Schwartz
Financial Weekly Commentary
May 19,
2014
The Markets
Americans have long relied on standards and
averages to help them gauge the performance of everything from intelligence to
athletics to the economy. So far, in 2014, American stock markets have been
grinding along without making much progress in either direction and that has
left many people looking for guidance about what they can expect in the future.
Last week, a writer at Barron’s enlisted Jeremy Siegel, a finance professor at Wharton, to
help explore the question by updating data used in a 2009 article. That piece
had looked at the performance of the U.S. stock market over 142 years and found
“below-average returns over five- and 10-year periods generally are followed by
above-average returns in the next five and 10 years.” In the new article, Siegel
and his associates looked at rolling five-, 10-, 20-, and 30-year return
periods through the end of 2013 and found:
“For the 60 months ended in April, the compounded annual real
return was nearly 17 percent, well above the median 7.17 percent for all
five-year periods. (Taxes and investment fees aren't included.) That suggests
the next five years could run below the average.
While that might temper bullishness, in the 120-month period
ended April, the compounded annual real return was just 5.58 percent, a full
percentage point below the 6.64 percent median 10-year annual return for all
the periods measured – again, since 1871.”
Despite the mixed
signals provided by long-term averages, Siegel told Barron’s “the odds-on bet” is the Dow Jones Industrial Average will
hit 18,000 by the end of the year (although there may be corrections along the
way). His expectations are interest rates will remain lower than has been
suggested and earnings will experience strong growth.
It’s a good idea to take the esteemed
professor’s thoughts with a grain of salt. An eight-year study of market
pundits found they were right about 47 percent of the time.
Data as of
5/16/14
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
-0.2%
|
1.6%
|
13.8%
|
12.2%
|
15.6%
|
5.7%
|
|
10-year
Treasury Note (Yield Only)
|
2.5
|
NA
|
1.9
|
3.2
|
3.2
|
4.7
|
|
Gold
(per ounce)
|
0.8
|
7.5
|
-6.5
|
-4.9
|
7.0
|
12.9
|
|
DJ-UBS
Commodity Index
|
-1.1
|
7.6
|
3.3
|
-5.3
|
2.5
|
-0.9
|
|
DJ Equity
All REIT TR Index
|
1.9
|
14.9
|
0.3
|
11.3
|
22.6
|
10.7
|
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.
the market isn’t the only thing that can put a hitch
in your financial plan’s giddy-up. The overall rate of divorce in the United
States trended lower between 2000 and 2011 (the latest
dates the Centers for Disease Control
has made available). In 2000, there were about four divorces or annulments per
1,000 Americans (total population). By 2011 that rate had fallen slightly to
3.6 per 1,000. As they often do, Baby Boomers bucked the trend. The divorce
rate for Americans over age 50 has trended higher. The New York Times wrote:
“A
half-century ago, only 2.8 percent of Americans older than 50 were divorced. By
2000, 11.8 percent were. In 2011, according to the Census
Bureau’s American Community Survey, 15.4 percent were divorced and
another 2.1 percent were separated. Some 13.5 percent were widowed.
While
divorce rates over all have stabilized and even inched downward, the divorce
rate among people 50 and older has doubled since 1990, according to an analysis
of census data by professors at Bowling Green State University in Bowling
Green, Ohio. That’s especially significant because half the married population
is older than 50.”
Anytime
you experience a significant life change, such as a divorce late in life, it’s
important to let us know. We can offer strategies to help compensate for any
cash flow disruption and tactics for managing taxes when splitting large
assets, such as qualified retirement plans. In addition, we can help with
essential (and often forgotten) steps, including reviewing and revising beneficiary
designations (on retirement plans, investment accounts, and insurance policies)
as well as modifying powers of attorney, named trustees, and other designations.
We also can coordinate our efforts with those of your attorney and/or
accountant.
Weekly Focus – Think About It
“Good judgment comes
from experience, and a lot of that comes from bad judgment.”
--Will Rogers, American humorist
and commentator
Value
vs. Growth Investing (5/16/14)
|
0.02
|
1.99
|
0.78
|
2.03
|
16.17
|
14.50
|
19.31
|
|
|
0.04
|
2.30
|
1.09
|
2.59
|
15.90
|
14.82
|
18.16
|
|
|
-0.21
|
3.18
|
0.91
|
3.71
|
15.12
|
16.53
|
18.95
|
|
|
0.44
|
1.13
|
1.87
|
0.07
|
18.86
|
15.84
|
19.37
|
|
|
-0.14
|
2.69
|
0.46
|
4.25
|
13.76
|
12.24
|
16.27
|
|
|
0.06
|
2.26
|
0.33
|
1.06
|
17.33
|
13.94
|
22.40
|
|
|
0.15
|
4.23
|
1.43
|
2.15
|
17.09
|
14.97
|
23.41
|
|
|
0.24
|
-0.84
|
-0.74
|
-2.98
|
14.23
|
10.99
|
20.75
|
|
|
-0.22
|
3.78
|
0.42
|
4.58
|
21.09
|
15.99
|
23.05
|
|
|
-0.23
|
-2.09
|
-1.24
|
-1.13
|
15.36
|
12.61
|
21.95
|
|
|
-0.14
|
-0.25
|
-0.77
|
0.71
|
15.31
|
12.02
|
21.43
|
|
|
-0.03
|
-6.95
|
-2.56
|
-5.62
|
14.21
|
11.23
|
20.61
|
|
|
-0.52
|
0.87
|
-0.47
|
1.46
|
16.50
|
14.57
|
23.75
|
|
|
-0.14
|
3.14
|
0.89
|
3.19
|
15.50
|
15.92
|
20.07
|
|
|
0.37
|
0.20
|
1.06
|
-0.92
|
17.61
|
14.52
|
19.79
|
|
|
-0.18
|
2.78
|
0.39
|
4.12
|
15.45
|
13.16
|
18.14
|
©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:
The Luckiest Man on Earth
Baseball season is upon us. One of the great things about America’s
national pastime is the rich history it has.
When you hear names like Babe Ruth, Jackie Robinson, Dizzy Dean, and
Sandy Koufax, you can’t but help to think back to the eras in which they played. Baseball provides us with a connection to our
own past, to the cultures of our parents, grandparents, and even
great-grandparents. While the game has
certainly been blighted by various scandals over the years (from racism to
performance-enhancing drugs), I think more people remember it for the
inspirational stories it has given us: stories of courage, perseverance,
endurance, and dedication.
There are few players who exemplified all
those qualities better than Lou Gehrig did.
Most of us have heard Gehrig’s name, but as the years pass and the
people who actually saw him play become ever fewer, it’s easy to forget who he
was and the example he set for so many people.
This year is the 75th
anniversary of Gehrig’s retirement from baseball. It was a premature retirement enforced by the
symptoms of a cruel disease, but it was also one of the most stirring moments
in sports history. I’m sure the story of
it will get a lot of press this year, and for good reason: it deserves to be
remembered.
After the 1938 American League season, Lou
Gehrig seemed on top of the world. He
had just won his third consecutive World Series with the New York Yankees. He was known as not only one of the greatest
hitters in the history of baseball (as he still is today) but also as the
greatest iron man the sport had ever seen.
He had already set the record of consecutive games played, a stat that
wouldn’t be broken until Cal Ripken, Jr. came along decades later. But a shadow had fallen over his game.
“I tired mid-season,” Gehrig said. “I don’t know why, but I just couldn’t get
going again.” While his stats remained
stellar, they were well below what he’d become accustomed to.
Unfortunately, the off-season hadn’t helped
him recover. As spring training began,
Gehrig looked worse, not better. At one
point, he even collapsed during the middle of practice. Things continued to decline, and by April it
was clear something was very wrong. One
reporter wrote, “I have seen him time a ball perfectly, swing on it as hard as
he can, meet it squarely—and drive a soft, looping fly over the infield. He is meeting the ball, time after time, and
it isn’t going anywhere.” He was also
having trouble running and throwing.
On April 30th, Gehrig went
hitless. After the game, he approached
his manager and said, “I’m benching myself.”
His reason? “For the good of the
team.” His consecutive games streak
ended at 2,130. It would be the last
time he ever played.
His wife, Eleanor, promptly contacted the
Mayo Clinic. Gehrig was flown out only
to receive the worst possible diagnosis: amyotrophic lateral sclerosis, or
ALS. (For years afterwards, most people
knew it by the name of its most famous victim: Lou Gehrig’s Disease.) Eleanor worked hard to keep Gehrig’s spirits
up, mainly by shielding him from the truth as long as she could: that most ALS
sufferers only live for a few years, lose almost all control of their body, and
yet usually remain conscious and alert to the very end.
Perhaps she needn’t have worried, because
even as Gehrig’s body gave out on him, he showed that it was his spirit that was the true driving force
behind his success. He refused to become
depressed and refused to indulge in self-pity.
In order to remain productive and useful, he took a job as a parole
commissioner, turning down far more profitable job offers. “Don’t think I am depressed or pessimistic
about my condition,” he wrote. “I intend
to hold on as long as possible, and then if the inevitable comes, I will accept
it philosophically and hope for the best.
That’s all we can do.”
When the Yankees held a retirement ceremony
for him on July 4th, 1939, he gave perhaps the most famous speech by
an athlete of all time.
Fans, for the past two weeks you have been reading
about the bad break I got. Yet today I consider myself the luckiest man on the
face of the earth. I have been in ballparks for seventeen years and have never
received anything but kindness and encouragement from you fans.
When the New York Giants, a team you would give your
right arm to beat, and vice versa, sends you a gift—that’s something. When
everybody down to the groundskeepers and those boys in white coats remember you
with trophies—that’s something. When you have a wonderful mother-in-law who
takes sides with you in squabbles with her own daughter—that's something. When you
have a father and a mother who work all their lives so that you can have an
education and build your body—it's a blessing. When you have a wife who has
been a tower of strength and shown more courage than you dreamed existed—that's
the finest I know.
So I close in saying that I might have been given a bad
break, but I've got an awful lot to live for. Thank you.
Gehrig died in 1941 at the age of 37, but his words,
his courage, his example—and of course, his game—lingered long afterwards. In some ways, Gehrig accomplished more in
death than he did in life, for he brought what was previously a little-known
disease into greater public awareness.
His case undoubtedly brought more attention to the condition, resulting in
more research and better care for those who suffer from ALS today.
Lou Gehrig was both a great athlete and a great
man. 75 years after his speech in Yankee
Stadium, his legacy lives on. Long may
it do so.
Regards,
,
Michael L. Schwartz, RFC®, CWS®, CFS
P.S. Please feel
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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
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