Acropolis is a St. Louis-based, fee-only wealth management firm. We serve individual investors, institutional investors and 401k plan sponsors. We specialize in retirement planning together with 401k and IRA rollovers.
To learn more about our financial planning services, please contact us at 1-888-882-0072.
Markets were higher Friday thanks to the unexpectedly good November jobs report that seems to be creating a more positive view of the economy, which, in turn is making investors less nervous about the near-term end of the Federal Reserve’s quantitative easing program.
The S&P 500 recorded its third straight monthly gain and closed out the month with its eighth consecutive weekly gain, the longest such streak since January 2004. For the year, the S&P 500 is up 29.12% amid an expanding economy and low interest rate policy from the Fed.
With third quarter earnings season complete, it was encouraging to see acceleration in the growth rate of S&P 500 ex-Financials revenue. Revenue growth has been stuck between the +/- 1% range for six quarters and has been a highly watched item by Acropolis. With profit margins near record highs, higher revenue growth is needed for corporate earnings to continue expanding. One quarter doesn’t make a trend, but several quarters of revenue growth would help justify the market’s valuation and support higher stock prices.
US markets were mixed today as large cap stocks remained effectively unchanged but small cap stocks enjoyed a nice boost. Developed markets, which are principally large cap were also unchanged along with US bonds.
It was a battle between two pieces of economic data. Consumer confidence, as measured by the Conference Board, was lower than last month and consensus expectations. Most economists thought that consumers would feel more confident in November given that the standoff in Washington was over in October, but shoppers feel as though the job market is likely to get tougher in the next six months.
The good news was that housing prices continue to rise according to the Case-Shiller home price indexes. Both the 10 and 20-city indexes were up 13.3 percent from a year ago. For the 20-city index, it was the fasted growth in home prices since early 2006, before the real estate bubble burst. That doesn’t mean that housing is out of the woods – affordability is falling due in part to rising interest rates.
US stocks were mostly lower yesterday, albeit mildly. It was very quiet ahead of the Thanksgiving holiday Thursday and half day Friday.
Initially, markets seemed optimistic about the short-term accord struck with Iran over the weekend but it was mild enough that disappointing home sales were enough to bring markets lower by the close.
The pending home sales continued it’s downward trend that began basically when the Federal Reserve started talking about ending quantitative easing and interest rates began to rise.
Markets were stronger across the board Friday although there was no apparent consensus on what was driving prices higher. Just as the Dow had it’s Super Sweet 16,000 on Thursday, the S&P followed suit on Friday crossing 1,800.
Now that September is safely behind us, some of the backward looking performance data really looks amazing. The five-year annual performance of the S&P 500 is no 20.29 percent per year, a cumulative return of just more than 150 percent. Even the 10-year data shows a return of 7.91 percent.
I guess we found the lost decade since those numbers will both rise in March after the bottom of the bear market.
US markets were surprisingly strong yesterday and the Dow Jones Industrial Average closed over 16,000 for the first time. If you’ve never seen the MTV show, My Super Sweet 16, about spoiling your 16 year old with a big party and a new car – consider yourself lucky.
The market’s rise was based on better than expected initial claims for unemployment insurance, which fell by 21,000 to 323,000 for the week ending November 16.
I wrote this article a few months ago for www.learnbonds.com, a nice website with lots of information about investing in bonds. In straightforward, plain English, the article evaluates one of the two primary sources of return on the bond market – credit risk. Some of the tables are slightly out of date, but the ideas are all 100 percent unchanged.
Of course, we can’t go back in history and buy JNJ in 1977, so the question is what will happen in the future, and that’s a much more difficult proposition. Predictions and forecasts are always murky, so murky that we try not to make them.
JNJ is a terrific business and while the price isn’t cheap, we are certainly comfortable holding for clients and adding it when it’s appropriate for a diversified portfolio. Given the current valuation, we tend to think it won’t do a whole lot better or worse than the overall market – don’t expect a 3.3 percent excess return for the next 36 years (or 36 months for that matter).
Markets closed lower yesterday across the board. The mild pullback was largely attributed to the released Federal Reserve minutes that suggested that the long-awaited end to quantitative easing might actually be around the corner. Of course, that’s what everyone thought about the September meeting.
While the end of quantitative easing may be in sight, the Fed is also signaling that interest rates will remain low for sometime beyond the ‘extended period’ language that they’ve used for the past several years.
Previous statements have suggested that they might raise rates when unemployment fell below 6.5 percent, although it appears that they might keep rates unchanged even after unemployment falls below 6.5 percent.
Stock markets enjoyed another quiet day of trading yesterday, but were slightly negative, so Dow 16,000 will have to wait for another day. Most of the day was spent waiting for outgoing Federal Reserve Chairman Ben Bernanke to speak and, after the markets closed, he paraphrased 1971 The Who song and said, ‘meet the new boss, same as the old boss.’
Much to no one’s surprise, the OECD lowered their forecast for global growth forecast from 3.1 to 2.7 percent. Wow – with just a month and a half left before year-end, the international economic glitterati can see what’s been pretty obvious to everyone else. They also reduced their global growth forecast from four percent to 3.6 percent in 2014.
I am guessing that if growth doesn’t pick up, they will lower their forecasts. Then again, we take the easy way out and don’t make predictions – it’s much harder to be wrong when you admit that you don’t know in the first place.
|Join Our Mailing List|