That Was The Week That Was-1st Week May

 

Sandy Cutler, CEO of Eaton Corporation, speaking on Mad Money, CNBC, May 1st, provided a report card on the state of the U.S. economy. He confirmed that residential and non-residential construction, aerospace, cars and truck sectors are very strong. Non-residential construction is a large source of hiring in the U.S. and lower oil prices have driven a lot of jobs to that industry. Also, truck sales in 2015 could be 300,000 units. Manufacturers build trucks only because people need them. Only one sector of the economy seems weak and that’s retail. (The American public is not spending their gas pump savings as much as the experts predicted.) Mad Money 5/1/2015

 

 Target Date Funds are the investment du jour (default) for most 401k plans. Investors who either neglect or are unable to choose an investment when they sign up for their employer sponsored retirement plan often are automatically enrolled in a Target Fund that most approximates the year when they would ‘normally retire’. Target Date Funds are also a good choice for people who don’t want to think about investing and simply want a‘set it and forget it type savings plan.’ While certainly better than going to cash or short-term bonds as a default investment, investors should know there are certain cautions when owning a Target Date Fund. Target Date Funds vary from company to company even though all have identical named products that ‘mature’ at the same time frame. A Retirement 2020 Target Date Fund with ABC Funds one would think should be no different than Retirement 2020 Target Date Fund with XYZ Funds; but, in actuality could be widely different in the way it’s managed. Here’s a few things you should know about the product:

Target Date Funds are an all inclusive money management plan that should be invested,not as part of an investment plan, but as the complete investment plan.

Each Target Date Fund is managed differently and may be more or less risky than an identical  dated Target Date Fund with another management company.

The longer one holds the fund the more percentage of the underlying investment portfolio becomes fixed. This increases the risk of the investment to rising interest rates.

Target Date Funds can and have lost significant amounts of money. In 2009 Target Dated Funds lost on average 25% according to Kiplinger Magazine.

While not the investment panacea that some financial experts tout these funds will provide professional management, a decreasing equity risk profile, and a lifetime management even past their ‘retirement’ date.

Made me smile…

 

 

In 2009, Paola Sapienza, associate professor of finance and the Zell Center Faculty Fellow at Northwestern University and Luigi Zingales pointed out: As trust declines, so does American’s willingness to invest their money in the financial system.

Americans unwillingness to trust institutions and businesses that will personally benefit them reflects in the confidence they have in a future comfortable retirement.

Employee Benefit Research Institute has published the 2015 Retirement Confidence Survey and discovered the numbers have rebounded to 22% of Americans are now confident about their retirement. Previously in 2014 only 18% of those survey were confident in a comfortable retirement. (note in the 1990s 51% were somewhat confident versus today’s 36%.)

More info go to the website at EBRI Retirement Confidence Survey 2015.

 

Sell in May & Go Away?  

Considering how unexciting the first four months of 2015 have been traders may well want to hold-off their long cherished tradition of ‘selling in May and coming back in November’. Bob Pisani at CNBC confirmed that from May to October the S&P 500 Index was positive 65% of the time and while the November to April period was up 85% of the time over the past 20-years. The latter period handily outperformed the former 6-1. CNBC May 1, 2015

 

IBD REPORTED May 5th that Sam Stovall at Capital IQ U.S.said that Investors should not sell in May but rotate instead to small cap health care and consumer staple stocks. They rose on average 2% during this period. If you were sitting in cash or money market this would be far more than you’d earn there. INVESTORS BUSINESS DAILY 5-5-2015

Yes, Virginia, There is Inflation!

Inflation at the grocery and retail stores is being manipulated and hidden through slick packaging games. Packages for many products are getting smaller (thinner actually) while prices stay the same. Clothes, at some manufacturers, are shrinking in size and quality while price hikes are modest.

Tony has lost some size.

Pullups are 5% less.Bounty is missing sheets

1 pound hot dog pack is 15 ounces.

10% less.

Two pounds lighter!

Just a few I found and you can do the same by googling inflation and seeing your favorite potato chips, peanut butter, clothes soap and other goods downsized. I found these and more at Mouseprint.org.

 

Excellent News! Factory Orders Rose Commerce Department Said May 4th. New orders for manufactured good rose 2.1% in March. Durable goods, autos and computers rose in March for the second time in three months. Markets up for the Monday.

 

 

Trade Deficit Slaps Markets!

Tuesday markets cratered when the U.S. Trade Deficit came in at the highest level since 2008. It was up 43% in March. In dollar terms a seasonally adjusted $54.1 billion in March from a revised $35.9 billion in February, the Commerce Department reported May 5th. Before you get all excited you should know that the main culprit is that the West Coast ports got back to business after an extended strike and imports surged. Still there were those that worried that a strong dollar was making American exports too expensive while encouraging imports. Barclays Capital economist Jess Hurwitz wrote, ‘we do expect the net trade balance to drag on overall growth over the next several quarters.” Americans are consuming more and the dollar is stronger. BloombergBusiness 5/5/2015.

Sideways Market? Sure looks like one. Having a portfolio that is comprised of dividend paying stocks is a great way to weather a sideways market. An investor doesn’t have to do anything fancier than sit and wait while getting paid.

 

Fed Chief Janet Yellen Called Stocks OverValued  Wednesday & Verbal Fist-a-Cuffs Broke Out & Markets Swooned. Yes, dear reader, Janet Yellen gave an opinion on what she thought of the stock market and lots of traders and investors took it to heart that she knew what she was talking about. The DJIA was having a so-so day before her words were heard on the Street and by the time you could say, “ Where’s The Ben Bernanke?’, the markets were off triple digits. The noise got so heated between those that said markets were fairly priced and those that agreed with Yellen, that CNBC almost had a fist fight on-air, except the two guys were split screen and miles apart. Cramer came on the air later in the day and scolded the Fed chief saying she may be good at running the Federal Reserve but ‘she’s no portfolio manager’. In fact, Yellen did say that while stocks were overvalued that they were not in relation to bonds. Markets later came slightly back and the Dow closed off 86 points and the Naz was even for the day. Sources CNBC.com, CNBC, WSJ., Bloomberg.

Alan Greenspan, the former Federal Reserve Chief, once commented about irrational exuberance in the markets and it took four years before the collapse.

Thursday Markets Bounced Back- Ignoring Yellen.

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

Securities Offered Through Westminster Financial Securities, Inc. Member FINRA/SIPC.