Now What: A Guide to Retirement During Volatile Times

Slower Growth ahead?

by ken | 09:16 in |


Ken’s Market comment’s on CNBC

http://video.cnbc.com/gallery/?play=1&video=3000163102

 

Slower Growth Ahead?


Markets ended positive last week despite a disappointing GDP report, erasing losses endured the previous week. As of Friday’s close, the S&P 500 gained 1.74%, the Dow climbed 1.13%, and the Nasdaq increased 2.28%.[1]

 

Earnings data and a handful of economic reports drove most of the market action last week. According to our first peek at preliminary first quarter GDP data, the economy grew at an annualized rate of 2.5%, which is up significantly from the 0.4% gain in the fourth quarter of 2012, but still below consensus expectations of around 3.0%.[2] While the data is preliminary, a deeper look suggests we may face slower growth in the second quarter. Let’s break down the numbers to see why:

Nearly all the gains in Q1 came from consumer spending and inventories. Consumer spending is expected to drop in the spring as Americans continue to feel the effects of the 2% payroll tax increase. Inventory growth, driven by farmers stocking up their silos after last year’s drought, made a strong contribution to last quarter’s growth; however, the activity was unusual, and unlikely to continue into Q2. Furthermore, government spending, which accounts for a significant part of economic activity, is declining rapidly – dropping 4.1% in Q1 alone. Most analysts expect government spending to continue to slide as the effects of sequestration become more pronounced.[3]

On the earnings front, more than 30% of the S&P 500 has reported and, while results are uneven, the news is mostly good. Blended earnings are up 2.4% in the first quarter, which is great since most analysts had low expectations. Two standout sectors thus far are technology, which benefited from strong consumer electronics sales, and building materials, which is getting a boost from the housing sector. [4]

 

On the downside, there are a lot of revenue misses happening; so far, only 39% of companies have beat revenue expectations, which is far below the historic average of 61%. This indicates that demand is still soft and companies are achieving their results by cutting costs. Anemic revenue growth seems to be tied to slow global demand, which is a particular problem for large multinational corporations that do a lot of business abroad. Demand in Europe is essentially flat, and sales volume is down across the board, making it difficult for companies to improve their margins.[5]

 

Next week will see the release of a slew of economic data, along with the steady march of more earnings reports. Analysts will be closely watching consumer spending and consumer confidence data, as well as the jobs report to see whether more market upside is possible. As always, we’ll continue to monitor earnings reports and economic data and keep you updated.

 

 

HEADLINES:

Durable goods orders dropped in March. Orders for long lasting manufactured goods recorded their largest drop in seven months, falling by 5.7% in March, following a 4.3% increase in February. The drop was nearly double what economists had expected, and indicates factory activity may be cooling off.[6]

Unemployment claims drop. The number of Americans filing jobless claims fell by a surprising 16,000, showing a possible improvement in the job market. The four-week moving average, a less volatile gauge, also fell, easing concerns of deterioration in labor market conditions.[7]

Oil, gasoline prices fall. The price of crude oil slipped last week as first quarter GDP growth came in under expectations. Coupled with disappointing economic growth in China, this report left analysts wondering if global demand for oil will soften in 2013. At the pump, the average price of gasoline dropped to $3.51, down 32 cents from a year ago.[8]

Spain delays deficit targets. In an admission that its severe austerity measures had failed to control its finances, Spain slashed its economic forecast and extended its deficit targets by two years. Economists warned that Spain’s economy would contract by 1.3% in 2013, but might grow by nearly half a percent in 2014. As anti-EU sentiment grows in core nations like Germany, these delays may make it politically difficult to continue to bail out countries like Spain.[9]

QUOTE OF THE WEEK:

“In virtually every area of your life, the more you give away, the more you get back.” – Dr. Wayne Dyer




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. Securities offered through Aurora Capital Member FINRA/SIPC.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets

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 Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

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.

Google 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.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

 

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[1] http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-april-22-2013.htm
[2] http://www.reuters.com/article/2013/04/27/us-usa-economy-idUSBRE93P04P20130427
[3] http://www.reuters.com/article/2013/04/27/us-usa-economy-idUSBRE93P04P20130427
[4] http://www.cnbc.com/id/100668291
[5] http://www.cnbc.com/id/100673553
[6] http://www.reuters.com/article/2013/04/24/us-usa-economy-goods-idUSBRE93N0NH20130424
[7] http://www.reuters.com/article/2013/04/25/us-usa-economy-jobless-idUSBRE93O0KC20130425
[8] http://news.yahoo.com/oil-slips-us-growth-lags-expectations-161728254.html
[9] http://news.yahoo.com/spain-slashes-forecasts-delays-deficit-targets-165237261.html

A Difficult Week

by ken | 08:09 in |


A Difficult Week


Even as we share this update with you, the events that unfolded last week in Massachusetts and Texas are still fresh in our minds. Our hearts will remain with the victims and their families, as well as the residents of Boston and West Texas, as they rebuild their lives from these tragedies. In times like these, we are reminded of the things that are truly important in life. If there is anything we can do for you or someone you know who was affected by any of last week’s events, please don’t hesitate to ask for our help.

 

It was also a difficult week for equity markets, as major indices experienced their biggest drop so far this year, pummeled by earnings reports and global concerns. For the week, the S&P 500 lost 2.11%, the Dow fell 2.14%, and the Nasdaq trimmed 2.70%.[1]

 

Earnings drove much of the selloff last week. Although the earnings reported thus far have largely beat estimates, disappointing reports from a handful of companies had an oversized effect on markets.[2] While 70% of the reports have beaten earnings estimates, only 44% have beat revenue expectations. This indicates that earnings results have largely been achieved by cost-cutting measures rather than organic growth. One factor that appears to be driving the weakness in revenue growth is soft demand overseas.[3]

 

Markets reacted poorly to China’s unexpectedly poor first-quarter GDP report, which showed a weak 7.7% growth instead of the 8%+ growth analysts had been expecting.[4] This indicates that China’s recovery may still be fragile. Coupled with concerns about Europe, it’s clear that global economies still have a long way to go.

 

On the positive side, investors responded well to Tuesday’s upbeat economic data, which shows that the news isn’t all bad. On the housing front, the Commerce Department reported that March housing starts increased by 7.0% from February’s estimate, while building permits declined slightly (though they are still 12% above March 2012 numbers).[5] A key measure of inflation also declined, supporting Fed chairman Ben Bernanke’s position that inflation is not an issue for now. Manufacturing also appears to be on the upswing; the Fed’s report shows that industrial production increased by 0.4% in March, beating expectations.[6]

 

In recent weeks, disappointing jobs numbers, slumping consumer confidence, and other weak data has indicated that the economy could be slowing down. However, the Fed’s most recent Beige Book survey shows no sign of such a slowdown. The report shows that despite prevailing concerns, the economy continued to grow at a moderate pace, bolstered by a vibrant housing sector and auto sales.[7] With so much conflicting data to review, many people struggle to make sound investment decisions. If you have any questions about how certain factors could affect you or your portfolio, please don’t hesitate to reach out to us. We pride ourselves on helping our clients cut through the clutter to develop strategies that are suitable for them and their goals.

 

As mentioned earlier, our thoughts are with the victims of Monday’s Boston bombing and those affected by the Texas plant explosion. It can be hard to think positively during such times, but we are proud of the swift work of first responders and investigators, and the way Americans have reached out in support of those in need.

 

HEADLINES:

Initial unemployment claims rise slightly. Unemployment claims jumped last week to 352,000, higher than the estimate of 347,000; the jump brings the 4-week moving average (a less-volatile measure) back in line with February numbers. Despite appearing to be stuck in neutral, unemployment claims are still significantly lower than the same time last year.[8]

Earthquake rocks Sichuan Province China. A magnitude-7 earthquake struck the southwestern province early Saturday morning, killing over 150 and injuring thousands. The earthquake triggered power outages and landslides in the same region that experienced a 2008 earthquake that left nearly 70,000 confirmed dead.[9]

Italy’s current president re-elected for a second term. Amid squabbling between party leaders, Giorgio Napolitano became the first Italian president to be asked to serve a second term. While European leaders reacted with relief, many view the election result as a sign of political stagnation.[10]

Gold retreats further in massive selloff. The precious metal’s biggest drop in 30 years came as investors rushed for the exits, and worries of margin calls have spooked goldbug investors. While gold is traditionally seen as a “safe haven” investment, it is also a historically volatile investment, falling an average of 31.6% in bear markets.[11]

QUOTE OF THE WEEK:

“You miss 100% of the shots you don't take.” – Wayne Gretzky

 

Share the Wealth of Knowledge!
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Securities offered through Aurora Capital Member FINRA/SIPC.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets

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 Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

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.

Google 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.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

 Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

 

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What is keeping the Stock Market near record highs?

by ken | 08:13 in |


What is keeping the Stock Market near record highs?


Despite some disappointing economic data, markets moved higher again last week. Both the Dow and S&P 500 posted new highs on Thursday, boosted by an upbeat jobs report. While U.S. investors still seem to lack some conviction, money is pouring in from Asia and Europe, as foreign investors seek growth.[1] For the week, the S&P 500 rose 2.29%, the Dow gained 2.06%, and the Nasdaq grew 2.84%.[2]

 

Retail sales contracted in March for the second time in three months, and consumer confidence tumbled in April in a double-whammy that sent equities into a spiral early last week. Retail sales fell 0.4% in March, and a gauge of consumer sentiment fell in April to the lowest level since July 2012.[3]  These numbers are concerning because consumer spending is 70% of GDP and may signal that tax hikes and increases in gasoline prices have stolen some momentum from first-quarter GDP growth. While retail spending can be volatile, consumers cut back across a wide range of categories, indicating that there’s not one dominant area driving the decline. One retail category, furniture, saw an increase last month, showing that the housing recovery is still driving a measure of spending.[4] Prior economic reports have glowingly stated that Americans were shrugging off new payroll taxes and continuing to spend. However, data now suggests that consumer spending was much weaker in Q1 than originally forecast.

 

On a more positive note, the number of Americans filing unemployment claims fell more than expected last week, easing fears of a deteriorating job market. After the previous week’s unexpectedly bad jobs report, we were relieved to see that jobless claims were back in line with expectations, indicating that the March numbers were a seasonal aberration, rather than an underlying weakness in the economic recovery.[5]

 

Looking at the week ahead, investors will be watching earnings reports closely to size up the recent soft patch and see what business leaders expect in the coming months. Next week will be light on economic data, but about a third of Dow Industrial companies and 70 S&P 500 companies will be reporting their first quarter earnings.[6]

 

We will not be surprised to see a measure of volatility in the weeks to come as markets pore over earnings reports and additional first-quarter economic reports. Markets will also be watching the saber rattling in North Korea; thus far, America and its allies appear to be watchful but unconcerned about the totalitarian nation’s threats, but that could change should North Korea make active moves toward the border.

 

Always remember to stay focused on your long-term financial strategy; short term ups and downs, while sometimes stressful, are a normal part of healthy markets.

 

HEADLINES:

Mortgage money loosening up. In a sign that banks are losing their lending jitters in the face of the housing recovery, mortgage loans are loosening, making it easier for Americans to qualify for loans. Lenders are increasingly offering loans to borrowers with “average” credit and smaller down payments, instead of just those with strong credit and a large down payment.[7]

Business inventories rose less than expected in February. Business restocked their warehouses at a slower rate than economists had forecasted, which could affect first quarter GDP. Economists had forecast growth of 0.4% in February, but inventories grew by just 0.1%.[8]

Fed officials downplay inflation risk to recovery. In a clear signal that the Fed intends to continue its aggressive bond-buying program, two Federal Reserve presidents stated that runaway inflation is unlikely to be a problem in the near or medium term. The officials defended the Fed’s actions and reiterated that inflation is being monitored carefully.[9]

Are Bitcoins the latest craze? Bitcoins, an entirely digital currency developed outside the control of any government, have enjoyed recent popularity with the price jumping to $200 per Bitcoin, before dropping to $105. While Bitcoins are popular among those who worry about the safety of government-backed currencies, they are highly speculative and volatile. Some analysts also believe that their anonymity also makes them vulnerable to attack and online theft.[10]

QUOTE OF THE WEEK:

“Courage is the commitment to begin without any guarantee of success.” –

Johann Wolfgang von Goethe

Share the Wealth of Knowledge!
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Securities offered through Aurora Capital Member FINRA/SIPC.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets

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 Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

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.

Google 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.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

. Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

 

By clicking on these links, you will leave our server as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.

 

 

 

Is this the start of a Market Correction?

by ken | 09:02 in |


Tune in every weekday to hear Ken’s Market Report on WRCR 1300am at 8:30 am

www.wrcr.com (online)

Ken also answer’s mailbag question ‘on the air’ at kenmahoney17@gmail.com 

Is this the start of a Market Correction? 

 

Markets pulled back last week as investors reacted to several disappointing economic reports and expressed concern that a spring swoon is around the corner. For the week, the S&P 500 lost 1.0%, the Dow trimmed 0.1%, and the Nasdaq fell 1.9%.[i]

 

The big news last week was Friday’s job report, which showed a drop in the overall unemployment rate from 7.7% in February to 7.6% in March. However, much of the drop can be attributed to discouraged job seekers who stopped looking for work rather than organic job creation. Unfortunately, the economy only added a disappointing 88,000 new jobs in March, about half the number economists were expecting.[ii] Earlier in the week, payroll processor ADP released a report showing that private employers added just 158,000 jobs in March, missing expectations of 200,000 new jobs.[iii] Despite the poor data, it’s usually unwise to read too much into a single report, since monthly job data is notoriously volatile.

 

In Washington, President Obama announced his intention to offer cuts to Social Security benefits and other government programs as a concession to Congressional Republicans, though no plan is final. While the White House's proposal could help to cut the federal deficit by $1.8 trillion over the next decade, it definitely has some drawbacks.[iv] All political affiliations aside, cuts to any programs are bound to be painful, but may also be necessary to get U.S. spending back on track. All this back-and-forth we are seeing is a sobering reminder of how much work still needs to be done to get the nation’s fiscal house in order; there is still a long road ahead.

 

Looking forward, investors will be watching first quarter earnings reports (which will start trickling in this week) and economic data to get a sense of how the economy is doing. Should initial earnings reports show weakness, stocks could experience further downside, though short-term consolidations are a common occurrence of healthy markets, and should not be viewed as a cause for alarm.

 

ECONOMIC CALENDAR:

Wednesday: EIA Petroleum Status Report, FOMC Minutes, Treasury Budget

Thursday: Jobless Claims, Import and Export Prices

Friday: Producer Price Index, Retail Sales, Consumer Sentiment, Business Inventories
 

HEADLINES:

IRS audits of wealthy taxpayers targets 1 in 8 high earners. New data from the IRS shows that taxpayers with taxable incomes of $1 million or more were audited 12 times more than the total population. These audits are proving lucrative for the IRS, netting an average of $117,000 per return.[v]


Portuguese court rejects some austerity measures, upholds others. In a blow to government finances, Portugal’s highest constitutional court rejected cuts in pension benefits and reductions in leave, but upheld other measures. The ruling will likely reduce the cash-strapped government’s revenues by as much as $1.17 billion.[vi]


Approximately 15% of the U.S. receives food stamps. Food stamp use grew 1.8% since January 2012, showing that one of the country’s largest social welfare programs is still growing. Though annual growth is increasing, the pace of growth is slowing as the economy improves.[vii]


Bank of Japan doubles down on bonds. In an effort to shake off nearly two decades of deflation, the Bank of Japan will begin a new quantitative easing program, purchasing 6.2 trillion yen in April and a further 7.5 trillion yen in six future installments (total of approximately $1.4 trillion.) While this may help boost economic growth, it will add to Japan’s already unsustainable public debt load. [viii]

 

QUOTE OF THE WEEK:

““Logic will get you from A to B. Imagination will take you everywhere.” Albert Einstein

 

Share the Wealth of Knowledge!

Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!

 

 

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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

 

Diversification does not guarantee profit nor is it guaranteed to protect assets.



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 Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

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.

Google 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.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

 

By clicking on these links, you will leave our server as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.

 

 

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