Archives for January 2014

It’s Time To Review Your IRA Beneficiaries

Courtesy of Freedigitalphotos.net/Stuart Miles

Courtesy of Freedigitalphotos.net/Stuart Miles

As of January 31, 2014, all clients who have an IRA with Hixon Zuercher Capital Management should have received a 2013 Form 5498 in the mail. This form presents all 2013 IRA contribution information, fair market value of the IRA portfolio as of December 31, 2013, as well as the IRA beneficiary summary statement. It is wise to review your beneficiaries every year at this time to be certain you still desire the same primary and contingent beneficiary(s). If you wish to change your beneficiary(s), or are having trouble locating them on this form, please contact Hixon Zuercher Capital Management so we may assist you in accordance with your need.

Don’t miss Hixon Zuercher 2014 State of the Markets Webinar on Feb 13, 2014 12:00 PM EST at:

https://attendee.gotowebinar.com/register/6278631763793061633

Since March 2009, we’ve been reaping the benefits of a bull market, with the S&P 500 returning over 150%. At this point, many investors are wondering if the growth can continue. Facing the end of quantitative easing, another debt ceiling debate, and a number of geopolitical concerns, we think now is a good time to share our viewpoints with you. Please join us as we analyze what the indicators are pointing to, and discuss what could be in store for 2014. Your family and friends are also encouraged to attend.

After registering, you will receive a confirmation email containing information about joining the webinar.

Brought to you by GoToWebinar

Rough Week. Now What? Weekly Update – January 27, 2014

Image courtesy of ddpavumba, FreeDigitalPhotos.net

Image courtesy of ddpavumba, FreeDigitalPhotos.net

Markets slid considerably last week after investors were rattled by a confluence of events in emerging markets. For the week, the S&P 500 fell 2.63%, the Dow sank 3.52%, and the Nasdaq dropped 1.65%.1 What were the international events that fueled the sell off?

Chinese manufacturing activity contracted in January for the first time in six months, according to one important survey. While there are probably some distortions in the numbers due to the Chinese New Year holiday, the data indicates that all may not be well with one of China’s most critical sectors.2

Political unrest in Turkey and financial turmoil in Argentina also stoked investor fears about these countries’ ability to maintain order.3 Concerns about developing economies are being heightened by the Fed’s tightening of its easy money policies, which could hurt emerging markets. Loose monetary policy has helped keep interest rates low around the world. Countries that have relied on low borrowing costs to spur economic activity could face a period of painful readjustment to the new reality.4

Investors seeking higher returns have also poured money into developing markets in recent years. The central bank’s tapering process now has investors scrutinizing the weak fundamentals that underpin many developing countries’ markets and wondering if their economies can stand on their own. If they pull their money out, developing economies could be hurt by damaged currencies, falling standards of living, and potential social unrest.

Fourth quarter earnings reports also drove some volatility last week. So far, results have been a mixed bag, with slightly more than half of the S&P 500 beating estimates. Of the 102 S&P 500 companies that have reported in, 63% have achieved earnings above expectations, as compared to 67% over the previous four quarters.

The takeaway: If any of last week’s headlines rob you of sleep, try to remember that it’s routine for economies and equity markets to cycle. While the selloff is troubling to some, it may also have created some opportunities to cherry pick investments with good upside potential at attractive prices. Investors buying the dip could spur another rally; disappointing data or a Fed surprise could cause the contraction to deepen. Whichever way markets move, we’ll be keeping our eyes on the trend and working to position our clients for long-term success.

 

ECONOMIC CALENDAR:

Monday: New Home Sales, Dallas Fed Mfg. Survey

Tuesday: Durable Goods Orders, S&P Case-Shiller HPI, Consumer Confidence

Wednesday: EIA Petroleum Status Report, FOMC Meeting Announcement

Thursday: GDP, Jobless Claims, Pending Home Sales Index

Friday: Personal Income and Outlays, Employment Cost Index, Chicago PMI, Consumer Sentiment

 

Data as of 1/24/2014

1-Week

Since 1/1/14

1-Year

5-Year

10-Year

Standard & Poor’s 500

-2.63%

-3.14%

19.77%

23.04%

5.68%

Dow

-3.52%

-4.21%

14.86%

19.32%

5.03%

NASDAQ

-1.65%

-1.16%

31.87%

35.89%

9.44%

U.S. Corporate Bond Index

0.12%

1.11%

-3.56%

3.98%

0.48%

International

-2.93%

-3.35%

11.04%

18.38%

7.19%

Data as of 1/24/2014

1 mo.

6 mo.

1 yr.

5 yr.

10 yr.

Treasury Yields (CMT)

0.04%

0.06%

0.11%

1.58%

2.75%

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

 

HEADLINES:

2013 existing home sales highest in 7 years. U.S. home resales rose in December after falling for the previous three months as low interest rates and continuing demand pushed up sales. Despite the loss of some momentum, 2013 was still an excellent year for the housing market.5

Weekly jobless claims creep up. While the number of Americans filing new unemployment claims inched upward last week, the overall trend suggests slow improvement in the labor market. The four-week moving average, a less volatile measure, fell 3,750 to 331,500 new claims.6

Oil prices climb on cold weather. U.S. oil rose on expectations that cold weather would cause demand for heating oil to surge. Frigid weather also caused natural gas prices to surge to a multi-year high.7

U.S. manufacturing growth slows in January. Falling new orders caused a slowdown in manufacturing growth for the first time in three months. Even so, the overall rate of growth remains robust.8

Earnings Reversal Sparks Volatility Weekly Update – January 21, 2014

Image Courtesy of David Castillo Dominici/freedigitalphotos.net

Image Courtesy of David Castillo Dominici/freedigitalphotos.net

Markets ended the week mixed as markets responded to some lackluster Q4 earnings reports. For the week, the S&P 500 lost 0.20%, the Dow gained 0.13%, and the Nasdaq gained 0.55%.1

Earnings reports contributed to the volatility investors saw in markets last week. Though earnings season is still young, companies seem to be beating revenue expectations but missing on earnings, a reversal of the trend we saw in previous earnings seasons. So far, reports suggest that revenues were up 0.5%, and 67% of reports have beaten expectations, which is a positive sign. On the other hand, the profit picture isn’t as rosy. It seems that the effects of the government shutdown, a shortened holiday shopping season, and deep discounting trimmed profits last quarter.2

On the economic front, the weekly job report shows that unemployment claims fell for the second week in a row, suggesting December’s dismal results may be temporary.3 Consumer sentiment slipped in January, weighed down by lowered expectations among lower and middle-income families, who are worried about jobs and income growth.4 Though the Fed has been largely silent ahead of their late January FOMC meeting, it’s likely that they are carefully weighing the data to determine next steps when Janet Yellen takes the reins in February. If overall economic data remains positive, the Fed could announce another round of tapering at the next meeting.

In Washington, the Senate finally approved a $1.1 trillion spending bill that will fund the government through the current fiscal year-end and quells fears of another government shutdown.5 Though the Treasury debt limit is still suspended until February 7, once the suspension expires, the Treasury will run out of money by the end of February. Hopefully Congress will avoid last-minute drama that could hurt confidence in the economy and quickly come to a bipartisan agreement.6

Looking ahead, investors could see some more volatility around high profile earnings reports from major blue chip companies following the Monday holiday. While positive reports could result in a resumption of the 2013 rally, the volatility investors are experiencing can be described as the kind of correction we may expect to see after a sustained rally. With little economic news to move the markets as a whole, the individual forward expectations of each company will move stocks one by one, making it difficult to predict a trend.

ECONOMIC CALENDAR:

Monday: U.S. Markets Closed for Martin Luther King Jr. Day

Thursday: Jobless Claims, PMI Manufacturing Index Flash, Existing Home Sales, EIA Petroleum Status Report

 

Data as of 1/17/2014

1-Week

Since 1/1/14

1-Year

5-Year

10-Year

Standard & Poor’s 500

-0.20%

-0.52%

24.16%

23.26%

6.13%

Dow

0.13%

-0.71%

21.05%

19.75%

5.53%

NASDAQ

0.55%

0.50%

33.85%

34.89%

9.61%

U.S. Corporate Bond Index

0.02%

0.99%

-3.51%

3.53%

0.43%

International

N/A

-0.43%

14.77%

17.28%

7.94%

Data as of 1/17/2014

1 mo.

6 mo.

1 yr.

5 yr.

10 yr.

Treasury Yields (CMT)

0.01%

0.07%

0.11%

1.64%

2.84%

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

HEADLINES:

Housing starts drop in December. After months of sizzling growth, groundbreaking on new homes fell 9.8% in December, the largest drop since April 2013. The decline was less than economists expected and was largely driven by the volatile multi-family homes segment. For 2013, housing starts increased by 18.3%.7

U.S. industrial output surges in Q4. Industrial output rose at its fastest clip in 3-½ years, growing 6.8%, the largest quarterly increase since 2010. Factory output and overall industrial production rose in December, a positive sign for the economy in 2014.8

Global economy expected to grow in 2014. According to a Reuters poll of economists, the world economy will grow 3.6% in 2014, as compared to 2.9% in 2013. While developed economies will do better this year, some emerging markets may struggle with fiscal reform and deflation.9

Dollar rallies on economic data. The dollar surged against a basket of currencies, pushing the euro to a seven-week low after positive economic data suggests the Fed may stay on track with tapering measures.10

Stocks Stall on Jobs Data Weekly Update – January 13, 2014

Classifieds

Image courtesy of Gualberto107/ FreeDigitalPhotos.net

Markets stalled in the first full week of 2014, with major indices ending on a mixed note. For the week, the S&P 500 gained 0.6%, the Dow lost 0.2%, and the Nasdaq rose 1.03%.1

Friday’s December Employment Situation report showed that job growth slowed significantly in December, adding just 74,000 new jobs. This was well below consensus estimates, which expected a number in the neighborhood of 200,000 new jobs. At odds with the dismal jobs data, the household survey showed a very large drop in unemployment, causing the headline unemployment number to fall to 6.7%, very close to the Fed’s goal of 6.5%.2

Markets reacted nervously to the unexpectedly negative data, which is completely out of line with the generally positive labor trends of the past weeks and months. One way for unemployment to drop even as job growth declines is for people to quit searching for jobs, thus dropping out of the labor force. In December, the labor force participation rate dropped to its lowest in more than three decades. However, labor force participation jumped in November, so it’s possible that the December data is a statistical outlier.3 Divergences between the two surveys do occasionally happen and economists usually wait a month or so for revisions to be made that straighten out the data.

Bottom line: we’re getting very close to the Fed’s threshold rate of 6.5% unemployment, but the overall labor market is still weak. Given this weakness, the Fed will probably need to clarify its tapering plans and give guidance about how critical that 6.5% floor really is.

Looking ahead, earnings season will be kicking off this week. First up are several major financial firms; like JPMorgan Chase [JPM], Wells Fargo [WFC], Bank of America [BAC], Citigroup [C],4 and investors, will be taking a hard look to get a sense of how fourth quarter earnings season will go. If earnings continue their positive trend, investors could see further upside; if earnings disappoint, investors may decide to take some more profits off the table and wait for better news.

ECONOMIC CALENDAR:

Tuesday: Retail Sales, Import and Export Prices, Business Inventories

Wednesday: Producer Price Index, Empire State Mfg. Survey, EIA Petroleum Status Report, Beige Book

Thursday: Consumer Price Index, Jobless Claims, Treasury International Capital, Philadelphia Fed Survey, Housing Market Index, Ben Bernanke Speaks 11:10 AM ET

Friday: Housing Starts, Industrial Production, Consumer Sentiment

Data as of 1/10/2014

1-Week

Since 1/1/14

1-Year

5-Year

10-Year

Standard & Poor’s 500

0.60%

-0.32%

25.15%

21.39%

6.42%

Dow

-0.20%

-0.84%

22.02%

18.23%

5.72%

NASDAQ

1.03%

-0.05%

33.73%

33.13%

10.00%

U.S. Corporate Bond Index

0.78%

0.97%

-3.82%

3.64%

0.47%

International

1.26%

-0.43%

15.35%

14.76%

7.81%

Data as of 1/10/2014

1 mo.

6 mo.

1 yr.

5 yr.

10 yr.

Treasury Yields (CMT)

0.01%

0.06%

0.12%

1.64%

2.88%

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

HEADLINES:

Yellen confirmed as next Fed chair. The Senate voted to confirm current Federal Reserve vice chairman Janet Yellen as the next Fed chairman. She will replace current chairman Ben Bernanke when his term ends at the end of January. A major focus of her tenure will be the unwinding of the central bank’s unprecedented quantitative easing programs.5

Wholesale inventories grew in November. Business inventories increased 0.5% in November, following a 1.3% increase in October. Inventory growth has been strong over the last few months, suggesting firms have confidence in consumer demand and that restocking could contribute significantly to Q4 economic growth.6

China exports slow.  Chinese exports declined more than expected in December, though the drop may be due to changes in how exports are calculated. Regulators clamped down on speculative trading activities disguised as export deals. Economists are optimistic that a brighter 2014 will cause export activity to pick up in the world’s second largest economy.7

Retailers cut forecasts. A disappointing holiday season led to several retailers cutting 2014 earnings forecasts. Despite aggressive actions to lure shoppers, a shortened shopping season, unseasonably cold weather, and anemic spending combined to hit retailer revenues hard.8

 

January 2014 Monthly Video Update

Welcome to our first monthly market review. Every month you can look forward to market benchmarks, performance analyses, and statistics that will help you make wise investment decisions. Contact us today for a detailed, personal analysis of your financial future.

 

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January 6, 2014 – 2013 In Review

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Image courtesy of cooldesign / FreeDigitalPhotos.net

Now that 2013 is behind us, let’s take a look at the events that shaped the markets last year and consider what may lie ahead in 2014. 2013 was the year that investors finally became confident in the economic recovery and poured their enthusiasm into equities. Despite significant volatility, stocks soared to new heights, giving the S&P 500 its best year since 1997. For the year, the S&P rose 29.6%, the Dow gained 26.5%, and the Nasdaq did best of all, growing an astonishing 38.3%.1

Let’s take a look at some of the major events that shaped 2013:

The Federal Reserve

The Federal Reserve was active in 2013, and anticipation of the end of quantitative easing drove much of the market volatility. The Fed bought $85 billion in bonds each month in 2013, a move that was designed to hold down long-term interest rates and encourage spending and investment. As the economic recovery gained steam, the Fed began evaluating its options for cutting back on bond purchases in order to return to “normal” monetary policies. Investors reacted with fears that the end of the easy money party would cause waves in financial markets, but that nervousness was largely overblown.

After months of anticipation, the Fed finally announced a reduction in the pace of their bond purchases at the December FOMC meeting. Markets rose after the announcement because investors viewed it as a vote of confidence about the economy’s strength.2

Current Fed chairman Ben Bernanke will be stepping down at the end of January and the Senate is expected to confirm Janet Yellen, the current vice chair, as his successor. She is closely aligned with Bernanke and is widely expected to continue current Fed policies.3

Budgetary Debates & the Government Shutdown

Political gridlock in Washington was another source of market volatility in 2013. After resolving the Fiscal Cliff in the first days of 2013, legislators were unable to agree on a deficit-reduction plan. This forced the federal government to institute across-the-board budget cuts designed to trim $1.2 trillion from the federal budget over the next 10 years.4

Act II of the budgetary debates resulted in a political stalemate over how to fund the government, pushing the federal government into a shutdown. Despite dealing with a 16-day shutdown, investors stayed calm and markets rose sharply in the period immediately following the budget deal. Some estimates put the cost of the shutdown at $2 billion in lost productivity plus the cost of ripple effects across the economy.5

Fortunately, a bipartisan budget deal reached in December promises to remove a lot of the uncertainty that hung over markets in 2013 by alleviating a new round of sequestration cuts and stabilizing government funding through late 2015.6

Though politicians will still have to tackle raising the Treasury debt ceiling in early 2014, we expect to avoid another showdown.

The Economy

The U.S. economy ended 2013 on a high note. GDP, a measure of economic activity, grew an estimated 4.1% in the third quarter, the fastest pace in almost two years. Though we don’t have data on Q4 GDP yet, it’s possible that sequestration and the government shutdown may have trimmed economic growth. On the positive side, some economists believe that 2014 may be the year that the economy really takes off.7

The labor market also improved significantly in 2013, with unemployment dropping to a five-year low of 7% in November. Payrolls increased solidly in October and November, and weekly unemployment claims fell in the final weeks of December. What’s better is that recent hiring trends show that gains were spread across both low-wage and higher-wage sectors. Much of the jobs’ growth we saw earlier in 2013 was concentrated in traditionally low-wage positions.8 More well paying jobs mean that employees will have more income to spend, hopefully boosting consumer spending.

Despite rising mortgage rates, the housing sector is still booming. Home values have risen for 20 consecutive months as low rates and a shortage of housing inventory boosted home prices.9 Manufacturing proved to be another bright spot in the economy; U.S. factory activity held close to a 2-1/2-year high in December, setting the stage for continued growth in 2014. Though manufacturing accounts for only about 12% of economic activity, it’s a key source of well-paying jobs and a big driver of the economic recovery.10

Company earnings rose for the fourth straight year despite weak demand and challenging conditions. Total earnings for S&P 500 companies in 2013 are estimated to increase 5.4%, painting a hopeful picture as we move into 2014. Investors were willing to pay outsized prices for those earnings results, pushing P/E ratios, a measure of stock price to earnings, to an average of 15.4 from 12.6 at the start of 2013. By that measure, stocks became more expensive in 2013, but P/E ratios in the S&P 500 still remained below the 20-year average of 16.5.11

Looking ahead, we’re optimistic about 2014. Though stocks exhibited a bit of a hangover in the first days of the New Year, the decline was not surprising, and the rally may continue after Friday’s December jobs report. Even if stocks slow their pace of growth, we think there’s still upside potential if the U.S. economy continues to gain steam and Q4 corporate earnings reports are positive. While a pullback is always possible as investors consolidate their positions, January has been a historically good month for markets.12 Although it’s impossible to predict market trends with accuracy, we’re always on the lookout for both dangers and opportunities for our clients, and we look forward to supporting you in the year ahead! Contact us today for your personal Discovery Meeting.

ECONOMIC CALENDAR:

Monday: Factory Orders, ISM Non-Mfg. Index

Tuesday: International Trade

Wednesday: ADP Employment Report, EIA Petroleum Status Report, FOMC Minutes

Thursday: Jobless Claims

Friday: Employment Situation

 

Data as of 1/3/2014

1-Week

Since 1/1/14

1-Year

5-Year

10-Year

Standard & Poor’s 500

-0.54%

-0.92%

25.49%

19.31%

6.52%

Dow

-0.05%

-0.64%

22.99%

16.46%

5.82%

NASDAQ

-0.59%

-1.07%

33.26%

30.63%

10.59%

U.S. Corporate Bond Index

0.36%

0.19%

-4.32%

4.00%

0.60%

International

-0.89%

-1.67%

15.39%

12.87%

7.91%

Data as of 1/3/2014

1 mo.

6 mo.

1 yr.

5 yr.

10 yr.

Treasury Yields (CMT)

0.02%

0.10%

0.13%

1.73%

3.01%

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance.com and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

HEADLINES:

Bernanke: Economy is recovering, but still has far to go. Fed Chairman Ben Bernanke spoke at an economic summit and gave an upbeat assessment of economic fundamentals, though he cautioned that the recovery is not complete. He also reiterated the Fed’s commitment to supporting the economy through accommodative monetary policies for as long as is needed.13

Consumer confidence surges.  U.S. consumer confidences jumped in December on a more upbeat outlook for hiring and signs that the economy could accelerate in 2014. Optimism about the job market is at a five year high, which is a positive sign for spending in 2014.14

Fed says further QE cuts likely. Jeffrey Lacker, a top Fed official, said that trimming $10 billion from the Fed’s monthly bond buys was the right call and further cuts will be discussed at future FOMC meetings, if economic conditions warrant. Fed decision-makers will be carefully weighing labor market gains and other factors in their evaluations.15

U.S. construction spending hits five-year high. November construction spending increased to the highest level since March 2009, the eighth straight month of gains. Spending gains in private construction of residential and nonresidential projects drove most of the gains and indicates continued strength in the housing sector.16

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