That Was The Week That Was-5th Week October

 

Big News of The Week! The Federal Reserve Ends Bond Buys, Market Slumps, Bond Yields Jump but ‘Considerable Time’ Before a Rate Hike Is Still The Language Du Jour. Waiting on pins and needles Wednesday the Street finally got the news at 2 PM EST that it was waiting for. There was nothing startling new or unexpected but the markets still took a slight hit. The 10-year jumped to 2.350%, meaning principal fell. The Fed made no mention of European malaise or defining exactly when a rate hike would be made. (Common knowledge thinks a June 2015 hike is still in the cards). It did say that the labor markets have improved with solid job gains and a lower unemployment number. Inflation, the Fed concluded, would most likely in the short term be held down by lower oil prices. The Fed judged that inflation running below 2% has diminished somewhat since the beginning of the year.  The Central Bank fears deflation more. Info from Barrons.com, MarketWatch, CNBC and WSJ.10/29/2014

 

In more market news…

  Bounce! Market corrections typically are V shaped. They go down relatively fast and then they ‘bounce’ back within a short period of time. Even experts cannot tell if this recent market dip was a correction or the beginnings of a crash until things cool down. The market correction began in September and pretty much ended as the third week of October started. It almost got to this- …yeah, that scary stage. Economist Gluskin Sheff, in his economic commentary, reported in October 25th MarketWatch.com., wrote that,’ In reality bear markets do not just pop out of the air. They are caused by tight money, recessions, or both. These conditions do not apply, nor will they until 2016 at the earliest.’ Sheff’s chart is below. The shaded areas are what he calls recessions. Stocks are the place to be. Applied Global Macro Research’s Carsten Valgreen sees stocks rising (modestly) 5% to 8% annually over the next three  years. The Barrons.com report 10/25 concluded that Valgreen’s crystal ball clouded as to the exact date when things will end.

 Social Security 2015 Increase to current retirees will be 1.7%! The cost of living adjustment is expected to increase the average income benefit by $22 a month. This follows increases in previous years 2013=1.7% and in 2014= 1.5%. For workers a higher cap to $118,500 from $117,000. Workers taking social security who are under the age of 66 may earn $15,720 before $1.00 in benefits will be withheld for every $2 earned above that limit.

Do You Know The Difference Between a Trust and a Will? Should You Have One, Both or Simply Named Beneficiaries? Many couples draw up a Revocable Living Trust and then forget to fund it. It’s one of the biggest mistakes people make.  At my annual client meeting in 2015 attorney Larry E. Powe will present information on how to best handle your particular estate plan. More info as to date and time later.

WSJ 10/27/2014 reported that the disparity in wealth today was caused by doing the wrong thing in 2009. The family that sold at the bottom of the market crisis has far less than the family that held throughout. Stocks are the place to be, the article reported. Professor Jeremy Siegel calculated that stocks have returned on average 6.7% per year over the past 200-years.

When should you take Social Security? Financial Experts contend you should wait to maximize your income. My argument is that you should take it as soon as possible. Why? Someone who waits 4 years from age 66 to age 70 gets no income during those four years. On average it will take almost 15 years before the higher social security income outperforms and makes the wait worthwhile. That fifteen years almost coincides perfectly with the lifespan of the average U.S. male.

WSJ cover 10/28/2014. Art Cashin, UBS director of floor operations at the NYSE, said oil is the key factor moving the stock market. ‘If oil dips below $80, we expect to see pressure come back on equities.’ CNBC 10/27  Someone was reading headlines.

Goldman Sachs, chief equity strategist David Kostin, reiterated his year-end forecast for U.S. equities, Monday 27th October. He repeated the S&P 500 Index would hit 2050 by end-of-year.  He also said U.S. success would not get dragged down by ‘stumbles’ in the rest of the world. Monday markets ended essentially flat.

 

Consumer Confidence Hits a High and Pulls Market With It. The Conference Board Consumer Confidence Index up 94.5. The index that follows what consumers buy has improved from an estimate of 87. Low gas prices and improved business conditions contributed to how people feel. This boost, suggested CNBC 10/28/2014, should be a welcome sign for retailers this coming holiday season. The Dow was up  188 points, Naz +78 and the S&P closed +23. Oil essentially flat and gold down.

 It was a 1-2 punch Thursday as the Japanese Central Bank shocked the markets by expanding its quantitative easing, increasing its bond purchases by 30 trillion yen a year. It would also triple its purchases of exchange traded funds and real-estate investment trusts. Most economists expected no action. Japanese stocks surged on the news. In the U.S. news that the 3rd quarter GDP grew at 3.5% versus an expected 3% rallied stocks into a triple digit move higher. It was a very good week. INFO gathered from CNBC, Barrons.com, WSJ. 10-31-2014

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

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