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Market Commentary
Economic Updates
Recent News |
Weekly Commentary
April 26, 2010
The Markets
A
trillion here, a trillion there, pretty soon we're talking serious money.
Between the
October 2007 all-time high and the February 2009 low, world stock market
valuation declined from $63.0 trillion to $28.6 trillion, according to the
World Federation of Exchanges. That's a drop of $34.4 trillion or 54.6% in just
16 months--serious money, indeed. Almost as remarkable, world stock markets
started rebounding in March 2009 and by March 2010, they had climbed back to
$49.1 trillion in valuation, which represents a 71.7% increase from the low.
That's a rise of $20.5 trillion in 13 months and leaves us "just"
$13.9 trillion short of the October 2007 all-time high.
Many
pundits in print, TV, and online have wondered how the economy is showing surprising
strength in the face of near double-digit unemployment. One simple answer is
that our world still has tremendous wealth in the form of equity investments. As
described above, world stock market valuation has risen $20.5 billion since the
low and this has helped investors/consumers feel wealthier. And, in a little
known fact, world stock market valuation at the end of last month was $12.7
trillion higher than it was five
years ago. According to a concept called the "wealth effect," as
investment wealth increases, consumers feel more secure and they start spending
more.
So, even
though the U.S. unemployment rate is high, overall world wealth in the form of
equity investments is in decent shape and the trend over the past year has been
up. This "equity wealth" is helping support worldwide economic
activity.
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Data
as of 4/23/10
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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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2.1%
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9.2%
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40.5%
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-6.3%
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0.9%
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-1.6%
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DJ Global ex US
(Foreign Stocks)
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-1.2
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2.4
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46.7
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-7.7
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4.2
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1.4
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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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6.0
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Gold (per ounce)
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-1.0
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3.2
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27.0
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18.3
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21.4
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15.1
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DJ-UBS
Commodity Index
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0.7
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-2.3
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24.0
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-7.8
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-2.9
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3.4
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DJ Equity All
REIT TR Index
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7.1
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18.9
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77.8
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-8.8
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4.9
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12.1
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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.
ONE THING THAT SPORTS AND THE
STOCK MARKET HAVE IN COMMON is
that momentum frequently determines who wins or loses. Athletic teams that get
on a roll often end up winning because "momentum" is on their side.
Likewise, similar to Newton's first law of motion, the stock market can stay in
a trend for a long time until something substantial comes along to knock it off
course.
Recent
upward momentum in the stock market has been very strong. In fact, the 14-day
relative strength index (RSI) on the S&P 500 closed above 65 for 29
consecutive days ending April 15--its longest such streak above 65 in 24 years,
according to Bloomberg. The RSI is a technical indicator that measures the
speed and change of price movements (i.e., momentum) and it fluctuates between
0 and 100, according to StockCharts.com. Readings in the 65 area
indicate solid upward price momentum.
Why
should you care about this idea of momentum?
It's
important because momentum can help determine the underlying strength of the
market. When the market is showing broad-based momentum, it often takes
something significant to change its course.
This does
not mean the market will go up in a straight line during periods of strong
momentum. For example, the S&P 500 dropped 1.6% on April 16 when the
government announced it was charging Goldman Sachs with fraud. But, it turns
out that there was enough underlying strength in the market that it only took
five trading days for the S&P 500 to recoup all of its Goldman-led losses,
according to data from Yahoo! Finance.
Technical
indicators like the RSI are certainly not foolproof. However, they may be
helpful in assessing the near-term strength of the market and its
susceptibility to corrections.
Weekly Focus -
Think About It
"I
never predict. I just look out the window and see what is visible--but not yet
seen."
-- Peter Drucker
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Monthly Lifestyle Newsletter
April 2010
Don't
Worry. Be Happy.
Are you a
happy person?Studies have found that a variety of factors directly influence
our day-to-day happiness. For instance, researchers have found that hereditary
personality traits - such as sociability, conscientiousness, and a tendency not
to worry - which directly influence our level happiness, are linked to specific
genes. Although we cannot change our genetic make-up, we can control other factors
that have the potential to increase our happiness. Here are a few:
Practice
optimism.
Optimism is defined as 'an inclination to put the most favorable
construction upon actions or events or to anticipate the best possible
outcome. In one research study, participants were asked to imagine ideal
situations and describe them in journal entries. After several weeks of
journaling, participants reported having a heightened sense of well-being.
By practicing optimism, some people can train themselves to have a
positive outlook - and that can make them happier.
Be
kind to others.
It turns out, Mom was right. There is a benefit to being kind to others - it
can make you happy. Research has found that acts of kindness and
demonstrations of gratitude - such as shoveling a neighbor's driveway, doing
volunteer work, or writing a letter of thanks to a mentor or friend - can
make you measurably happier. In fact, research has found that one act of
kindness can inspire feelings of happiness that linger for as long as
three months.
Listen
to music. Music can
jumpstart certain parts of our brains by releasing endorphins and
melatonin, and sparking feelings of happiness and relaxation. In studies,
patients who listened to music during surgeries had lower blood pressure, reduced
heart rates, and lower anxiety levels than patients who did not listen to
music. In one study, surgical patients who listened to music required less
sedation.
Have
a good laugh.
Laughter is an endorphin trigger. It releases stress hormones and actually
can strengthen your immune system, in addition to making you feel happier.
Whether you prefer a funny television show, the shtick of your favorite
comedian, or a dinner with entertaining friends, make sure you get a
regular dose of laughter.
There is no
reason to mope around in life. If you're feeling blue, take action - make
yourself happy!
Skillet
Bread
Skillet bread
was a staple in the diet of pioneers who traveled by covered wagon across our
great nation. They generally carried just the essentials required for survival.
In terms of food, that might have included coffee, salt, sugar, beans, rice,
and baking soda. Often, their meals were prepared in a skillet over an open
fire. Try this modern day skillet bread recipe if you want to get a flavor of
the old west. Cook it in grandma's cast iron skillet, if you still have it.
Skillet Bread
2 tablespoons
olive oil
1 small
onion, thinly sliced
1 Yukon gold potato,
peeled and thinly sliced
1 tablespoon
rosemary
1 teaspoon sea
salt
¼ teaspoon black
pepper
1 package
refrigerated pizza dough
Cornmeal
Directions
Heat oven to
450° Fahrenheit. Add the oil to a cast iron skillet over medium heat. Add the
onion and sauté until golden. Transfer the onion to a bowl. Add the potato,
rosemary, salt, and pepper to the bowl. Mix these ingredients thoroughly.
Wipe the
skillet clean and turn it upside down. Sprinkle the bottom (which will be your
cooking surface) with the cornmeal to prevent sticking. Shape the pizza dough to
fit the skillet bottom and put the dough on the bottom of the skillet, which
has been sprinkled with cornmeal. Arrange the potato mixture evenly over the
dough, leaving a 1-inch border. Bake for about 20 minutes. Serve in wedges.
What Do You
Know About Citrus X Paradisi?
Citrus X Paradisi was called the forbidden fruit when it was discovered
in the mid-1700s in Barbados
and Jamaica.
Today, we know it as the grapefruit!
1. Grapefruit are believed to be an
accidental hybrid of which two fruits?
a. Limes and oranges
b. Lemons and oranges
c. Pummelos and grapes
d. Pummelos and oranges
2. Grapefruit peel is:
a. An important source of pectin
b. Squeezed and the oil is used for soft
drink flavoring
c. A source of flavoring for tonic water
and bitter chocolate
d. Combined with dried pulp and used as
cattle feed
e. All of the above
3. Why was this fruit nicknamed
grapefruit?
a. It is the color of wild grapes
b. It is the shape of a large grape
c. It is a hybrid of a grape and a
pummelo
d. It grows in bunches
4. A grapefruit is what percentage juice?
a. 25%
b. 50%
c. 75%
d. 90%
How Does Your
City Stack Up?
If you're
thinking of moving to another city once you retire, or are considering living
somewhere else for part of the year, it's important to do some research and
make an informed decision about your new hometown. A website called Sperling's Best Places can help. It provides
all kinds of valuable information about cities and states across America. You
can compare the cost of living, population characteristics, current and
projected economic conditions, cost of housing, and other information about
cities, counties, and states across America. For example, did you know
that:
Tucson, Arizona
has significantly better air quality than Phoenix
or Sedona, Arizona, but worse water quality than
both of those cities?
The median home price in Punta Gorda, Florida
is almost 40% higher than the median home price in Homosassa, Florida
and that the value of homes in Punta Gorda fell significantly further than
the value of homes in Homosassa during the housing crisis?
During the next 10 years, Gardnerville
Ranchos, Nevada - a popular retirement
community - is expected to experience more robust jobs growth than Pahrump, Nevada?
However, the cost of living in Pahrump is generally lower than the cost of
living in Gardnerville Ranchos.
Even if
you're not planning to move, it can be interesting to see how your town
compares to others. It's possible that a nearby locale may have a more
attractive profile - such as lower cost of living, more stable home values, or
better economic prospects - than the area you currently live in. Check it out
on Sperling's website.
Answers:
1d. Pummelos and oranges
2e. All of the above
3d. It grows in bunches
4c. A grapefruit is 75% juice
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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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