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Market Commentary
Economic Updates
Recent News |
Weekly Commentary
February 22, 2010
The Markets
The U.S. stock market has had several "mini
corrections" since the March 9, 2009 low and last week's strong
performance has some analysts saying the recent 9% drop in the S&P 500 from
its mid-January high may have run its course, according to the Associated
Press.
Stocks rose for the second consecutive week and
have now recouped about two-thirds of the 9% drop that occurred between January
19 and February 8. Jitters about sovereign debt problems in Europe, central
governments "taking away the punch bowl" of easy money, and a
surprise rise in the discount rate last week have started to give way to the
good news that corporate earnings are still moving up smartly, the
manufacturing sector is on the rise, and inflation is subdued, according to
Bloomberg.
Interestingly, whether you are bullish or bearish,
there is still plenty of data to support either view. However, some of this
data is contradictory which makes discerning solid trends a little more
difficult. For example, the value of the U.S. dollar rose more than 8% against
a basket of six currencies between late November 2009 and February 19,
according to www.stockcharts.com. Yet, as the dollar is
rising, our government is running trillion dollar deficits and the Federal
Reserve continues to proclaim that it will keep interest rates low for an
extended period of time--both of which would seem to be bad news for the value
of the dollar.
Also, core consumer prices declined in January for the first time since 1982, suggesting
inflation is well under control. Despite low inflation, gold closed last week
over $1,100 an ounce, which is not far from its all-time record high, according
to Barron's and CNBC. Low inflation would seem to be bearish for gold prices,
but, so far, gold has ignored our relatively stable prices.
This "new normal" of contradictory
relationships makes navigating the financial markets a bit trickier than usual,
but we are working hard to meet the challenge for you.
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Data as of 2/19/10
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1-Week
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Y-T-D
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1-Year
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3-Year
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5-Year
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10-Year
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Standard & Poor's 500 (Domestic Stocks)
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3.1%
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-0.5%
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44.0%
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-8.8%
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-1.3%
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-2.0%
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DJ Global ex US (Foreign Stocks)
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1.5
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-4.9
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53.3
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-8.8
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2.0
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0.4
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10-year Treasury Note (Yield Only)
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3.8
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N/A
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2.9
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4.7
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4.3
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6.3
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Gold (per ounce)
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2.8
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0.8
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13.5
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18.4
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21.1
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13.8
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DJ-UBS Commodity Index
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3.7
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-3.1
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29.6
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-6.9
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-2.5
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3.2
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DJ Equity All REIT TR Index
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5.4
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-1.0
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89.4
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-15.7
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1.6
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11.0
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Notes:
S&P 500, DJ Global ex US, Gold, DJ-UBS 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 TR 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 or not available.
THE RICH ARE GETTING RICHER and the
IRS just released some data that drives home that point. Below are some
eye-popping tidbits on the top 400 individual tax returns based on largest
Adjusted Gross Income, according to the IRS.
In 1992, the person ranked 400th on the list
had an Adjusted Gross Income of $24.4 million. In 2007, that number rose
to $138.8 million.
In 1992, the average Adjusted Gross Income for the 400 people on the list
was $46.8 million. In 2007, the average rose to $344.8 million.
In 1992, the top 400 paid 1.0% of the
country's total income taxes. In 2007, they paid 2.1% of the total.
In 1992, the average tax rate for the top 400
was 26.4%. In 2007, the average tax rate was 16.6%.
During the 16 years between 1992 and 2007, a
select group of 3,472 different people made the top 400 list at least
once. And, out of those 3,472 people, 72% appeared on the list only once.
At the other end, 7 extremely wealthy people made the top 400 list every
one of those 16 years!
Do you have any guess as to who those 7 people are
that made the top 400 list every year between 1992 and 2007? Inquiring minds
want to know, but the IRS is not divulging the names.
Weekly Focus - Think About It
"A man is rich in proportion to the number of
things which he can afford to let alone."
--Henry David Thoreau
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Best regards,
Jim Forcella, CFP®, CFS
LPL Branch Manager
LPL Investment Adviser Representative
CA Insurance License #0635256
P.S. - Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
Closing Reminders - Should your personal or financial situation change (i.e. Marital or employment status, beneficiary changes or income needs) please contact us at 530.222.6301 or 800.546.5573 for either a phone review, or an appointment. We want to ensure that your current financial objectives meet your personal circumstances.
Forcella Wealth Management Information - Are you receiving too much mail regarding your investments? You now have the option to receive your LPL Financial communications electronically! LPL Financial is pleased to offer the convenience of viewing shareholder communications, including the fund prospectus, annual reports, and proxy statements online. Visit the link below to be directed to a secure website where you will enter your LPL Financial account number and Email address. You will no longer receive shareholder communications information through the mail but can request a hard copy at any time. Please feel free to contact us if you have any questions regarding this form.
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Forcella Wealth Management
1600 Victor Ave ● Redding, CA 96003
Phone 530.222.6301 ● Toll Free 800.546.5573 ● Fax 530.226.1677
jim.forcella@lpl.com ● www.forcellawealth.com
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* This
newsletter was prepared by PEAK.
* The
Standard & Poor's 500 (S&P 500) is an unmanaged group of securities
considered to be representative of the stock market in general.
* The
DJ Global ex US is an unmanaged group of non-U.S. securities designed to
reflect the performance of the global equity securities that have readily
available prices.
* 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 London afternoon gold price fix as reported by the London
Bullion Market Association.
* The
DJ 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 TR 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.
* Past performance does not guarantee future
results.
* You cannot invest directly in an index.
* Consult your financial professional before making
any investment decision.
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Securities Offered Through LPL Financial Member FINRA/SIPC
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