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!