A
recap of news from Wall Street, world markets & the economy.
Brought
to you by Jim Hecker, Financial Advisor, Wealth Design Group, LLC.
Tip
of the Month
If you’re likely to face estate taxes in the future, meaning you’ll make a voluntary contribution to Uncle Sam when you die, you have two basic choices of how to pay the tax:
If you’re likely to face estate taxes in the future, meaning you’ll make a voluntary contribution to Uncle Sam when you die, you have two basic choices of how to pay the tax:
- Pay estate taxes in full some years from now, generally within 9 months of your death (so asset liquidity is a key issue), at the scheduled tax rate of 55% of your estate’s value (can you say “ouch!”?), or
- Pay them a little at a time (say, at ½% to 1% of your estate’s value per year], for the next 15 or 20 years [via an insurance trust outside your estate]
- Even if your estate doesn’t wind up triggering estate taxes, your insurance trust simply becomes a well-protected, income-and-estate-tax-avoiding vehicle that can provide you with steady growth, attractive returns and asset protection, all of which are unaffected by the daily swings in the stock market.
Because
the numbers are compelling, I suggest you consider option #2, and
also suggest starting this year, while the rules give you more
flexibility than they likely will in the future (I can explain all
this more when we talk). You don’t even have to give up control of
the trust’s assets to accomplish your objectives. Give me a call
and I’ll show you what some of your options are.
News
update
You might say July brought a new twist on an old story: headlines from Europe actually helped foster an overall stock market advance. The S&P 500 rose 1.26% on the month, and much of the gain was linked to European Central Bank President Mario Draghi’s July 26 pledge that the ECB would do “whatever it takes” to save the euro. After that statement, Wall Street seemingly forgot about the wave of poor-to-mediocre domestic indicators that had held stocks down for most of the month.1,2
You might say July brought a new twist on an old story: headlines from Europe actually helped foster an overall stock market advance. The S&P 500 rose 1.26% on the month, and much of the gain was linked to European Central Bank President Mario Draghi’s July 26 pledge that the ECB would do “whatever it takes” to save the euro. After that statement, Wall Street seemingly forgot about the wave of poor-to-mediocre domestic indicators that had held stocks down for most of the month.1,2
Domestic
economic health
There wasn’t much to cheer about in the June employment report. Unemployment remained at 8.2%, and the economy had added only 75,000 new jobs per month in Q2 2012 compared to 226,000 a month in the previous quarter. About a third of the 80,000 jobs added in June were temporary. There was one positive note: the ranks of the long-term unemployed had thinned to 5.4 million down from 6.3 million a year ago.3,4
There wasn’t much to cheer about in the June employment report. Unemployment remained at 8.2%, and the economy had added only 75,000 new jobs per month in Q2 2012 compared to 226,000 a month in the previous quarter. About a third of the 80,000 jobs added in June were temporary. There was one positive note: the ranks of the long-term unemployed had thinned to 5.4 million down from 6.3 million a year ago.3,4
Consumer
spending was flat for June, even as consumer incomes rose 0.5%. (The
economy had grown 1.5% in Q2 compared to 2.0% in Q1.) Consumer
confidence polls diverged: the University of Michigan’s July survey
hit a 2012 low of 72.3, but the Conference Board’s July survey
showed 3.2% improvement to 65.9, its first gain in five months. U.S.
retail sales dropped for a third straight month in June (-0.5%), a
phenomenon unseen since 2008.2,5,6,7,8
There
wasn’t much movement in consumer or producer prices. The Consumer
Price Index was flat in June while the Producer Price Index rose just
0.1%; annualized consumer inflation was running at 1.7% in June, the
same as in May.9
Had
growth returned to the manufacturing sector? According to the
Institute for Supply Management, no. Its July manufacturing PMI came
in at 49.8, after a June mark of 49.7. The service sector had fared
better in June; the ISM PMI for that sector had come in at 52.1.
June’s durable goods orders topped forecasts, rising an impressive
1.6%.6,10,11
Global
economic health
A day after he assured the world that the ECB would pull out all the stops to preserve the eurozone, Bloomberg reported that Mario Draghi was meeting with the head of Germany’s central bank to arrange a round of sovereign debt purchases. Yet even as markets waited for an ECB announcement at the start of August, a Bundesbank source commented to CNBC that “monetary policy should strictly focus on its primary mandate to preserve price stability” – a comment that dampened some enthusiasm. Still, it looked like the risk of a quick “Grexit” had passed – as July ebbed into August, Greece’s government agreed to accept the austerity measures required to qualify for the next installment of its EU/IMF rescue loan.2,12,13
A day after he assured the world that the ECB would pull out all the stops to preserve the eurozone, Bloomberg reported that Mario Draghi was meeting with the head of Germany’s central bank to arrange a round of sovereign debt purchases. Yet even as markets waited for an ECB announcement at the start of August, a Bundesbank source commented to CNBC that “monetary policy should strictly focus on its primary mandate to preserve price stability” – a comment that dampened some enthusiasm. Still, it looked like the risk of a quick “Grexit” had passed – as July ebbed into August, Greece’s government agreed to accept the austerity measures required to qualify for the next installment of its EU/IMF rescue loan.2,12,13
Across
the euro area, inflation held steady at 2.4% in June, though
joblessness had ticked up to 11.2%; eurozone sovereign debt had risen
to 88.2% of GDP. Assorted purchasing manufacturer indices looked
weak. China’s official PMI hit an 8-month low of 50.1% in July as
HSBC’s China PMI rose slightly to 49.3. Taiwan’s PMI came in
under 50 in July, and manufacturing gauges in India and South Korea
respectively registered their biggest monthly drops since September
and December. The eurozone Markit PMI dropped to a 37-month low of
44.0 in July.14,15
World
markets
The “Draghi rally” certainly helped indices in Europe, though its effect was less pronounced in other regions. Data from the New York Times tells the tale for July: FTSE 100, +1.15%; DAX, +5.55%; CAC 40, +2.97%; FTSEurofirst 300, +4.11%; Hang Seng, +1.83%; TSX Composite, +0.59%; Bovespa, +3.21%; S&P/ASX All Ordinaries, +3.58%; Shanghai Composite, -5.47%; Nikkei 225, -4.48%. The MSCI World Index rose 1.20% for July, while the MSCI Emerging Markets Index advanced 1.61%.16,17
The “Draghi rally” certainly helped indices in Europe, though its effect was less pronounced in other regions. Data from the New York Times tells the tale for July: FTSE 100, +1.15%; DAX, +5.55%; CAC 40, +2.97%; FTSEurofirst 300, +4.11%; Hang Seng, +1.83%; TSX Composite, +0.59%; Bovespa, +3.21%; S&P/ASX All Ordinaries, +3.58%; Shanghai Composite, -5.47%; Nikkei 225, -4.48%. The MSCI World Index rose 1.20% for July, while the MSCI Emerging Markets Index advanced 1.61%.16,17
Commodities
markets
Wheat futures soared 17.30% in July while corn futures gained 26.86%. Energy futures also did well on the NYMEX last month: natural gas went +13.63%, RBOB gasoline +5.41%, heating oil +5.10% and crude oil +3.65. Among metals, gold gained 0.39% and silver 1.09% while copper dipped 2.26%. Cotton prices were virtually flat in July (-0.01%). The U.S. Dollar Index was up 1.17% last month. On July 31, gold settled at $1,610.50 on the COMEX, oil at $88.06 on the NYMEX; at the pump, regular unleaded was averaging precisely $3.50 a gallon.18
Wheat futures soared 17.30% in July while corn futures gained 26.86%. Energy futures also did well on the NYMEX last month: natural gas went +13.63%, RBOB gasoline +5.41%, heating oil +5.10% and crude oil +3.65. Among metals, gold gained 0.39% and silver 1.09% while copper dipped 2.26%. Cotton prices were virtually flat in July (-0.01%). The U.S. Dollar Index was up 1.17% last month. On July 31, gold settled at $1,610.50 on the COMEX, oil at $88.06 on the NYMEX; at the pump, regular unleaded was averaging precisely $3.50 a gallon.18
Real
estate
Housing sector analysts had gotten used to the S&P/Case-Shiller Home Price Index bringing depressing data and gloomy analysis, so the May edition was a real surprise – prices rose in all 20 metro markets with a 2.2% composite gain. (In fact, it was the best month the index had seen in over a decade.) Existing home sales, however, slipped badly in June (-5.4%) along with new home sales (-8.4%) and pending home sales (-1.4%). Housing starts were up 6.9% in June to a three-and-a-half-year peak, with single-family starts increasing 4.7%.19,20,21
Housing sector analysts had gotten used to the S&P/Case-Shiller Home Price Index bringing depressing data and gloomy analysis, so the May edition was a real surprise – prices rose in all 20 metro markets with a 2.2% composite gain. (In fact, it was the best month the index had seen in over a decade.) Existing home sales, however, slipped badly in June (-5.4%) along with new home sales (-8.4%) and pending home sales (-1.4%). Housing starts were up 6.9% in June to a three-and-a-half-year peak, with single-family starts increasing 4.7%.19,20,21
Mortgage
rates reached historical lows - again. In Freddie Mac’s, July 26
survey, the average interest rate on the 30-year FRM was 3.49%
compared to 3.66% on June 29. Those eyeing refinancing watched the
15-year FRM’s average rate dip to 2.80% on July 26, down from 2.94%
in the final June survey. Between June 29 and July 26, average rates
for 5/1-year ARMs moved from 2.79% to 2.74% and average rates on
1-year ARMs went from 2.74% to 2.71%.22
Looking
back … looking forward
The Dow ended July at 13,008.68, the S&P at 1,379.33 and the NASDAQ at 2,939.52. The gain in the blue chips is relatively impressive given the fact that the Dow had many more down days than up days last month.1,12,23
The Dow ended July at 13,008.68, the S&P at 1,379.33 and the NASDAQ at 2,939.52. The gain in the blue chips is relatively impressive given the fact that the Dow had many more down days than up days last month.1,12,23
| % CHANGE |
Y-T-D
|
1Q
CHG
|
1-YR
CHG
|
10-YR
AVG
|
DJIA
|
+6.48
|
+1.00
|
+7.22
|
+4.89
|
NASDAQ
|
+12.83
|
+0.15
|
+7.10
|
+12.13
|
S&P
500
|
+9.68
|
+1.26
|
+7.18
|
+5.13
|
| REAL YIELD |
7/31
RATE
|
1
YR AGO
|
5
YRS AGO
|
10
YRS AGO
|
10
YR TIPS
|
-0.69%
|
0.33%
|
2.44%
|
3.10%
|
Sources:
bloomberg.com, usatoday.com, bigcharts.com, treasury.gov -
7/31/121,27,28,29
Indices
are unmanaged, do not incur fees or expenses, and cannot be invested
into directly.
These
returns do not include dividends.
As
August began, Wall Street hoped for promising announcements from the
Federal Reserve and European Central Bank – two entities not known
for sudden bold moves. The Fed offered carefully placed hints of
possible future action in its August 1 policy statement, noting that
it “will closely monitor incoming information on economic and
financial developments and will provide additional accommodation as
needed to promote a stronger economic recovery.” That language is
just a tiny bit stronger than that seen in prior FOMC statements, and
bulls are taking it as a signal that the fall may bring a new
stimulus of some sort. Meanwhile, it could be that August simply
continues what we have seen in June and July: stocks persistently
advancing in spite of the pressures on U.S. consumer spending, global
manufacturing and the European banking sector and bond market.28
Upcoming
economic releases
Coming up in August, we have: the July employment report and July’s ISM service sector index (8/3), June wholesale inventories (8/9), July’s retail sales and PPI and June business inventories (8/14), July’s CPI and industrial output data and the latest NAHB housing market index (8/15), July housing starts and building permits (8/16), the initial August consumer sentiment survey from the University of Michigan plus the July edition of the Conference Board’s Leading Economic Indicators index (8/17), the release of the July 31 FOMC minutes (8/21), July existing home sales (8/22), July new home sales and June’s FHFA housing price index (8/23), July’s durable goods orders (8/24), June’s Case-Shiller home price index and the Conference Board’s August consumer confidence poll (8/28), July’s pending home sales, another estimate of Q2 GDP and a new Fed Beige Book (8/29), July consumer spending data (8/30), and a report on July factory orders along with the month’s final University of Michigan consumer sentiment survey (8/31).
Coming up in August, we have: the July employment report and July’s ISM service sector index (8/3), June wholesale inventories (8/9), July’s retail sales and PPI and June business inventories (8/14), July’s CPI and industrial output data and the latest NAHB housing market index (8/15), July housing starts and building permits (8/16), the initial August consumer sentiment survey from the University of Michigan plus the July edition of the Conference Board’s Leading Economic Indicators index (8/17), the release of the July 31 FOMC minutes (8/21), July existing home sales (8/22), July new home sales and June’s FHFA housing price index (8/23), July’s durable goods orders (8/24), June’s Case-Shiller home price index and the Conference Board’s August consumer confidence poll (8/28), July’s pending home sales, another estimate of Q2 GDP and a new Fed Beige Book (8/29), July consumer spending data (8/30), and a report on July factory orders along with the month’s final University of Michigan consumer sentiment survey (8/31).
*Registered Representative and Financial Advisor of Park Avenue Securities LLC PAS.
Securities products/services and advisory services offered through PAS a registered Broker-dealer and investment advisor.
Field Representative, The Guardian Life Insurance Company of America (Guardian) New York, NY.
PAS is an indirect wholly owned subsidiary of Guardian.
Wealth Design Group is not an affiliate or subsidiary of PAS or Guardian.
PAS is a member FINRA, SIPC.
This
material was prepared by MarketingLibrary.Net Inc., and does not
necessarily represent the views of the presenting party, nor their
affiliates. Marketing Library.Net Inc. is not affiliated with any
broker or brokerage firm that may be providing this information to
you. This information should not be construed as investment, tax or
legal advice and may not be relied on for the purpose of avoiding any
Federal tax penalty. This is not a solicitation or recommendation to
purchase or sell any investment or insurance product or service, and
should not be relied upon as such. The Dow Jones Industrial Average
is a price-weighted index of 30 actively traded blue-chip stocks. The
NASDAQ Composite Index is an unmanaged, market-weighted index of all
over-the-counter common stocks traded on the National Association of
Securities Dealers Automated Quotation System. The Standard &
Poor's 500 (S&P 500) is an unmanaged group of securities
considered to be representative of the stock market in general. It is
not possible to invest directly in an index. NYSE Group, Inc.
(NYSE:NYX) operates two securities exchanges: the New York Stock
Exchange (the “NYSE”) and NYSE Arca (formerly known as the
Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE
Group is a leading provider of securities listing, trading and market
data products and services. The New York Mercantile Exchange, Inc.
(NYMEX) is the world's largest physical commodity futures exchange
and the preeminent trading forum for energy and precious metals, with
trading conducted through two divisions – the NYMEX Division, home
to the energy, platinum, and palladium markets, and the COMEX
Division, on which all other metals trade. The US Dollar Index
measures the performance of the U.S. dollar against a basket of six
currencies. The FTSE 100 Index is a share index of the 100 most
highly capitalized companies listed on the London Stock Exchange. The
DAX 30 is a Blue Chip stock market index consisting of the 30 major
German companies trading on the Frankfurt Stock Exchange. The CAC-40
Index is a narrow-based, modified capitalization-weighted index of 40
companies listed on the Paris Bourse. The FTSEurofirst 300 Index
represents the 300 largest companies ranked by market capitalization
in the FTSE Developed Europe Index. The Hang Seng Index is a
freefloat-adjusted market capitalization-weighted stock market index
that is the main indicator of the overall market performance in Hong
Kong. The S&P/TSX Composite Index is an index of the stock
(equity) prices of the largest companies on the Toronto Stock
Exchange (TSX) as measured by market capitalization. The Bovespa
Index is a gross total return index weighted by traded volume &
is comprised of the most liquid stocks traded on the Sao Paulo Stock
Exchange. The S&P/ASX All Ordinaries Index represents the 500
largest companies in the Australian equities market. The SSE
Composite Index is an index of all stocks (A shares and B shares)
that are traded at the Shanghai Stock Exchange. Nikkei 225 (Ticker:
^N225) is a stock market index for the Tokyo Stock Exchange (TSE).
The Nikkei average is the most watched index of Asian stocks. The
MSCI World Index is a free-float weighted equity index that includes
developed world markets, and does not include emerging markets. The
MSCI Emerging Markets Index is a float-adjusted market capitalization
index consisting of indices in more than 25 emerging economies.
Additional risks are associated with international investing, such as
currency fluctuations, political and economic instability and
differences in accounting standards. All information is believed to
be from reliable sources; however we make no representation as to its
completeness or accuracy. All economic and performance data is
historical and not indicative of future results. Market indices
discussed are unmanaged. Investors cannot invest in unmanaged
indices. The publisher is not engaged in rendering legal, accounting
or other professional services. If assistance is needed, the reader
is advised to engage the services of a competent professional.
Citations.
1
- www.bloomberg.com/markets/stocks/ [7/31/12]
2
- cnbc.com/id/48352210 [7/27/12]
3
-
www.ncsl.org/issues-research/labor/national-employment-monthly-update.aspx
[7/31/12]
4
-
www.nj.com/news/index.ssf/2012/07/us_unemployment_rate_stays_at.html
[7/6/12]
5
-
business.time.com/2012/07/31/us-consumer-spending-flat-income-up-0-5-in-june/
[7/31/12]
6
- briefing.com/investor/calendars/economic/2012/07/23-27 [7/27/12]
7
-
www.latimes.com/business/la-fi-consumer-confidence-20120801,0,543957.story
[8/1/12]
8
-
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[7/16/12]
9
-
www.businessweek.com/news/2012-07-17/u-dot-s-dot-consumer-price-index-was-unchanged-in-june-core-up-0-dot-2-percent
[7/17/12]
10
- www.ism.ws/ISMReport/MfgROB.cfm [8/1/12]
11
- www.ism.ws/ISMReport/NonMfgROB.cfm [7/5/12]
12
- www.cnbc.com/id/48415895 [7/31/12]
13
- www.bbc.co.uk/news/world-europe-19085236 [8/1/12]
14
- epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/
[8/1/12]
15
-
in.reuters.com/article/2012/08/01/economy-global-idINL6E8J13A920120801
[8/1/12]
16
-
markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp
[7/31/12]
17
-
mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html
[7/31/12]
18
-
money.msn.com/market-news/post.aspx?post=69561ea6-6d00-4e34-8db8-b8dcd17ee72e
[7/31/12]
19
-
www.latimes.com/business/money/la-fi-mo-home-prices-20120731,0,1786807.story
[7/31/12]
20
- www.cnbc.com/id/48335711 [7/26/12]
21
-
www.usatoday.com/money/economy/housing/story/2012-07-18/housing-starts-june/56297966/1
[7/18/12]
22
- www.freddiemac.com/pmms/ [8/1/12]
23
-
montoyaregistry.com/Financial-Market.aspx?financial-market=an-introduction-to-the-stock-market&category=29
[7/2/12]
24
- www.usatoday.com/money/index [7/31/12]
25
-
bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=8%2F1%2F11&x=0&y=0
[7/31/12]
25
-
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=8%2F1%2F11&x=0&y=0
[7/31/12]
25
-
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=8%2F1%2F11&x=0&y=0
[7/31/12]
25
-
bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F31%2F02&x=0&y=0
[7/31/12]
25
-
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F31%2F02&x=0&y=0
[7/31/12]
25
-
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F31%2F02&x=0&y=0
[7/31/12]
26
-
treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldYear&year=2012
[7/31/12]
26
-
treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll
[7/31/12]
27
-
treasurydirect.gov/instit/annceresult/press/preanre/2002/ofm71002.pdf
[7/10/02]
28
-
money.cnn.com/2012/08/01/news/economy/federal-reserve-stimulus/index.htm
[8/1/12]
