Market Summary

You cannot turn on a TV or read an article without knowing that the U.S. stock markets produced unusual gains in 2013.


Even more unusual, there was not a single downward pullback or correction in the S&P 500 of greater than 6% all year! 

(Source: Yahoo! Finance)

Economists, fund managers and newsletter editors largely agree that the major causative of this rising market has been the Fed's massive and continuous monetary stimulus.


So, can this uptrend continue? Of course it can. The Fed, while announcing the beginnings of a tapering program, is still pumping money into the system. Also, markets often overshoot both in the rising phase as well as in cyclical declines.


However, there are a number of things we will have our eye on, as this rising phase is getting very long in the tooth - 58 months and counting!


1. Trading volume, which is the number of shares traded, fell in 2013 by 14.4% compared to 2012.  How does a stock market keep rising when there is less demand for stocks?  Will volume rise this year? (Source: The Lombardi Report, Jan062014)


2. The yield on the 10-year US Treasury surpassed 3% last week - its highest level since July 26, 2011.  Why is this important?  Rising yields historically have made stocks less attractive and housing more vulnerable.


3. From World War II to the end of the 20th Century, the stock market declined into a significant bottom in the second year of every Presidential term with one exception-1986.  The average decline was 21%, with declines tending to be worse when there was no correction in the first

year of the cycle. (Source: Streetsmart Report, Jan032014)
Our Management Philosophy

Limit downside risk and provide clients a reasonable rate of return over a market cycle.


With over five decades of combined money management experience in South Texas, you can be sure that Walter and Anthony Reyna have seen it all. This father-son pair built and developed Walter J. Reyna Inc. on the importance of hard work and strategic planning and continue to implement these core values in their business today.


The Reynas believe that wealth accumulation and protection are the result of exceptional planning, not luck. Visit our website to learn more.


Walter J. Reyna, Inc.
5315 North McColl Road
McAllen, Texas 78504 

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Market Summary Continued

4. Actual earnings growth in the S&P 500 has been minimal.  Companies have been showing better corporate earnings by initiating stock buyback programs.  This process reduces the number of shares outstanding and results in a rise in per-share earnings in spite of there being no change in profits.  Companies cannot keep buying back their own shares forever, so the question is, can they begin to produce more revenue in 2014?


5. Finally, as mentioned previously, the Fed, which has provided the main support for the market run these past five years, will begin decreasing that stimulus this month with the goal of having it down to zero by next summer. How will this eventually effect the stock markets? Over the past five years, each time a stimulus program has ended, it has been followed by a pretty good sized pullback until the next stimulus plan was announced.


Does this mean that we are currently bearish on the stock market? No. These are just the headwinds we believe could possibly derail the market's upward trend in 2014. 


Looking ahead, here is how we see things possibly setting up for U.S. markets (note: these are merely our opinions based on our readings): 


1. After a run from September through December, the markets may be ready for a breather. It would not surprise us to see a small pullback sometime this month or early February.


2. After the pullback, we think the markets will continue their upward trend through April or so.


3. Late April, early May, we think some of the headwinds mentioned above could come into play, causing a larger decline in the markets that could extend a few months.


The question from then on, which we think could be around August or September, is whether that decline steamrolls into something even more substantial or markets bounce back. 


Whether we are correct or not, we are prepared for any number of possibilities in 2014. If you have specific questions about your portfolio or want to discuss our holdings, please feel free to contact us anytime. In addition to being your trusted asset managers, we are also a devoted resource and here to answer any questions you may have.  


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For more information about your portfolio performance, please refer to your personalized statements or contact us. Regulatory restrictions prevent us from reporting personalized performance data in this newsletter. See below for important disclosures. 

Portfolio Insights
(1)The S&P 500 Index is representative of domestic markets and includes the average performance of 500 widely held common stocks.  Individuals cannot invest directly in any index and unlike investments; the S&P 500 Index does not incur management fees, charges, or expenses. (2) All Statistical information, investment category determinations, and economic data retrieved from Past performance is no guarantee of future results and all investment strategies involve the risk of financial loss. 


This publication is proprietary and limited to the sole use of Walter J. Reyna, Inc. clients.  Client portfolios are designed for the moderate investor but are actively managed on a monthly basis and may not follow traditional risk adjusted asset allocation models. Walter J. Reyna, Inc. maintains full discretion over said accounts and manages as deemed necessary. Clients with questions about the fees associated with their discretionary advisory account should refer to their advisory agreement. The information contained herein is for illustration purposes only. It is not necessarily complete, does not include client directed investments, and its accuracy is not guaranteed by Walter J. Reyna, Inc.  All clients should reference their periodic statements for accuracy. All clients needing additional information about holdings in the portfolio, including the objectives, risks, asset class and costs associated should refer to their respective prospectus. If you have received this communication in error, please notify us immediately by e-mail or telephone.  Neither the information, nor any opinion expressed constitutes a solicitation nor investment advice, for the purchase of any future security referred to in the Advisory Newsletter.  Investments offered through Registered Representatives of Lincoln Financial  Securities Corporation, member SIPC.  Lincoln Financial Securities Corporation and Walter J. Reyna, Inc. are not affiliated.