When people buy high-value items, the excitement of realizing their dreams can carry them away. Ask yourself these questions before buying something major.
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Many baby boomers are facing financial risk going into retirement. What is this generation doing to face the new reality that they may not have their home mortgages paid off before retiring? Find out here.
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FICO, the consumer credit-rating company, has a new addition called Version 9. This is good news for people who have amassed large medical debts. Learn about how your credit score could improve by clicking here.
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Netflix, Hulu Plus, and Amazon Prime Video have created a new trend - "binge watching." This habit has been defined by fans "watching between two to six episodes of the same TV show in one sitting. Here's what they're watching.
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Are you concerned by belly fat? You'd better check out these fitness facts before starting an exercise program. Some fitness experts claim that "ab workouts are a waste of time."
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Amazon is trying it. UPS has considered it. Ice fishermen in Minnesota used it to get beer. Now Google is getting into the game.
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Why didn't the summer movie season thrill the movie-going public? (in addition to the fact that the selection of new movies was lousy?) Find out here.
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Are you plagued with thoughts about how much you hate your job? Author Sharon Salzberg says "...many Americans who feel increasingly frustrated, overworked and under-appreciated have more control over their work lives than they may realize." Find out more here.
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Is your auto mechanic's billing rate higher than yours? Time to start saving money on auto repairs. Click here for some tips.
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 Are American highways on the way to becoming death-free? A new study by Insurance Institute for Highway Safety will show that significant improvements in both passive and active auto safety will soon be available.
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Millennials, like all of us, are getting older. The Pew Research Center now lists them as being between 18 and 33. This study has some interesting facts for marketers regarding the generation's religious and political affiliations, marriage rate, racial diversity, voting rates, and much more. See if your experience aligns with these stats.
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VAMPIRE TOURISM. Now's your chance to visit the remote mountaintop the fictional Dracula may have called home. Read more here.
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I came across an article in the New York Times that I wanted to be sure to share with you. The subject is one that permeates our life in the 21st century: taking a break from the constant flow of information we receive every day. Please be sure take a look at this piece.
In addition to an update on news about Baby Boomers and Millennials, our "What's Happening Now" sidebar features links to technology trends, entertainment, and exercise. We hope you'll enjoy the information and advice in this section.
We're open to your suggestions and eager to answer any questions on financial matters. Please feel free to contact us at: 614-888-2121 (toll-free, 877-389-2121) or chornyak@chornyak.com.
All of us at Chornyak & Associates hope you enjoy the fine Indian summer that we always have in Central Ohio!
Sincerely,
Joe
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Hit the reset button in your brain
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Daniel J. Levitin, professor at McGill University and author of "The Organized Mind: Thinking Straight in the Age of Information Overload," reminds of the importance of taking a "real" vacation. We believe that his advice on taking time to recharge is critical for today's business professional and everyone, for that matter.
(This article from the New York Times is reproduced here in its entirety.) THIS month, many Americans will take time off from work to go on vacation, catch up on household projects and simply be with family and friends. And many of us will feel guilty for doing so. We will worry about all of the e-mails piling up at work, and in many cases continue to compulsively check email during our precious time off.
But beware the false break. Make sure you have a real one. The summer vacation is more than a quaint tradition. Along with family time, mealtime and weekends, it is an important way that we can make the most of our beautiful brains.
Every day we're assaulted with facts, pseudofacts, news feeds and jibber-jabber, coming from all directions. According to a 2011 study, on a typical day, we take in the equivalent of about 174 newspapers' worth of information, five times as much as we did in 1986. As the world's 21,274 television stations produce some 85,000 hours of original programming every day (by 2003 figures), we watch an average of five hours of television per day. For every hour of YouTube video you watch, there are 5,999 hours of new video just posted!
If you're feeling overwhelmed, there's a reason: The processing capacity of the conscious mind is limited. This is a result of how the brain's attentional system evolved. Our brains have two dominant modes of attention: the task-positive network and the task-negative network (they're called networks because they comprise distributed networks of neurons, like electrical circuits within the brain). The task-positive network is active when you're actively engaged in a task, focused on it, and undistracted; neuroscientists have taken to calling it the central executive. The task-negative network is active when your mind is wandering; this is the daydreaming mode. These two attentional networks operate like a seesaw in the brain: when one is active the other is not.
This two-part attentional system is one of the crowning achievements of the human brain, and the focus it enables allowed us to harness fire, build the pyramids, discover penicillin and decode the entire human genome. Those projects required some plain old-fashioned stick-to-itiveness.
But the insight that led to them probably came from the daydreaming mode. This brain state, marked by the flow of connections among disparate ideas and thoughts, is responsible for our moments of greatest creativity and insight, when we're able to solve problems that previously seemed unsolvable. You might be going for a walk or grocery shopping or doing something that doesn't require sustained attention and suddenly - boom - the answer to a problem that had been vexing you suddenly appears. This is the mind-wandering mode, making connections among things that we didn't previously see as connected.
A third component of the attentional system, the attentional filter, helps to orient our attention, to tell us what to pay attention to and what we can safely ignore. This undoubtedly evolved to alert us to predators and other dangerous situations. The constant flow of information from Twitter, Facebook, Vine, Instagram, text messages and the like engages that system, and we find ourselves not sustaining attention on any one thing for very long - the curse of the information age.
My collaborator Vinod Menon, a professor of neuroscience at Stanford, and I showed that the switch between daydreaming and attention is controlled in a part of the brain called the insula, an important structure about an inch or so beneath the surface of the top of your skull. Switching between two external objects involves the temporal-parietal junction. If the relationship between the central executive system and the mind-wandering system is like a seesaw, then the insula - the attentional switch - is like an adult holding one side down so that the other stays up in the air. The efficacy of this switch varies from person to person, in some functioning smoothly, in others rather rusty. But switch it does, and if it is called upon to switch too often, we feel tired and a bit dizzy, as though we were seesawing too rapidly.
Every status update you read on Facebook, every tweet or text message you get from a friend, is competing for resources in your brain with important things like whether to put your savings in stocks or bonds, where you left your passport or how best to reconcile with a close friend you just had an argument with.
If you want to be more productive and creative, and to have more energy, the science dictates that you should partition your day into project periods. Your social networking should be done during a designated time, not as constant interruptions to your day.
Email, too, should be done at designated times. An email that you know is sitting there, unread, may sap attentional resources as your brain keeps thinking about it, distracting you from what you're doing. What might be in it? Who's it from? Is it good news or bad news? It's better to leave your email program off than to hear that constant ping and know that you're ignoring messages.
Increasing creativity will happen naturally as we tame the multitasking and immerse ourselves in a single task for sustained periods of, say, 30 to 50 minutes. Several studies have shown that a walk in nature or listening to music can trigger the mind-wandering mode. This acts as a neural reset button, and provides much needed perspective on what you're doing.
Daydreaming leads to creativity, and creative activities teach us agency, the ability to change the world, to mold it to our liking, to have a positive effect on our environment. Music, for example, turns out to be an effective method for improving attention, building up self-confidence, social skills and a sense of engagement.
This radical idea - that problem solving might take some time and doesn't always have to be accomplished immediately - could have profound effects on decision making and even on our economy. Consider this: By some estimates, preventable medical error is the third leading cause of death in the United States, accounting for hundreds of thousands of deaths each year. You want your diagnostician to give the right answer, not always the quickest one. Zoning out is not always bad. You don't want your airline pilot or air traffic controller to do it while they're on the job, but you do want them to have opportunities to reset - this is why air traffic control and other high-attention jobs typically require frequent breaks. Several studies have shown that people who work overtime reach a point of diminishing returns.
Taking breaks is biologically restorative. Naps are even better. In several studies, a nap of even 10 minutes improved cognitive function and vigor, and decreased sleepiness and fatigue. If we can train ourselves to take regular vacations - true vacations without work - and to set aside time for naps and contemplation, we will be in a more powerful position to start solving some of the world's big problems. And to be happier and well rested while we're doing it.
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Should couples retire together or at different times?
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Robert Laura of Forbes refers to himself as a "retirement activist." In this article he raises some interesting questions about what happens when both persons in a marriage retire. We hope you'll profit from his advice.This question is often referred to as either an "in-sync" or "out-of-sync" retirement. There is no easy answer as to which approach is best for you because there are pros and cons to each option. Age is usually a primary factor in both situations. Generally speaking, married couples range in age difference between one and five years, with the male being the oldest in most cases. Accordingly, once the male reaches the traditional retirement age of 62 or 65, he may be ready to call it quits, which can leave a few concerns on the table given the other spouse's situation and age. Generally, the older spouse will be eligible for some form of Social Security first, which will help offset any lost income. Not to mention, they may also be eligible for Medicare, which dramatically reduces the costs of individual health insurance. However, those two aspects become major stumbling blocks for the younger spouse, who won't be able to replace their income with Social Security, and at the same time may have to pay hefty healthcare premiums to remain insured. Whether couples have little to no age gap, or a substantial one, it's not uncommon for a woman to put her career on hold for the sake of the family. As a result, she may prefer an out-of-sync retirement so she can work longer. Considering the time she put into raising a family, it may have taken her a few extra years to achieve the career success she desires and therefore wants to continue to make an impact there. Another factor to consider is the role each spouse plays within the household. Not all, but some out-of sync retirements can cause arguments and frustration in terms of who is responsible for certain household chores now that one spouse is retired. Role confusion can make it crucial to discuss feelings and needs with each other before retirement instead of assuming you're both on the same page. Talking about things such as: - Will you go to bed and wake up at the same time?
- Will you eat breakfast, lunch, and dinner together every day?
- How much alone time will each of you need?
- Will household responsibilities be shared or follow traditional roles? Who has the most time and energy to complete regular household chores including yard work, cooking, and laundry to name a few?
- What are a few things you're both willing to sacrifice in order to make your time in retirement the best it can be?
The possibility of spending 24 hours a day, 7 days a week together can be equally concerning. Initially, an in-sync retirement may conjure up loving images of long walks on the beach and star gazing over a bonfire together, but that can come with its own challenges. A simple trip to the grocery store can turn into an unnecessary tiff as one spouse questions the others driving, the route taken, or what gets put in the basket. Therefore, it is important to spend time together, but to also spend a certain amount of time apart. That makes it important for couples to manage their own social networks. However, women tend to be more social and have stronger social networks, whereas men often find social solace at work. That can represent a major challenge for couples if one spouse loses their social network in retirement and doesn't have a means to replace it. It can mean an over reliance on the other spouse to coordinate activities or deal with the wrath that comes from sitting on the couch and watching TV all day. It's important to develop and have your own social network, as well as get out of the house on a regular basis. By doing your own thing, meeting with your own friends, and allowing the other spouse freedom to do what makes them happy, you each bring more happiness and contentment into the home and to the relationship. As yo can see, a number of factors, including age, retirement savings, and individual roles come into play when you and your spouse decide to either retire together or at different times. In either event, it's important to be open and willing to discuss the trade-offs and then do what's best for the overall marriage.
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30 ways to waste your money
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We won't include the entire list of 30 here, but be sure to continue reading this article from Yahoo! Finance. Many of the suggestions for saving money you may already be practicing or have suspected, but we guarantee that there's something in this article that will keep you from wasting money. HINT: The links within the article give even more money-saving tips.
Almost all of us have holes in our budgets. And as with other kinds of leaks, you may have hardly noticed some of them. But those small drips can quickly add up to big bucks. The trick is to find the holes and plug them so you can keep more money in your pocket. That extra cash could be the ticket to finally being able to save, invest or break the cycle of living from paycheck to paycheck.
We've updated our popular list of money-wasters for 2014 with even more tips and resources to help you cut unnecessary expenses from your budget. Consider these 30 common ways people waste money. If any of them sound familiar, start plugging your budget holes right away.
Buying at the Wrong Times
Most things are marked down at certain times each year. So planning your purchases to get big-ticket items when they're at their lowest price can save you hundreds of dollars. For example, apparel is dramatically marked down at the end of each season and during sales events over long holiday weekends, such as Labor Day and Memorial Day. Furniture is discounted as much as 60% during clearance sales in January and July before new styles are released in the following months. Prices on TVs and computers are slashed on Black Friday -- and the list goes on.
Timing your travel purchases right can also help you save big. Fares for domestic flights are at their lowest, on average, 54 days in advance, according to a study by CheapAir.com. For flights to Europe, you'll get the lowest fares by booking 319 days in advance (see When to Book Flights to Get the Lowest Fares). And to get the best rate on a hotel room, you typically need to book a stay 14 to 21 days in advance (see How to Get the Best Deal on a Hotel).
Tossing Food Based on the Expiration Date
There's a good chance you're throwing away hundreds or even thousands of dollars' worth of food each year before it has gone bad if you're using sell-by and expiration dates as gauges for whether food is still edible. These dates are just manufacturers' best guess of when food is at peak quality and are not related to safety, according to Emily M. Broad Leib, director of the Harvard Law School Food Law and Policy Clinic. Because of confusion over food date labeling, a family of four spends between $1,365 and $2,275 per year, on average, on food that is wasted.
Consumers can usually expect food to be safe for another five to seven days past the sell-by date printed on the package. The best test to tell if something is still good is to smell it or take a small bite. To learn more, see Confusing Packages Lead to Wasted Food, Money.
Paying Checking Account Fees
Yes, it is getting harder to find a free checking account with no strings attached. But there still are banks that offer accounts without fees or minimum-balance requirements -- and some even pay interest. We like the Capital One 360 account and the online-only Ally Bank Interest Checking account these days. See Where to Get Free Checking for more details. Community banks and credit unions, in particular, are more likely to offer free checking. You can search for a community bank near you at the Independent Community Bankers of America site and look for credit unions at www.culookup.com. And sometimes free checking is a perk with brokerage accounts. Always Opting for the Senior Discount Many businesses offer discounts for older adults. But often these special rates aren't that special and seniors would be better off taking advantage of other deals available to consumers of any age. For example, the Empire State Building, American Museum of Natural History, Metropolitan Museum of Art, Museum of Modern Art, and Circle Line Cruises in New York City all offer special rates for seniors. But seniors will pay even less to visit all of those attractions by purchasing a New York CityPASS for $109 (versus $131 if purchased separately with senior rates). For more, see Why Senior Travel Discounts Aren't Always the Best Deal. Not Adjusting the Thermostat Don't waste money heating or cooling an empty house or apartment. When you leave for the day, lower -- or rise, depending on the season -- your thermostat by several degrees. You can save 5% to 15% (about $180 a year) by adjusting your thermostat 10 degrees to 15 degrees for eight hours, according to the U.S. Department of Energy. A programmable thermostat makes setting your home's temperature easy.
Shopping at the Wrong Store Sure, it's convenient to do all of your shopping at one place. But if you buy your food, medicine, toiletries, and paper products at the same store, you're probably spending more than you have to on many items in your shopping cart.
For example, you'll get the best deal on cleaning supplies, personal grooming items, greeting cards, gift wrap and bags at dollar stores. You can get a gallon of regular milk for 50 cents to 60 cents less at the supermarket than at a warehouse club, and higher-end grocers, such as Whole Foods and Trader Joe's, tend to have the lowest prices on organic, almond, soy and other specialty milks. You'll save nearly 70% per unit on batteries if you buy them in bulk at a warehouse club, such as BJ's Wholesale Club, Costco or Sam's Club, rather than the drugstore. See Best Buys at Warehouse Clubs, Grocers and Big-Box Stores, What Not to Buy at Drugstores and What to Buy at Dollar Stores.
Paying Foreign Transaction Fees If you're traveling abroad, the fees you pay when using credit cards and getting foreign currency can add up quickly. However, there are several ways to trim costs. For example, credit cards tend to offer better currency exchange rates than exchange bureaus. And be sure you use a card that doesn't levy a foreign transaction fee, which can cost 1% to 3% of every purchase you make on vacation.
If you need cash, wait until you arrive at your destination to get foreign currency. Then go to a local ATM -- it is the cheapest way to get currency, often at a wholesale rate. For more ways to avoid or limit conversion fees, see Save Money on Your Money When Traveling Abroad. Carrying a Balance Debt is a shackle that holds you back. For instance, if you have a $1,000 balance on a credit card that charges an 18% rate, you blow $180 every year on interest. Carrying a balance can also cost you down the line in the form of a lower credit score that will trigger higher interest rates on your loans. That's because your score is based, in part, on your credit utilization ratio -- how much of your available credit you've used. It's wise to keep your total ratio and the ratio for each credit line below 30% at all times. See How to Pay Off Your Credit Card Debt in a Year for steps to wipe out your balances quickly. Buying Insurance You Don't Need You only need life insurance if someone, such as a child, is financially dependent on you. That means most singles, seniors, and kids don't need a policy. Other policies you can probably do without include credit-card insurance (better to use the premium to pay down your debt in the first place), rental-car insurance (most auto policies and credit cards carry some coverage) and mortgage life insurance (a regular term-life insurance policy is more comprehensive). PLEASE click here and see the rest of the list!
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This communication is strictly intended for individuals residing in the States of: AL, AR, AZ, CA, CO, CT, DC, DE, FL, GA, IA, IL, IN, KY, LA, MA, MD, ME, MI, MN, MS, MT, NC, NH, NJ, NV, NY, OH, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WI, WV. No offers may be made or accepted from any resident outside these States due to various state requirements and registration requirements regarding investment products and services.
Securities and Advisory Services Offered Through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser. Fixed-insurance products and services offered by Chornyak & Associates, LTD are separate and unrelated to Commonwealth.
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Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor's. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000� Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Barclays Capital Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury's daily yield curve. The Barclays Capital Mortgage-Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Barclays Capital Municipal Bond Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. The Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index measures the performance of intermediate (1- to 10-year) U.S. TIPS.
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U.S. markets shoot higher
August was another very strong month for U.S. stock markets, even as the conflict in Ukraine worsened and signs of weaker global economic growth appeared. After a slow first week, gains were steady through month-end, with the S&P 500 Index closing out August up 4 percent, the Dow Jones Industrial Average up 3.6 percent, and the Nasdaq up 4.82 percent. The larger uptick for the Nasdaq suggests that investors were becoming more focused on gains than on market risks.
Fundamentals continued to strengthen from July's already strong levels. With 99 percent of companies reporting by the end of August, per FactSet, almost three-quarters had beaten earnings expectations, while almost two-thirds had beaten sales estimates. The overall earnings growth rate was 7.7 percent, up a full percentage point from the end of July. The earnings surprise level was consistent with past quarters, but the sales surprise level was much higher, suggesting that companies are actually strengthening their performance as the domestic economic recovery continues. Investors reacted to the improving financial picture by bidding stock prices higher.
Technicals remained strong at month-end, following a strong bounce off of moving-average support levels early in the month. The Dow bounced off of its 200-day moving average, while the S&P 500 recovered from its 100-day and the Nasdaq from its 50-day. All are now above their support levels. With the averages at or close to recent highs, there is little resistance to slow further appreciation.
While the U.S. recovery supported domestic market growth in August, developed international markets suffered from political and economic problems, and the MSCI EAFE Index posted a 0.15-percent decline. Just as with the U.S. indices, the EAFE was down at the beginning of the month and then recovered, but its recovery was limited by news that European growth continued to be much weaker than expected, as well as by the continuing and expanding conflict in Ukraine. At month-end, reports of actual Russian troop presence in Ukraine raised the possibility of more comprehensive sanctions and a wider war, which could damage European economies even more. Technically, developed foreign markets continued to be weak, with the recovery during the month failing to lift them above support levels.
On the other hand, emerging markets, as represented by the MSCI Emerging Markets Index, had a positive month, gaining 2.07 percent in August. Possible reasons included the growing likelihood of quantitative easing by the European Central Bank (ECB) and renewed growth in China. Emerging markets have typically performed well when developed central banks loosen policy, and this looks likely to continue. Technical signs for emerging markets are positive and improving.
Fixed income also showed gains for the month, as rates declined. The 10-year Treasury rate continued to drop from the already low levels at July's end, finishing August at 2.35 percent, down 23 basis points. Lower rates mean higher bond prices, and the Barclays Capital Aggregate Bond Index gained 1.10 percent in August. The decline in rates in the U.S. appeared largely due to a flight to safety by investors spooked by the situation in Ukraine and supported by continued ECB monetary easing. August revisions show U.S. economy growing even fasterEconomic reports in August continued strong but showed pockets of slowing that suggest caution. Good news included consumer confidence recovering to a seven-year high-the highest level since the financial crisis. Business confidence went along for the ride, with the major survey of the service sector reaching an eight-year high. Housing starts rebounded sharply after weakness in July, while prices continued to increase as mortgage foreclosures and delinquencies dropped even further, settling at close to normal levels for the first time since the financial crisis. Employment growth continued strong. Initial jobless claims remained under the 300,000 level, a sign of strength. Further, the four-week moving average of initial claims remained below the 300,000 level for much of the month, which last occurred before the recession (see chart). The unemployment rate edged up slightly in what, counterintuitively, is also a sign of strength because the recovering economy has lured more people back into the labor market. July's monthly increase of 209,000 jobs, though down from June, continued a string of 200,000+ months that is the longest since the late 1990s. But there were areas of weakness. Personal spending actually declined for the month. This was a surprise and inconsistent with the strong consumer confidence numbers, and it may have led to weaker-than-expected retail sales growth. Spending depends heavily on wage growth, which was flat on the month and continues to defy expectations of an increase. On the business side, industrial production was also disappointing. The big economic news in August was Janet Yellen's speech at the Federal Reserve's (Fed) annual Jackson Hole Economic Policy Symposium. In her remarks, she noted that, overall, the economy was growing faster than the Fed had expected and the labor market was improving more quickly. She cautioned, however, that risks remained and that the Fed intended to continue its stimulative policy bias. In general, this was the most positive speech that a Fed chairman has made in some time, and it suggested that even the Fed expects the recovery to continue. Overall, the economy remains strong and the recovery appears to be on track. Economic growth for the second quarter was revised up to 4.2 percent from an already very strong 4 percent, and leading indicators remain strong. But the signs of weakness from the consumer sector suggest a degree of caution looking forward. Unless and until wage growth accelerates, the recovery may not move beyond current levels; however, even with that, growth is likely to continue. International risks return to the forefrontWhile the U.S. continued to grow, European growth slowed even further. The German economy, long the engine of what recovery there was in Europe, actually shrank 0.2 percent in the second quarter-not a lot but a harbinger of growing weakness across the continent. Other European countries also had problems, the biggest of which was the collapse of the French government driven by policy conflicts between that country's economics minister and its president. With both Germany and France showing weakness, the core of the eurozone is subject to much more uncertainty. Further worsening the situation in Europe is the growing crisis in Ukraine. Although thought to be under control at the end of July, in late August Russian troops moved into eastern Ukraine to support separatists there, even as Ukrainian government troops suffered reverses. European sanctions, which have already hit both the Russian and European economies, may be made more severe, leading to further economic damage. Though Europe is the primary source of economic risk, other hotspots, like Syria and Iraq because of the ISIS insurgency, continue to simmer. The Israeli/Gaza conflict is also still on the table. Finally, while Chinese growth has recovered, questions about the sustainability of its growth model, as well as its more recent reversion to previous policy models, remain. A beautiful August could lead to a beautiful fallAfter a difficult first half of the year, on multiple levels, the summer has been much better. Both July and August have had much better weather, as well as much better economic news and market results. Fundamentals continue to be very strong-good economic and employment growth, stronger-than-expected corporate sales and earnings growth-suggesting that the sunshine will likely continue. Even so, we can see the storms forming around the world. Europe remains politically and economically fraught, with the ECB preparing to implement policies that it once categorically ruled out, driven by growing evidence that current policies have failed. Iraq and Syria continue to devolve into warlord-led violence, as does Libya. War also looms as a very real possibility, as Russian troops move into the European borderland of Ukraine and expanded sanctions appear to be very likely at a minimum. Here in the U.S. we have largely benefited from these trends but may not continue to do so if they worsen. Even as the Fed ratifies the U.S. recovery by preparing to end its bond purchases, a crisis in Europe or Asia could easily shock our economy. U.S. markets are priced for the current good news to continue, so any sign that it will not could have a disproportionate effect. Looking at the big picture, though, the U.S. remains the most politically stable and economically solid of the major economies. Any short-term volatility may rock the boat but no more than that. As always, a properly constructed portfolio can give good returns in good times and a solid framework in bad times, regardless of sunshine or stormy weather. Authored by Brad McMillan, vice president, chief investment officer at Commonwealth Financial Network.All information according to Bloomberg, unless stated otherwise.
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