Market Update through 4/15/13

as of April 15, 2013        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 16.02% 9.42% -1.49% -1.49%
S&P 500 15.88% 9.51% -0.99% -0.99%
DJ Industrial Average 16.73% 12.19% 0.23% 0.23%
Nasdaq Composite 8.52% 6.86% -1.53% -1.53%
Russell 2000 15.60% 7.19% -4.63% -4.63%
EAFE Index 18.72% 7.19% 1.80% 1.80%
         
Bonds        
Barclays US Aggregate 3.81% 0.72% n/a 0.85%
Barclays Intermediate US Gov/Credit 3.37% 0.71% n/a 0.45%
Barclays Municipal  5.32% 1.00% n/a 0.71%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $88.71    $96.36
Natural Gas    $4.14    $3.99
Gold    $1,360.60    $1,597.70
Euro    $1.30    $1.28

Mark A. Lewis

Director of Operations

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Remember, Wear Sunscreen

My husband and I spend many an evening discussing world affairs and social issues. The health care crisis is a popular subject. While I will not profess to have the solution to all of our country’s woes, I have come to one important conclusion. Preparing for a financially secure and comfortable retirement is not just about saving and investing wisely; it is about taking care of your physical well being as well.

In a 2010 study, the Bureau of Labor Statistics estimated that the a 65-year-old couple with median drug expenses would need $271,000 to have a 90% chance of having enough money to cover health expenses in retirement (82 for men and 85 for women). This amount includes the Part B premium for physician services and Part D for prescription drugs. Couples with a high level of prescription drug spending could see that number jump to a whopping $371,000!

Medicare currently covers just over 50% of health care expenses. The program does not cover vision, dental or hearing aids, nor does it cover long term care expenses. In addition, health care costs have historically grown at a rate far exceeding overall inflation rate. Some experts suggest you assume a 6% inflation rate when calculating health care expense.

For those of you who are still working, take the right steps to secure a healthy retirement. If your company offers a Qualified High Deductible health insurance plan, you would be eligible to establish a Health Savings Account to start saving for future medical expenses. And think twice before retiring early. Private insurance is expensive, sometimes costing more than $1000 per month for an individual.

If you are already retired, be a prudent shopper for your Medigap policies. Make sure all of your prescriptions are covered, and if they are not, talk to your doctor about an alternative that is covered. And price policies annually, as the prices tend to change yearly.

Lastly, remember that you need to act fiscally and you need to act physically. Eat right, exercise and of course, wear sunscreen.

Tracy Allen, CFP®
Financial Advisor

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Market Update through 3/31/13

as of March 28, 2013        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 14.56% 11.07% 11.07% 3.92%
S&P 500 13.96% 10.61% 10.61% 3.75%
DJ Industrial Average 13.37% 11.93% 11.93% 3.86%
Nasdaq Composite 7.39% 8.51% 8.51% 3.49%
Russell 2000 16.30% 12.39% 12.39% 4.62%
EAFE Index 7.80% 4.40% 4.40% 0.41%
         
Bonds        
Barclays US Aggregate 3.77% -0.12% n/a 0.08%
Barclays Intermediate US Gov/Credit 3.53% 0.26% n/a 0.14%
Barclays Municipal  5.25% 0.23% n/a -0.43%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $96.36    $93.67
Natural Gas    $3.99    $3.88
Gold    $1,597.70    $1,600.10
Euro    $1.28    $1.29

Mark A. Lewis

Director of Operations

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Market Update through 3/15/13

as of March 15, 2013        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 14.27% 10.42% 10.42% 3.30%
S&P 500 13.82% 9.96% 9.96% 3.14%
DJ Industrial Average 12.54% 11.44% 11.44% 3.40%
Nasdaq Composite 7.99% 7.85% 7.85% 2.86%
Russell 2000 16.26% 12.40% 12.40% 4.62%
EAFE Index 9.44% 6.84% 6.84% 2.75%
         
Bonds        
Barclays US Aggregate 3.74% -0.50% n/a -0.30%
Barclays Intermediate US Gov/Credit 3.52% -0.05% n/a -0.16%
Barclays Municipal  5.17% -0.05% n/a -0.76%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $93.67    $90.63
Natural Gas    $3.88    $3.50
Gold    $1,600.10    $1,583.90
Euro    $1.29    $1.29

Mark A. Lewis

Director of Operations

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Record Highs – Now What?

The stock market continues on an impressive winning streak with the Dow Jones Industrial Average continuing to set new record highs. The index, through this Thursday’s close, has seen ten consecutive gaining sessions – a streak not seen since 1996. The S&P 500 closed on Thursday just two points shy of its record closing high of 1565 set in October 2007 and is up an impressive 9.0% year to date (which excludes dividend income).

The basic investing mantra of “buy low, sell high” can cause one to have concern of buying new stock positions at record high levels. But a deeper look would suggest that though prices are at or above record highs there is still good value in equity investing. When you buy stocks, you are really buying the company’s earnings.  Even though stock prices are up, so are company earnings.  To properly evaluate stocks, one important measure to consider is the price-to-earnings ratio (P/E).  Company earnings in aggregate are well past their previous record high which leaves the current market P/E under 14. At the October 2007 highs the P/E on the market was around 15.7 – which suggests you are now paying less for each dollar of company earnings when you buy stock than you were in 2007.

Dividend yields on stocks are also attractive relative to fixed income in this low rate environment. The current yield across the S&P 500 is at about 2.14%, which is higher than the current yield on the 10 year Treasury of 2.04%. This is a tough comparison since there is much more investment risk inherent in stocks, but as a result of recent price appreciation in stocks and the relative yield comparisons many individual investors are continuing to pour money into stocks in hopes for continued gains. This is seen by the recent positive net inflows into stock mutual funds – a reversal of the trend over the last few years of investors moving money from stock funds into fixed income funds. Though the individual investor is probably kicking themselves for not buying into stocks earlier in the rally, their return to stocks is a positive for equity holders as their additional purchases could provide for further price gains.

So while it may be tempting to sell some of your investments following the recent strong gains in stock markets we still feel that is not advisable. As part of our ongoing portfolio management process we may sell positions that have had strong recent gains to rebalance the portfolio, but selling stock at record highs simply in an attempt to prevent a future loss is market timing which we want to help clients avoid.

According to the Wall Street Journal the average market return received once the DJIA hits a new record high, prior to the next bear market, has been 28%. Though we can’t predict the future we can comfortably say that over time stocks could rise further, then decline, then rise to set a new record high just as has happened many times over the course of market history. And that is as vague of an answer to the “Now What” question as I can give you!

Enjoy the new market highs! Every investor who stuck it out through the 2009 lows and fully participated in the market’s recovery deserves a celebration for their proper investing discipline. Cheers!

Travis Boyer, CFA
Financial Advisor

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Stock Market Perspective

It’s a new high for the Dow Jones Industrial Average, closing Friday at 14,397.  The S&P 500, currently at 1,550, is just shy of its high of 1,565 in October of 2007.  Friday, the unemployment rate dropped to an unexpected 7.7%.  It’s hard to believe that four years ago in March of 2009 (S&P 500 low of 676) we were hearing from clients their concern about another Great Depression, the potential for martial law in the streets, and the end of America as we know it.  Thankfully, there were careful, albeit scary and unprecedented, steps taken to slowly and painfully back away from brink of the abyss.  Miraculously we moved on from that to these new highs.

Recently the CFA Institute conducted a poll of the readers of their news digest, many of whom are CFA charter holders.  They asked what the next major financial-market mover, with effects significant enough to last more than one year, would be.  About 27% chose the option “a macroeconomic event” (pretty vague), and another 24% said “a random unforeseeable event.”  The remaining chose more concise, specific options having to do with quantitative easing, corporate profits, technology, etc. 

What I took from this is that over half of the poll respondents, who are presumably well-informed professionals in the field of investment management, have no clue what will happen next to shake the markets.  This may be disconcerting at first glance, but I found it comforting.  We often receive pressure to predict the short-term future of the financial markets.  But we don’t believe it is possible to do this with any real success. 

However, we do believe in the long-term success of a well-diversified portfolio that is suited to the investor’s risk tolerance.  We believe that keeping your allocation intact during good and bad times is the best way to avoid the pitfalls of market timing.  The crash of 2008-2009 may have been “unforeseeable” but so was the stock market reaching new highs this spring — even just one year ago we thought Greece was going to fall off the map. 

Predictions may be interesting, but they shouldn’t be used to decide whether or not to make a short-term investment in an asset class.  Maintaining your chosen asset allocation is crucial.  Of all of the predictions that I recall from the spring of 2009, I don’t remember anyone suggesting that we’d see new highs on the stock market in four years with unemployment slowly ticking down to 7.7%.

Harli L. Palme, CFA, CFP(r)

Partner

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Market Update through 2/28/13

as of February 28, 2013        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 13.02% 6.89% 6.89% 1.33%
S&P 500 12.94% 6.61% 6.61% 1.36%
DJ Industrial Average 11.05% 7.77% 7.77% 1.76%
Nasdaq Composite 7.51% 4.86% 4.86% 0.75%
Russell 2000 12.25% 7.43% 7.43% 1.10%
EAFE Index 10.15% 4.35% 4.35% -0.89%
         
Bonds        
Barclays US Aggregate 3.12% -0.20% n/a 0.50%
Barclays Intermediate US Gov/Credit 3.01% 0.12% n/a 0.48%
Barclays Municipal  5.01% 0.72% n/a 0.30%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $90.63    $95.91
Natural Gas    $3.50    $3.15
Gold    $1,583.90    $1,609.80
Euro    $1.29    $1.33

Mark A. Lewis

Director of Operations.

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Always Be Prepared

Last fall, there was an interesting news story circulating that some of you may recall.  It was the story of Walter Samasko and his house full of gold coins.  Poor Samasko, whom neighbors described as quiet, reclusive and strongly anti-government, had died from a heart attack and his body was undiscovered for at least a month.  When authorities went to clean Samasko’s house, they discovered boxes of gold coins worth more than $7 million in his garage and crawl space.     Samasko had no will, so local authorities used a list of attendants from his mother’s funeral in 1992 to track down his nearest surviving relative, first cousin Arlene Magdanz, a substitute teacher in California.  Can you say Eureka?

I can only imagine what it would be like to be told I had inherited $7 million from a long-lost relative.  I would like to believe that I would not regret the fact that the government would take over $800,000 in estate taxes and other fees.  I mean, this is found money, right?  But I am sure there is one person who rolled over in his grave:  Walter Samasko.  Remember, Samasko had no will or trust and he had not taken the necessary steps to create a plan that would prevent his estate from the taxation he surely would have hated.  Rather than die intestate, Walter should have drawn up a will and created a trust leaving his assets to charity.  Not only would these documents protect his assets from taxation, the living trust would have prevented probate court, thus preserving the privacy Samasko clearly desired.

The federal estate-tax exclusion now is set permanently at $5 million and is indexed for inflation. But because of inflation, the amount for 2013 works out to $5,250,000 for individuals and $10,500,000 for couples.  The federal gift and generation-skipping transfer tax exemption is the same as the estate-tax exclusion amount.  The top federal estate-tax rate on the largest estates is now 40%, up from 35% in 2012. Transfers from one spouse to the other typically are tax-free.   

These exemptions mean many of us will never need to worry about estate taxes.  This does not mean you don’t need an estate plan.  Wills, trusts, powers of attorney, living wills and health care powers of attorney are all important documents that allow you to determine who receives your assets, who will have guardianship over your children, who will make decisions for you when you are unable, who will manage your financial and legal affairs and so on. 

In our work, we often find people who are reluctant to address the topic of estate and incapacity planning.  While I realize this can be a touchy subject, I always think of the old adage, “Those who fail to plan, plan to fail.”  So please, don’t be like Walter!  If you have not yet created your estate plan, get started today.  If you need help finding an estate planning attorney or if you would like some general guidance on estate planning, your financial advisor is happy to assist.

 

Tracy H. Allen, CFP®

Financial Advisor

 

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Market Update through 2/15/13

 

as of February 15, 2013        
  Total Return
Index 12 months YTD QTD MTD
Stocks        
Russell 3000 15.77% 7.28% 7.28% 1.70%
S&P 500 15.74% 6.86% 6.86% 1.60%
DJ Industrial Average 12.40% 7.11% 7.11% 1.13%
Nasdaq Composite 11.19% 5.85% 5.85% 1.70%
Russell 2000 15.09% 8.80% 8.80% 2.39%
EAFE Index* 8.22% 3.71% 3.71% -1.41%
*EAFE index does not include dividends.        
         
Bonds        
Barclays US Aggregate 2.71% -0.65% n/a 0.05%
Barclays Intermediate US Gov/Credit 2.59% -0.29% n/a 0.07%
Barclays Municipal  4.90% 0.47% n/a 0.05%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $95.91    $97.46
Natural Gas    $3.15    $3.36
Gold    $1,609.80    $1,668.00
Euro    $1.33    $1.36

Mark A. Lewis

Director of Operations

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Market Update through 1/31/13

as of January 31, 2013        
  Total Return
Index 12 months YTD QTD January
Stocks        
Russell 3000 16.90% 5.49% 5.49% 5.49%
S&P 500 16.78% 5.18% 5.18% 5.18%
DJ Industrial Average 12.75% 5.91% 5.91% 5.91%
Nasdaq Composite 13.41% 4.08% 4.08% 4.08%
Russell 2000 15.47% 6.26% 6.26% 6.26%
EAFE Index* 13.49% 5.19% 5.19% 5.19%
*EAFE index does not include dividends.        
         
Bonds        
Barclays US Aggregate 2.59% -0.70% n/a -0.70%
Barclays Intermediate US Gov/Credit 2.47% -0.36% n/a -0.36%
Barclays Municipal  4.80% 0.42% n/a 0.42%
         
    Current   Prior
Commodity/Currency   Level   Level
         
Crude Oil    $97.46    $93.97
Natural Gas    $3.36    $3.42
Gold    $1,668.00    $1,684.90
Euro    $1.36    $1.32

Mark A. Lewis

Director of Operations

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