred to as the “White Album”) in 1968.
Traditionally, birthdays are fun events, but
when it comes to taxes, birthdays have a special place. From a tax standpoint,
birthdays are not always “fun” and very often are different and not created the
same.
It is very important that as you plan for or
reach any of these milestone birthdays that we meet to review your specific
situation to determine what strategies would be best for you.
Some financial professionals do not review tax
returns!
Unfortunately, if you do not have the
appropriate financial advisor, this could result in a tax headache for you.
We are committed to helping our clients
prepare as best as possible for each of these important milestones.
Some Important Tax Birthdays (after age 50)
Age 50 Allows for catch-up
contributions to retirement plans.
Age 55 Allows retirement plan
distributions to terminated employees without the 10% penalty.
Age 59½ Allows taxpayers to take
distributions from an IRA, annuity, or other retirement plan without penalty.
Age 60 (if widowed) Allows for
start of widow/widower benefits from Social Security.
Age 62 Allows for starting
early Social Security benefits.
Age 65 Allows for enrollment
in Medicare and the government drug plan.
Age 65-67 Allows for full
retirement benefits from Social Security.
Age 70½ To avoid penalties, a
mandatory required minimum distribution from retirement accounts must be taken
no later than April 1st of the year following the year you turn age 70½.
Now, let’s discuss some more specifics on a
few of those ages:
Age 50: If you are age 50 or older
as of the end of the year, you can make an additional catch-up contribution to
your 401(k) plan (up to $5,500 for 2014), and Section 403(b) tax deferred
annuity plan (up to $5,500 for 2014). To do this you must first check to see
that your plan permits catch-up contributions. You can also make an additional
catch-up contribution (up to $1,000) to a traditional IRA or Roth IRA.
Age 55: If you permanently leave
your job for any reason after you turn age 55, you can receive distributions
from your former employer’s qualified retirement plans without being socked
with a 10% premature withdrawal penalty tax. This is an exception to the
general rule that distributions received before age 59 ½ are hit with a 10%
penalty.
Age 59½: You can receive distributions from all types of tax-favored
retirement plans and accounts (IRAs, 401(k)s, pensions, and the like) and from
tax-deferred annuities without being socked with the 10% premature withdrawal
tax.
Age 62: You can start receiving
early Social Security benefits. You should consider consulting a professional
for more specific information. Please beware: Depending on your income from
other sources, up to 85% of your Social Security benefits may be taxed.
Age 70½: You generally must begin taking annual Required Minimum Distributions
(RMD) from your tax-favored retirement accounts (traditional IRAs, SEP
accounts, 401(k) accounts, and the like). (However, you do not need to take any
RMD from your Roth IRA.) You must calculate your minimum distribution and if
you do not take out the minimum distribution, the difference between what you
should have taken out and what you actually took out is usually subject to a
50% penalty!
These tax laws are very important because if
you choose to ignore the RMD rules there can be dire consequences. Planning for
this event is critical and provides a great opportunity to seek the advice of a
knowledgeable professional. The IRS can assess a penalty tax equal to 50% of
the shortfall between the amount that you should have withdrawn for the year
and the amount that you actually took out. Unfortunately, although these rules
seem simple, they often are not! For example, your first RMD is for the year
you turn 70½. However, you can postpone taking out your first RMD until as late
as April 1st of the following year. If you chose that option, however, you must
take two RMDs in that following year (one by April 1st, which is for the
previous year) plus another by Dec. 31st (which is the one for the current
year). Beware: If you turned 70½ last year and did not take your RMD in 2013,
you face the April 1st deadline in 2014. For each subsequent year, you must
take your RMD by Dec. 31st. There's one more exception. If you're still working
after reaching age 70 ½, and you don't own over 5% of the business that employs
you, the tax law allows you to postpone taking any required minimum withdrawals
from that employer's plans until after you've retired.
In today’s highly complex and rapidly changing
world, investors are faced with an incredible array of investment choices. Many
financial advisors are happy to help you invest your hard-earned dollars, but
that is only one part of achieving your overall financial goals. Some advisors
are not well versed in certain critical areas or do not have access to other
professionals that may coordinate those areas for them. Even if a financial
professional can assist in those areas, there may be a limited incentive to do
so because their relationship with their clients may be solely based upon
commissions and limited in other services, such as tax reduction strategies.
We believe that investors deserve more and
should receive more!
That’s why, as part of our Gold Medal
Services, we offer the ability to review and coordinate not only our client’s
investments strategies, but how they affect and interact with their tax and
estate planning needs and concerns.
If you have any friends or loved ones whose
current financial professional is not providing this service then call us at
(215) 886-2122 to schedule a complimentary Financial Check-up.
Regards,
,
Michael L. Schwartz, RFC®, CWS®, CFS
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 email with their email address and we will ask for their
permission to be added.
Michael
L. Schwartz, RFC, CWS, CFS, a registered principal offering securities and
advisory services through Independent Financial Group, LLC., a registered
broker-dealer and investment advisor.
Member FINRA-SIPC. Schwartz Financial and Independent Financial Group
are unaffiliated entities.
This
information is provided for informational purposes only and is not a
solicitation or recommendation that any particular investor should purchase or
sell any security. The information contained herein is obtained from sources
believed to be reliable but its accuracy or completeness is not
guaranteed. Any opinions expressed
herein are subject to change without notice.
An Index is a composite of securities that provides a performance
benchmark. Returns are presented for
illustrative purposes only and are not intended to project the performance of
any specific investment. Indexes are
unmanaged, do not incur management fees, costs and expenses and cannot be
invested in directly. Past
performance is not a guarantee of
future results.
* 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
our “market commentary” please reply to this
e-mail with “Unsubscribe” in the
subject line, or write us at “mike@schwartzfinancial.com”.
