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Weekly Market Commentary

It’s like déjà vu all over again!

This wasn’t the first quarter, or even the first year, that bond markets have not performed in the way Wall Street strategists have expected.

During 2014, bond yields were expected to rise. They did not.

During 2015, bonds were predicted to finish the year yielding about 2.8 percent to 3.3 percent. On December 31, they were at about 2.3 percent.

During the first quarter of 2016, despite persistent predictions yields would move higher after the Federal Reserve’s rate hike, yields fell and bond values increased. Government bonds delivered the strongest returns gaining 3.7 percent for the quarter, according to Bloomberg.

There is an inverse relationship between interest rates and bond prices. When rates move higher, bond prices move lower, and the value of investors’ holdings may fall. When rates move lower, bond prices move higher, and the value of investors’ holdings may increase.

The current bull market in bonds started in 1982. During January of that year, the 10-year U.S. Treasury yield was about 14.6 percent. Since then, rates on Treasuries have declined and investors have reaped the rewards of steadily rising bond values. 

The Federal Reserve began tightening monetary policy in December 2015 by raising the fed funds rate. Late in the month, the rate on benchmark 10-year Treasury bonds reached about 2.3 percent. However, after central banks in Europe and Japan loosened their monetary policies, yields on Treasuries moved lower. By the end of the first quarter of 2016, they were at about 1.8 percent.

Overseas, the picture was a bit more complicated. An expert cited by Bloomberg explained, “Of the five countries that performed best – Germany, Belgium, Denmark, Japan, and the United Kingdom – the two-year debt of all but the United Kingdom has negative yields.”

When bonds have negative yields, investors are paying to lend their money. Why would anyone do that? The Economist reported there are three types of investors who buy bonds when yields are negative: 1) central banks and other entities that must own government bonds, 2) investors who expect to make money when a country’s currency gains value, and 3) investors who would rather suffer a small loss in government bonds than risk a bigger loss investing in something else.

That something else might have been a stock market during the first month or so of the quarter.

Globally, stocks underperformed bonds, returning 0.4 percent for the first quarter of 2016. However, the end-of-quarter return doesn’t really tell the whole story. Fears of global recession, among other things, produced a wild ride for stock market investors during the first months of the year. Worldwide, stocks were down about 11.3 percent through mid-February, according to Barron’s, and then gained 13.2 percent to end the quarter slightly higher, overall.

The United States delivered strong returns for the period. Barron’s reported:

“Still, the United States fared a good deal better than other developed markets, with Europe down 2.4 percent, the United Kingdom off 2.3 percent, and Japan worse by 6.4 percent – a surprise because overseas markets were touted as the places to be. That is, except for emerging markets; but their results also confounded the seers, as they returned a robust 5.8 percent for the quarter.”

At the end of last week, the Bureau of Labor Statistics’ monthly jobs report showed more people were looking for jobs, increases in employment exceeded analysts’ expectations, and average hourly earnings had moved higher. These were positive signs for the U.S. economy.

 


Data as of 4/1/16

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

1.8%

1.4%

0.6%

9.9%

9.2%

4.8%

Dow Jones Global ex-U.S.

0.3

-2.8

-12.5

-1.8

-2.2

-0.6

10-year Treasury Note (Yield Only)

1.8

NA

1.9

1.8

3.5

4.9

Gold (per ounce)

-0.6

14.3

1.4

-8.5

-3.1

7.5

Bloomberg Commodity Index

-1.7

-0.8

-22.0

-17.0

-14.4

-7.3

DJ Equity All REIT Total Return Index

3.3

6.1

5.0

9.9

11.5

6.7

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg 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 Total Return 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.

how do investors feel about stock markets? The American Association of Individual Investors (AAII) surveys investors weekly about whether they are bullish, bearish, or neutral on stock markets for the next six months. Last week, the majority of participants indicated they were neutral. There was less bullish sentiment than the previous week, but bulls maintained a slight edge over bears:

·         Bullish: 27.2 percent

·         Neutral: 47.1 percent

·         Bearish: 25.8 percent

The AAII also asked whether participants were better off, worse off, or as well off as they had been eight years ago (early in the Great Recession). More than one-half (54 percent) said they were better off. The remainder was almost evenly split. Twenty-four percent indicated they were not better off, and 23 percent said they were as well off.

Weekly Focus – Think About It

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way…”

--Charles Dickens, A Tale of Two Cities

 

* International debt securities involves special additional risks.  These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.  These risks are often heightened for investments in emerging markets. * Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * 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 afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg 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 Total Return 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. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal. 

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Weekly Market Commentary (March 28, 2016)

Weekly Market Commentary (March 28, 2016)

Are corporations in the United States struggling?

In its cover article last week, The Economist (a British publication), suggested there is not enough competition among American companies. It pointed out:

“Aggregate domestic profits are at near-record levels relative to GDP…High profits might be a sign of brilliant innovations or wise long-term investments were it not for the fact that they are also suspiciously persistent. A very profitable American firm has an 80 percent chance of being that way 10 years later. In the 1990s the odds were only about 50 percent.”

At the end of last week, U.S. headlines indicated concern about declining corporate profits:

·         Consumers prop up U.S. economy, but profits under pressure

·         U.S. Fourth-Quarter GDP Revised Up to 1.4% Growth but Corporate Profits Fall

·         Corporate profits fall in 2015 for first time since Great Recession

·         U.S. Corporate Profits Fall 8.1% in 4th Quarter

So, are U.S. companies experiencing record profits or are they in trouble?

Last week’s press release from the Bureau of Economic Analysis indicated corporate profits (after inventory valuation and capital consumption adjustments) declined from the third quarter of 2015 to the fourth quarter of 2015; hence, the headlines.

However, a one-quarter decline doesn’t provide a complete picture of the health of corporate America. As CFO.com pointed out, over the full year, corporate profits were up 3.3 percent year-to-year.

Trading Economics offered additional context. From 1950 through 2015, U.S. corporate profits averaged about $395 billion annually. Profits hit a record low for that period, $14 billion, during the first quarter of 1951. Profits rose to an all-time high of about $1.64 trillion during the third quarter of 2014.

Fourth quarter’s profits of $1.38 trillion remain well above that average.


Data as of 3/24/16

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

-0.7%

-0.4%

-2.7%

9.5%

9.2%

4.7%

Dow Jones Global ex-U.S.

-2.1

-3.1

-14.1

-2.0

-2.0

-0.5

10-year Treasury Note (Yield Only)

1.9

NA

1.9

1.9

3.4

4.7

Gold (per ounce)

-2.5

14.9

2.5

-8.6

-3.3

8.2

Bloomberg Commodity Index

-1.9

0.9

-20.8

-16.8

-14.0

-7.0

DJ Equity All REIT Total Return Index

-1.2

2.7

-0.2

9.3

11.6

6.3

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg 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 Total Return 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.

If you could live anywhere, where would you live?  If cities are your cup of tea, then here is some good news. The 2016 Worldwide Cost of Living Report compares the prices of 160 products and services – from food and drink to domestic care and private schools – in cities around the world. It found the cost-of-living in many cities fell during 2015 thanks to lower commodity prices, weakening currencies, and geopolitical unrest.

Be warned: a lower cost-of-living doesn’t mean a city offers good value. Take Zurich, for instance. Remember the uproar when the Swiss unpegged their currency early in 2015? The Swiss franc realized double-digit gains, the Swiss stock market swooned, and the Swiss people went shopping in neighboring countries. Well, the cost of living in Zurich fell from September 2014 to September 2015, but the decline wasn’t proportionate to declines elsewhere in Europe, and Zurich currently reigns as Europe’s most expensive city.

In September 2015, the most and least expensive cities in the world were:

Most expensive:

·         Republic of Singapore

·         Zurich, Switzerland

·         Hong Kong, China

·         Geneva, Switzerland

·         Paris, France

Least expensive:

·         Chennai, India

·         Karachi, Pakistan

·         Mumbai, India

·         Bangalore, India

·         Lusaka, Gambia

Cities in the United States didn’t fare well, either. A strong U.S. dollar helped push all 16 of the U.S. cities that were in the survey up at least 15 places. New York and Los Angeles both rank among the 10 most expensive cities in the world.

Weekly Focus – Think About It

“The first step in the evolution of ethics is a sense of solidarity with other human beings.”

--Albert Schweitzer, Winner of the Nobel Peace Prize

 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * 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 afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg 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 Total Return 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. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.

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Weekly Market Commentary (21 March 2016)

There is ongoing debate about whether markets behave in rational ways.

The efficient market hypothesis suggests it’s impossible to outperform the stock market because current share prices reflect all relevant information. In other words, stocks should always trade at fair value and it should be impossible to invest in a stock that is overpriced or underpriced.

The Economist reported there are two issues efficient market theorists have trouble explaining. The first is market bubbles, “where entire markets get out of whack with traditional valuation measures and then collapse.” The other is pricing anomalies. For instance, value stocks are inexpensive relative to their asset values and tend to outperform over the long term. In a perfect market, pricing anomalies shouldn’t occur.

During the past few weeks, U.S. stock markets have recovered from losses suffered earlier in the year and moved into positive territory for 2016. The shift into positive territory has some suggesting markets may not be correctly priced, but there is disagreement about whether it currently is overvalued or undervalued.

According to Barron’s, the recent strong performance of U.S. stock markets hasn’t been inspired by sound decisions and rational economic behavior. “The market’s valuation, at 17 times consensus analyst earnings-per-share estimates for 2016, looks stretched again, given that easy monetary policy and rising oil prices – not earnings growth – are responsible.”

Wharton Professor of Finance Jeremy Siegel disagreed. “On an absolute basis [the stock market is] slightly more highly valued than average but relative to interest rates, which are extremely low, it is actually undervalued in my opinion.”

Investors who believe markets perform well most of the time, but not all of the time, may want to take opportunities like these to look for companies whose shares may be mispriced, as well.


Data as of 3/18/16

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

1.4%

0.3%

-2.4%

9.7%

9.9%

4.6%

Dow Jones Global ex-U.S.

1.6

-1.0

-11.0

-1.6

-0.9

-0.3

10-year Treasury Note (Yield Only)

1.9

NA

2.0

2.0

3.3

4.7

Gold (per ounce)

-1.0

17.9

9.1

-7.9

-2.5

8.5

Bloomberg Commodity Index

1.0

2.8

-17.8

-16.3

-13.3

-6.6

DJ Equity All REIT Total Return Index

2.2

4.0

2.4

9.8

11.8

6.3

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg 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 Total Return 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.

Here’s a milestone you don’t reach until your seventies. The major milestones of older Americans are not attended with the same sense of wonder that accompanies the major milestones of younger Americans. Sure, registering for Social Security benefits and signing up for Medicare are rites of passage, but they don’t hold a candle to earning your driver’s license, receiving your first kiss, winning your first promotion, or dancing at your wedding.

If you have retirement accounts when you become a septuagenarian, then you’ll encounter a milestone the Internal Revenue Service (IRS) strongly encourages you to remember. Beginning April 1 of the year following the year in which you reach age 70½, you must begin taking required minimum distributions (RMDs) from most of your retirement accounts. Forbes offered this list:

·         Traditional IRAs

·         Rollover IRAs

·         Inherited IRAs

·         SEP IRAs

·         SIMPLE IRAs

·         401(k), 403(b), and 457(b) plan accounts

·         Keogh plans

There currently are no RMDs for Roth IRAs, unless the accounts were inherited.

If you have more than one qualifying retirement account, then a separate RMD must be calculated for each account. If you want to withdraw a portion of each account, you can, but it may prove simpler to take the entire amount due from a single account. Once you start, you must take RMDs by December 31 every year. If you don’t, you’ll owe some hefty penalty taxes.

The IRS offers some instructions for calculating the RMD due. “The required minimum distribution for any year is the account balance as of the end of the immediately preceding calendar year divided by a distribution period from the IRS’ “Uniform Lifetime Table.” A separate table is used if the sole beneficiary is the owner’s spouse who is ten or more years younger than the owner.”

If you would prefer to have some help figuring out the correct amount when RMDs are due, contact your financial professional.

Weekly Focus – Think About It

“It wasn't by accident that the Gettysburg address was so short. The laws of prose writing are as immutable as those of flight, of mathematics, of physics.”

--Ernest Hemingway, American writer

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * 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 afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg 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 Total Return 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. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision.

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Weekly Market Commentary (March 14, 2016)

Stim-u-late mar-kets! Come on! It’s monetary easing.*

The European Central Bank (ECB) was singing a tune that invigorated financial markets last week. The Wall Street Journal explained:

“The fresh measures included cuts to all three of the ECB’s main interest rates, €20 billion a month of additional bond purchases atop the ECB’s current €60 billion ($67 billion) program, and an expansion of its quantitative easing program to highly rated corporate bonds – all more aggressive steps than analysts had anticipated. The central bank also announced a series of ultracheap four-year loans to banks, some of which could be paid to borrow from the ECB.”

Most national indices in Europe gained ground last week. The Financial Times Stock Exchange Milano Italia Borsa (FTSE MIB), which measures the performance of the 40 most-traded stocks on the Italian national stock exchange, was up almost 4 percent. Spain’s Indice Bursatil Español Index (IBEX 35), which is comprised of the most liquid stocks trading on the Spanish continuous market, gained more than 3 percent. Major markets in the United States moved higher, as well.

Of course, the harmony provided by global oil markets proved pleasing to investors, too. An International Energy Agency (IEA) report suggested more equitable supply and demand balances could mean oil prices have bottomed out.

Barron’s offered a word of caution, “Investors shouldn’t get too comfortable when it seems that oil moves and central-bank maneuvers are the main reason stocks go up or down, not earnings and economic growth.”

*Set to the tune of Kool and the Gang’s ‘Celebration.’ You know, “Cel-e-brate good times! Come on! It’s a celebration.”


Data as of 3/11/16

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

1.1%

-1.1%

-0.9%

9.1%

9.2%

4.7%

Dow Jones Global ex-U.S.

1.1

-2.5

-9.6

-2.3

-1.6

1.3

10-year Treasury Note (Yield Only)

2.0

NA

2.1

2.1

3.4

4.8

Gold (per ounce)

-1.0

19.1

10.0

-7.1

-2.2

8.8

Bloomberg Commodity Index

2.0

1.8

-19.6

-16.5

-13.3

-6.8

DJ Equity All REIT Total Return Index

1.7

1.7

4.7

9.0

11.0

6.4

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg 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 Total Return 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.

Here’s some Good News: Healthcare spending is expected to increase more slowly during 2016!It’s projected to grow by 6.5 percent this year, according to a report from PWC. That’s still a lot faster than inflation. The Economist projects overall consumer prices in the United States will increase by 1.2 percent this year.

The report suggested several factors are contributing to lower healthcare spending, including:

·         The Affordable Care Act’s Cadillac Tax. PWC reported the tax“…is motivating businesses to enact high cost-sharing. Their workers are already responding to the higher deductibles by scrutinizing what services are necessary and which are not…cost sharing can backfire if the employee foregoes preventative care and faces years of chronic illness.” Twenty-five percent of employers offer only high-deductible healthcare plans for employees.

·         Virtual healthcare. Telemedicine appears to be the next big thing in medicine. Doctors making house calls using real-time audio and video is the gold standard for service, according to the Modern Medicine Network. Remote patient monitoring, pre-recorded videos, and computer-assisted or message-based communications also are being offered.

·         New health advisors. A new variety of healthcare company is making information about facilities, providers, services, and pricing more accessible. In some cases, financial incentives encourage employees to seek treatment at a preferred facility.

These gains are more than offset by factors that are pushing healthcare spending higher, including:

·         High-cost specialty drugs. PWC reported specialty drugs are becoming a focus for the pharmaceutical industry. “With 700 specialty products currently in development, these investments will soon surpass traditional drug investments…According to a recent Express Scripts report, total national prescription spending increased 13.1 percent last year to about $980 per person.”

·         Cyber security investments. Healthcare organizations are spending heavily on cyber security to protect patients from data breaches. The cost of a breach is about $200 per patient record. The cost of security is about $8 per patient record.

It’s critical to factor healthcare spending into retirement plans. In 2015, the Employee Benefits Research Institute (EBRI) found a 65-year-old man needs $124,000 in savings and a 65-year-old woman needs $140,000 if each wants a 90 percent chance of having enough money saved to cover healthcare expenses in retirement. EBRI’s analysis did not include the savings needed to cover long-term care expenses.

 

Weekly Focus – Think About It

“Yesterday is not ours to recover, but tomorrow is ours to win or lose.”

--Lyndon B. Johnson, Former U.S. President

Best regards,

 

Lee Barczak

President

 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * 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 afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg 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 Total Return 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. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.

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Weekly Commentary (March 7, 2016)

When Mark Twain’s death was reported in the United States, he was alive and well in London. He responded to news accounts with a note saying, “The report of my death was an exaggeration.”

Last week’s jobs data suggest the same is true of reports that a recession is imminent in the United States. Barron’s explained:

“Thank goodness the mid-February fears of recession that brought markets to their knees – and the 10-year Treasury yield to a low of 1.53 percent – were overblown. Friday’s nonfarm payrolls report was the latest confirmation. It showed that 242,000 jobs were created last month, far more than expected and up from the previous month’s reading, which was itself revised higher.”

The employment data weren’t all positive, though. Average hourly earnings declined when it was expected to increase and the number of hours worked was lower, on average, than it has been for two years.

Regardless, The Wall Street Journal said employment, consumer, and business spending reports helped calm investors’ fear the U.S. economy was losing momentum. Some investors sold bonds, which helped push the yield on 10-year Treasury notes higher.

Investors also were encouraged by last week’s oil price rally, according to CNBC. A better demand outlook, coupled with cuts in supply, boosted oil prices by 9.5 percent in one week.

U.S. stock market performance reflected investors’ renewed optimism. USA Today said, “Stocks have rebounded from their worst start to a year ever, with the benchmark S&P 500 trimming its year-to-date loss to 2.15 percent after being down by more than 10 percent on February 11.” At the end of last week, the Standard & Poor’s 500 Index was about 6 percent below its record high.


Data as of 3/4/16

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor's 500 (Domestic Stocks)

2.7%

-2.2%

-5.1%

9.5%

8.7%

4.6%

Dow Jones Global ex-U.S.

5.0

-3.6

-13.2

-2.1

-2.5

-0.3

10-year Treasury Note (Yield Only)

1.9

NA

2.1

1.9

3.5

4.7

Gold (per ounce)

4.2

20.3

6.5

-6.7

-2.2

8.5

Bloomberg Commodity Index

3.9

-0.2

-23.2

-16.8

-14.3

-7.0

DJ Equity All REIT Total Return Index

3.9

0.0

0.6

8.4

10.7

6.2

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg 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 Total Return 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 you leaving the same amount to all of your beneficiaries?

One-third of all parents with wills have divided their estates unequally among their children, according to the National Bureau of Economic Research (NBER). The study found bequests in complex families – families with stepchildren or estranged children – are more likely to be unequal. The Squared Away Blog reported:

“…parents with stepchildren are considerably less likely to include all of their children than are parents who have only biological offspring. This is more true for women with stepchildren than for men with stepchildren. Divorced and widowed parents are even less likely to divide their assets evenly if they have stepchildren.”

The blog reported there were some mitigating factors. Wealthier parents were more likely to include stepchildren and children with whom they had little or no contact during their lifetimes than less wealthy parents. However, parents who suffered from poor health were less likely to divide their estates equally. Bequests sometimes were used as an incentive to provide long-term care.

Since children may interpret unequal inheritance as an expression of unequal love, why do parents play favorites? Researchers at Ohio State University delved into the question in 2003 and reported altruism (equalizing income differences among children), exchange (bequests in return for services), and/or evolution (bequests to biological children rather than adopted or stepchildren) played a role when distribution of assets was uneven.

Weekly Focus – Think About It

“The philosophy of the school room in one generation will be the philosophy of government in the next.”

--Abraham Lincoln, Former U.S. President

 

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate. *Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. * The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index. * 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 afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg 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 Total Return 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. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * Stock investing involves risk including loss of principal.

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