Archives for February 2015

Dow Sets First Record Close of 2015 Weekly Update – February 23, 2015

Image courtesy of FreeDigitalPhotos.net/cooldesign

Image courtesy of
FreeDigitalPhotos.net/cooldesign

Stocks rallied on the news that Greece reached a new deal with its creditors, sending the Dow and the S&P 500 to new record closes and bringing the Nasdaq close to its own record set in March 2000.1 For the week, the S&P 500 gained 0.63%, the Dow rose 0.67%, and the NASDAQ grew 1.27%.2

Greek leaders, who have been in talks with EU creditors for several weeks, were able to reach an 11th-hour deal on Friday to extend the Greek bailout for an extra four months. Though the agreement just kicks the can down the road until the next major deadline, it avoids (or at least postpones) a debt default and fresh economic crisis and keeps Greece in the Eurozone for now. The delay also gives leaders breathing room to negotiate further economic reforms that will likely be unpopular with Greek voters.3 Investors reacted positively to the news and sent the major indexes to record highs.

In other geopolitical news, one of NATO’s highest-ranking generals warned that alliance members should prepare for a Russian assault on an Eastern European member state. Though the current ceasefire between Russian and Ukrainian forces continues, the remarks highlight a serious decline in trust between Europe and Russia.4 How real is the threat of all-out war? It’s impossible to know at this juncture, but it’s clear that European military commanders are taking Russia’s territorial ambitions seriously.

The week ahead is filled with important economic events. Federal Reserve Chair Janet Yellen will speak before the House and Senate about monetary policy, putting future rate changes in focus. If the Fed holds to a mid-year interest hike, it would signal the bank’s confidence in the economy’s resilience; holding off might indicate concern about how the global picture might affect domestic growth.5 Investors will also get their second look at fourth quarter 2014 Gross Domestic Product, giving us a clearer look at how the economy performed in the last three months of the year.

 

ECONOMIC CALENDAR:

Monday: Existing Home Sales, Dallas Fed Mfg. Survey

Tuesday: S&P Case-Shiller HPI, Consumer Confidence, Janet Yellen Speaks 10:00 AM ET

Wednesday: New Home Sales, Janet Yellen Speaks 10:00 AM ET, EIA Petroleum Status Report

Thursday: Consumer Price Index, Durable Goods Orders, Jobless Claims

Friday: GDP, Chicago PMI, Consumer Sentiment, Pending Home Sales Index

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HEADLINES:

Weekly jobless claims fall more than forecast. After some seasonal disruptions, weekly applications for unemployment benefits fell to 283,000 in the latest sign of an improving job market. The four-week average, a less volatile measure, fell to its lowest level in 15 weeks.6

U.S. home construction falls in January. Groundbreaking on new homes dropped 2.0% last month as builders slowed down construction of new single-family homes. However, building activity is still moving faster than it did a year ago.7

U.S. loosens trade restrictions against Cuba. The federal government announced plans to allow small Cuban businesses to export goods to the U.S. Though there are restrictions on what can be imported, the move represents an important change in relations with the communist country.8

U.S. factory activity rises. The manufacturing sector, a significant contributor to economic growth, expanded in February at its fastest pace since November. This is good news after the cold-weather related slowdowns of early 2014.9

What Pushed the Major Indexes up? Weekly Update – February 17, 2015

Image courtesy of FreeDigitalPhotos.net/renjith krishnan

Image courtesy of
FreeDigitalPhotos.net/renjith krishnan

Stocks ended another positive week at record highs, sending the Dow above 18,000 and the S&P 500 to a new record close. Investors reacted positively to firming oil prices and news of a possible peace deal in Ukraine. For the week, the S&P 500 gained 2.02%, the Dow rose 1.09%, and the Nasdaq grew 3.15%.1

There were a few factors behind the week’s rally, which erased previous losses and brought the major indexes back to positive for the year. Oil prices, which have been falling steadily for months, may be bottoming out as production declines and the number of oil rigs fall. Markets have been sensitive to oil prices and a slight bounce last week was enough to send stocks higher.2

The deteriorating financial situation in Greece was also in focus. As Greece nears its deadline for a new round of loans from the EU, encouraging remarks from Greek leaders suggest that an 11th-hour deal may be possible. Greece is seeking a new debt agreement with EU lenders that would allow it to back out of the painful austerity measures that have been imposed by creditors since 2010. If no agreement is reached, Greece would probably seek loans from alternative sources (like Russia or China), potentially damaging internal financial relations within the EU.3

Investors also reacted positively to better-than-expected growth numbers from Europe, which showed that the Eurozone economy grew 0.3% in the fourth quarter of 2014. Germany’s economy outperformed, growing 0.7% on strong domestic demand. Even better, only three countries in the 18-member zone experienced economic contractions: Greece, Finland, and Cyprus.4

Oil will likely be the source of more market activity during this holiday-shortened week as analysts try and determine whether crude oil prices may be stabilizing. The effects of a Russia-Ukraine ceasefire may also ripple through oil markets, causing additional volatility, though we can hope for further market growth.

 

ECONOMIC CALENDAR:

Monday: U.S. Markets Closed For Presidents’ Day Holiday

Tuesday: Empire State Mfg. Survey, Housing Market Index, Treasury International Capital

Wednesday: Housing Starts, PPI-FD, Industrial Production, FOMC Minutes

Thursday: Jobless Claims, PMI Manufacturing Index Flash, Philadelphia Fed Survey, EIA Petroleum Status Report

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HEADLINES:

Consumer spending lags in January. Retail sales, a core measure of how Americans spend, edged up barely 0.1% after dropping 0.3% in December. This report suggests that Americans are not using fuel savings to boost their spending, which could trim Q1 economic growth.5

Small business sentiment downbeat. Optimism about the economy fell last month among small business owners who worried about sales and decreasing inventory spending. However, sentiment about the labor market remains positive.6

Weekly unemployment claims rise unexpectedly. The number of Americans filing new unemployment claims rose slightly last week. Seasonal issues – including major snowstorms in Massachusetts – may have affected data collection and underlying labor trends still show strength.7

U.S. business inventories increase slightly. Inventories, a key factor of economic growth, edged up just 0.1% in December, supporting views that growth slowed in the fourth quarter.8

Prices At Pump Help Drive Savings Weekly Update – February 9, 2015

Image courtesy of FreeDigitalPhotos.net/digitalart

Image courtesy of
FreeDigitalPhotos.net/digitalart

Markets shook off losses last week and ended with strong weekly gains on the back of a positive January jobs report. For the week, the S&P 500 gained 3.03%, the Dow rose 3.84%, and the Nasdaq grew 2.36%.1

January’s monthly Employment Situation report showed that the economy gained 257,000 new jobs last month. Though the unemployment rate rose to 5.7%, it went up for the right reasons as Americans rejoined the labor force and began searching for jobs again. Best of all, average earnings grew 0.5%; since economists have been worrying about the slow pace of wage growth in the recovery, a jump in earnings is good news for the economy.2

Though wages went up, consumer spending in December dropped to its lowest level in five years as Americans cut spending and used extra gas money to boost their savings.

Higher incomes, lower prices at the pump, and falling inflation are giving American households a much-needed boost in spending power this year.3 Though the drop in consumer spending could hit Q4 economic growth numbers, the underlying factors set the stage for a strong 2015 for American consumers.

Stocks lost a little steam on Friday due to growing concern over a standoff between Greece’s new anti-austerity government and Eurozone leaders. Greek leaders are seeking to tear up the agreements signed by the previous government in favor of debt forgiveness from the EU. However, the message from EU leaders to Greece is clear: Uphold your financial commitments and stick to the plan.4

Though Greek voters are unequivocally tired of painful austerity cuts, Greece still depends on EU money, and its new leaders must tread carefully. Citing concern about how a liquidity crunch would affect Greece’s ability to repay debts, Standard and Poor’s downgraded Greek sovereign debt from B to B-.5 What will the outcome of the showdown be? Hard to know at this stage, but the conclusion will likely affect how future negotiations with Spain, France, and Italy play out.

Looking ahead, though the week ahead is light on economic reports, analysts will be closely monitoring the January retail sales report to see how Americans are spending. The Labor Department’s Job Openings and Labor Turnover Survey that comes out Tuesday will also give some more insight into the overall health of the jobs recovery.6 Positive data could renew focus on the Federal Reserve and a possible interest rate hike this year.

ECONOMIC CALENDAR:

Tuesday: JOLTS

Wednesday: EIA Petroleum Status Report, Treasury Budget

Thursday: Jobless Claims, Retail Sales, Business Inventories

Friday: Import and Export Prices, Consumer Sentiment

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HEADLINES:

Q4 earnings reports show revenue weakness. Though overall earnings are positive, U.S. firms are still struggling with weak demand. Including reports from 274 S&P 500 companies, overall earnings are up an optimistic 6.7% from Q4 2013; however, revenues are up just 0.2%.7

U.S. motor vehicle sales catch fire in January. U.S. automakers reported the strongest January car and truck sales in seven years. Ford and GM had strong months, showing that sales increased 15% and 18%, respectively, over last year.8

U.S. productivity falls in Q4 2014. Hourly output per worker, a measure of the productivity of the U.S. economy, fell 1.8% in the final three months of 2014. This could mean that employers have eked out every drop of labor from their workers (and may be forced to raise wages).9

Brent crude has best gains in 17 years. Oil rallied again and showed the best two-week performance since 1998, gaining 19%. Price volatility was stoked by falling oil production and violence in Libya.10

Hixon Zuercher February 2015 Monthly Video Update

Are Your Estate Documents In Order?

As wealth managers, it’s part of our commitment to you to help you guide your financial affairs. One area that is particularly critical to get right is estate preparation and the protection of your loved ones from the unexpected. Proper estate preparation is an act of love and responsibility to those you care about.

Estate Preparation Questions You Should Consider

  • Have you discussed your wishes with your spouse and loved ones?
  • Do you have an updated Will?
  • Have you executed a Living Will and healthcare proxy to protect your wishes in the event of incapacity?
  • Have you named guardians for your children?
  • Have you created a Trust and titled your assets in the name of the Trust?
  • Were your estate plans constructed to minimize tax consequences?
  • Have you reviewed your primary and secondary beneficiaries to make sure they reflect your priorities?

These questions are not exhaustive and are only designed to act as a starting point for your preparations. If you’re not sure about any of these issues, it may be time to request a legal and financial review.

Why is estate preparation so critical?

  • It documents your wishes and helps ensure that they are carried out when you are no longer able to look after your affairs.
  • It helps protect the financial stability of your loved ones and support your life priorities.
  • It helps minimize the taxes, expenses, and legal hassle involved with transferring assets to heirs.

Do I really need estate preparation if I have beneficiaries on my accounts?

Beneficiary provisions are a valuable tool for reducing the expense and time associated with transferring wealth; however, they do not replace proper estate preparation. We believe that the process of preparing your estate is critical to protecting your family and future financial affairs. We have also found that estate preparations offer an opportunity to explore your life priorities and discuss your thoughts with your loved ones.

Many Americans put off estate preparation because they view it as morbid or depressing. We prefer to treat it as preparing for life and protecting your family from the unexpected. Though you cannot control the future, these preparations help you focus on what you can control and empower you to care for your loved ones long after you’re gone.

If you have worked with an attorney to develop your estate plans, it’s still a good idea to regularly review your documents to make sure that they still reflect your wishes. Letting your documents go out of date can create legal problems or expensive tax bills for your heirs. To help ensure that our clients have professional recommendations for their circumstances, we partner with legal professionals who specialize in helping clients create a personalized estate blueprint. Please let us know if we can provide an introduction.

We’ve asked some questions that we hope will help you think about your priorities and prompt a discussion with your loved ones. Please feel free to share this information with your friends and family; everyone deserves the benefit of professional recommendations and the confidence of knowing that their future wishes are protected. If you would like to review your current estate provisions or need help finding an attorney, please call our office at 419-425-2400.

What Clues Did the First Month of the Year Leave Us? Weekly Update – February 2, 2015

Image courtesy of FreeDigitalPhotos.net/Cooldesign

Image courtesy of
FreeDigitalPhotos.net/Cooldesign

Markets were driven lower in another volatile week of trading, ending the first month of 2015 in the red. For the week, the S&P 500 lost 2.77%, the Dow fell 2.87%, and the Nasdaq dropped 2.58%.[1]

One of the major contributors to the week’s losses was an unexpected miss in fourth quarter economic growth. The first estimate of Gross Domestic Product (GDP) showed that the economy grew an underwhelming 2.6% in the last three months of 2014. This is a significant drop from the 5.0% growth the economy saw in the third quarter and below economists’ expectations of 2.8%-3.0% growth. However, consumer spending was higher than expected, showing that Americans are still buying. Also, keep in mind that this is just the first estimate of GDP growth. [2] A lot of economic data has yet to be analyzed, and we can hope for upward revisions in the months to come.

Earnings season marches onward and the news is mixed. While the reports we have seen from 228 S&P 500 companies show that earnings are up 5.5% over the same period in 2013, revenues are up just 1.7%.[3] Overall, U.S. companies appear to be struggling with three factors:

  • Falling oil prices, which are seriously affecting energy companies and interrelated businesses.
  • The strength of the U.S. dollar, which is hitting companies that depend on foreign demand hard. A strong dollar makes it more expensive to buy U.S. products.
  • Weak global economic growth. This factor is also pressing down forward guidance from companies, many of which are expecting a tough business environment in 2015.[4]

Even if overall earnings numbers may not look inspiring, there are a lot of individual success stories in each sector. Though volatility is stressful, it can provide opportunities for investors who can be flexible. Part of what we do for our clients is look for those opportunities for growth in every market environment.

Oil prices continued to slide though some analysts believe we may be approaching an oil price floor. One industry insider believes that oil prices could double by the end of 2015 as oil companies respond to the supply glut by slowing down production.[5]

Looking forward, the week ahead is filled with more economic reports, including the January Employment Situation Report, which will hopefully show continual improvement in the labor market. Markets are likely to remain volatile in the days and weeks ahead, but we can hope that positive data might encourage investors to “buy the dip.”

ECONOMIC CALENDAR:

 Monday: Personal Income and Outlays, PMI Manufacturing Index, ISM Mfg Index, Construction Spending

Tuesday: Motor Vehicle Sales, Factory Orders

Wednesday: ADP Employment Report, ISM Non-Mfg. Index, EIA Petroleum Status Report

Thursday: International Trade, Jobless Claims, Productivity and Costs

Friday: Employment Situation

Data as of 1/30/2015 1-Week Since 1/1/15 1-Year 5-Year 10-Year
Standard & Poor’s 500 -2.77% -3.10% 11.19% 17.16% 7.03%
DOW -2.87% -3.69% 8.31% 14.10% 6.46%
NASDAQ -2.58% -2.13% 12.42% 23.17% 12.77%
U.S. Corporate Bond Index 1.59% 2.71% 5.68% 2.71% 1.18%
International -0.28% 0.44% -2.99% 3.37% 1.83%
Data as 1/30/2015 1 mo. 6 mo. 1 yr. 5 yr. 10 yr.
Treasury Yields (CMT) 0.01% 0.07% 0.18% 1.18% 1.68%

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:

Durable goods fall sharply in December. Orders for long lasting U.S. manufactured goods dropped 3.4% in December after falling 2.1% in November, raising questions about the health of one of the economy’s most important sectors. Though demand for automobiles grew, a core indicator of business investment fell for the fourth straight month.[6]

Consumer sentiment brightens in January. Optimism about better job and wage prospects sent a measure of U.S. consumer sentiment to its highest level since 2004. Hopefully, increased confidence in the economic expansion will translate into higher consumer spending this quarter.[7]

Chinese factory growth slides. China’s manufacturing sector unexpectedly shrank in January to the lowest level since 2012. Since factories often experience a bump just before an important spring holiday, the drop could presage further gloom for China’s economy.[8]

Jobless claims fall to 14-year low. The number of Americans filing new claims for unemployment benefits fell to the lowest level since 2000. Claims had been trending higher in previous reports, so the sudden drop is an indicator that the labor market is returning to its positive trend.[9]

[1] http://goo.gl/RPwDsE

[2] http://www.cnbc.com/id/102383485

[3] http://www.zacks.com/commentary/37601/3-factors-define-q4-earnings-season

[4] http://www.zacks.com/commentary/37601/3-factors-define-q4-earnings-season

[5] http://www.cnbc.com/id/102381893

[6] http://www.usatoday.com/story/money/business/2015/01/27/durable-goods-orders-december/22370639/

[7] http://www.reuters.com/article/2015/01/30/us-usa-economy-sentiment-idUSKBN0L31QI20150130

[8] http://www.reuters.com/article/2015/02/01/us-china-economy-pmi-idUSKBN0L50ZX20150201

[9] http://www.marketwatch.com/story/jobless-claims-drop-to-14-year-low-2015-01-29