Phillips File
June 24, 2011
Stocks fell broadly before recovering in late trading Thursday as investors reacted to negative news on a number of fronts. On Wednesday came a downbeat assessment of the U.S. economy by Fed Chairman Ben Bernanke, and on Thursday a surprise announcement that the U.S. would tap into its Strategic Petroleum Reserve as part of an international effort to counteract oil shortages stemming from the ongoing conflict in Libya and unrest elsewhere in the Middle East. The Dow Jones Industrials, which had been down almost 235 points during midday trading, finished 59.67 points lower at 12,050. Other major averages traced similar moves.
Positive news has been in short supply lately, with equities in a generally declining trend since the end of April. Stocks sold off somewhat yesterday after Bernanke said the Fed was making what he characterized as “fairly significant” reductions in its economic growth forecasts for 2011 and 2012. The central bank now expects growth this year of up to 2.9%, down from its April projection of up to 3.3% and its January forecast of up to 3.9%. In other words, the Fed has lowered its 2011 forecast a full percentage point since the first of the year.
For 2012, the Fed reduced its growth forecast to 3.7%, down from 4% previously. Bernanke also said the U.S. economy is “still years away” from full employment, which is generally defined as an unemployment rate of about 5%, well below the current rate of 9.1%. The Labor Department also said Thursday that initial claims for unemployment insurance were up 9,000 to 429,000 last week, higher than most analysts had anticipated.
Bernanke’s views added to the anxieties of investors already concerned about the end of the Fed’s QE2 stimulus program, stresses in the eurozone surrounding Greece’s severe financial problems, and the ongoing impasse in Washington over cutting the nation’s budget deficit and raising the debt ceiling. News of the oil initiative, while welcome in terms of reducing supply strains and immediately lowering prices, also served as a stark reminder of the world’s reliance on an unstable region for this critical commodity. However, equity investors came back in after a late-session report that Greece had agreed with the International Monetary Fund and the European Union on a five-year austerity plan.
Although economic and geopolitical uncertainties are obviously weighing on investors, it’s also true that corporate profits remain strong, interest rates are low and the U.S. economy is growing, albeit slowly. Second-quarter earnings reports, which are about to commence, may provide more clarity on how companies are actually faring.
While dramatic market fluctuations are never pleasant, they are also not a good reason to hastily deviate from your long-term financial plan. Volatile market swings can be unsettling, but keeping an eye on your asset allocation targets can help keep things in perspective and remind you of the role equities play in a balanced portfolio. If you’d like to discuss your investment portfolio – or if you have any other questions or concerns about your overall financial plan – please give me a call.
May 28, 2010
2010 is an interesting year for trying to do estate planning. Congress failed to act before the end of 2009 to prevent the temporary repeal of the estate tax in 2010. When this happened, even though there is not an estate tax, there is also NOT A STEPPED UP BASIS at death. This also has ramifications if you have, like some many of our clients, a credit shelter trust arrangement in your wills.
Please contact your attorney and find out if you need to have a short term change made to your will until we get some clarification on legislation. For your reading, I have an article by Andrew Friedman which is written in understandable language "The State of the Estate Tax".
Also, for those of you making charitable gifts, please note the following comments by Chip Bauder, Senior Vice President of Wealth Solutions at Raymond James:
Income tax rates are scheduled to go up in 2011, topping out at 39.6%, with the capital gains tax rate rising from 15% to 20% (possibly limited to those with incomes above $250,000). Ordinarily, taxpayers save more from charitable contributions when tax rates are high, but that may not be the case after 2010, when certain itemized deductions cutbacks return & proposals become law:
- President Obama has proposed capping charitable deduction tax savings at 28% for donors in the 36% or 39.6% tax brackets, in 2011 and later years. So a $10,000 gift by a donor in the highest bracket would reduce taxes by only $2,800 in 2011, not $3,960.
- The Code 68 deduction cutbacks for high-income taxpayers (sometimes called the "3% haircut") would be reinstated in 2011. For 2009, one percent of AGI in excess of $166,800 was shaved from certain itemized deductions, up to 80% of affected deductions, including charitable contributions. The cutbacks have been phased out completely for 2010, but are restored at the full 3% reduction after 2010. Taxpayers with excess AGI of $1 million, for example, would lose $30,000 of deductions in 2011.
Best year to plan a gift is 2010...
To help you with this, Raymond James can help you set up a charitable account that will allow you to load up your gifts in this tax year, but you can use the gifts for future gifts to churches or your favorite charities.
Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS we are not qualified to render advice on tax or legal.
April 12, 2010
After attending a two day workshop on the Health Care Bill, it is difficult to avoid feeling kicked in the teeth. The taxes in the bill as it currently stands constitute a tax increase on unearned income of the very people with whom I work...you. Unearned income is the dividends, annuities, royalties, capital gains, and rent you receive, exclusive of your retirement plans.
Michael Hayman, CIMA®, Vice President of External Sales at Raymond James, whom many of you met at our January educational investment forum, had the following comments and I found it a comfort:
Lynn,
I understand some of the worry. As you stated to your clients in the last meeting we had together, taxes are going up, and even more than we may have thought with the healthcare bill. Here a few thoughts that at least make me feel better:
- The economy is undoubtedly showing some good signs lately, as jobs were created last month (yes, many for census, but still over 100k when you strip out the census hirings.) So, the job market is likely turning.
- Manufacturing has been expanding multiple months in a row; this too will lead to jobs.
- Consumers are showing some signs: sentiment is increasing, car sales are much better, and investor psychology is much better. Much of this is due to statements looking better.
- We had a period of low taxes from 2000-2010, and the market returned 0%, so taxes alone do not determine the direction of market.
- Taxes were higher in the 90�s, and the market did great.
And lastly and most importantly in my opinion...
The market is aware of all these implications and yet it continues to go higher. The reason being is that earnings look good and likely will continue to look good. The alternative of bonds does not look so compelling, so equities look to be the better bet. I have said the markets always have known better than any person and I am not dismissing some of the worries of many of the experts, as I share many of these, but I also look at the continued improvement in the economy and see some momentum there.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of the author and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.
March 15, 2010
"How the Market Got It's Groove Back," read one headline. Others marked the one-year anniversary of this recession's apparent market low by wishing happy birthday to the "baby bull." No one is celebrating with too much glee, but the upbeat mood among investors and most analysts is in dramatic contrast to the gloom evident when the markets closed on March 9, 2009. At the time, no one knew that would be the beginning of the recovery.
The market indices were relatively quiet as the anniversary approached. At the one-year mark, the Dow Jones Industrial Average (an unmanaged index of 30 widely held stocks) stood at 10,564.38, up 61.4% since its close the year before. The NASDAQ Composite (an unmanaged index of common stocks listed on the NASDAQ National Stock Market) finished at 2,340.68, up 84.5% from a year ago. The S&P 500 (an unmanaged index of 500 widely held stocks) stood at 1,140.44, which was up 68.6% compared to its close on March 9, 2009.
A year ago, it was just another Black Monday in the history of financial markets – oddly enough, March 9 last year was a Monday, just as it was a Monday when the Dow lost nearly 23% of its value on October 19, 1987. On Monday, October 28, 1929, the Dow lost 13.5% – the day was one of several losing sessions that foreshadowed the Great Depression.
Despite vast differences in the times and circumstances surrounding dramatic market days, there are common lessons to be extracted. In the past, investors who could and did stay in the markets eventually prospered – it took more than 22 years to reach previous highs in the case of the Great Depression, but just over two after the 1987 plunge. Those who succumbed to the panic all too often sold at or near the bottom, in effect, buying into their losses, then stood aside as recovery occurred. Right now, no one needs to dial up a long-term memory to understand how rapidly markets can sometimes recover and how beneficial it can be to stay invested for the long term while maintaining a diversified portfolio. This seems to be so even as the markets have far to go to recover to the highs of late 2007.
No one knows where the markets will go next, but as we push beyond the anniversary of the apparent low point, with the economy on a slow road to recovery, a generally positive outlook doesn't seem out of line. If you'd like to discuss positioning your portfolio for the future or have other concerns, please give me a call.
Past performance is not indicative of future results. Investors cannot invest directly in an index.
January 26, 2010
As your financial advisor, I struggle to strike a happy balance between keeping you informed and cramming your inbox with stuff you have no interest in reading. With this in mind, I am sending along both the link as well as a copy of the white paper recently released by Eagle Asset Management. In this white paper, each portfolio manager talks candidly about what he or she sees for the future... the good, the bad and the ugly. I found it to be right on target, a good overview and somewhat easy to read. Note that these responders are NOT part of the marketing department, so their comments are candid. I think you will find this beneficial reading as we begin the year and a new market cycle.
Economic Recovery: Where the Market May Go, an updated perspective by Eagle senior portfolio managers on the current market situation and potential investment opportunities ahead.
December 9, 2009
Just blew in from the Advanced Planner's Study Group meeting in Vail, Colorado. At this meeting, a small group of top RJ financial advisors listened, discussed, and argued to analysts, chief market strategists, political and legislative experts. Topics ranged from the credit markets, inflation, political developments and their likely effects on the government's tax, fiscal and retirement policies, as well as the outlook on the economy and opportunities for the future. Of course, they all don't agree. However, here are the themes I see being played out going forward. We will address how each can affect you in our review meetings.
I am expecting:
- Taxes to increase
- Conversions to Roths by the millions
- Attempts to weaken the dollar further – to help grow us out of this recession
- Reward of dividend producing companies – both here and around the world
Watch for more information during your one-on-one meetings here.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any opinions are those of Lynn Phillips-Gaines and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of 12-09-09 and are subject to change without notice.
October 12, 2009
While the majority of money from investors continues to pour into bonds, I see opportunities with the equity portions of investments for longer term investors...especially the dividend high quality companies which haven�t participated in the run up in prices. This is an exciting time for our company as we position for the opportunities ahead. There is an inverse relationship between interest rates and bond prices. When interest rates increase, bond prices decrease and when interest rates decrease, bond prices increase. Expressions of opinion are as of 10-14-09 and are subject to change without notice. Investments mentioned may not be suitable for all investors. Past performance may not be indicative of future results.
Congrats to Patricia who achieved a milestone of getting one of her many licenses yesterday. We are most proud of her.
We are hoping the rain will move out of the area for the office warming event on the 23rd. However, even if it is raining, we will still be serving up BBQ in our new location.
September 30, 2009
Welcome to the opening of our website.
This website has been designed with you, our client, in mind. We want it to be a
place where you can access timely information on what we are thinking … both here
in the Starkville office and at Raymond James. So please explore and send us some
feedback.
We are putting the plans together for the client appreciation Tailgate-BBQ/Office-Warming event on Friday, October 23, (before the Florida game on Saturday), in our new office (the front of the old office building). Drop by for some BBQ, fun and a tour of our new office. If you have your family in town, bring them with you! We will hope for pleasant weather. And, you can RSVP on our website to give us a headcount for ordering food. Click here to find map and directions to our office.
