Greetings!
The market is fairly optimistic recently. Are they catching Olympic fever? Recent market optimism aside, worldwide debt problems are likely to be with us for years. We continue to believe that "deleveraging", or paying off our debt, will hamper economic growth and create macro risks over the next five years.
However, our researchers expect stock returns, especially outside of the U.S., should start to improve.
Our portfolio positioning is driven by a weighing of risk and potential reward and patiently assessing opportunities before investing more aggressively. As a result, our portfolios may be invested quite differently from their benchmarks.
In each of the last three years, there have been strong market rallies early in the year followed by market corrections ranging from about 9% to 19%. These volatile market conditions are one reason why we make a consistent effort to remind our clients of our long-term fundamental and valuation-driven approach that tends to result in more gradual portfolio shifts. A disciplined, unemotional investment approach is absolutely necessary in order to resist the emotional pull of these ups and downs so that decision making is not impaired. For long-term investors, the silver lining is that the price declines that could come with these risks will likely generate good buying opportunities, and allow us to generate better long-term returns than what the broad markets offer. (7)
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| Weekly Economic Update | |
HIRING INCREASES, AS DOES UNEMPLOYMENT Good news: 163,000 new jobs were added to the economy in July. While the jobless rate did tick up to 8.3% in the Labor Department's latest employment report, the positives were significant: 148,000 new positions were filled in the private sector, and overall job gains were the best in any month since February. Will this discourage the Federal Reserve from thoughts of easing? Perhaps not; after all, July marked the 42nd straight month in which unemployment exceeded 8%. (1,2)
CONSUMERS SAVE MORE, SPEND LESS
Personal incomes rose 0.5% in July, yet consumer spending was essentially flat (the Commerce Department said it actually decreased by less than .1%). The personal savings rate jumped 0.4% last month to 4.4%. (3)
HOME PRICES RISE 2.2% IN MAY
The S&P/Case-Shiller Home Price Index logged its second straight overall monthly gain and witnessed its best month in years. The year-over-year decrease in house prices across 20 cities was trimmed to just 0.7% in the May index. (3)
MANUFACTURING SECTOR CONTRACTS AGAIN
The Institute for Supply Management's July manufacturing index came in at a subpar 49.8 after a 49.7 June mark. In better news, ISM's service sector index improved to 52.6 in July from June's reading of 52.1. (2,4)
FRIDAY RALLY LEADS TO WEEKLY GAINS
Last week's policy statements from the Fed and European Central Bank wearied the markets, but the Dow rose 217 points after Friday's jobs report. The major U.S. indices all had winning weeks: Dow, +1.69% to 13,096.17; NASDAQ, +2.00% to 2,967.90; S&P 500, +1.90% to 1,390.99. Gold settled Friday at $1,609.30 an ounce, oil at $91.40 a barrel. (1,5)
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| Market Summary |
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% Change |
Y-T-D |
1Yr Chg |
5-Year Avg | |
DJIA |
+7.19 |
+10.08 |
-0.13 | |
NASDAQ |
+13.92 |
+10.21 |
+3.64 | |
S&P 500 |
+10.61 |
+10.37 |
-0.59 |
(Source: msn.money.com, bigcharts.com, treasury.gov, treasurydirect.gov - 8/03/12). Past performance is no guarantee of future results. Indices are unmanaged, and investors cannot invest in them directly. |
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Create a beautiful week!
Karl Frank, MBA, MSF
Certified Financial Planner (R)
A & I Financial Services LLC
303.690.5070
Citations:
1 - money.msn.com/market-news/post.aspx?post=df
0f24d5-5a39-4034-84a5-d540c1356894 [8/3/12]
2 - www.cnbc.com/id/48482586 [8/3/12]
3 - www.foxbusiness.com/news/2012/07/31/us-personal-spending-flat-home-prices-rise/ [7/31/12]
4 - www.ism.ws/ISMReport/MfgROB.cfm [8/1/12]
5 - montoyaregistry.com/Financial-Market.aspx?financial-market=common-financial-mistakes-and-how-to-avoid-them&category=29 [8/3/12]
6 - www.usatoday.com/money/index [8/3/12]
7 - Litman Gregory, Summer 2012 Investment Letter
Securities offered through Geneos Wealth Management, Inc., member FINRA/SIPC. Investment advisory services offered through A & I Financial Services LLC, registered investment advisor.
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| Words for Thought |
"A clever man commits no minor blunders."
Johann Wolfgang von Goethe |
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Riddle of the Week
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A friend wants change for a dollar. All you have in your pocket is change, and it amounts to over a dollar, but you still can't make the change correctly. What is the largest amount of money you could possibly have in this situation? What coins do you have that prevent you from making the change correctly?
Last week's riddle:
You have been hired by an eccentric farmer, who requests that you build four pens for his nine sheep, but only allow an odd number of sheep in each pen. How do you accomplish this?
Last week's answer:
Build three pens, each holding three sheep. Build a fourth pen surrounding the other pens, thereby containing all nine sheep. |
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Karl Frank was interviewed by 9News on March 28th, 2012 regarding "3 Things You Should Do if You Win the Mega Millions Lottery". | |
Click Here to View Video
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