A concert performance at The Great Allentown Fair, Allentown, PA.
Copyright Bruce Winter
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Greetings!
The cooler days here in the Lehigh Valley remind us that fall is coming and Labor Day is around the corner. We hope you enjoy these days as much as we do.
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THE MARKETS |
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Even though the 4th of
July was about two months ago, we may see some fireworks in the financial
markets over the next few months.
Since Independence Day, trading
volume has been rather low and volatility somewhat subdued. Traditionally, the
movers and shakers on Wall Street retreat to the Hamptons and other far-flung places around
the world during the summer and, as a result, we often see little action during
the warm months. This summer was no exception as big drops have been rare. Instead,
we've seen a steady, non-volatile rise in the major averages. We are now into
the last week of this summer hiatus and, as the titans of finance return and
Congress gets set to start legislating again, the sparks may fly.
Like fireworks, these sparks could
do one of two things. First, they could make us "ooh and aah" over how
beautiful they are, i.e., we get a big market rally. Or, second, we could get
too close and get burned, i.e., the market tanks. Some would also argue that
there's a third possibility - we could just muddle about and stay in an
extended trading range. This might be analogous to a firework that misfires and
fizzles out.
As much as we would like to dust
off our crystal ball and peer into it for prescience, we know that predicting
the future is not an effective investment strategy. However, thinking about
possible scenarios, developing plans and being ready to adjust course as
situations unfold is appropriate.
We don't know which type of sparks
might fly in the next few months, or even if sparks will fly, but, if they do,
we will do our best to help you enjoy and profit from them.
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Data
as of 8/28/09
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1-WK
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YTD
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1-YR
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3-YR
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5-YR
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10-YR
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Standard & Poor's
500 (Domestic Stocks)
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0.3%
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13.9%
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-19.8%
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-7.5%
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-1.3%
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-2.5%
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DJ Global ex US
(Foreign Stocks)
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2.0
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29.8
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-14.8
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-4.7
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5.3
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1.5
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10-year Treasury Note
(Yield Only)
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3.5
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N/A
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3.8
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4.8
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4.2
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5.9
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Gold (per ounce)
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0.3
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9.9
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14.0
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15.9
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18.6
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14.1
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DJ-UBS Commodity Index
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0.2
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9.0
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-33.0
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-9.2
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-2.2
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3.9
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DJ Equity All REIT TR
Index
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2.7
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12.1
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-32.2
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-12.7
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0.7
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9.0
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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 available.
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THINK BACK TO A TIME
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Think back to a time when you saw a beautiful sunrise. Perhaps
you were standing on a beach mesmerized by the quickly changing interplay of
light, clouds, and water. While you were caught up in the moment, you probably
didn't realize that the light you saw peaking over the horizon was already
about eight minutes old. Due to the sun's distance from earth and the speed of
light, it takes about eight minutes for light from the sun to reach us.
Interestingly,
using a high-powered telescope, scientists can peer into the universe and see
light that goes back almost 13 billion years, according to Elizabeth Barton, an
assistant professor of astronomy at the University of California-Irvine as
quoted by CNN. Our naked eyes, of course, are no match for the scientists'
fancy tools.
In the financial
markets, we have a similar dynamic taking place. On one side, we have the main
street investor who has only basic tools at his disposal to make investment
decisions. They have no Bloomberg terminal, no high-frequency algorithmic
trading system, and no salesman from Goldman Sachs calling them with the latest
ideas from the morning "trading huddle" session. On the other side, we have the
Wall Street power-players who have all these fancy tools, a legion of PhD
geniuses on staff, and access to the latest and greatest information before it
becomes widespread knowledge.
Which side do
you think will win the investment game?
Your first
reaction might be that the Wall Street power-players with all the tools will
win hands down. Upon closer inspection, it turns out that the main street
investor does have a chance.
Sure, the
biggies on Wall Street have advantages, but look where that got them. Lehman
Brothers went bust. Bear Stearns and Merrill Lynch got taken over in distress
sales. Citigroup and Bank of America are in major surgery. And, the list goes
on.
Sometimes you
can be too fancy and sophisticated for your own good.
By contrast, the
main street investor who remains calm, follows solid principles, and doesn't
get swept up in the latest convoluted investment scheme, may do just fine over
time.
Undoubtedly, the
person who stands on the shore and admires the beautiful sunrise doesn't care
that the light is eight minutes old. Likewise, we don't get caught up in the
machinations of Wall Street. We simply try to do what's best for you in the
most transparent way possible.
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THINK ABOUT IT
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"Simplicity is
the ultimate sophistication."
--Leonardo da
Vinci
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Mary L. Nothelfer, CFP® Emilio
J. Morrone, CPA, CFP®
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Securities
offered through LPL Financial, Member FINRA/SIPC.
*
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.
* This
newsletter was prepared by PEAK.
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