The Markets
The
second quarter offered a level of drama often found in homes with teenagers.
When
investors realized their good friend, quantitative easing, might have an
earlier-than-expected curfew, they threw a hissy fit that resounded through
global markets. The outburst interrupted the trajectory of Standard &
Poor’s 500 Index, which finished June lower after hitting record highs in May. As
stocks fell, yields on the benchmark 10-year Treasury bond hit a 22-month high.
Higher treasury yields and a strengthening greenback
proved attractive to investors and capital flowed out of emerging markets
during the quarter. As interest rates moved higher, the cost of borrowing rose
sharply in many emerging countries. That may impede economic growth, which has slowed
already, in many developing countries. Economies in emerging Asia, Latin
America, and Europe grew by about 4 percent on average year-on-year during the
first quarter as compared to 6.4 percent on average during the past decade.
When compared to growth rates in developed countries, such
as the European Union (EU), that’s still a pretty attractive growth rate. The
EU has suffered seven consecutive quarters of recession. It’s hard to say the recovery
is going well, but experts are hopeful because the Spanish economy is
contracting at a slower rate, Italian business activity isn’t declining as fast
as it once did, the French downturn is moderating, and the German economic growth
is in positive numbers.
It’s a different story in the United States. By the end
of second quarter, economists were predicting 2014 could prove to be the best
year for U.S. economic growth since 2005. The
Wall Street Journal’s monthly survey
found that, “Economists… expect gross domestic product to expand at a 2.3
percent annual pace this year and 2.8 percent next year. The Federal Reserve
edged up 2014 growth forecasts to between 3 and 3.5 percent, from a March
estimate of 2.9 to 3.4 percent.” Encouraging economic signs include:
·
Housing market
vigor:
Experts say housing market strength will be critical to economic performance in
the second half of the year.
·
Employment gains: Unemployment has dropped from double-digits to 7.6 percent,
although there are still about 2.4
million fewer jobs than there were before the recession.
·
Confident consumers: After years of
paring spending and paying down debt, Americans are feeling optimistic.
Consumer confidence now stands at a five-year high.
While optimism about the American economy is good news,
it’s important to remember world economies are like members of a family. What
happens to one country or region often has a significant influence on what
happens in the others.
Data as of 7/5/13
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
1.6%
|
14.4%
|
19.3%
|
16.7%
|
5.4%
|
5.0%
|
|
10-year
Treasury Note (Yield Only)
|
2.7
|
N/A
|
1.6
|
2.9
|
3.9
|
3.7
|
|
Gold
(per ounce)
|
1.7
|
-28.4
|
-24.4
|
0.1
|
5.8
|
13.3
|
|
DJ-UBS
Commodity Index
|
0.9
|
-9.7
|
-10.4
|
0.4
|
-11.5
|
0.7
|
|
DJ
Equity All REIT TR Index
|
0.0
|
5.6
|
8.8
|
19.8
|
8.5
|
10.5
|
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.
She can bring
home the bacon and fry it up in a pan… From 1960 through 2011, the percentage of
households with children under the age of 18 and mom as the primary or sole breadwinner
increased from 11 to 40 percent. According to the Pew Research Center report,
‘Breadwinner Moms’ fall into two distinct groups: married moms who earn more
than their husbands (37 percent) and single mothers (63 percent). The earnings
gap between the two groups tends to be very large:
“The median total
family income of married mothers who earn more than their husbands was nearly
$80,000 in 2011, well above the national median of $57,100 for all families
with children, and nearly four times the $23,000 median for families led by a
single mother.”
It’s interesting to note an educational gap has been
developing between husbands and wives, as well. A growing proportion of married
women are better educated than their husbands. According to Pew Research, “the
share of couples in which the mother has attained a higher education than her
spouse has gone up from 7 percent in 1960 to 23 percent in 2011.” This probably
shouldn’t be a surprise since more women than men have been receiving college
degrees of all types – associates, bachelors, masters, and doctorates – every
year since 1982.
Perceptions about
women’s roles in both the workplace and the family appear to be changing, too.
According to another Pew report, almost three-fourths of American adults say
having more women in the workforce has been a change for the better. About 60
percent say family life is more satisfying when both spouses work and they
share responsibility for housework and child care.
Weekly Focus – Think
About It
"If we become
increasingly humble about how little we know, we may be more eager to
search."
--Sir John Templeton, Global investing pioneer
Value
vs. Growth Investing (7/5/13)
|
1.75
|
16.04
|
1.88
|
5.83
|
22.58
|
19.82
|
8.13
|
|
|
1.63
|
15.33
|
1.46
|
5.47
|
21.33
|
19.41
|
7.28
|
|
|
1.40
|
19.99
|
1.82
|
6.23
|
27.91
|
21.00
|
9.14
|
|
|
2.33
|
10.76
|
1.56
|
4.66
|
14.02
|
19.10
|
6.88
|
|
|
1.19
|
15.96
|
1.07
|
5.64
|
23.23
|
18.38
|
5.80
|
|
|
1.82
|
17.71
|
2.66
|
6.38
|
26.43
|
20.77
|
9.64
|
|
|
1.42
|
15.06
|
1.48
|
3.85
|
23.80
|
22.05
|
10.28
|
|
|
2.68
|
16.09
|
3.39
|
7.48
|
21.92
|
19.61
|
7.15
|
|
|
1.37
|
22.08
|
3.09
|
7.76
|
34.06
|
20.48
|
11.56
|
|
|
2.80
|
18.62
|
4.00
|
8.06
|
24.86
|
21.05
|
11.81
|
|
|
3.03
|
18.95
|
3.64
|
7.77
|
26.43
|
20.15
|
10.68
|
|
|
2.85
|
19.09
|
5.48
|
10.78
|
22.42
|
22.17
|
10.45
|
|
|
2.51
|
17.89
|
3.04
|
5.93
|
25.80
|
20.86
|
14.45
|
|
|
1.52
|
18.84
|
1.86
|
5.83
|
26.90
|
21.19
|
9.61
|
|
|
2.44
|
12.33
|
2.18
|
5.62
|
16.09
|
19.47
|
7.23
|
|
|
1.32
|
17.32
|
1.62
|
6.10
|
25.53
|
18.97
|
7.55
|
©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:
Retirement can be the ultimate vacation … IF
you plan ahead.
As
we start getting into summer, I’ve had several friends tell me about their
vacation plans. Listening to them talk,
it’s clear they’ve put a lot of thought and effort into planning for their
trips. That got me thinking: what if
people put as much time into planning their retirement as they do for their
vacations?
Unfortunately,
this isn’t usually the case. It’s a
common saying that “most people spend more time planning their vacation than
they do their retirement.” That’s a
problem, because the average vacation only lasts a few weeks. Your retirement, on the other hand, can span years.
I
think one reason for this is because many people don’t know how to start planning for retirement … or
they’re a bit intimidated by the thought of it.
But planning isn’t what should
intimidate you. Retiring without a plan is what’s really
scary.
Fortunately,
it’s easy to get started with your own retirement plan—and some aspects of it
are even fun! When you get right down to
it, all you really have to do is apply the principles of good vacation planning
to your retirement. I’ll give an example. Before writing this letter, I looked at a
number of different travel websites.
Most of them gave tips on how to go on vacation. I was amazed at how similar these tips were
to planning for retirement. So I’ve listed
some of them below, along with how to make them suitable for your golden years:
|
Vacation
Planning
|
Retirement
Planning
|
|
Tip
#1 – Make a list of places you want to visit.
Write down the activities you want to do in each location, and what
you like about them.
|
Tip
#1 – Make a list of goals you want to pursue after retirement. Write down why they’re important to you.
|
|
Tip
#2 – Rank these places in order of how important each one is to you.
|
Tip
#2 – Rank these goals in order of how important each one is to you. Have fun with these first two steps.
|
|
Tip
#3 – Determine your budget. Factor in
travel, hotel, and food costs. Then
determine how much it will cost to do the various activities you listed in
Tip #1. Don’t forget to include how
much you plan to spend on souvenirs and things like that.
|
Tip
#3 – Determine your budget. First
start with expenses; where do you want to live, and how much will it cost to
live there. What are your utilities
like? What medical costs do you
anticipate having? What debts do you
owe? Finally, estimate how much it
will cost to pursue the goals you listed in Tip #1. (It’s okay if it’s a rough estimate.)
|
|
#4
– After determining what your vacation will cost, calculate your current
budget by adding up your income minus expenses. Whatever’s left is what you have to save
for your vacation.
|
#4
– Calculate your current budget by adding up your income minus expenses. Whatever’s left is what you have to save
for your retirement on a monthly basis.
|
|
#5
– Go online, consult with a travel agent, or check out a travel book and try
to find ways to bring your costs down.
Savvy vacationers can find deals, coupons, and tour companies that
really make a trip easier on your wallet.
|
#5
– Get together with me and bring everything you’ve written down so far. We can discuss possible ways to further
fund your retirement, whether it’s through investing or something else.
|
|
#6
– Book your vacation!
|
#6
– Set your retirement date!
|
Planning your
vacation and planning your retirement aren’t exactly the same, but they’re not
too far apart, either. In the end,
what’s really important is that you devote the same energy to your retirement
as you do your summer excursions.
Ultimately,
the best advice I can give you is to let me help. Give my office a call at 215-886-2122 and we can schedule a time for us to meet. Together, we’ll go over your goals and
expenses, and the income you’ll need to reach both. We’ll create a plan that shows you how to
fund your retirement, how to enjoy your retirement … and how to stay retired.
Remember:
planning your vacation is great for spending a few weeks in the sun. But planning for retirement can lead to a
holiday that lasts for years.
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, 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.
* 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”.
