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Upbeat Finish on Deal Hopes
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Weekly Update - October 14, 2013
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The market experienced another tumultuous week as investors responded to fear about the looming debt ceiling and hope about a possible resolution. Despite the volatility, markets rebounded on Friday as hopes of a deal circulated in the media. For the week, the S&P 500 gained 0.75%, the Dow increased by 1.09%, and the NASDAQ lost 0.42%.[1]
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The government shutdown continued for another week, reaching its 11th day on Friday. Currently, about 500,000 federal employees are still furloughed, after many essential personnel were returned piecemeal to their jobs. Unfortunately, even if the shutdown were to end today, there will still be lasting effects as critical inspections have been left undone, research projects have been delayed, and workers have been left without pay for weeks. Some economists believe that the disruption of spending patterns among those affected by the shutdown - including civilian contractors not counted among the official furlough numbers - could affect consumer spending and economic growth numbers.[2]
Congress is also grappling with the debt ceiling issue. The Treasury Department has informed Congress and the White House that it will reach the debt limit by Thursday, October 17, leaving it with enough cash for a few days of operations. If a deal is not reached by then, the U.S. will be faced with a potential default, which would cause major shocks throughout the economy and global financial system. While most analysts don't think lawmakers will allow a default to happen, financial institutions are quietly preparing for that eventuality.[3]
There are however, signs of hope. The House of Representatives seems to be at a complete impasse and attention has now turned to the Senate, where Republican and Democrat leaders sat down over the weekend to try and hammer out a compromise. Relations between the two sides are much less fraught in the Senate and we can hope for a reasonable deal. However, any bill passed by the Senate would still have to pass muster in the House, where the environment is still highly politicized. On the other hand, failure by the House to pass a bill ending the shutdown and preventing a default would be highly costly to lawmakers at election time.
Earnings season is in full swing, but reports are largely overshadowed by the impasse in Washington. So far, it's too early to see a trend, but S&P 500 companies are expected to post third-quarter earnings growth of 4.2%. Out of the 31% of S&P 500 companies that have reported so far, only about 55% have beat expectations, below the historical average of 63%.[4]
Looking ahead, it's likely to be another tumultuous week for markets. We don't know how close lawmakers are to a compromise, but we know from experience that Congress often waits until that last possible minute for a deal.
While we're optimistic, we are closely monitoring the situation and realize there are several potential market scenarios. As financial professionals, it's our job to worry about market movements so that our clients don't have to. If you have any concerns about your portfolio or any questions about how these issues may affect your investments, please reach out to us. We are always happy to help.
ECONOMIC CALENDAR:
Monday: Ben Bernanke Speaks 8:00 PM ET
Tuesday: Empire State Mfg. Survey
Wednesday: Consumer Price Index, Treasury International Capital, Housing Market Index, Beige Book
Thursday: Housing Starts, Jobless Claims, Industrial Production, Philadelphia Fed Survey, EIA Petroleum Status Report
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Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov . International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
HEADLINES:
Tweet causes oil prices to jump. Oil traders were jolted last week by a Twitter post by the Israeli Defense Force that suggested they might have bombed Syrian airports. Traders are increasingly turning to social media to stay on top of quickly evolving situations.[5]
China's export growth fizzles. The Asian giant's export growth slid 0.3% as sales to Southeast Asia tumbled. The data was a disappointing break with a raft of other indicators suggesting China's economy might be on the rebound.[6]
Consumer sentiment falls to 9-month low. The government shutdown and consumer malaise caused sentiment to decline, but only a small amount. Consumers were still optimistic about inflation and income, indicating that a quick rebound is possible if the government impasse ends.[7]
Small business confidence dips. Confidence among U.S. small businesses fell in September as owners worried about the economy's near-term outlook. However, owners remain upbeat about sales forecasts and expansion prospects.[8]
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"When you can do the common things of life in an uncommon way, you will command the attention of the world."
- George Washington Carver
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Simple but impressive. Receipt from RealSimple.com
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Ingredients:
1 17.25-ounce package thawed puff pastry
1 egg, lightly beaten
1 � cups (6 ounces) grated Parmesan
1 tablespoon poppy or sesame seeds (optional)
Directions:
1. Heat oven to 400�F.
2. Cut the puff pastry lengthwise into 24 strips. Brush each with the egg and sprinkle with Parmesan and poppy or sesame seeds (optional), and twist.
3. Place on 2 baking sheets. Bake until golden, 12 to 15 minutes. Serve warm.
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Need to Amend Your Return?
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If you discover an error after filing your taxes, you may need to amend your return. Here's how to determine:
* When to amend a return. You should file an amended return if you need to correct your filing status, number of dependents, total income, tax deductions or tax credits. The instructions for Form 1040X, Amended U.S. Individual Income Tax Return, list additional reasons to amend a return.
* When NOT to amend a return. In some cases, you don't need to amend your tax return. For example, the IRS usually corrects math errors when processing your original return. If you did not include a required form or schedule, the IRS will send you a request for whatever is missing.
For more information on filing an amended return, talk to your tax professional or go to IRS.gov to get Form 1040X.
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Slicing the ball? Use your wristwatch to avoid an in-flight disaster that starts with your downswing. Rotate your wristwatch toward the ground on your downswing; this simple adjustment properly positions your forearms for your follow-through and avoids slicing the ball.
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Stave Off the Flu With Food
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If you've ever had the flu or a bad cold, you know that it can be a miserable experience that can leave you down for weeks. Boost your body's flu-fighting reserves with some healthful additions to your diet:
* Black-eyed peas contain zinc
* Carrots contain beta-carotene
* Green, black, and oolong teas contain quercetin, an important antioxidant
* Yogurt contains probiotics
* Tomatoes contain Vitamin C
* Mushrooms contain selenium
* Almonds contain antioxidant Vitamin E
* Wild salmon contains Vitamin D
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Lemons are a green alternative to bleach in the laundry; just add � cup of lemon juice in the rinse cycle for bright whites. Plastic food-storage containers with acid stains can be restored with a little lemon juice on the stained areas and then dried in the sun.
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Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets
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 Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The Dow Jones Corporate Bond Index is a 96-bond index designed to represent the market performance, on a total-return basis, of investment-grade bonds issued by leading U.S. companies. Bonds are equally weighted by maturity cell, industry sector, and the overall index.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
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.
Google 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.
Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative, Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
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