June 2013

Following historic stock market highs in May, higher volatility and sharp reversals are back. Mid-year is a good time for investors to review strategy, especially asset allocation decisions. Such discussions are always a priority at ASG, regardless of the mood of the market.

Looking forward, we are well served to consider that all asset classes carry risks. As we have seen so many times before, stock market risk is elevated near market tops. Bond market risk is exposed in a rising yield environment. A loss of purchasing power over time is a well-known risk to cash. One way to face these risks head on is to hold a combination of asset classes in percentages that are consistent with your goals, your age, and your appetite for risk. Buying and selling stocks and bonds to match certain economic conditions, predictions, or behavioral biases is often an invitation to painful timing errors.

As we enter the second half of the year, much of our attention at ASG will focus on corporate earnings. If the economy is on the mend, companies will likely grow profits with corresponding strength in stock prices. We will also continue to follow the policies of Fed Chairman Ben Bernanke and the Federal Reserve Bank. A gradual withdrawal of monetary stimulus by the Fed would be welcome later in the year, if it means that the US economic recovery is finally able to sustain itself.

Fiscal policy (taxation and government spending) is on hold in Washington what with the distraction of multiple scandals and heightened geopolitical risk. The full effect of sequestration (indiscriminate, mandatory spending cuts) is still unknown but it seems as if there is no other way for elected officials to address troublesome deficits. So, we would be surprised to hear of any progress on the much needed reform of tax policy, social security, Medicare, Medicaid, disability and unemployment compensation.

As we enter the third quarter of 2013, we keep an eye on the following dates:

July 2 Auto Sales
July 4 Happy Independence Day!
July 5 Unemployment Rate
July 22 Existing Home Sales
July 24 New Home Sales
July 31 GDP

Our commitment to help you reach your financial goals is top of mind as we celebrate Independence Day. After all, a merit worthy goal of investing is total financial independence defined as life savings that cannot be outlived. Happy Summer!

March 2013

A rally in stocks has pushed the Dow Jones Industrial Average beyond the all-time high set nearly six years ago. The stock market’s rise has been the biggest driver of millionaire creation in the United States, but participation is uneven. According to research from Edward Wolff of New York University, the top 10 percent of Americans own more than 80 percent of all stocks.
A rally that makes history attracts the attention of the media and much has been written about the direction of current stock price levels. Monetary policy at the Federal Reserve featuring very low interest rates has provided the intended sustained tailwind for stocks. Quite the opposite is true of cash and bonds. The big question is whether the low interest rate policy will stay in place through 2015 as advertised by Fed Chairman Ben Bernanke.

Meanwhile, American businesses continue to do well. They have cash in reserve and are cautious with spending and hiring. This conservative stance is good for shareholders, but economic growth in the United States is still correspondingly slow. In this environment, unemployment remains elevated. PIMCO CEO Mohamed El-Erian recently summed it up by saying, “As wonderful as stock rallies are, they don’t mean much if they are not ultimately validated by a vibrant economy, lower unemployment, and financial stability.”
In Washington, a fight over the budget is far from over. The so called “fiscal cliff” was averted at the beginning of this year. More recently, lawmakers failed to avert the automatic budget cuts known as sequestration. The automatic budget cuts have sharpened the focus of our elected officials, but the middle ground remains highly elusive. In addition, a government shutdown remains possible by March 27; unless a continuing resolution allows government to stay open until the end of the year.

At ASG, we remain focused on things within our control. Let us help you find balance with asset allocation decisions that are consistent with your age and your individual appetite for risk. If you are not already fully funded in tax-deferred or tax-free IRAs for 2012, you have until April 15th to make an additional contribution. Your future self will be glad you did!

As we enter the second quarter of 2013, we keep an eye on the following dates:

March 20 FOMC Rate Decision
March 31 Happy Easter!
April 5 Unemployment Rate
April 15 Tax Filing Deadline
May 19 US Debt Ceiling Deadline

Our commitment to help you reach your financial goals is stronger than ever. Happy Spring!