The Markets
U.S. stock markets finished the week – and the quarter – on a positive note.
The Federal Reserve’s accommodative monetary policy and strong profit growth helped provide the lift needed to propel the S&P 500 Index to a record high. The Dow Jones Industrials Index also finished the week above its previous record close. For the quarter, the S&P 500 was up about 10 percent, the Dow was up about 11.3 percent, and the NASDAQ finished up about 8.2 percent.
Despite the strong performance overall, markets were somewhat choppy during the week. Concerns about Cyprus and the Eurozone debt crisis overshadowed markets early on. A positive report on durable goods from the Commerce Department helped push markets higher, as did a home-price index report from Standard & Poor’s Case-Shiller that showed the biggest yearly increase in home prices since the summer of 2006. This report seemed to have held more sway with investors than either weaker-than-expected new home sales or lower-than-anticipated consumer confidence. Late in the week, the GDP growth rate for the fourth quarter of 2012 was revised upward, but remained sluggish at 0.4 percent annually.
The U.S. Treasury market generally has benefitted from worries inspired by the Eurozone debt crisis. The latest episodes in the crisis – the Cyprus bank bailout and Italy’s failure to form a government – helped nudge rates lower last week. The U.S. continues to be perceived as relatively safe.
Fears about Eurozone debt issues generally have had a positive effect on gold prices, too, helping the precious metal reach a record high price in September 2011. That has not been the case this year. Gold finished the quarter down by more than 5 percent.
|
Data as of 3/29/13 |
1-Week |
Y-T-D |
1-Year |
3-Year |
5-Year |
10-Year |
| Standard & Poor’s 500 (Domestic Stocks) |
0.8% |
10.0% |
11.6% |
10.2% |
3.6% |
6.2% |
| 10-year Treasury Note (Yield Only) |
1.9 |
N/A |
2.2 |
3.9 |
3.5 |
3.9 |
| Gold (per ounce) |
-0.6 |
-5.6 |
-4.6 |
13.0 |
11.3 |
17.1 |
| DJ-UBS Commodity Index |
-0.4 |
-1.1 |
-3.3 |
1.4 |
-7.8 |
2.0 |
| DJ Equity All REIT TR Index |
1.4 |
7.9 |
17.8 |
16.8 |
7.1 |
12.5 |
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.
HOW FAST SHOULD THE UNITED STATES’ ECONOMY BE GROWING? According to The Economist, “In the three years since the end of the recession in mid-2009, growth averaged 2.2 percent, barely half the 4.2 percent average of the seven previous recoveries.” This begs the question: How fast should the economy be growing?
Economists, academics, and policy makers have been trying to figure that out. Many have started with an economic theory put forward by noted economist Milton Friedman in 1964. His “Plucking Model” postulates the business cycle is like a string attached to a board. The board represents “the ceiling of maximum feasible output.” Once in a while, the string is plucked down by recession and then it springs back. The idea is the depth of a recession will be mirrored by the strength of the recovery that follows.
At first blush, the Plucking Model doesn’t appear to apply to this recovery. The Great Recession was the deepest downturn since World War II, and the country hasn’t snapped back. According to several recent reports, there may be a reason for this. Our ‘ceiling of optimal output’ – the fastest rate at which our economy is expected to grow – may be lower than it used to be.
· Productivity and Potential Output Before, During, and After the Great Recession, a working paper from the San Francisco Federal Reserve, found growth in the U.S. was slowing in the mid-2000s although the slowdown was largely unrecognized before the Great Recession.
· What Accounts for the Slow Growth of the Economy After the Recession, a Congressional Budget Office study, determined about two-thirds of the difference between America ’s current growth rate and the average growth after previous recoveries is due to long-term trends including demographic changes. The other one-third is credited to low demand for goods and services.
· Disentangling the Channels of the 2007-2009 Recessions, by James Stock of HarvardUniversity and Mark Watson of PrincetonUniversity , also found slower growth in the U.S. is largely the result of demographic trends such as a limited labor supply as Baby Boomers have begun to retire and the number of women joining the workforce has leveled off.
Considered together, the reports seem to indicate U.S. economic growth began slowing before the recession and, unless demographic trends shift, our country may continue to experience slower growth.
Weekly Focus – Think About It
“I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. Twenty-six times, I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”
—Michael Jordan
What’s happening at Solis Wealth Management?
Please enjoy this week’s commentary from ~ Kris Placencia, Director of Client Relations
While I’d like to report some exciting or fun news about what’s going on in my life, I have to be honest and say that the last couple of weeks have been very difficult for me for a number of reasons.
On March 17th, a high school friend of my daughters suffered an injury to the head after a skateboarding accident. Following a week in a coma, he passed away. He was just 18 years old and looking forward to graduation in June and an exciting future. It was very painful to watch my daughter experience the grief she did at such a young age. As a parent we want to protect our children from this type of pain in any way we can but realize that it is simply part of life.
These past couple of weeks has again reminded me of what is most important in this life. Too often we take the people we care about the most for granted. Too often we complain about the little things and focus on what seems to be negative and fail to see those things which we have been blessed with. What is most important is not checking everything off my list or making sure my point gets across. The bottom line in this life is loving people. I have also learned that while I’d like to think I know how to do this, sometimes I’m just not very good at it and fail miserably; oftentimes hurting those I love the most in this process. Many times (or even most times), love is about surrendering our own wants, desires and even needs for other people.
Each experience we go through, even the most painful and difficult allow us the opportunity to learn something, to take something from it. My daughter does not let me walk out the door without saying she loves me. She has taught me a lot. ~ Kris
Best regards,
Greg R. Solis, AIF®
President
Solis Wealth Management
78-075 Main Street
Suite 204
La Quinta, CA 92253
Office: (760) 771-3339
Fax: (760) 771-3181
www.soliswealth.com (http://www.soliswealth.com/)
E-Mail: greg.solis@lpl.com
CA Insurance License #0795867
Greg R Solis is a Registered Representative with and
Securities offered through LPL Financial, Member FINRA/SIPC
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* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.
* 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.
Sources:
http://finance.yahoo.com/news/wall-street-week-ahead-pullback-023826452.html
http://www.foxbusiness.com/news/2013/03/28/market-snapshot-sp-500-dow-close-strong-quarter-at-record-highs/
http://finance.yahoo.com/blogs/hot-stock-minute/p-500-just-shy-record-blackberry-whiplash-penney-200335828.html
http://www.cnbc.com/id/100600047
http://www.reuters.com/article/2013/03/26/markets-usa-bonds-idUSL2N0CI0ZP20130326
http://www.reuters.com/article/2013/03/28/markets-precious-idUSL3N0CK7X020130328
http://www.economist.com/news/finance-and-economics/21573969-demography-may-explain-weakness-americas-recovery-where-did-everyone-go
http://economistsview.typepad.com/economistsview/2006/01/new_support_for.html
http://www.asb.unsw.edu.au/research/centreforappliedeconomicresearch/Documents/J.%20Fernald%20-%20Productivity%20and%20Potential%20Output%20before,%20during,%20and%20after%20the%20Great%20Recession.pdf (Introduction)
http://www.cbo.gov/publication/43707 (Paragraphs 3 and 4)
http://www.brookings.edu/~/media/Projects/BPEA/Spring%202012/2012a_Stock (Pages 126-129) (You may have to copy this URL into your web browser in order to view this document)
http://www.brainyquote.com/quotes/topics/topic_sports.html#OVs9di1k3zC2GzGi.99