Schwartz Financial Weekly Commentary 5/6/13

The Markets

Like athletes testing their limits, the Standard & Poor’s 500 and the Dow Jones Industrials Indices both hit new highs last week. The S&P closed the week above the 1,600 level for the first time, while the Dow climbed above the 15,000 mark on Friday before closing lower. Strong corporate earnings, gains in the housing market, and good news from Europe helped support last week’s strong performance.

 

Corporate earnings season – the period when companies’ managements tell shareholders how well the companies have performed during the previous quarter – is almost over. Seventy-two percent of the companies in the S&P 500 have beaten analysts’ expectations, according to information provided by FactSet and reported on MarketWatch. Since 1994, about 63 percent of companies have beaten expectations on average.

 

Housing market news was largely positive last week. The Standard & Poor’s/Case-Shiller 20-city index of home prices was up 9.3 percent year-over-year through February which was the largest gain in almost 7 years. Generally, cities that had seen big price declines during the housing crisis realized the biggest gains, including Phoenix, Las Vegas, and Atlanta. Cities experiencing strong jobs growth, such as San Francisco, Seattle, and Dallas, also showed significant price gains.

 

In Europe, Italy’s elected leaders finally resolved their political impasse and formed a government. The highly-diverse coalition includes a record number of women, as well as Italy’s first non-white minister. The new cabinet was sworn in on Sunday, April 28. On Monday, Italy’s FTSE MIB, an index which reflects the performance of the Italian stock market, the MSCI World Index, and several U.S. stock markets moved higher.

 

Data as of 5/3/13	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	2.0%	13.2%	16.0%	10.3%	2.8%	5.7%
10-year Treasury Note (Yield Only)	1.8	N/A	1.9	3.7	3.9	3.9
Gold (per ounce)	-0.2	-13.3	-10.3	7.4	10.8	15.7
DJ-UBS Commodity Index	0.9	-4.3	-3.7	-0.5	-8.8	1.6
DJ Equity All REIT TR Index	2.0	15.0	20.8	15.9	6.7	12.5

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.

 

does money buy happiness… or doesn’t it? Many years ago, Richard Easterlin, a Professor of Economics at the University of Southern California, studied the relationship between happiness and money. He found that, over shorter periods of time, happiness and income tend to move in tandem. “Happiness tends to fall in economic contractions and rise in expansions.”

 

Over longer periods of time, he found satisfaction with life (i.e., happiness) had little relationship to rates of economic growth (i.e., people having more money). The conclusion was once people have enough money to meet basic needs, they are as happy as they are going to be.

 

A recent paper from the National Bureau of Economic Research, written by economists Betsey Stevenson and Justin Wolfers of the University of Michigan, appears to cast doubt on Easterlin’s happiness-income paradox. The authors relied on data from Gallup polls which asked people throughout the world how much they earned and on which rung of the happiness ladder they were perched. While people in some countries appeared to be happier than people in other countries, everyone – no matter how much money they had – was happier when they had more money.

 

So, does more money translate into more happiness or doesn’t it?

 

It may all come down to your definition of happiness. After all, well-being is subjective as Princeton’s Professor of Psychology and Public Affairs, Daniel Kahneman, and its Professor of Economics and International Affairs, Angus Deaton, pointed out in a 2012 paper. The pair evaluated two measures of happiness: life evaluation (satisfaction with your place in the world) and emotional well-being (day-to-day happiness). The researchers found that life evaluation increases steadily with income, while day-to-day happiness maxes out an annual income of $75,000. They concluded “high income buys life satisfaction but not happiness, and low income is associated both with low life evaluation and low emotional well-being.”

 

Weekly Focus – Think About It

 

“All I ask is the chance to prove that money can't make me happy.”

--Spike Milligan, British comedian

Value vs. Growth Investing (5/3/13)

Name	1-Week	YTD	4-Week	13-Week	1-Year	3-Year	5-Year
US Market	2.05	14.07	4.09	7.13	18.82	12.87	5.58
Large Cap	1.98	13.78	4.01	7.38	18.25	12.75	4.79
Large Core	1.65	17.73	4.50	9.77	24.02	14.24	6.86
Large Growth	3.31	10.80	4.04	6.41	12.00	12.59	5.48
Large Value	0.92	13.34	3.50	6.17	19.53	11.55	1.84
Mid Cap	2.28	15.31	4.51	6.81	20.56	13.48	7.14
Mid Core	2.26	14.68	3.97	6.69	20.03	15.17	8.25
Mid Growth	2.15	12.57	4.31	4.51	14.61	12.81	5.08
Mid Value	2.43	18.79	5.24	9.33	27.47	12.39	8.03
Small Cap	2.10	13.42	3.70	5.43	19.65	11.98	8.61
Small Core	2.27	13.78	3.68	6.15	19.51	10.84	7.84
Small Growth	2.18	11.65	3.94	4.16	15.72	13.08	7.88
Small Value	1.83	14.71	3.52	5.84	23.76	12.02	9.99
US Core	1.82	16.78	4.33	8.84	22.89	14.23	7.34
US Growth	3.00	11.20	4.09	5.88	12.74	12.74	5.61
US Value	1.30	14.53	3.86	6.79	21.39	11.74	3.63

©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:

 

 

Regards,

,

Michael L. Schwartz, RFC®, CWS®, CFS

 

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Michael L. Schwartz, RFC®, CWS®, CFS, offers securities through First Allied 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 affiliate of First Allied Securities, Inc.

 

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.

 

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