Schwartz Financial Weekly Commentary 1/20/14

The Markets

Predict, forecast, divine, foresee… Each year, pundits, analysts, and authorities from around the world offer investors insight to what the year may hold. While prognosticating brings to mind the words of British Prime Minister Winston Churchill who said, “It is always wise to look ahead, but difficult to look further than you can see.” With that firmly in mind, let’s take a look at what some experts have been saying about 2014.

 

Last week, economists at the World Bank released their latest growth forecast which projects global economies will expand by 3.2 percent this year. That’s an improvement over last year’s growth rate of 2.4 percent. Developing nations are expected to grow faster than high income countries. The Global Economic Prospects report cautioned, “Growth prospects for 2014 are, however, sensitive to the tapering of monetary stimulus in the United States, which began earlier this month, and to the structural shifts taking place in China’s economy.”

 

The 10 active money managers sitting at Barron’s Roundtable found little to agree about as they discussed interest rates, stock prices, gross domestic product (GDP), and what to have for lunch. According to Barron’s:

 

“The Roundtable's optimists expect the global economy to pick up, bonds to tick up, and stocks to mosey higher, notwithstanding the errant hiccup. The pessimists… see crippled economies here and abroad, rotten government policies, and a selloff in stocks that could rekindle fears of, yes, systemic risk. Yet, somewhere between these poles, all say, lie plenty of investments worth a wager...”

 

And, what does the new chairwoman of the U.S. Federal Reserve expect? After all, according to The Wall Street Journal which reviewed more than 700 predictions made by Federal Reserve officials about growth, jobs, and inflation, Janet Yellen made the most accurate forecasts from 2009 through 2012. In an interview published in Time Magazine this week, Yellen said the Fed's policymaking committee generally is hopeful that U.S. economic growth could be upwards of 3 percent during 2014. Additionally, she anticipates inflation will move toward 2 percent and the housing market will pick up and continue to recover.

 

Ms. Yellen offered no prediction about another subject of great concern to many Americans – the outcome of Super Bowl XLVIII.

 

Data as of 1/17/14	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	-0.2%	-0.5%	24.2%	12.4%	18.0%	4.9%
10-year Treasury Note (Yield Only)	2.8	NA	1.9	3.4	2.4	4.1
Gold (per ounce)	0.5	4.0	-25.4	-2.8	8.5	11.9
DJ-UBS Commodity Index	1.2	-0.5	-11.1	-8.3	2.5	-1.3
DJ Equity All REIT TR Index	0.4	2.7	1.9	10.3	19.9	8.9

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.

 

if you’ve ever doubted the idea that change is constant, just consider the last couple decades. Businesses that once were thriving have languished. Industries that were lynchpins of American capitalism have gone the way of the Pony Express. Here are a few examples of things that have changed in recent years:

 

• Telephones: More than 90 percent of American adults own cell phones, according to the Pew Research Center, and more than one-half rely on that Swiss army knife of communication, the smart phone. The popularity of cell phones put public payphones on the endangered species list and may prove to be the downfall of landlines. According to a Center for Disease Control and Prevention report, almost 40 percent of American homes have only cell phones. That’s a big change from 2003 when the percentage was less than 5 percent of households.
• Books: Electronic publishing platforms mean authors have the option to publish carefully-scribed works themselves and make the books available to the public at bargain prices. Digital books have made access to the written word easier and, one can only hope, they may lead to primary and secondary schools being able to offer the most up-to-date textbooks to students.
• Movies: A new Harris poll found two-thirds of Americans go to the movies less often than they did a few years ago. The majority prefer the convenience of watching what they want, when they want, in the comfort of their homes. Instead of going to the theater, they own or rent DVDs and Blu-Rays, subscribe to movies-on-demand or streaming services, and record movies played on TV for later viewing. Of course, the medium for movie watching has also changed. In addition to the big screen, you can view a film on your tablet, smart phone, wall-sized television, or another device.

 

The world is changing all the time. While it is impossible to predict which trends have momentum and staying power, industries in transformation often open new opportunities for investors.

 

Weekly Focus – Think About It

 

“It's not that I'm so smart, it's just that I stay with problems longer.”

--Albert Einstein, Theoretical Physicist

Value vs. Growth Investing (1/17/14)

Name	1-Week	YTD	4-Week	13-Week	1-Year	3-Year	5-Year
US Market	-0.13	-0.27	3.54	6.49	27.55	15.05	19.98
Large Cap	-0.13	-0.43	3.43	6.63	26.46	14.92	18.63
Large Core	-0.43	-0.55	2.92	4.97	28.24	16.60	18.98
Large Growth	0.20	-0.25	3.90	8.27	28.26	15.42	21.48
Large Value	-0.17	-0.50	3.43	6.58	23.21	12.73	15.59
Mid Cap	-0.17	0.25	3.92	6.27	30.23	15.47	23.37
Mid Core	0.47	0.89	4.55	7.03	27.59	16.23	24.01
Mid Growth	-0.06	0.65	4.40	6.45	29.38	13.87	23.13
Mid Value	-0.92	-0.81	2.77	5.28	33.69	16.21	22.87
Small Cap	-0.06	-0.10	3.67	5.85	31.27	14.90	23.95
Small Core	-0.38	-0.85	2.49	4.91	28.77	13.45	23.13
Small Growth	0.28	0.43	4.74	5.54	35.86	16.04	24.20
Small Value	-0.08	0.11	3.74	7.18	29.37	15.24	24.50
US Core	-0.25	-0.29	3.20	5.37	28.06	16.33	20.31
US Growth	0.15	-0.02	4.06	7.69	28.95	15.17	22.03
US Value	-0.31	-0.51	3.31	6.34	25.77	13.61	17.66

 ©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:

 

Last Call

 

Please take some time to join us this Thursday as our office celebrates 30 years in business.  Our open house will run from 1:00PM to past 7:30PM.  Look forward to seeing you.

 

 

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 and advisory services through Independent Financial Group, LLC., A Registered Broker/Dealer,  Member FINRA-SIPC. 

 

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.

 

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