The Markets
Encouraging, but still lackluster.
That’s how one analyst described the September jobs report
released last Friday by the Labor Department. On the encouraging side, the
unemployment rate dropped to its lowest level since January 2009 and the
previous two month’s reports were revised upward to show 86,000 more jobs were
created than originally reported. On the lackluster side, “At the recent pace
of job growth, it would take about 28 months to recoup all the jobs lost during
the last recession,” and “The U.S. is still short about 4.1 million jobs compared
to its precession peak,” according to MarketWatch.
This middle of the road jobs report continues the tug-of-war
trend we’ve seen in the economy. Neither the recessionary forces nor the
expansionary forces in the economy can gain an edge. Like a chess match that
ends in a draw, the opposing economic forces seem to just about neutralize each
other and we end up with modest growth that doesn’t please anybody.
So, what has to happen for the economy to shake off its
lethargy and get back to an energizing growth level? Here’s a top six wish list:
1)
Solve the upcoming fiscal cliff
situation.
2)
Solve the European sovereign debt
situation.
3) Reduce
the stubbornly high long-term joblessness rate and the alarmingly high youth
joblessness rate.
4) Complete
the de-leveraging process for certain sectors of the economy, including the
banking and household sectors.
5)
Complete a smooth transition of
leadership in China and light a fire under its economy.
6)
Replace the highly partisan
atmosphere in Washington with constructive collaboration.
Source: The Guardian
What are the odds of resolving some of these issues? Well,
if you believe the stock market, the odds look reasonable as the Dow Jones
Industrial Average continues to hover near a five-year high. Going forward, we
need to turn the “hope of solving” into the “reality of solving” to keep Wall
Street’s optimism from turning to pessimism.
Data as of 10/5/12
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard
& Poor's 500 (Domestic Stocks)
|
1.4%
|
16.2%
|
27.7%
|
12.0%
|
-1.3%
|
6.4%
|
DJ
Global ex US (Foreign Stocks)
|
1.8
|
9.8
|
16.3
|
2.4
|
-6.4
|
8.2
|
10-year
Treasury Note (Yield Only)
|
1.7
|
N/A
|
1.9
|
3.2
|
4.6
|
3.6
|
Gold
(per ounce)
|
0.5
|
13.3
|
10.3
|
21.1
|
19.3
|
18.7
|
DJ-UBS
Commodity Index
|
-0.5
|
5.1
|
5.3
|
5.6
|
-3.4
|
3.6
|
DJ
Equity All REIT TR Index
|
0.4
|
16.4
|
36.1
|
21.6
|
1.5
|
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.
IS THE U.S. “TURNING
JAPANESE?” Over the years, analysts have
compared the “lost decade” in the U.S. stock market to the ongoing “lost two
decades” in Japan’s stock market and wondered if we are heading down the same
path. With a wink to the 1980 New Wave hit from The Vapors, let’s take a look.
Japan
On December 29, 1989, Japan’s Nikkei 225 stock average, the
broad measure of the Japan’s stock market, peaked at 38,916. Five years later,
it closed at 19,753, representing a loss of 49 percent. But, it didn’t stop there.
As of last week, after more than 22 years since the 1989
peak, the Nikkei 225 is still down. In fact, it closed at 8,863 – a stunning loss of 77 percent.
Despite this dramatic decline and the tremendous
indebtedness of the country, Japan’s economy and society have not imploded.
Japan is still the third largest economy in the world, unemployment is low, and
the society is civil.
United States
Our stock market, as measured by the S&P 500 index,
peaked on October 9, 2007 at 1,565. That peak was followed by a more than 50
percent decline. However, unlike Japan, the U.S. market bounced back strongly
and, as of last week, the S&P 500 index closed at 1,461, representing a
decline of about 7 percent over the past five years.
Now, some people say we should go back to the March 24, 2000
peak in the S&P 500 index of 1,527 and consider that the starting point for
a lost decade. Fair enough. Using that date, the U.S. stock market is down
about 4 percent over the past 12½ years, excluding reinvested dividends.
Despite this weak stock market performance and the growing
indebtedness of our country, we still have the world’s largest economy, our
society is civil (mostly), and, while unemployment is lackluster, it’s not
disastrous.
Comparison
Five years removed from the peak in each market, Japan was
down 49 percent, while the U.S. market was down just 7 percent.
From the peak of Japan’s stock market through last week – a
stretch of more than 22 years – its stock market average is down 77 percent. In
the U.S., using our March 24, 2000 peak, we’re down only about 4 percent over
the intervening 12½ year period.
So, looking strictly at the numbers, we have not “Turned
Japanese.” While reasonable people can argue about our government’s policies
and the Federal Reserve’s actions, we can take some comfort in knowing that our
economy and stock market, while lackluster, are still persevering.
Weekly Focus – Think About It…
“The measure of
success is not whether you have a tough problem to deal with, but whether it is
the same problem you had last year.”
--John Foster Dulles, former Secretary of
State
Value vs. Growth Investing (10/5/12)
1.39
|
17.73
|
3.95
|
6.97
|
30.35
|
14.62
|
1.33
|
|
1.46
|
18.75
|
4.30
|
7.68
|
31.13
|
14.17
|
0.92
|
|
2.10
|
18.96
|
4.48
|
7.85
|
32.65
|
14.11
|
2.39
|
|
0.80
|
22.24
|
3.04
|
6.66
|
31.80
|
16.28
|
2.67
|
|
1.55
|
15.37
|
5.51
|
8.61
|
29.07
|
12.18
|
-2.58
|
|
1.29
|
14.98
|
3.22
|
5.48
|
27.71
|
15.61
|
1.93
|
|
1.56
|
15.08
|
2.89
|
4.96
|
30.40
|
17.47
|
2.97
|
|
0.76
|
15.40
|
2.32
|
4.64
|
23.85
|
16.33
|
1.34
|
|
1.61
|
14.43
|
4.51
|
6.88
|
28.77
|
12.93
|
1.22
|
|
0.90
|
14.72
|
2.26
|
3.66
|
29.61
|
15.44
|
2.88
|
|
0.53
|
13.48
|
1.22
|
3.35
|
27.91
|
13.93
|
1.86
|
|
0.35
|
14.81
|
1.65
|
3.08
|
26.99
|
16.67
|
2.20
|
|
1.83
|
15.91
|
3.94
|
4.55
|
34.07
|
15.68
|
4.50
|
|
1.89
|
17.85
|
3.94
|
6.97
|
31.90
|
14.90
|
2.63
|
|
0.76
|
20.32
|
2.81
|
6.03
|
29.83
|
16.41
|
2.43
|
|
1.58
|
15.23
|
5.20
|
7.98
|
29.38
|
12.58
|
-1.33
|
©2004
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Traditional IRAs, most employer-sponsored
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owner reaches age 70½). Failure to take RMDs triggers a 50% federal income tax
penalty on the amount that should have been withdrawn. Roth IRA owners never
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When you begin taking distributions from your
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Best Regards,
,
Michael L. Schwartz, RFC®, CWS®, CFS
P.S.
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Securities, Inc., A Registered Broker/Dealer, Member FINRA-SIPC. Advisory Services offered through First
Allied Advisory Services, A Registered Investment Advisor.
Schwartz Financial Service is not an
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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.
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