The Markets
“Is all this stock
market optimism a red flag?”
Contrarians – investors
who bet against prevailing market trends – were probably nodding along as they
read that headline in The Wall Street
Journal back on January 18, 2013. The
Journal cited the American
Association of Individual Investor’s (AAII’s)
Sentiment Survey, which showed about
46 percent of participants were feeling bullish. As it turned out, the bulls
were right. The Standard & Poor’s 500 Index rose from about 1486 to about
2040 through the end of last week.
You may recall, two
weeks ago, the AAII Sentiment Survey showed investor
pessimism at a nine-year low with just 15 percent of participants growling like
bears. Well, last week, pessimism rebounded and optimism moved higher, too. The
survey results were:
·
Bullish: 57.9 percent, up 5.2 percentage points from the
prior week
·
Neutral: 22.8 percent, down 9.5 percentage points
from the prior week
·
Bearish: 19.3 percent, up 4.3 percentage points from
the prior week
The
historic average for the survey is bullish 39.0 percent, neutral 30.5 percent,
and bearish 30.5 percent.
Americans
are feeling pretty confident about the stock market’s potential and that’s not
always a positive sign. Expectations of
Returns and Expected Returns, a paper published by Robin Greenwood and
Andrei Shleifer of Harvard University, compared investors’ expectations for
returns to what financial economists
call expected returns (which are calculated
using dividends, consumption, and market valuations). They crunched numbers for
data collected between 1963 and 2011 and found expectations for returns and
expected returns tend to be negatively correlated. “…Both expectations of
returns and [financial economists’ expected returns] predict future stock
market returns, but with opposite signs. When [financial economists’ expected
returns] are high, market returns are on average high; when [investors’]
expectations of returns are high, market returns are on average low.”
So,
since investor expectations are high, will U.S. stock markets returns be low? There
is no way to know. Whether you’re a bull or a bear, in times like these, it’s
good to have a well-diversified portfolio.
Data as of 11/14/14
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard
& Poor's 500 (Domestic Stocks)
|
0.4%
|
10.4%
|
13.9%
|
17.7%
|
13.0%
|
5.6%
|
|
10-year
Treasury Note (Yield Only)
|
2.3
|
NA
|
2.7
|
2.0
|
3.3
|
4.2
|
|
Gold (per
ounce)
|
1.3
|
-2.7
|
-9.1
|
-13.0
|
0.7
|
10.3
|
|
Bloomberg
Commodity Index
|
-0.7
|
-7.1
|
-5.2
|
-7.5
|
-3.0
|
-2.6
|
|
DJ Equity
All REIT Total Return Index
|
-0.6
|
22.9
|
20.6
|
16.4
|
16.9
|
8.2
|
S&P 500,
Gold, Bloomberg 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 Total Return 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
NEW HIRE'
is the name of a September survey published by PwC. It’s not about how to make newly-hired people more comfortable
and productive. It’s about how the R generation – the latest iteration of
industrial robots – is transforming manufacturing. More than one-half of the
120 manufacturing firms surveyed already have adopted robotics technologies.
Auto manufacturers employ robots, as do food; consumer goods; life sciences,
pharmaceutical, and biomedical; and metals companies.
PwC predicts the shift
to robots will create new jobs for engineers specializing in robots and
robotics operating systems. It also is likely to result in the displacement of
a fair number of human workers. Currently there are about 1.5 million
‘intelligent industrial work assistants’ laboring around the world. About
230,000 are employed in the United States. According to The New Hire report:
“Industrial robots are on the verge of
revolutionizing manufacturing. As they become smarter, faster and cheaper,
they’re being called upon to do more – well beyond traditional repetitive, onerous,
or even dangerous tasks such as welding and materials handling. They’re taking
on more “human” capabilities and traits such as sensing, dexterity, memory,
trainability, and object recognition. As a result, they’re taking on more jobs
– such as picking and packaging, testing or inspecting products, or assembling
minute electronics.”
That
may be a little optimistic. Last month, Popular
Mechanics reported engineers have been working on mechanical
first-responders, like bomb-defusing and investigator robots, to help with
threats like Ebola and the Fukushima nuclear power plant disaster. The magazine
found robots competing in the DARPA Robotics Challenge were more like toddlers
and less like capable adults. “For a typical task in the event, turning a valve,
a team of several people required an hour or more to prep the robot, and that
same team had to stand at the ready to catch their bot when it stumbled (which
happened often).”
Weekly Focus – Think About It
“All
the world's a stage, and all the men and women merely players: they have their
exits and their entrances; and one man in his time plays many parts, his acts
being seven ages.”
--William Shakespeare, English playwright and poet
Value
vs. Growth Investing (11/7/14)
|
0.41
|
11.45
|
9.11
|
4.46
|
15.42
|
20.17
|
16.04
|
|
|
0.52
|
12.35
|
8.76
|
4.91
|
16.30
|
20.11
|
15.30
|
|
|
0.44
|
14.69
|
9.55
|
7.47
|
16.88
|
22.74
|
16.56
|
|
|
1.06
|
13.83
|
9.88
|
5.17
|
19.44
|
20.33
|
16.16
|
|
|
0.04
|
8.54
|
6.76
|
2.09
|
12.54
|
17.48
|
13.25
|
|
|
0.09
|
10.48
|
10.03
|
3.24
|
14.37
|
20.65
|
18.01
|
|
|
0.26
|
13.15
|
10.67
|
3.67
|
16.79
|
21.39
|
19.17
|
|
|
0.54
|
9.48
|
11.83
|
4.79
|
14.30
|
17.81
|
17.30
|
|
|
-0.57
|
8.99
|
7.49
|
1.20
|
12.17
|
22.85
|
17.52
|
|
|
0.17
|
4.74
|
10.41
|
3.03
|
9.04
|
19.22
|
17.42
|
|
|
0.11
|
6.29
|
10.23
|
2.73
|
10.59
|
19.35
|
16.73
|
|
|
0.62
|
0.59
|
11.27
|
3.41
|
4.09
|
17.40
|
17.58
|
|
|
-0.21
|
7.30
|
9.76
|
2.94
|
12.48
|
20.87
|
17.89
|
|
|
0.38
|
13.77
|
9.82
|
6.36
|
16.42
|
22.23
|
17.16
|
|
|
0.93
|
12.06
|
10.34
|
4.98
|
17.35
|
19.62
|
16.55
|
|
|
-0.10
|
8.56
|
7.11
|
1.98
|
12.46
|
18.81
|
14.44
|
©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:
As the days get shorter and the nights
longer, most people start turning their attention to holiday plans and
Christmas shopping. But there’s
something else on the rise this time of year: charitable giving.
Charity exists no matter the season, but it
seems to be especially prevalent during the holidays. I imagine it’s because people use this time
to count their blessings and reflect on how much they have to be thankful for. It’s only natural that we should want to share
these warm feelings with others. One of
the best ways to do that is by giving our time, talents, and even money to help
those in need.
But while the spirit of giving comes from
the heart, that doesn’t mean the head can’t have its say. Here are a few tips on how to donate safely
and effectively:
Seven Charitable Giving Tips
If you plan to donate money to a cause,
charity, or organization this holiday season, here are a few things to keep in
mind:
1. Charitable contributions can often be tax deductible. Obviously, that’s not the reason for giving,
but it doesn’t hurt to help your tax bill in addition to your fellow man! In order to qualify for a tax deduction,
though, you need to ensure that your gift is to a qualified organization. Contributions to individuals, political
organizations, or political candidates don’t count.
2. Remember that donating money doesn’t have to mean donating
cash.
You can also donate stocks or other property. These donations are tax deductible too—just
keep in mind that the deduction you claim should be equal to the item’s “fair
market value,” meaning “the price you would get if you sold the property on the
open market.
3. Write this number down: 1040. To deduct any contribution, you will need to
file a Schedule A, Form 1040 with the IRS and itemize any deductions.
4. Get it in writing! No
matter what you give, make sure you keep some type of record. This is especially important for cash
deductions, because they must be documented in writing in order to claim a
deduction. What exactly is a “written
record”? It could be a receipt, a letter
from the organization you donated to, or a bank statement. Per the IRS, the record “should include the
name of the charity, the date, and the amount donated.
5. Do your research.
Before you donate to any charity or organization, make sure you have
researched them fully. The last thing
you want to do is give your money to a scammer instead of someone who really
needs it. The Federal Trade Commission
(FTC) website has some useful tips in this regard:
wAvoid organizations
that refuse to provide detailed information about its identity, mission, costs,
and especially how the donation will be used.
wAvoid organizations
that won’t provide proof that a contribution is tax deductible.
wAvoid organizations
that use high-pressure tactics, like trying to get you to donate
immediately.
6. Do your research, (cont.) The FTC also recommends you do the
following before giving:
wAsk for detailed
information about the charity, including their contact info.
wSearch for the
organization online, especially in conjunction with the word “complaint(s)” or
“scam.” If someone has been scammed
before, you can probably find out about it.
wFind out if the
charity is registered by contacting the National Association of State Charity
Officials. Meanwhile, why not ask around
about them at the Better Business Bureau as well?
7. Donating your time can be just as good as donating your money. Charitable giving isn’t all about writing a
check. Sometimes, the best way to help
other people is simply to be there for them.
Volunteer at a local soup kitchen, homeless shelter, or orphanage. Most importantly, spread the spirit of the
season everywhere you go by simply offering assistance to those who look like
they may be in need of help.
Whoever or however you decide to help this
holiday season, make sure you use your head as well as your heart. That way, you can ensure that those most in
need of charity are the ones who actually receive it. And from me to you, Happy Holidays!
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, 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
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”.
