Schwartz Financial Market Commentary 6/17/13

The Markets

 

Like a host at a dinner party, the International Monetary Fund (IMF) put the performance of the U.S. economy on the table last week to be gnawed over by world markets. When the IMF presented its annual review of the world’s largest economy, it stated that:

 

“Despite some improvements in economic indicators, particularly in the housing market, the very rapid pace of deficit reduction… is slowing growth significantly… U.S. growth is expected to slow to 1.9 percent in 2013, from 2.2 percent in 2012. This projection reflects the impact of the sequester ($85 billion of automatic U.S. government spending cuts), and the expiration of the payroll tax cut and the increase in tax rates for high-income taxpayers…Growth could pick up to 2.7 percent next year with a more moderate fiscal adjustment and a further strengthening of the housing market.”

 

The IMF also said the Federal Reserve should continue quantitative easing through 2013.

 

It was not the only one pondering the Fed’s quantitative easing program. The major U.S. stock market indices finished the week lower. The Dow Jones Industrials Average fell 1.2 percent last week, the Standard & Poor’s 500 Index was off by 1 percent, and the NASDAQ dropped 1.3 percent. Remarkably, the Dow experienced four straight days of triple-digit swings.

 

The next Federal Open Market Committee Meeting is on June 18 and 19. While few people expect the Fed to announce it will reduce the pace of bond buying immediately, the majority of economists surveyed by USA TODAY predict the Federal Reserve will begin to reduce bond purchases by early fall.

 


Data as of 6/14/13
1-Week
Y-T-D
1-Year
3-Year
5-Year
10-Year
Standard & Poor’s 500 (Domestic Stocks)
-1.0%
14.1%
22.4%
14.3%
3.7%
4.9%
10-year Treasury Note (Yield Only)
2.1
N/A
1.6
3.3
4.2
3.2
Gold (per ounce)
0.4
-17.9
-13.8
4.4
9.4
14.5
DJ-UBS Commodity Index
-0.7
-6.3
1.2
0.8
-10.6
1.1
DJ Equity All REIT TR Index
-0.8
7.0
16.1
15.6
5.8
11.0

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.

 

Are emerging countries leading the way in renewable energy? It seems that way sometimes. According to UNEP’s report, Global Trends in Renewable Energy Investment 2013, “Renewables are picking up speed across Asia, Latin America, the Middle East, and Africa, with new investment in all technologies… Markets, manufacturing, and investment shifted increasingly towards developing countries during 2012.” For instance, after running even with the United States during 2011, China became the dominant country for renewable energy investment in 2012, according to the report.

 

This doesn’t mean the United States isn’t in the race. According to The Economist, an analysis by Bloomberg New Energy Finance found the U.S. and China traded about $6.5 billion in solar, wind, and smart-grid technology and services during 2011. America sold about $1.5 billion more to China than it imported. The Economistconcluded, “American ingenuity is required to supply Chinese factories with such things as polysilicon and wafers for photovoltaic cells, and the fiberglass and control systems used in wind turbines.”

 

So, what does the future hold? Kiplinger’s Letters said solar power production will double in 2013 and move ahead of geothermal power as a source of clean energy. They believe wind energy will soon rival hydroelectric power, as well. The United States added more wind power capacity last year than any other type of power generation. Currently, wind comprises about 5 percent of power generated in the United States.

 

Global investment in renewable energy may have fallen during 2012, but that doesn’t mean the industry has lost momentum. Renewable energy is gaining share in a growing number of countries and regions, including the European Union where renewable energy – primarily solar and wind power – accounted for about 21 percent of electricity consumption in 2011, and almost 70 percent of new electric capacity in 2012.

 

Renewables just may prove to be the tortoise in the energy race.

 

Weekly Focus – Think About It

 

“It is not in the stars to hold our destiny, but in ourselves.”

William Shakespeare, English poet and playwright

Value vs. Growth Investing (6/14/13)

-0.93
15.30
-1.36
4.31
25.95
16.96
6.35
-1.01
14.91
-1.21
4.78
24.28
16.88
5.74
-0.91
19.41
-0.86
6.85
30.75
18.40
7.76
-1.30
9.91
-2.78
2.95
17.39
16.33
5.22
-0.82
16.11
0.09
4.73
25.69
16.12
4.15
-0.72
16.51
-1.95
3.33
30.86
17.19
7.36
-0.65
14.93
-2.82
2.04
28.59
18.82
8.04
-1.09
13.73
-2.53
2.40
26.15
16.11
4.83
-0.42
21.00
-0.54
5.53
38.28
16.50
9.27
-0.66
15.78
-1.20
2.37
30.19
16.76
8.96
-1.02
15.87
-1.58
2.54
30.90
15.62
7.83
-0.22
15.36
-0.55
2.90
27.84
18.12
7.97
-0.69
16.09
-1.40
1.68
31.86
16.55
11.11
-0.86
18.20
-1.32
5.49
30.26
18.33
7.96
-1.19
11.00
-2.59
2.83
19.73
16.46
5.37
-0.73
17.09
-0.14
4.68
28.56
16.22
5.66

 ©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:

 

Does the 3.8% investment surtax apply to retirement funds?

 

Q: Does the 3.8% investment surtax apply to retirement funds? For example, if I take a lump-sum distribution of my 401(k) plan, which holds employer stock, will the basis be taxed at 3.8% on top of income tax?

 

A: The investment surtax of 3.8% does not apply to MOST retirement payments. It could apply to certain non-qualified annuity payments. However, the retirement payment will increase your income and COULD put you over the threshold to where the surtax will apply. For example, the surtax will apply if modified adjusted gross income (MAGI) is over $250,000 (married/joint). If a couple’s MAGI is $235,000 and they take a $25,000 IRA distribution, it increases the MAGI to $260,000, making some of their investment income subject to the surtax.

 
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, offers securities through First Allied Securities, Inc., A Registered Broker/Dealer,  Member FINRA-SIPC.  Advisory Services offered through First Allied Advisory Services, A Registered Investment Advisor.

Schwartz Financial Service is not an affiliate of First Allied Securities, Inc.

 

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”.

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