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Paul Stein Presents:

MONTHLY QUOTE

“The truth is that there is nothing noble in being superior to somebody else. The only real nobility is in being superior to your former self.”
    

– Whitney Young

MONTHLY TIP

If you know you are spending way too much, going all-cash for a spell might be a good move for your budget and might lead you revise your spending habits for the better.

MONTHLY RIDDLE

Past mountains, plains, and hills, it follows a river while standing still. What is it?

Last month’s riddle:
It begins and ends with E yet it may contain only one letter. What is it?

Last month’s answer:

An envelope.

March 2015

THE MONTH IN BRIEF
What a difference a month makes. After a rough January, the S&P 500 soared 5.49% in February. Steadying oil prices, solid earnings, improving indicators in Europe and Asia and central bank action all prompted the bulls to run freely. Stateside, inflation gave way to a touch of deflation, home sales cooled off and consumer spending and confidence were disappointing – but the labor market was in good shape and so were the manufacturing and service sectors. February brought some reassuring economic news, and that was all Wall Street needed for a rally.1

DOMESTIC ECONOMIC HEALTH
Cheaper fuel and energy costs meant two things: less consumer spending and falling consumer prices. Important economic indicators reflected these developments. January’s Consumer Price Index dipped 0.7% (although the core CPI rose 0.2%), resulting in annual deflation in the United States for the first time since October 2009. Personal spending lagged 0.2% during January. The federal government also reduced Q4 GDP in its second estimate, taking growth down to 2.3% from the previously announced 2.6%.2,3

Consumer confidence retreated, perhaps in the wake of a bad January for stocks and word that gas prices were poised to go back up. February’s Conference Board index slipped 7.4 points to 96.4; the final February University of Michigan consumer sentiment index came in at 95.4, down from 98.1 in the final January survey.2,4

Fortunately, there was enough good news to offset the bad. The Labor Department’s January jobs report showed 257,000 new hires. Companies were hiring at the fastest clip in 18 years – non-farm payrolls had swelled by an average of 336,000 workers a month from November-January. The unemployment rate did tick north to 5.7% in January and the underemployment (U-6) rate was up at 11.3%, but this reflected an increase in job seekers. Hourly wages were up 0.5% in January, personal incomes up 0.3%.2,5

America’s manufacturing sector continued to grow and expand. February’s ISM factory PMI came in at 52.9, not too far off of January’s 53.5 reading; the Federal Reserve found manufacturing output up 0.2% for that month. ISM’s service sector PMI had notched a reading of 56.7 for January, rising 0.2 points. Hard goods orders improved 2.8% in January after slipping 3.7% in December. The Producer Price Index declined 0.8% in January thanks largely to a record 10.3% monthly plunge for wholesale energy prices (January saw a seventh consecutive monthly decline).2,6

Fed chair Janet Yellen underlined the central bank’s commitment to patience on raising interest rates in her February testimony before the Senate banking committee, saying it seemed “unlikely that economic conditions will warrant an increase in the target range for the federal funds rate for at least the next couple of FOMC meetings.”7

GLOBAL ECONOMIC HEALTH
There was no “Grexit” in February: Greece and the European Union hammered out a deal in principle to extend aid to that nation’s beleaguered economy through the end of June. (Without a deal, the €240 billion bailout for Greece would have ceased at the end of February). Greece remained on shaky ground with the EU and the International Monetary Fund, but at least it remained in the eurozone. A Eurostat flash estimate showed euro area deflation halved in February from January levels (consumer prices retreated only 0.3% annually as opposed to 0.6%). Unemployment ticked down to 11.2% in the 19-country euro area in January, a 33-month low.8,9

February ended with a surprise from the east: the People’s Bank of China made its second interest rate cut in three months (the benchmark rate was lowered 0.25% to 5.35%). Also, the final February HSBC/Markit China manufacturing PMI showed sector growth again at a better-than-expected 50.7 reading, up a full point in a month. February HSBC/Markit factory PMIs in other key Asia Pacific nations were all above 50 as well: 52.9 in India, 51.6 in Japan, and 51.1 in South Korea.10,11

WORLD MARKETS
Just how good was February for stocks? You not only had all-time highs for the S&P and Dow by the end of the month, you also had historic peaks for Germany’s DAX and Great Britain’s FTSE 100 and Japan’s Nikkei 225 reaching a 15-year high.12

Almost all foreign indices of note rose last month – two that didn’t were Turkey’s BIST 100 (-5.39%) and Pakistan’s KSE 100 (-2.36%). Another two indices actually gained more than 20% for February – Russia’s RTS index (21.60%) and Greece’s ATG index (21.96%). Elsewhere in Europe, you had the following gains: FTSE MIB, 8.95%; STOXX 600, 6.85%; DAX, 6.61%; FTSE 100, 2.92%; CAC 40, 7.54%; ISEQ, 9.24%; Europe Dow, 6.39%. On other continents, more gains: Asia Dow, 4.93%; Nikkei 225, 6.36%; S&P/ASX 200, 6.09%; Hang Seng, 1.29%; Sensex, 0.13%; Shanghai Composite, 3.11%; Dow Jones Americas, 5.50%; Bovespa, 9.97%; IPC All-Share, 7.91%; TSX Composite, 3.82%. February saw the Global Dow advance 5.78%; the MSCI World Index rose 5.68% on the month, the MSCI Emerging Markets Index far less at 2.98%.1,13

COMMODITIES MARKETS

Oil found a floor and took a step up: on the NYMEX, light sweet crude ended the month at $49.76 a barrel, going +3.32% for February. The big leap was taken by RBOB gasoline, which rose 24.43% on the month. February also saw gains of 14.74% for heating oil and 1.05% for natural gas. Cocoa futures were up 15.59% for February, corn futures 3.58%, cotton futures 7.87%, soybean futures 7.24% and wheat futures 3.59%. Last month’s losers among ag futures included coffee (-15.10%) and sugar (-5.81%).14

Gold retreated 4.70% to $1,213.10, silver 2.56% to $16.56. Platinum fell 3.60%. As for the U.S. Dollar Index, it wrapped up February at 95.29 (+0.52% on the month).14,15

REAL ESTATE
Brutal weather across two-thirds of the country held homebuying back. The Census Bureau found new home sales tailing off 0.2% in January. More significantly, the National Association of Realtors measured a 4.9% fall in existing home sales. The NAR did announce a 1.7% January gain in its pending home sales index. According to the latest S&P/Case-Shiller home price index, prices across 20 major metro areas climbed an average of 4.5% during 2014.2,16

Snow, sleet and ice had also slightly hindered new construction. The Census Bureau reported groundbreaking down 2.0% for January, and there were also 0.7% fewer building permits issued. Starts were still up 18.7% from a year prior, and permits were 8.1% above year-ago levels.17

Home loan interest rates increased in February. Freddie Mac’s February 26 Primary Mortgage Market Survey found the average interest on a 30-year FRM at 3.80%, a 15-year FRM at 3.07%, a 5/1-year ARM at 2.99% and a 1-year ARM at 2.44%. In its January 29 survey, interest averaged 3.66% for the 30-year fixed, 2.98% for the 15-year fixed, 2.86% for the 5/1-year ARM and 2.38% for the 1-year ARM.18

LOOKING BACK…LOOKING FORWARD
February brought a major drop for the CBOE VIX; the so-called “fear index” ended the month 36.39% lower at 13.34. The Nasdaq climbed 7.08% to 4,963.53, the Russell 2000 5.83% to 1,233.37, the Dow 5.64% to 18,132.70 and the S&P 5.49% to 2,104.50. February, in fact, was the S&P’s hottest month since October 2011.1,12

Sources: online.wsj.com, bigcharts.com, treasury.gov – 2/27/151,19,20,21

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

March opened with the Nasdaq closing above 5,000 for only the third time in history and the S&P, Russell 2000 and Dow all settling at record levels. Have headwinds suddenly ceased? No. In Europe, the restructured Greek debt deal is still a shaky one, deflation is lingering and the jobless rate is twice ours. Demand for key commodities isn’t where it was two years ago; oil prices are half what they once were. Warnings that the majority of stocks are overvalued continue, with bears maintaining that the S&P will only make a minor gain for 2015. Still, the bulls staged a remarkable return last month and March has begun with the sense that obstacles have been cleared from their path. While this bull market is growing venerable, it does not yet seem vulnerable to many investors.22

UPCOMING ECONOMIC RELEASES: The roll call of indicators and reports for the rest of March includes ... February’s ISM services PMI, a new Fed Beige Book and ADP’s February job-change report (3/4), February’s Challenger job-cut report (3/5), the February employment report from the Labor Department (3/6), January wholesale stockpiles (3/10), January business stockpiles and February retail sales (3/12), the February PPI and March’s initial consumer sentiment index from the University of Michigan (3/13), February industrial output (3/16), February housing starts and building permits (3/17), a Fed policy statement (3/18), the February set of leading economic indicators from the Conference Board (3/19), February existing home sales (3/23), February new home sales and February’s CPI (3/24), February hard goods orders (3/25), the final estimate of Q4 GDP plus the University of Michigan’s final March consumer sentiment index (3/27), February personal spending and pending home sales (3/30), and finally the Conference Board’s March consumer confidence index and the January edition of the Case-Shiller home price index (3/31).

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<<RepresentativeDisclosure>>

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. MarketingPro, 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. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. 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 Borsa Istanbul 100 Index is a capitalization-weighted index composed of National Market companies except investment trusts. Karachi Stock Exchange 100 Index (KSE-100 Index) is a stock index acting as a benchmark to compare prices on the Karachi Stock Exchange (KSE) over a period. The RTS Index (abbreviated: RTSI, Russian: Индекс РТС) is a free-float capitalization-weighted index of 50 Russian stocks traded on the Moscow Exchange. The Athens Stock Exchange General Index is a capitalization-weighted index of Greek stocks listed on the Athens Stock Exchange. The FTSE MIB (Milano Italia Borsa) is the benchmark stock market index for the Borsa Italiana, the Italian national stock exchange. The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The ISEQ Overall Index is a capitalization-weighted index of all official list equities in the Irish Stock Exchange, excluding U.K.-registered companies. The Europe Dow measures the European equity markets by tracking 30 leading blue-chip companies in the region. The Asia Dow measures the Asia equity markets by tracking 30 leading blue-chip companies in the region. 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 S&P/ASX 200 measures the performance of the 200 largest index-eligible stocks listed on the ASX (Australian Stock Exchange) by float-adjusted market capitalization. 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 BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The Dow Jones Americas Index measures the Latin American equity markets by tracking 30 leading blue-chip companies in the region. 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 Mexican IPC index (Indice de Precios y Cotizaciones) is a major stock market index which tracks the performance of leading companies listed on the Mexican Stock Exchange. 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 Global Dow is a 150-stock index of corporations from around the world created by Dow Jones & Company. 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. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 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 - wsj.com/mdc/public/page/2_3023-monthly_gblstkidx.html [2/27/15]

2 - marketwatch.com/economy-politics/calendars/economic [2/27/15]

3 - tinyurl.com/pn4rvqe [2/26/15]

4 - investing.com/economic-calendar/michigan-consumer-sentiment-320 [2/27/15]

5 - marketwatch.com/story/us-adds-257000-jobs-as-wage-gains-appear-2015-02-06 [2/6/15]

6 - reuters.com/article/2015/02/18/usa-economy-idUSL1N0VS0SI20150218 [2/18/15]

7 - tinyurl.com/omzlqpe [2/24/15]

8 - irishtimes.com/business/economy/greece-eurogroup-agree-to-four-month-bailout-extension-1.2111060 [2/20/15]

9 - ec.europa.eu/eurostat [3/2/15]

10 - moneycontrol.com/news/asian-markets/chinas-rate-cut-buoys-asia-stks-yuan-at-over-two-year-low_1317789.html [3/2/15]

11 - tinyurl.com/n7sqltg [3/2/15]

12 - money.cnn.com/2015/02/27/investing/stocks-market-record-february/index.html [2/27/15]

13 - mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html [2/27/15]

14 - money.cnn.com/data/commodities/ [2/27/15]

15 - online.wsj.com/mdc/public/npage/2_3050.html?mod=mdc_curr_dtabnk&symb=DXY [3/2/15]

16 - usnews.com/news/business/articles/2015/02/25/us-new-home-sales-barely-nudge-up-in-january [2/25/15]

17 - equipmentworld.com/u-s-home-starts-fall-2-percent-in-january-as-builder-confidence-dips-due-to-cold-weather/ [2/18/15]

18 - freddiemac.com/pmms/archive.html [3/2/15]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F27%2F14&x=0&y=0 [2/27/15]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F27%2F14&x=0&y=0 [2/27/15]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F27%2F14&x=0&y=0 [2/27/15]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F26%2F10&x=0&y=0 [2/27/15]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F26%2F10&x=0&y=0 [2/27/15]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F26%2F10&x=0&y=0 [2/27/15]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F28%2F05&x=0&y=0 [2/27/15]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F28%2F05&x=0&y=0 [2/27/15]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F28%2F05&x=0&y=0 [2/27/15]

20 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [3/2/15]

21 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [3/2/15]

22 - marketwatch.com/story/us-stocks-futures-climb-ahead-of-data-deluge-2015-03-02/ [3/2/15]

Paul Stein Presents:

MONTHLY QUOTE

“Always seek out the seed of triumph in every adversity.”
    

– Og Mandino

MONTHLY TIP

Own a business? The start of 2015 is the right time to schedule quarterly meetings with your CPA, so you can adjust (or establish) metrics and key performance indicators and review performance as 2015 progresses.

MONTHLY RIDDLE

Isabella took her two children to a place where stealing was common and everyone wanted to run home. Where did the three of them spend an enjoyable afternoon?

Last month’s riddle:
You saw me where I never was and where I could not be. And yet within that very place, my face you often see. What am I?

Last month’s answer:

A reflection.

January 2015

THE MONTH IN BRIEF
December certainly looked like it was going to be a trying month for the market, but then Wall Street got a little help from the Federal Reserve. In its December 17 policy statement, the central bank told the world that it would be “patient in beginning to normalize the stance of monetary policy.” That declaration helped turn stocks around. Oil prices (and retail gas prices) declined further in December; readings on fall consumer spending and Q3 GDP improved. When 2014 ended, the S&P 500 had posted another double-digit yearly gain – and while some foreign economies seemed to be slowing or sputtering, ours looked quite healthy.1

DOMESTIC ECONOMIC HEALTH
Three very positive indicators from the Commerce Department confirmed how well the economy was doing. Third-quarter GDP went in the books at 5.0% (up from 3.9% in the second estimate). Consumer spending rose by a very strong 0.6% in November with consumer wages also rising 0.4%. Cheap gasoline and growing consumer confidence seemed apparent factors in the impressive 0.7% November gain in retail sales.2,3

America’s two most-watched household sentiment gauges pushed higher in December. The Conference Board’s consumer confidence index rose 3.9 points on the month to 92.6, and the University of Michigan’s index gain 4.8 points off of its final November mark to reach 93.6.2,3

More good news came from the Labor Department: November had been an outstanding month for hiring. Sure, the jobless rate stayed at 5.8% (the U-6 rate encompassing unemployed and underemployed ticked down to 11.4%), but the economy added 321,000 new jobs, 86,000 of them in the professional and business sectors. Additionally, the Labor Department revised the employment gains of September and October upward – 44,000 more people found work across those two months than initially reported.4 

The Institute for Supply Management announced a slight November downturn in its manufacturing PMI; the 0.3% retreat took it to 58.7, still indicating strong expansion for the sector. (Overall hard goods orders also retreated in November, down 0.7%; economists polled by MarketWatch projected a 3.3% gain.) ISM’s service sector PMI jumped 2.2 points north in November to 59.3.2,3

Inflation pressure? There wasn’t much. The headline Consumer Price Index and Producer Price Index both saw November declines – 0.3% for the CPI, 0.2% for the PPI. Year-over-year, the CPI had only advanced 1.3%, the PPI 1.4%. (The core CPI was up 1.7% yearly, the core PPI up 1.8% in 12 months.)2,3

In mid-December, Congress voted to retroactively reinstate more than 50 tax breaks that had expired at the end of 2013. The extenders (which included the tuition & fees deduction, the R&D credit, the state & local sales tax deduction and many others) were all set to sunset at the beginning of 2015 barring further legislative action.5 

GLOBAL ECONOMIC HEALTH
December ended with more uncertainty for Greece (and the European Union). The Greek parliament dissolved, unable to select a new president; the Syriza party looked poised to win the resulting national election. It had long protested anti-austerity conditions handed down as part of the bailout offered to Greece by the International Monetary Fund, European Central Bank and European Commission, and had vowed to overturn much of those economic measures if it assumed power. Elsewhere on the continent, Russia’s economy looked headed for recession; government economists put 2014 GDP at 0.6% and projected 2015 GDP at -0.8%. By the end of 2014, the ruble had sunk 50% versus the dollar.6,7

As for the broad EU, its jobless rate stood at 10.0% as the year wrapped up (with unemployment in the 18-country euro area at 11.5%), and its annual inflation rate stood at just 0.3% in December. In the U.K., inflation touched a 12-year low last month.8,9

Important indicators on foreign factory output and GDP were mostly disappointing. As December ended, the latest HSBC/Markit manufacturing PMI for China came in at 49.5; readings below 50 signal sector contraction. China’s State Information Center put the country’s Q3 growth at 7.3% (down from 7.5% in Q2) while forecasting 7.0% GDP for 2015. The Markit Composite Flash PMI for the eurozone moved up to 51.7 in mid-December; just prior to that, it had been at 51.1, a 16-month low.9,10

WORLD MARKETS
European and Latin American bourses took widespread losses in December. Was it any surprise that Russia’s RTS index fell hardest? Its 18.84% monthly drop topped the 14.22% decline of Greece’s ATG. Other European losses last month: DAX, 1.76%; CAC 40, 2.67%; IBEX 35, -4.56%; FTSE 100, -2.33%; STOXX 600, -1.36%. Ireland’s ISEQ was an exception, up 3.02% last month. Europe’s best 2014 performer was Turkey’s BIST 100 index, which went +26.43%. Argentina’s MERVAL sank 12.54%, Mexico’s IPC All-Share 2.36% and Brazil’s Bovespa 8.52%; in Venezuela, the Caracas General index soared exactly 29% in December. The MERVAL was the top performer for the Americas in 2014, going +59.14%.11

The picture in the Asia Pacific region was somewhat better. The winner for the month and the year: the Shanghai Composite. It gained 20.57% in December and 52.87% for the year (its A Shares actually advanced 53.06%). The Sensex lost 4.16% in December, the KOSPI 3.29% and the Hang Seng 1.59%, yet the KSE 100 rose 2.99%, the Jakarta Composite 1.50% and the S&P/ASX 200 1.84%. Japan’s Nikkei 225 was virtually flat, losing 0.05%.11

Now to the Dow Jones and MSCI benchmarks. The Europe Dow dipped 5.30% in December, the Dow Jones Americas just 0.76%; the Asia Dow was off 2.67%, the Global Dow 2.71%. The twin MSCI indices staged December retreats – the MSCI World lost 1.71%, the MSCI Emerging Markets 4.82%.11,12

COMMODITIES MARKETS

Call 2014 the year of the strong dollar and weak oil. The U.S. Dollar Index gained 2.18% more in December, moving up to 90.29 on New Year’s Eve. Oil’s catastrophic 2014 ended with an 18.25% December loss; WTI crude went -45.42% on the year with a barrel worth just $53.27 on the floor of the NYMEX as the final trading day of 2014 concluded. Other major energy futures racked up big monthly losses, too. Unleaded gasoline slid 22.17% to bring its 2014 retreat to 47.03%. Natural gas fell 28.65%, heating oil 16.02%. Crops had a mixed month: sugar lost 6.50% and coffee 9.90%, but soybeans rose 0.54%, corn 5.77%, wheat 1.86% and cotton 3.16%.13,14

Last month was actually decent for metals. Gold ended 2014 at $1,184.10 on the COMEX with futures advancing 1.44% in December. Still, it declined 1.23% for the year. Silver rose 1.43% in December, platinum 0.58%; copper futures lost 1.12%.14

REAL ESTATE
The housing market lost some momentum in November, even as interest rates for conventional mortgages stayed below 4%. The National Association of Realtors reported existing home sales dropping 6.1% in that month; the Census Bureau found new home sales down 1.6%. It was just the second retreat in eight months for resales, and the first decline in the pace of new house purchases since July. November’s 20-city Case-Shiller home price index showed a 4.5% annual advance.2,3,17

Looking at the near future, NAR’s pending home sales gauge managed to rise 0.8% in November, which was its best performance in 14 months. Groundbreaking tailed off for the first time in three months in the eleventh month of the year: housing starts fell 1.6%, with the issuance of building permits down 5.2%.15,16

Freddie Mac’s last 2014 Primary Mortgage Market Survey (December 31) showed the average interest rate for the 30-year FRM at 3.87%, a tenth of a percent below where it was in the November 26 edition of the survey. Between those two dates, mean rates on 15-year FRMs declined from 3.17% to 3.15% and mean rates for 1-year ARMs declined from 2.44% to 2.40%. Average rates on 5/1-year ARMs were unchanged at 3.01%.17

LOOKING BACK…LOOKING FORWARD
The Dow, S&P 500 and NASDAQ all posted slight December declines. Closing values from December 31 for the big three: DJIA, 17,823.07; NASDAQ, 4,736.05; S&P, 2,058.90. Oil’s winter tumble helped the CBOE VIX advance hugely – it ended the year at 19.20, with a monthly gain of 44.04% and a yearly gain of 39.94%. The Russell 2000 settled at 1,204.70 on December 31, rising 2.68% on the month and gaining 3.53% for 2014.11

Sources: online.wsj.com, bigcharts.com, treasury.gov - 12/31/1411,18,19,20

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

For the last couple of years, stocks have surpassed expectations. Will they do so this year? Will corporate earnings be strong enough to generate another double-digit advance for the S&P? If the Fed times its moves right, the bull market could hold up nicely. Oil and Russia present two wild cards for the coming quarters. What if the world’s need for oil has peaked, and demand is never as high as it once was? What if the plummeting ruble and the seeming freefall of oil futures send Russia (in the worst-case scenario) toward a debt default? Can U.S. equities adequately withstand such potential shocks? Major questions, but it is worth reflecting on the major economic and geopolitical question marks confronting stocks in the past few years – all of which the bulls eventually ran past. Perhaps 2015 will surprise the analysts once again.

UPCOMING ECONOMIC RELEASES: 2015 kicks off with the following slate of economic announcements and reports: the December ISM factory PMI (1/2), December’s ISM service sector PMI and November factory orders (1/6), ADP’s employment change report for December and the December 17 Federal Reserve policy meeting minutes (1/7), December’s Challenger job-cut report (1/8), the Labor Department’s December employment report and November wholesale inventories (1/9), a new Fed Beige Book, November business inventories and December retail sales (1/14), the December PPI (1/15), the initial January consumer sentiment index from the University of Michigan, December industrial output and the December CPI (1/16), December housing starts and building permits (1/21), the Conference Board’s December leading indicator index and December existing home sales (1/23), the November Case-Shiller home price index, December hard goods orders, the Conference Board January consumer confidence index and December new home sales (1/27), a Federal Reserve policy statement (1/28), December pending home sales (1/29), and lastly the University of Michigan’s final January consumer sentiment index and the federal government’s first estimate of Q4 GDP (1/31).

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<<RepresentativeDisclosure>>

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. MarketingPro, 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. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. 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 RTS Index (abbreviated: RTSI, Russian: Индекс РТС) is a free-float capitalization-weighted index of 50 Russian stocks traded on the Moscow Exchange. The Athens Stock Exchange General Index is a capitalization-weighted index of Greek stocks listed on the Athens 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 IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain's principal stock exchange. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. The ISEQ Overall Index is a capitalization-weighted index of all official list equities in the Irish Stock Exchange, excluding U.K.-registered companies. The Borsa Istanbul 100 Index is a capitalization-weighted index composed of National Market companies except investment trusts. The MERVAL Index (MERcado de VALores, literally Stock Exchange) is the most important index of the Buenos Aires Stock Exchange. The Mexican IPC index (Indice de Precios y Cotizaciones) is a major stock market index which tracks the performance of leading companies listed on the Mexican Stock Exchange. 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 IBC Index from the Caracas Stock Exchange (Venezuela), also known as the General Index, is a capitalization-weighted index of the 15 most liquid and highest capitalized stocks traded on the Caracas Stock Exchange (Bolsa de Valores de Caracas). The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. 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. Karachi Stock Exchange 100 Index (KSE-100 Index) is a stock index acting as a benchmark to compare prices on the Karachi Stock Exchange (KSE) over a period. The IDX Composite or Jakarta Composite Index is an index of all stocks that are traded on the Indonesia Stock Exchange (IDX). The S&P/ASX 200 measures the performance of the 200 largest index-eligible stocks listed on the ASX (Australian Stock Exchange) by float-adjusted market capitalization. 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 S&P/ASX 200 is Australia's “premier” share market index. The Europe Dow measures the European equity markets by tracking 30 leading blue-chip companies in the region. The Dow Jones Americas Index measures the Latin American equity markets by tracking 30 leading blue-chip companies in the region. The Asia Dow measures the Asia equity markets by tracking 30 leading blue-chip companies in the region. The Global Dow is a 150-stock index of corporations from around the world created by Dow Jones & Company. 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. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 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 - money.cnn.com/2014/12/18/investing/stocks-markets-fed-oil/ [12/19/14]

2 - marketwatch.com/economy-politics/calendars/economic [12/30/14]

3 - investing.com/economic-calendar/ [12/31/14]

4 - forbes.com/sites/samanthasharf/2014/12/05/jobs-report-u-s-economy-added-321000-jobs-in-november-unemployment-steady-at-5-8/ [12/5/14]

5 - forbes.com/sites/ashleaebeling/2014/12/19/obama-signs-2014-tax-extenders-money-in-your-pocket/ [12/19/14]

6 - money.cnn.com/2014/12/29/news/economy/greece-elections-syriza/ [12/29/14]

7 - bbc.com/news/world-europe-30623489 [12/29/14]

8 - ec.europa.eu/eurostat/cache/infographs/economy/desktop/index.html [12/30/14]

9 - reuters.com/article/2014/12/16/us-global-economy-idUSKBN0JU0E420141216 [12/16/14]

10 - shanghaidaily.com/business/economy/Chinese-GDP-growth-may-slow-to-7-in-2015-on-weak-property/shdaily.shtml [12/30/14]

11 - online.wsj.com/mdc/public/page/2_3023-monthly_gblstkidx.html [12/31/14]

12 - mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html [12/31/14]

13 - online.wsj.com/mdc/public/npage/2_3050.html?mod=mdc_curr_dtabnk&symb=DXY [12/31/14]

14 - money.cnn.com/data/commodities/ [12/31/14]      

15 - 247wallst.com/housing/2014/12/31/pending-home-sales-monthly-rise-highest-in-14-months/ [12/31/14]

16 - bloomberg.com/news/2014-12-16/housing-starts-in-u-s-exceed-1-million-pace-for-third-month.html [12/16/14]

17 - freddiemac.com/pmms/archive.html [12/31/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F31%2F09&x=0&y=0 [12/31/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F31%2F09&x=0&y=0 [12/31/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F31%2F09&x=0&y=0 [12/31/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=12%2F31%2F04&x=0&y=0 [12/31/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=12%2F31%2F04&x=0&y=0 [12/31/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=12%2F31%2F04&x=0&y=0 [12/31/14]

19 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [12/31/14]

20 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [12/31/14]

Paul Stein Presents:

MONTHLY QUOTE

“It is wise to apply the oil of refined politeness to the mechanisms of friendship.”
    

– Colette

MONTHLY TIP

Make sure you take your 2014 RMD in time. The deadline is December 31; if you will be taking your very first RMD, it can be delayed until April 1. Remember that all of your IRAs need to be considered when calculating the RMD.

MONTHLY RIDDLE

You saw me where I never was and where I could not be. And yet within that very place, my face you often see. What am I?

Last month’s riddle:
An elephant manages to drink water from a puddle 26' away, but how does the elephant do this with an 18' chain around his left hind leg?

Last month’s answer:

The chain isn’t attached to anything.

December 2014

THE MONTH IN BRIEF
November brought a dizzying plunge in oil prices, confirmation of a recession in Japan and distinct hints of one in the euro area, and declines in the pace of manufacturing activity in America, Europe and China. Even so, the month was remarkably placid on Wall Street – unlike October, we didn’t see a lot of days marked by triple-digit Dow swings. The Dow, in fact, rose 2.52% on the month; many overseas benchmarks posted nice gains as well. Losses plagued the commodities sector. The latest GDP estimates out of Washington suggested our economy was in better shape than some analysts thought.1

DOMESTIC ECONOMIC HEALTH
By the estimate of the federal government, the second and third quarter of 2014 amounted to the best six months for the U.S. economy since 2003. The Commerce Department revised Q3 output up to 3.9%, complementing 4.6% growth for Q2.2

Another key economic indicator improved further. The jobless rate had ticked down to 5.8% in October, with the U-6 rate (encompassing part-time workers, jobseekers and those out of the job hunt) falling 0.3% to 11.5%. Labor Department data showed companies adding 214,000 new hires to their payrolls in that month.3,4 

While economists certainly found this encouraging, households weren’t feeling so upbeat. The Conference Board’s consumer confidence index fell to 88.7 from its October reading of 94.5; the University of Michigan’s consumer sentiment index did better, finishing November 1.9 points higher at 88.8.5

The Consumer Price Index was flat in October, and up just 1.7% year-over-year. Still, the tenth month of the year brought only modest gains for consumer spending (0.2%) and retail sales (0.3%). Total Black Friday sales were down 11% from 2013 levels, according to National Retail Federation estimates; this could have reflected online sales growth and more stores having deep discounts on Thanksgiving Day.5,6

Declining gas prices across the month effectively put more money in consumers’ pockets, a factor that may lead to greater personal spending for November. By December 1, AAA’s Daily Fuel Gauge Report showed regular unleaded averaging just $2.77 a gallon.7

U.S. manufacturing activity cooled a bit in November, but our factory sector was still hotter than many others worldwide. The Institute for Supply Management’s November manufacturing PMI came in with a reading of 58.7, down from 59.0 in October. (ISM’s service sector PMI had slipped 1.5 points to 57.1 in October.) Overall durable goods orders rose 0.4% in October, but core durable orders fell 0.9%. The headline Producer Price Index was up 0.2% for October, but only 1.5% annually.5,8,9 

GLOBAL ECONOMIC HEALTH
Unexpectedly, Japan fell into a recession in Q3. Analysts surveyed by Reuters thought its economy would expand 2.1%; instead, there was a 1.6% contraction following a 7.3% reversal in Q2. This affirmed and underscored the Bank of Japan’s decision to ease for the foreseeable future.10

The euro area hadn’t slipped back into recession yet, but it was coming perilously close in the eyes of many economists. Its yearly inflation measured just 0.3% last month and its jobless rate was at 11.5%. European Central Bank President Mario Draghi said that ECB leaders would consider exceptional moves (such as buying sovereign debt) to ward off deflation. The Markit manufacturing PMI for the eurozone barely showed expansion for November with a 50.1 mark.10,11,12

Word came that China’s economy had grown 7.3% in Q3, putting it on pace for its worst year since 1990. China’s official factory PMI came in a half-point lower in November at 50.3, and the HSBC/Markit PMI for the PRC showed no expansion for the sector at all with a reading of 50.0 that represented a 6-month low. Markit manufacturing PMIs in Indonesia and Japan also fell, but India’s rose to a 21-month high in November.12,13

WORLD MARKETS
Generally speaking, November was a good month with many consequential indices advancing. Some of the gains in the Asia Pacific region: Sensex, 2.97%; KOSPI, 0.83%; Shanghai Composite, 10.85%; Nikkei 225, 6.37%; KSE 100, 2.70%. The Hang Seng was flat (-0.04% to be precise) while Australia's ASX 200 suffered a 3.86% retreat. Elsewhere in the Americas, the Bovespa had a flat month (+0.07%) while the TSX Composite rose 0.90% and the IPC All-Share lost 1.86%.1

Major European indices saw the following November gains: CAC 40, 3.71%; DAX, 7.01%; IBEX, 2.80%; FTSE MIB, 1.17%; FTSE 100, 2.69%. Russia's RTS was the big November loser, retreating 10.74%.1

As for multinational and regional benchmarks, the Global Dow rose 1.72% in November, the Europe Dow 2.71% and the Dow Jones Americas 1.91%; the Asia Dow lost 0.53%. Europe’s STOXX 600 bourse advanced 3.10% for the month. The MSCI World Index gained 1.84%, but MSCI’s Emerging Markets Index lost 1.12%.1,14

COMMODITIES MARKETS

On November 28, OPEC ministers made no move to reduce oil output from their respective nations. That cemented an awful monthly loss for NYMEX crude – prices fell 18.23% for November to a settlement of $66.15 a barrel. Heating oil (-12.60%) and RBOB gasoline (-12.54%) were also crushed last month. The same couldn’t be said for natural gas; it rose 5.72% in November. Cold weather was not only a boon to natgas futures, but also an aid to wheat futures: they rose 8.74% for November, standing out in a field of losses among crops. Corn did advance 0.27%, but coffee dipped 0.90%, cocoa 0.69%, cotton 5.16%, sugar 2.87% and soybeans 2.59%.15  

Gold didn’t fare too badly in November, losing only 0.54% and settling at a COMEX price of $1.175.20 an ounce at month’s end. Copper fell 6.43% on the month, platinum 1.35% and silver 3.24% (it wrapped up the month at $15.49 an ounce). The U.S. Dollar Index tacked on another 1.43% to its YTD gain and ended November at 88.16.15,16

REAL ESTATE
The month’s last Freddie Mac Primary Mortgage Market survey (November 26) found the average interest rate for a 30-year FRM at 3.97%, down 0.01% from the October 30 survey. Rates on other types of home loans moved appreciably during the month. On November 26, the mean rates for the 15-year FRM, 5/1-year ARM and 1-year ARM were respectively at 3.17%, 3.01% and 2.44%; compare that with 3.13%, 2.94% and 2.43% on October 30.17

Home sales (new and existing) again improved to minor degree. The National Association of Realtors found resales up 1.5% in October – but most importantly, October brought the first year-over-year gain in sales (2.5%) seen in 12 months. Across a year of data, distressed sales had fallen to 9% of the market from 14%. (Not all the news from NAR was good; its pending home sales index fell 1.1% for October.) New home purchases increased in October as well – the Census Bureau measured a 0.7% gain, marking a third straight month of increasing sales volume.5,18

NAR stated that the median existing-home price was $208,300 in October, down from $209,700 in September. September’s S&P/Case-Shiller Home Price Index showed only a 4.9% annualized gain (this was across the full 20-city index).5,18

As for new projects, the Census Bureau also noted a 4.8% gain in building permits in November, with the indicator reaching a 6-year peak. A drop in multi-family projects sent overall housing starts down 2.8% in October, though single-family starts rose 4.2%.19

LOOKING BACK…LOOKING FORWARD
While the Russell 2000 had a flat month (actually losing 0.02% to 1,173.23), other major U.S. indices fared well in November, with the S&P 500 rising 2.45% to 2,067.56, the NASDAQ gaining 3.47% to 4,791.63 and the DJIA advancing 2.52% to 17,828.24. The CBOE VIX ended November at 13.33, sliding 4.99% for the month.1

Sources: online.wsj.com, bigcharts.com, treasury.gov - 11/28/141,20,21

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation.

The fall earnings season, the waning fears about Ebola invading the U.S. and the ease with which Wall Street accepted the end of QE3 were factors in a very positive November. Will stocks continue to rally in December as energy investors wait for a point of capitulation? One view says cheap oil is good for the consumer, the broad economy and the stock market. Another view sees an extended lack of demand not only hurting energy shares, but also breeding unemployment and deflation. Eyes will also be on the Fed – as we are on the cusp of 2015, its December policy meeting might be a moment at which some clues emerge about the timing of an interest rate hike. Still, stocks don’t seem too beset by obstacles as we head toward the New Year, and with any luck, the December 31 close for the S&P 500 just might be a record one.

UPCOMING ECONOMIC RELEASES: Here is a roll call of the important stateside reports and releases in the year’s final month: November’s ISM services PMI, a new Federal Reserve Beige Book and the November ADP employment report (12/3), November’s Challenger job-cut report (12/4), the November jobs report from the Labor Department and October factory orders (12/5), October wholesale inventories (12/9), November retail sales and October business inventories (12/11), the preliminary December consumer sentiment index from the University of Michigan plus the November PPI (12/11), November industrial production (12/15), November housing starts and building permits (12/16), a Fed policy statement and November’s CPI (12/17), the Conference Board’s leading indicator index for November (12/18), November existing home sales (12/22), the final estimate of Q3 GDP, the final December consumer sentiment index from the University of Michigan, and November new home sales, personal spending and hard goods orders (12/23), October’s Case-Shiller home price index and 2014’s last Conference Board consumer confidence index (12/30), and then finally NAR’s report on November pending home sales (12/31).

Please feel free to forward this article to family, friends or colleagues.
If you would like us to add them to our distribution list, please reply with their address.
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<<RepresentativeDisclosure>>

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. MarketingPro, 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. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. 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 BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. 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. Karachi Stock Exchange 100 Index (KSE-100 Index) is a stock index acting as a benchmark to compare prices on the Karachi Stock Exchange (KSE) over a period. 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/ASX 200 is Australia's “premier” share market index. 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/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 Mexican IPC index (Indice de Precios y Cotizaciones) is a major stock market index which tracks the performance of leading companies listed on the Mexican Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain's principal stock exchange. The FTSE MIB (Milano Italia Borsa) is the benchmark stock market index for the Borsa Italiana, the Italian national stock exchange. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The RTS Index (abbreviated: RTSI, Russian: Индекс РТС) is a free-float capitalization-weighted index of 50 Russian stocks traded on the Moscow Exchange. The Global Dow is a 150-stock index of corporations from around the world created by Dow Jones & Company. The Europe Dow measures the European equity markets by tracking 30 leading blue-chip companies in the region. The Dow Jones Americas Index measures the Latin American equity markets by tracking 30 leading blue-chip companies in the region. The Asia Dow measures the Asia equity markets by tracking 30 leading blue-chip companies in the region. The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. 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. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 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 - online.wsj.com/mdc/public/page/2_3023-monthly_gblstkidx.html [11/30/14]

2 - nasdaq.com/article/us-thirdquarter-gdp-revised-up-to-39-advance-20141125-00467 [11/25/14]

3 - ncsl.org/research/labor-and-employment/national-employment-monthly-update.aspx [11/7/14]

4 - portalseven.com/employment/unemployment_rate_u6.jsp [11/26/14]

5 - investing.com/economic-calendar/ [11/26/14]

6 - tinyurl.com/p9lj9f4 [12/1/14]

7 - fuelgaugereport.aaa.com [12/1/14]

8 - ism.ws/ismreport/NonMfgROB.cfm [12/1/14]

9 - ism.ws/ismreport/NonMfgROB.cfm [11/5/14]

10 - tinyurl.com/pxyju2p [11/17/14]

11 - epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/ [12/1/14]

12 - reuters.com/article/2014/12/01/us-global-economy-idUSKCN0JF1AN20141201 [12/1/14]

13 - reuters.com/article/2014/11/20/us-global-economy-idUSKCN0J407V20141120 [11/20/14]

14 - mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html [11/30/14]

15 - money.cnn.com/data/commodities/ [11/30/14]

16 - online.wsj.com/mdc/public/npage/2_3050.html?mod=mdc_curr_dtabnk&symb=DXY [11/30/14]

17 - freddiemac.com/pmms/archive.html [12/1/14]

18 - forbes.com/sites/erincarlyle/2014/11/20/existing-home-sales-rise-1-5-in-october-hit-fastest-pace-in-more-than-year-says-nar/ [11/20/14]

19 - bloomberg.com/news/2014-11-19/housing-starts-in-u-s-fall-on-multifamily-as-permits-climb.html [11/19/14]

20 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F29%2F13&x=0&y=0 [11/28/14]

20 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F29%2F13&x=0&y=0 [11/28/14]

20 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F29%2F13&x=0&y=0 [11/28/14]

20 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F27%2F09&x=0&y=0 [11/28/14]

20 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F27%2F09&x=0&y=0 [11/28/14]

20 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F27%2F09&x=0&y=0 [11/28/14]

20 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F29%2F04&x=0&y=0 [11/28/14]

20 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F29%2F04&x=0&y=0 [11/28/14]

20 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F29%2F04&x=0&y=0 [11/28/14]

21 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [11/3/14]

Paul Stein Presents:

MONTHLY QUOTE

“Reflect on your present blessings, of which every man has many; not on your past misfortunes, of which all men have some.”
    

– Charles Dickens

MONTHLY TIP

Paying off credit card debt has more than an immediate benefit: it can save you money in the long term by improving your credit, and with less consumer debt, you can potentially save more for retirement.

MONTHLY RIDDLE

An elephant manages to drink water from a puddle 26' away, but how does the elephant do this with an 18' chain around his left hind leg?

Last month’s riddle:
You have two twins, three triplets and four quadruplets in a room; how many total people do you have in the room?

Last month’s answer:

9. Two twins are 2 people, three triplets are 3 people, and four quadruplets are 4 people. 2 + 3 + 4 = 9.

November 2014

THE MONTH IN BRIEF
Wall Street had a dramatic October, as investors grew anxious about the big Es: Ebola, Europe and easing (specifically, the end of QE3). Ultimately, stocks climbed higher with help from another big E: earnings. The S&P 500 advanced 2.32% for the month, pushing into record territory again. Many Asia Pacific stock indices posted solid gains; many European indices racked up October losses. It was a rough month for gold, silver, oil and many crop futures. Domestic indicators were mostly positive and made the U.S. look like a bright spot in the global economy. Sales picked up slightly in the housing market, and the stock market seemed to take the wrap-up of the Federal Reserve’s historic stimulus program in stride.1

DOMESTIC ECONOMIC HEALTH
The initial Q3 GDP reading suggested that the economy was now on solid footing. The Bureau of Economic Analysis reported 3.5% expansion in Q3; that and the 4.6% growth of Q2 represented the best six months for the economy in more than a decade. Consumer spending was the question mark: it grew just 1.8% in Q3, and it actually retreated 0.2% in September, a month which also brought a 0.3% decline in retail sales. Some of the Q3 personal spending slowdown could be attributed to limited wage growth; personal incomes had grown by an unspectacular 2.0% in 12 months.2,3

Consumer confidence, on the other hand, kept improving. The Conference Board’s October index hit 94.5, and the University of Michigan’s consumer sentiment gauge had a final October reading of 86.9.2,3

Thanks to 248,000 new hires, the U.S. jobless rate fell to 5.9% in September. America hadn’t seen such low unemployment since July 2008. The U-6 rate (unemployed + underemployed) dipped to a 71-month low of 11.8%.4

September saw no real pickup in consumer prices – just another 0.1% gain in both the headline and core Consumer Price Index. The annualized advance for both was just 1.7%. (Food prices, however, had risen 3.0% in 12 months.) Producer prices dipped 0.1% in September after being unchanged for August.2,5

Speaking of production, September brought a 1.0% gain in factory output, although hard goods orders tailed off 1.3%. The 59.0 reading on the Institute for Supply Management’s October manufacturing PMI defied the forecast of analysts polled by MarketWatch, who had predicted a 0.1% decline from September to a mark of 56.5. (ISM’s non-manufacturing PMI fell a whole percentage point in September to 58.6.)2,6 

Lastly, the month ended with the American Automobile Association forecasting the average U.S. gas price to dip under $3 a gallon in early November, a prediction that came true. On November 3, AAA had a mean nationwide price of $2.98 for regular unleaded, which had become 36¢ cheaper over a year.7,8

GLOBAL ECONOMIC HEALTH
Just as the Fed halted its monetary stimulus, the Bank of Japan increased its asset purchase program. On Halloween, the BofJ said that it would boost its quantitative easing to 80 trillion yen a year from the current 50 trillion yen. The announcement gave a boost to global stocks and poised Japan’s currency for depreciation.7

Not all the news out of the Asia Pacific region was so encouraging. China’s economy was coming off its poorest quarter since 2008: its official GDP reading for Q3 was 7.3%, down from 7.5% in Q2 and the poorest measurement taken since Q1 2009. The country’s industrial output rose to 8.0% in September from 6.9% in August, perhaps a sign of a better number for Q4. The Chinese government’s manufacturing PMI declined 0.3 points to 50.8 for October, while the HSBC/Markit PMI for the nation came in at a slightly improved 50.4.9,10

Was a recession imminent for the euro area? At month’s end, the European Central Bank had refrained from easing, even with the risk of deflation. Germany’s manufacturing sector grew slightly in October, but there was contraction in Italy and France and the overall Markit factory PMI for the eurozone was a tepid 50.6.10

WORLD MARKETS
European stock market investors lacked confidence in October: the month saw the Europe Dow lose 2.98%, the STOXX 600 1.83%, the FTSE MIB 5.30%, the CAC 40 4.15%, the DAX 1.56%, the RTS 2.87% and the FTSE 100 1.15%.1

In Asia, key indices turned in much better performances. While Korea’s KOSPI retreated 2.76%, the Shanghai Composite gained 2.38%, the Nikkei 225 1.49%, the ASX 200 4.42%, and the Asia Dow 1.98%; the Sensex and Hang Seng both advanced 4.64%. In the Americas, the Bovespa gained 0.95%, the IPC All-Share 0.09% and the DJ Americas 1.98%. Up north, the TSX Composite slipped 2.32% for October.1

Finally, the Global Dow lost 0.26% last month; the MSCI Emerging Markets Index rose 1.07% and the MSCI World Index advanced 0.57%.1,11

COMMODITIES MARKETS

For the second straight month, big losses characterized this sector (select crops aside). Supply again outweighed demand for NYMEX crude: oil prices dropped 11.63% to $80.54 a barrel by Halloween. Other energy commodities were hit hard, too: heating oil slipped 5.11%, natural gas 6.35% and unleaded gasoline a whopping 16.94%. While copper moved 1.30% north on the month, silver retreated 5.44% and gold fell 2.94%; platinum futures lost 5.38%. Silver ended October at $16.11 an ounce, gold at $1,171.60 an ounce. The U.S. Dollar Index gained a little more in October. On September 30, it had settled at 85.94; on Halloween, it closed at 86.92 to go +1.14% for the month.12,13  

With winter coming to northern climes, certain ag commodities had a great month. Wheat futures rose 10.04%, soybean futures 14.31% and corn futures 16.33%. Sugar advanced 3.36%. The major losses came in warm-weather crops: cocoa fell 11.96%, coffee 3.01%.12

REAL ESTATE
September saw a minor acceleration in purchases of both new and existing homes: the National Association of Realtors reported resales up 2.4% and the Census Bureau found a 0.2% monthly advance in sales of new residences. Year-over-year, new home sales had improved 17.0%. NAR’s pending home sale index rose 0.3% for September after falling 1.0% for August. As for home prices, the yearly gain in the S&P/Case-Shiller Home Price Index continued to moderate, lessening 1.1% to 5.6% in the August edition.2,14

Markedly declining mortgage rates may have promoted an increase in home buying for October. On October 30, Freddie Mac had the average interest rate on a conventional home loan at 3.98%. In Freddie’s September 25 Primary Mortgage Market Survey, it was up at 4.20%. While the mean rate that Freddie measured for the 1-year ARM was 2.43% in both surveys, the 15-year fixed became cheaper in October with average interest rates falling to 3.13% from 3.36%, and so did 5/1-year ARMs with mean rates falling from 3.08% to 2.94%.15

As the housing industry said goodbye to another summer, the yearly rate of housing starts topped the 1 million mark again thanks to a 6.3% September rise in groundbreaking. The Census Bureau also noted a 1.5% gain in building permits for that month.16

LOOKING BACK…LOOKING FORWARD
Last month, one of the biggest threats to stocks wasn’t an economic development but a disease. The first Ebola cases reported in the U.S. and the fear about the global reach of the virus contributed to the Dow’s triple-digit plunges as much (or more) than headlines from Europe and China. The fears eventually lessened, the market went back to focusing on fundamentals, and U.S. equities came out ahead. Across October, the DJIA rose 2.04% to 17,390.52, the S&P 500 2.32% to 2,018.05, the Nasdaq 3.06% to 4,630.74 and the Russell 2000 a tremendous 6.52% to 1,173.51, taking its YTD return to +0.85%. The CBOE VIX lost 2.28% in October, descending to 14.03 on Halloween.1

Sources: online.wsj.com, bigcharts.com, treasury.gov - 10/31/141,17,18

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

So, is Wall Street poised for a great month? The market doesn’t seem to be complaining (yet) about the lack of easing from the Fed, as it remains sensitive and responsive to the needs and wishes of investors. November began with the S&P at another all-time peak, and the factors which may affect the market the most appear predictable: earnings, the mid-term elections, and the ECB’s decision on quantitative easing. On Halloween, Thomson Reuters said corporate earnings growth was averaging 9.3% with 76% of S&P 500 firms so far beating estimates, we just got the second impressive quarterly GDP reading in a row, and the Fed likely won’t make a move with interest rates until at least mid-2015 – all factors that might inspire some calm and some further gains for stocks, or at least the S&P hanging around the 2,000 level for a while.19

UPCOMING ECONOMIC RELEASES: Coming up, the important economic reports include: October’s ISM services PMI and the September ADP employment report (11/5), the October Challenger job-cut report (11/6), the October employment report from the Labor Department (11/7), September wholesale inventories (11/12), October retail sales, the initial November consumer sentiment index from the University of Michigan, and September business inventories (11/14), October industrial output (11/17), the October PPI (11/18), the October Fed policy meeting minutes and October housing starts and building permits (11/19), October existing home sales, the October CPI and the Conference Board’s latest leading indicator index (11/2o), September’s Case-Shiller home price index, the Conference Board’s November consumer confidence index and the second estimate of Q3 growth from Washington (11/25), and then a raft of data all at once on the eve of Thanksgiving – October new home sales, pending home sales, personal spending and hard goods orders plus the final November University of Michigan consumer sentiment index (11/26).

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<<RepresentativeDisclosure>>

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. MarketingPro, 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. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. 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 Europe Dow measures the European equity markets by tracking 30 leading blue-chip companies in the region. The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. The FTSE MIB (Milano Italia Borsa) is the benchmark stock market index for the Borsa Italiana, the Italian national stock exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The RTS Index (abbreviated: RTSI, Russian: Индекс РТС) is a free-float capitalization-weighted index of 50 Russian stocks traded on the Moscow Exchange.  The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. 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 S&P/ASX 200 is Australia's “premier” share market index. The Asia Dow measures the Asia equity markets by tracking 30 leading blue-chip companies in the region. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). 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 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 Mexican IPC index (Indice de Precios y Cotizaciones) is a major stock market index which tracks the performance of leading companies listed on the Mexican Stock Exchange. The Dow Jones Americas Index measures the Latin American equity markets by tracking 30 leading blue-chip companies in the region. 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 Global Dow is a 150-stock index of corporations from around the world created by Dow Jones & Company. 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. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 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 - online.wsj.com/mdc/public/page/2_3023-monthly_gblstkidx.html [10/31/14]

2 - marketwatch.com/economy-politics/calendars/economic [10/31/14]

3 - bloomberg.com/news/2014-10-31/michigan-u-s-consumer-sentiment-index-rises-to-86-9-from-84-6.html [10/31/14]

4 - tinyurl.com/lynbsnf [10/3/14]

5 - 247wallst.com/economy/2014/10/22/september-cpi-avoids-deflation-fears/ [10/22/14]

6 - ism.ws/ismreport/NonMfgROB.cfm [10/3/14]

7 - foxbusiness.com/markets/2014/10/31/bank-japan-delivers-halloween-treat-for-wall-street/ [10/31/14]

8 - fuelgaugereport.com/ [11/3/14]

9 - forbes.com/sites/kenrapoza/2014/10/21/china-growth-party-over-but-large-investors-soldier-on/ [10/21/14]

10 - reuters.com/article/2014/11/03/us-global-economy-idUSKBN0IN0VF20141103 [11/3/14]

11 - mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html [10/31/14]

12 - money.cnn.com/data/commodities/ [10/31/14]

13 - online.wsj.com/mdc/public/npage/2_3050.html?mod=mdc_curr_dtabnk&symb=DXY [11/3/14]

14 - csmonitor.com/Business/new-economy/2014/1024/New-home-sales-inch-up-to-a-six-year-high-in-September [10/24/14]

15 - freddiemac.com/pmms/archive.html [11/3/14]

16 - nasdaq.com/article/dollar-gains-ground-on-upbeat-consumer-sentiment-data-cm403255 [10/17/14]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=10%2F31%2F13&x=0&y=0 [10/31/14]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=10%2F31%2F13&x=0&y=0 [10/31/14]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=10%2F31%2F13&x=0&y=0 [10/31/14]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=10%2F30%2F09&x=0&y=0 [10/31/14]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=10%2F30%2F09&x=0&y=0 [10/31/14]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=10%2F30%2F09&x=0&y=0 [10/31/14]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=11%2F1%2F04&x=0&y=0 [10/31/14]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=11%2F1%2F04&x=0&y=0 [10/31/14]

17 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=11%2F1%2F04&x=0&y=0 [10/31/14]

18 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [11/3/14]

19 - tinyurl.com/p7stlxc [10/31/14]

Paul Stein Presents:

MONTHLY QUOTE

“He that is of the opinion money will do everything may well be suspected of doing everything for money.”
    

– Ben Franklin

MONTHLY TIP

The end of the year is a good time to review (and adjust) the asset allocation of your portfolio. When you see a big difference between stock market performance and bond market performance in a given year, this is especially sensible.

MONTHLY RIDDLE

You have two twins, three triplets and four quadruplets in a room; how many total people do you have in the room?

Last month’s riddle:
What may contain hundreds or thousands of wheels yet never moves or rises above the land?

Last month’s answer:

A parking lot.

October 2014

THE MONTH IN BRIEF
Bullish sentiment certainly waned in September – when the month was over, the Dow, Nasdaq, S&P 500 and Russell 2000 had all retreated to varying degree. Troubling headlines from Asia, the Middle East and Eastern Europe weighed on Wall Street’s collective mind, as did some unexpectedly weak U.S. economic signals. While the Federal Reserve maintained its outlook on interest rates, investors were acknowledging the looming end of QE3. The dollar got even stronger, and the broad commodities market took a severe hit. Housing news was mixed. The S&P notched a new record close of 2,011.36 during the month, then lost 1.8% between that peak and the start of October.1

DOMESTIC ECONOMIC HEALTH
The latest consumer indicators were mostly encouraging. Personal spending – which had declined 0.1% in July – rose 0.5% for August. Year-over-year, the increase was 4.1%. (The Commerce Department also noted 0.3% wage growth in August.)2,3

Household sentiment, as measured by the University of Michigan’s index, also improved: the index’s final September reading was 84.6 (up from 82.5 at the end of August, and the highest reading since late April). On the other hand, the Conference Board’s consumer confidence index sank a troubling 7.4 points, falling to 86.0.2,4

Shoppers were opening their wallets a bit more as inflation remained benign. Retail sales were up 0.6% in August following the 0.3% gain the Commerce Department recorded for July. August’s headline Consumer Price Index showed a 0.2% retreat, taking the annualized rise in consumer prices down to 1.7%. The core CPI was flat for August.4

Wall Street was disappointed in the August employment report. The Labor Department announced just 142,000 new hires, representing the smallest monthly net job gain since December. Unemployment ticked down to 6.1% and the U-6 rate (including the underemployed) dipped 0.2% to 12.0%.5

Factory activity had surged in July with aircraft orders being the big influence, but that all seemed to reverse in August. Factory orders dropped 10.1% in the eighth month of the year according to the Commerce Department, and August brought 0.1% and 0.4% respective declines in factory and manufacturing production. Durable goods orders fell 18.2% in August. Producer prices were flat in August and up 1.8% in a year.2,4

Given all that, the August drop in the Institute for Supply Management’s factory PMI wasn’t surprising. It came in at 56.6 as opposed to 59.0 for July – still strong, just less so. ISM’s service sector PMI had gained 0.9 points in August, reaching 59.6.2,6 

As the month and quarter wound down, the Commerce Department revised Q2 GDP north again, from 4.2% to 4.6%. Investors were pleased by that and by the Fed’s September policy statement, which again said that interest rates would likely not be adjusted for “a considerable time” after the end of quantitative easing.4,7

GLOBAL ECONOMIC HEALTH
Investors watched fluid geopolitical situations on multiple continents. The U.S. led air strikes against ISIS positions in Syria, including oil refineries ISIS had captured. A truce in Ukraine seemed shaky at best: the month ended with Russian separatists killing seven Ukrainian soldiers. Pro-democracy protests in Hong Kong escalated into a blockade and raised fears of violence.3,8

Speaking of China, its latest official factory PMI came in flat for September at 51.1, indicating mild sector expansion; HSBC’s factory PMI for the country was also unchanged at 50.2. The PRC also announced economic initiatives to encourage home buying and assist real estate developers.9

Other key manufacturing gauges were largely unimpressive. The Markit factory PMI for Germany showed sector contraction for the first time in 15 months in September; Markit’s manufacturing PMI for France showed contraction for the fifth month in a row. The eurozone factory PMI came in at 50.3 in September, the poorest reading in 14 months. In a Reuters poll late last month, economists put the chance of the European Central Bank initiating a quantitative easing campaign at 40%; the ECB followed through with that move in early October.10

WORLD MARKETS
There were benchmarks that rose in September. Take China’s Shanghai Composite, with its 6.62% gain. Or the Nikkei 225, which advanced 4.86%, or Pakistan’s KSE Composite, up 4.06%. Not all Asia Pacific indices were so fortunate: the Kospi lost 2.34%, the Sensex 0.03%, the ASX 200 5.92% and the Hang Seng 7.31%. In Europe, the CAC 40 gained 0.80% and the DAX 0.04% while the FTSE 100 slipped 2.89%. Ireland’s ISEQ rose 1.91% and Italy’s FTSE MIB advanced 2.16%.11

In the Americas, the Bovespa sank 11.70%, the IPC All-Share 1.41% and the TSX Composite 4.26%. Overseas indices in the Dow Jones family suffered a rough month – the DJ Americas lost 2.89%, the Asia Dow 7.04%, the Europe Dow 4.10% and the Global Dow 3.29%. The STOXX 600 gained 0.32% last month; the MSCI World Index dipped 2.88% while the MSCI Emerging Markets Index slid 7.59%.11,12

COMMODITIES MARKETS

September saw a 3.85% rise for the U.S. Dollar Index – the DXY closed out the month at 85.94. That factor alone meant rough going for many commodity futures. Important metals all pulled back: COMEX gold fell 5.98% for the month to close at $1,212.80 on September 30; platinum dropped 8.99%, copper 4.07% and silver 12.40%. Silver futures ended September down at $17.06.13,14  

Crop futures also had a trying September, with major losses for soybeans (16.35%), corn (10.80%), cotton (9.22%) and wheat (13.25%). Sugar retreated just 0.06%, coffee gained just 0.03%. Cocoa actually advanced 1.35%.14

Did air strikes on ISIS-controlled refineries put any real pressure on oil prices? No. NYMEX crude lost 4.72% last month and ended September at $92.00. Unleaded gasoline sank 7.23% and heating oil fell 7.24%. Natural gas futures, partly reflecting fears over security of Ukraine pipelines, rose 1.10%.14

REAL ESTATE
Existing home sales had slipped 1.8% in August, in the first decline the National Association of Realtors had measured since March. Year-over-year, the sales pace had decreased by 5.3%. NAR also reported pending home sales down 1.0% for August, a switch from July’s 3.2% gain. The Census Bureau, on the other hand, reported new home sales up 18.0% in August. It noted an 8.0% annualized rise in new home prices and a 33.0% yearly improvement in new home buying.2,15

At the jobsite, the August numbers were negative. Construction spending was down 0.8% for the month, housing starts 14.4% and building permits 5.6%. A falloff in multi-family projects accounted for much of those retreats. Groundbreaking for single-family homes was up 4.2% year-over-year as of August.2,16

September saw mortgages grow more expensive. By the time Freddie Mac’s September 25 Primary Mortgage Market Survey rolled around, the average interest rate on a 30-year fixed loan was up to 4.20%. Rates on the refinancer’s favorite, the 15-year fixed, were averaging 3.36%. Average rates on the 5/1-year ARM and 1-year ARM respectively reached 3.08% and 2.43%. Back on August 28, mean interest rates on mortgage types were estimated as follows: 30-year FRM, 4.10%; 15-year FRM, 3.25%; 5/1-year ARM, 2.97%; 1-year ARM, 2.39%.17

LOOKING BACK…LOOKING FORWARD
Well, the CBOE VIX certainly had a fine month. It gained 36.14% to close at 16.31 on September 30. Small caps were battered last month – the Russell 2000 fell 6.19%. The big three retreated far less than that – the Dow lost 0.32%, the Nasdaq 1.90% and the S&P 1.55%. At September’s end, here was where the key U.S. indices finished: DJIA, 17,042.90; S&P, 1,972.79; Nasdaq, 4,493.39; RUT, 1,101.68.11

Sources: online.wsj.com, bigcharts.com, treasury.gov - 9/30/1411,18,19

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

October has been a famously either/or month for stocks (plenty of big ascents, descents and swings over the years), and equities are being subjected to major volatility as the month opens thanks to recent world events. Unhappily, October 1 saw a correction in the Russell 2000. In the best-case scenario, better-than-expected earnings take center stage for the bulk of the month, complemented by upbeat economic indicators (manufacturing expansion, net job gains above the 200,000 level, a good initial reading on Q3 growth, solid fall consumer spending). The Fed’s longstanding asset purchase program is about to end; Wall Street is hopefully ready to accept that. October may throw more challenges at stocks than we have seen in several months. At junctures like these, hanging on and settling in for the ride often ends up being a wise move.20 

UPCOMING ECONOMIC RELEASES: Here is the rollout of important economic indicators and reports for the rest of this month: the Labor Department’s September jobs report and the September ISM services PMI (10/3), the release of the minutes from the Fed’s most recent policy meeting (10/8), August wholesale inventories (10/9), September retail sales, a new Beige Book from the Fed and September’s PPI (10/15), September industrial output (10/16), the initial University of Michigan consumer sentiment index  for October and the numbers on September housing starts and building permits (10/17), September existing home sales (10/21), September’s CPI (10/22), the Conference Board’s September leading indicators (10/23), September new home sales (10/24), September pending home sales (10/27), the Conference Board’s October consumer confidence index, the August Case-Shiller home price index and September hard goods orders (10/28), a Fed policy announcement (10/29), the first estimate of Q3 GDP from the federal government (10/30), and lastly the personal spending report for September and the final October University of Michigan consumer sentiment reading (10/31).

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. MarketingPro, 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. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. 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 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. Karachi Stock Exchange 100 Index (KSE-100 Index) is a stock index acting as a benchmark to compare prices on the Karachi Stock Exchange (KSE) over a period. The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). 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/ASX 200 is Australia's “premier” share market index. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The ISEQ Overall Index is a capitalization-weighted index of all official list equities in the Irish Stock Exchange, excluding U.K.-registered companies. The FTSE MIB (Milano Italia Borsa) is the benchmark stock market index for the Borsa Italiana, the Italian national stock exchange. 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 Mexican IPC index (Indice de Precios y Cotizaciones) is a major stock market index which tracks the performance of leading companies listed on the Mexican Stock Exchange. 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 Dow Jones Americas Index measures the Latin American equity markets by tracking 30 leading blue-chip companies in the region. The Asia Dow measures the Asia equity markets by tracking 30 leading blue-chip companies in the region. The Europe Dow measures the European equity markets by tracking 30 leading blue-chip companies in the region. The Global Dow is a 150-stock index of corporations from around the world created by Dow Jones & Company. The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. 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. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 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 - gurufocus.com/news/281201/bear-case [9/30/14]

2 - briefing.com/investor/calendars/economic/2014/09/29-03 [10/2/14]

3 - nasdaq.com/article/premarket-primer-tuesday-september-30-hong-kong-protests-continue-despite-efforts-to-disperse-cm396549 [9/30/14]

4 - investing.com/economic-calendar/ [10/2/14]

5 - marketwatch.com/story/hiring-slows-as-us-adds-142000-jobs-in-august-2014-09-05 [9/5/14]

6 - ism.ws/ismreport/NonMfgROB.cfm [9/4/14]

7 - forbes.com/sites/samanthasharf/2014/09/17/fed-still-sees-considerable-time-before-interest-rate-hike/ [9/17/14]

8 - tinyurl.com/la76spp [9/25/14]

9 - tinyurl.com/l34prhp [9/30/14]

10 - uk.reuters.com/article/2014/10/01/uk-global-economy-idUKKCN0HQ31C20141001 [10/1/14]

11 - online.wsj.com/mdc/public/page/2_3023-monthly_gblstkidx.html [9/30/14]

12 - mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html [9/30/14]

13 - online.wsj.com/mdc/public/npage/2_3050.html?mod=mdc_curr_dtabnk&symb=DXY [10/1/14]

14 - money.cnn.com/data/commodities/ [9/30/14]            

15 - tinyurl.com/l6h69cj [9/25/14]

16 - abcnews.go.com/Business/wireStory/us-home-construction-drops-144-percent-august-25589765 [9/18/14]

17 - freddiemac.com/pmms/archive.html [10/1/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F30%2F13&x=0&y=0 [9/30/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F30%2F13&x=0&y=0 [9/30/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F30%2F13&x=0&y=0 [9/30/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F30%2F09&x=0&y=0 [9/30/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F30%2F09&x=0&y=0 [9/30/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F30%2F09&x=0&y=0 [9/30/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F30%2F04&x=0&y=0 [9/30/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F30%2F04&x=0&y=0 [9/30/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F30%2F04&x=0&y=0 [9/30/14]

19 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [10/1/14]

20 - reuters.com/article/2014/10/01/us-markets-stocks-idUSKCN0HQ3RE20141001 [10/1/14]

Paul Stein Presents:

MONTHLY QUOTE

“Do not consider painful what is good for you.”
 

– Euripides

MONTHLY TIP

Tax planning is a year-round pursuit, especially for the business owner. Arrange a time to meet with your tax professional and figure out how many tax breaks you are eligible to claim.

MONTHLY RIDDLE

What may contain hundreds or thousands of wheels yet never moves or rises above the land?

Last month’s riddle:
Never resting, never still. Moving silently over the hill. It can’t walk, run or trot. All is cool where it is not. What is it?

Last month’s answer:

Sunshine.

September 2014

THE MONTH IN BRIEF
August has often been a good month for stocks, and the eighth month of 2014 was no exception. The S&P 500 surpassed 2,000 while logging a 3.77% monthly advance. Even with ISIS controlling parts of Iraq and Syria and Russia possibly conducting a stealth invasion of Ukraine, Wall Street retained its optimism. The rally in stocks wasn’t matched by big gains for oil and gold. The housing market was cooler than it was last summer, but by no means lukewarm. Most U.S. indicators signaled a healthier economy, perhaps one strong enough to motivate the Federal Reserve to raise interest rates a bit sooner than forecast.1

DOMESTIC ECONOMIC HEALTH
Commerce Department data showed consumer spending unexpectedly ticking down 0.1% in July, even with personal wages rising 0.2% - and seasonally adjusted retail sales were also flat. If households were retaining more of their incomes than expected, they were also more confident in August than they had been the previous month. The Conference Board’s August consumer confidence index hit 92.4 (blowing past the Briefing.com forecast of a descent to 88.0) and the University of Michigan’s consumer sentiment index ended August with a climb to 82.5.2,3

The latest Consumer Price Index showed inflation running right at the Fed’s target: an annual increase of 2.0%, with a July gain of 0.1%. (The core CPI was up 1.9% in a year and 0.1% in July.) Wholesale prices also rose 0.1% in July, putting the year-over-year increase at just 1.7%.4,5

American manufacturing was clearly very healthy this summer. The Federal Reserve announced a 1.0% July increase in factory production (the best month for the indicator since February) with an impressive 10.1% July jump in car manufacturing (a 5-year peak). Thanks to a huge request for new planes at Boeing, overall hard goods orders improved 22.6% in July.5,6

Indeed, the Institute for Supply Management’s August factory PMI affirmed the Fed’s findings: it reached 59.0, the best reading since March 2011. Weeks prior, ISM’s service sector PMI had come in at 56.0, up 1.6 points from June.7,8

Perhaps the best news of all was the pace of hiring. In July, U.S. employers added more than 200,000 jobs for a sixth straight month. That hadn’t happened in 17 years. Another good thing about July’s 209,000 new hires: according to Labor Department data, 47,000 entered business and professional positions.9

Finally, second quarter growth was judged even better than previously thought. Toward the end of August, the Commerce Department revised Q2 GDP from 4.0% to 4.2%. Capital spending was up 8.4% during the quarter.10

GLOBAL ECONOMIC HEALTH
Had Russia invaded Ukraine under the pretense of offering humanitarian aid? If so, the economic reaction to that incursion was still relatively localized. At the end of the month, NATO reported it had footage of Russian combat units operating within Ukraine’s borders – and still, U.S. stocks seemed unaffected. Sanctions imposed on Russia did perhaps affect the eurozone Markit PMI, which ticked down to 50.7 in August.11,12

China’s HSBC factory PMI flirted with contraction at 50.2 – not exactly encouraging news from the globe’s top market for commodities. The PRC’s official PMI was at 51.1 last month, underneath July's 51.7 mark. Japan’s PMI increased 1.7 points last month to 52.2.12

Markets also took the threats posed by ISIS in stride in August. Fears of oil output being presently disrupted in Iraq were muted. Even though the largest exporter of energy supplies outside the Middle East – Russia – was in a conflict of its own, there was no leap in energy prices. In part, that can be attributed to record output from the U.S. and reduced demand given the eurozone’s lingering recession and China’s economic engines revving down slightly this year.13

WORLD MARKETS
In terms of indices, some of the best August performances occurred in the Americas. Brazil’s Bovespa jumped 9.78% and Argentina’s MERVAL soared 19.90%. Mexico’s IPC All-Share rose 4.13% while Canada’s S&P/TSX Composite gained a mere 1.92%. The major European national bourses also recorded advances – 0.67% for the DAX, 3.18% for the CAC 40, 1.33% for the FTSE 100. In the Asia Pacific region, benchmarks were up and down in August – losses of 1.26% for the Nikkei 225 and 0.37% for the Kospi, gains of 2.87% for the Sensex, 2.71% for the PSE and 0.71% for the Shanghai Composite. Vietnam’s VN-Index notably advanced 6.81% last month. The Hang Seng and S&P/ASX 200 respectively posted tiny August losses (0.06% for the former, 0.12% for the latter).1

How about the regional and multi-country indices? The MSCI World Index gained 2.00% for August, the MSCI Emerging Markets Index 2.07%. Last month also brought gains of 1.79% for the DJ STOXX 600, 1.61% for the Global Dow and 3.95% for the Dow Jones Americas. The Asia Dow eked out an 0.08% advance while the Europe Dow lost 0.26%.1,14

COMMODITIES MARKETS

Last month, cotton went +8.87% to register the biggest gain among major commodities. Soybeans went -10.93% to rack up the largest August loss. As for the rest of the ag futures, the month played out like this: wheat, +3.40%; corn, +0.98%; cocoa, + 1.25%; coffee, -0.89%; sugar, -5.89%.15

As for metals, gold managed a 0.31% August gain, yet silver lost 5.76%, platinum 2.85% and copper 2.76%. Gold ended the market month at $1,287.40 on the COMEX, silver finishing at $19.49. Turning to the buck, the U.S. Dollar Index gained 1.58% to settle at 82.75 on August 29. Oil slid 1.85% for August; at the close on August 29, NYMEX crude was worth $95.96 per barrel. Heating oil retreated 0.95% last month while unleaded gasoline lost 1.40%; natural gas futures certainly looked good, rising 6.69%.15,16

REAL ESTATE
Annual home price gains were clearly leveling off, with the 20-city Case-Shiller home price index showing an 8.1% yearly gain in its June edition compared to 9.4% a month earlier. The National Association of Realtors announced a 2.4% rise in residential resales for July plus a 3.3% increase in pending home sales. New home buying was down 2.4% for the month, according to the Census Bureau.2,8

July brought a lot of groundbreaking. According to Census Bureau data, housing starts increased 15.7% for the month, and there was also an 8.1% rise for building permits.8

Conventional home loans got a touch cheaper during August, with Freddie Mac calculating the average interest rate on the 30-year FRM at 4.10% in its August 28 Primary Mortgage Market Survey. That compared to 4.12% on July 31. Interest rates for 5/1-year ARMs also declined from 3.01% to 2.97% in that period. Average interest rates on the 15-year FRM (3.23% to 3.25%) and 1-year ARM (2.38% to 2.39%) increased in that stretch.17

LOOKING BACK…LOOKING FORWARD
Though the headlines carried news of some fairly significant geopolitical crises in August, Wall Street wasn’t all that anxious about them. One telling sign is the S&P rising to an all-time record; another is the CBOE VIX, the so-called “fear index,” closing down at 11.98 on August 29 (the final market day of the month).1

While the VIX sank 29.32% in August, the key U.S. stock indices all gained 3% or more. The Nasdaq rose 4.82%, the Russell 2000 4.85%, and the Dow 3.23%. At the close on August 29, the S&P settled at 2,003.37, the DJIA at 17,098.45, the NASDAQ at 4,580.27 and the RUT at 1,174.35.1

Sources: online.wsj.com, bigcharts.com, treasury.gov - 8/29/141,18,19

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

History is no barometer of future performance on Wall Street. That is worth stating for two reasons. One, it has been a long time since stocks corrected, and investors may be psychologically satisfied with the S&P 500 topping the once-unimaginable 2,000 mark. Two, September has historically been a poor month for the blue chips. On average, the Dow has declined 0.8% in the ninth month of a year. So Wall Street history and the back-of-the-mind bearish sense that things are going too well don’t seem to bode well for U.S. equities this month, but all that may amount to nothing. MarketWatch’s Mark Hulbert notes that the Dow has slipped an average of 2.7% in Septembers during years when stocks were already in the red, and on average gained 0.3% in Septembers during which stocks were in the green. The market may defy expectations and presumptions.20 

UPCOMING ECONOMIC RELEASES: The rest of September presents the following reports and announcements: ISM’s August services PMI, the August ADP employment report and the August Challenger job cuts report (9/4), the Labor Department’s August jobs report (9/5), July wholesale inventories (9/10), July business inventories, August retail sales and the University of Michigan’s initial September consumer sentiment index (9/12), August industrial production (9/15), the August PPI (9/16), the latest Federal Reserve policy statement and the August CPI (9/17), August housing starts and building permits (9/18), the Conference Board’s August leading indicator index (9/19), August existing home sales (9/22), August new home sales (9/24), August durable goods orders (9/25), the final estimate of Q2 GDP and the final September consumer sentiment index from the University of Michigan (9/26), August pending home sales and personal spending (9/29), and finally the July Case-Shiller home price index and the Conference Board’s September consumer confidence index (9/30).

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<<RepresentativeDisclosure>>

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. MarketingPro, 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. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. 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 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 MERVAL Index (MERcado de VALores, literally Stock Exchange) is the most important index of the Buenos Aires Stock Exchange. The Mexican IPC index (Indice de Precios y Cotizaciones) is a major stock market index which tracks the performance of leading companies listed on the Mexican Stock Exchange. 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 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 ISEQ Overall Index is a capitalization-weighted index of all official list equities in the Irish Stock Exchange, excluding U.K.-registered companies. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. 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 Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The Philippine Stock Exchange PSEi Index is a capitalization-weighted index composed of stocks representative of the Industrial, Properties, Services, Holding Firms, Financial and Mining & Oil Sectors of the PSE; it was formerly named the PSE Composite.  The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The Vietnam Stock Index or VN-Index is a capitalization-weighted index of all the companies listed on the Ho Chi Minh City Stock Exchange. 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/ASX 200 is Australia's “premier” share market index. 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. The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. The Global Dow is a 150-stock index of corporations from around the world created by Dow Jones & Company. The Dow Jones Americas Index measures the Latin American equity markets by tracking 30 leading blue-chip companies in the region. The Asia Dow measures the Asia equity markets by tracking 30 leading blue-chip companies in the region. The Europe Dow measures the European equity markets by tracking 30 leading blue-chip companies in the region. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 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 - online.wsj.com/mdc/public/page/2_3023-monthly_gblstkidx.html [8/29/14]

2 - biz.yahoo.com/c/ec/201435.html [9/2/14]

3 - foxbusiness.com/economy-policy/2014/08/13/us-retail-sales-basically-flat-in-july-recent-job-growth-fails-to-boost/ [8/13/14]

4 - reuters.com/article/2014/08/19/us-usa-economy-inflation-idUSKBN0GJ15U20140819 [8/19/14]

5 - reuters.com/article/2014/08/15/us-usa-economy-prices-idUSKBN0GF11G20140815 [8/15/14]

6 - marketwatch.com/story/durable-goods-orders-jump-226-in-july-on-boeing-contracts-2014-08-26 [8/26/14]

7 - ism.ws/ismreport/mfgrob.cfm [9/2/14]

8 - investing.com/economic-calendar/ [9/2/14]

9 - marketwatch.com/story/us-adds-209000-jobs-in-july-to-keep-hot-streak-intact-2014-08-01 [8/1/14]

10 - abcnews.go.com/Business/wireStory/revised-estimate-q2-growth-stay-solid-25155529 [8/28/14]

11 - tinyurl.com/omb5ll2 [7/1/14]

12 - fxstreet.com/analysis/za-today/2014/09/02/ [9/2/14]

13 - investing.com/analysis/the-world%E2%80%99s-on-fire:-5-risks-to-watch-224521 [9/2/14]

14 - mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html [8/29/14]

15 - money.cnn.com/data/commodities/ [9/1/14]

16 - online.wsj.com/mdc/public/npage/2_3050.html?mod=mdc_curr_dtabnk&symb=DXY [9/1/14]

17 - freddiemac.com/pmms/archive.html [9/2/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=8%2F29%2F13&x=0&y=0 [8/29/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=8%2F29%2F13&x=0&y=0 [8/29/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=8%2F29%2F13&x=0&y=0 [8/29/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=8%2F28%2F09&x=0&y=0 [8/29/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=8%2F28%2F09&x=0&y=0 [8/29/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=8%2F28%2F09&x=0&y=0 [8/29/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=8%2F30%2F04&x=0&y=0 [8/29/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=8%2F30%2F04&x=0&y=0 [8/29/14]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=8%2F30%2F04&x=0&y=0 [8/29/14]

19 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [9/2/14]

20 - marketwatch.com/story/heres-what-history-says-about-the-stock-market-in-september-2014-08-29 [8/29/14]

Paul Stein Presents:

MONTHLY QUOTE

“For one human being to love another; that is perhaps the most difficult of all our tasks, the ultimate, the last test and proof, the work for which all other work is but preparation.”
    

– Rainer Maria Rilke

MONTHLY TIP

If a consumer debt burden bothers you, think twice about turning to a debt settlement company. Their ideal customers are consumers who can access big lump sums of cash. If that isn’t you, negotiating with creditors yourself may prove cheaper.

MONTHLY RIDDLE

Never resting, never still. Moving silently over the hill. It can’t walk, run or trot. All is cool where it is not. What is it?

Last month’s riddle:
A farmer feeds a total of ten goats and dogs with 56 biscuits. The dogs each eat six biscuits and the goats each eat five biscuits. So how many goats and how many dogs does he have?

Last month’s answer:

4 goats and 6 dogs. 4 x 5 =20, 6 x 6 = 36, 20 + 36 = 56 biscuits.

August 2014

THE MONTH IN BRIEF
Stocks seemed set for just a slight July loss until developments on the last day of the month rattled Wall Street. Argentina effectively defaulted on its debt (for the second time in the past 13 years), and new data out of Washington showed that wages were finally on the way up (a caution flag for higher interest rates). The blue chips lost 317 points on July 31 (the Dow’s worst day since February 3) while the S&P 500 sank 39 points. The S&P lost 1.51% in an eventful month in which the Fed set an exit plan for QE3, a pair of geopolitical events troubled global markets, and U.S. economic indicators looked pretty good even as earnings were mediocre.1,2

DOMESTIC ECONOMIC HEALTH
July’s Conference Board consumer confidence index came in at 90.9, a major leap from the (upwardly revised) June reading of 86.4. The University of Michigan’s consumer sentiment index, on the other hand, only reached 81.8(0.7 points beneath the forecast of economists polled by Briefing.com). Consumer spending and incomes were both up 0.4% in June, and retail sales advanced another 0.2% in that month, with the Commerce Department revising May’s gain north to 0.5%.3,4

As for employment, the Labor Department noted a sixth consecutive month of job creation above the 200,000 level – something that hadn’t occurred since 1997. Employers added 209,000 non-farm jobs in July, 47,000 in the professional & business services category. Unemployment crept up to 6.2% and underemployment (the U-6 rate) ticked up to 12.2% last month, but that was a consequence of more participants in the labor market.5

On the factory front, the Institute for Supply Management’s July manufacturing PMI read 57.1, up 1.8 points from June. U.S. industrial output had risen 0.2% in June, a Federal Reserve report noted. Buoyed by demand for aircraft, durable goods orders advanced 0.7% in June after a 1.0% retreat in May.3,4,6

Annualized consumer inflation remained at 2.1% in June, even with a 0.3% monthly rise in the Consumer Price Index. (Yearly inflation was only at 1.1% in February.) Wholesale prices were up 1.9% in 12 months as of June, with the Producer Price Index showing a monthly gain of 0.4%. At month’s end, Wall Street noticed that the Bureau of Labor Statistics employment cost index rose 0.7% in Q2, its largest quarterly jump since 2008. Employment costs include wages, and this signaled wage growth at last. Investors fretted that the rising indicator might offer further grounds for hiking interest rates sooner than anticipated.7,8

On July 9, the Fed solidified its endgame for QE3: reductions to monetary stimulus would continue as scheduled, concluding with a last $15 billion cut to zero at the October Federal Open Market Committee meeting. The economy was certainly over the winter doldrums: in the federal government’s initial estimate, Q2 brought 4.0% growth. The abysmal first quarter number was revised again: Q1 2014 GDP now goes in the books at -2.1% rather than -2.9%.3,9

GLOBAL ECONOMIC HEALTH
In 2001, Wall Street hedge fund managers bought inexpensive debt from Argentina only to see that nation stop the bond payments and record the worst sovereign default in history. As July ended, Argentina stared into the maw of a second default related to the first. U.S. district courts were blocking payments to the nation’s other bondholders until Argentina finally paid interest on the debt payments it had owed the American hedge funds for 13 years. The crisis triggered a major global selloff, but that wasn’t the only anxiety putting pressure on stock market indices in July.10

After the downing of Malaysia Airlines Flight 17 in Ukraine at the apparent hands of Russian separatists, investors worried that the U.S. and eurozone would tighten economic sanctions on Russia. Israel launched a ground offensive into Gaza in response to Hamas missile attacks, and attempts at cease fires were short-lived. In mid-month, the parent firm of major Portuguese lender Banco Espirito Santo failed to make payments on commercial paper – and the bank still appeared shaky as July ended.1,11

China offered better news. In July, its official PMI rose 0.7 points to a 26-month peak of 51.7. China’s GDP was 7.4% for the first half of 2014, but its government still predicted its economy reaching the 7.5% target for the year. Markit’s eurozone PMI topped the Reuters forecast of 52.8 for July, reaching a 3-month peak of 54.0. Factory sectors in France and Germany were heading in opposite directions – France’s Markit PMI was at 49.4 in July, Germany’s at 55.9. Markit projections showed eurozone GDP growing at about 0.4% per quarter.12,13

WORLD MARKETS
For the second month in a row, emerging market indices largely outpaced benchmarks in Europe and the U.S. Witness these July performances: Hang Seng, +6.75%; Kospi, +3.69%; Nikkei 225, +3.03%; Sensex, +1.89%; Jakarta Composite, +4.31%; Bovespa, +5.01%; IPC All-Share, +2.53%; Merval, +3.81%; Shanghai Composite, +7.48%; ASX 200, +4.40%; MSCI Emerging Markets, +1.43%; Asia Dow, +1.59%. (The Dow Jones Americas index did pull back 1.71%).2,14

Major European indices were mostly in the red in July. Losses came to the DAX (4.33%), the CAC 40 (4.00%), the RTS (10.74%), the FTSE 100 (0.21%), the Europe Dow (4.05%) and the STOXX 600 (1.72%). To round out the scorecard, the MSCI World Index fell 1.67% in July, the Global Dow 1.02%.2,14

COMMODITIES MARKETS

In the big picture, futures struggled. Energy futures certainly didn’t have a good month: July brought losses of 14.04% for natural gas, 9.16% for unleaded gasoline, 2.68% for heating oil and 7.22% for oil, with NYMEX crude ending the month at $98.17. Some marquee crops descended, too: cotton went -15.39% last month, soybeans -12.54%, wheat -5.97%, sugar -0.99% and corn -15.57%. Cocoa and coffee proved exceptions; the former gained 2.13% and the latter jumped 13.49%.15  

How did key metals do? Not too well. Copper futures rose 1.00% last month, but July saw COMEX gold lose 3.43%, silver 2.76% and platinum 1.57%. At the close on July 31, COMEX gold was valued at $1,281.30 an ounce. The U.S. Dollar Index gained 2.11% for July.15,16

REAL ESTATE
Housing indicators presented a mixed bag as the data stream went from the prime home buying season of spring into summer. Existing home sales, according to the National Association of Realtors, rose 5.3% in June. That increase sent the yearly sales pace up to 5.04 million; October was the last month in which it was that high. New home sales plummeted 8.1% for June, and the Census Bureau noted 5.8 months of new home inventory on the market – the most since October 2011. Pending home sales were down 1.1% for June, NAR noted, a sea change from the 6.0% gain noticed in May.3,17

As for yearly home price gains, there was a major slip for the S&P/Case-Shiller index in May – the annualized overall price gain across 20 metro markets was 9.3%, down markedly from 10.8% in the April edition. (Then again, house prices can’t climb 10% or more every year.) The Census Bureau found a 5.3% annualized increase in new home prices. Building permits for new construction were down 4.2% for June, and housing starts down 9.3% in that month.3,7,17

Home loans? On July 31, Freddie Mac published the following average interest rates in its Primary Mortgage Market Survey: 30-year FRM, 4.12%; 15-year FRM, 3.23%; 5/1-year ARM, 3.01%; 1-year ARM, 2.38%. Here were the average rates on June 26: 30-year FRM, 4.14%; 15-year FRM, 3.22%; 5/1-year ARM, 2.98%; 1-year ARM, 2.40%.18

LOOKING BACK…LOOKING FORWARD
At the close on July 31, the Dow settled at 16,563.30, the S&P at 1,930.67, the Nasdaq at 4,369.77 and the Russell 2000 at 1,120.07. Small caps also took a beating in July, with the RUT diving 6.11%. The jump in the CBOE VIX exceeded 30% in the last trading week of the month, which left the fear index with a July gain of 46.50%. The VIX ended July at 16.95.2,21

Sources: online.wsj.com, bigcharts.com, treasury.gov - 7/31/142,19,20

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

After the fall stocks took at the end of last month, analysts are again wondering if a correction is near. (For the record, the July 31 selloff left the S&P 500 just 3.1% down from its record high.) If a correction is coming – and Argentina, Russia and Portugal aren’t the only possible worries that might unnerve Wall Street – there is always the silver lining of being able to pick up quality shares for less, an opportunity some investors have awaited. There is certainly more to worry about than there was three months ago. Global investors do take many cues from the U.S., however, and our hiring and our GDP look very, very good right now. How much attention will the (presumably positive) indicators from America command over the next several weeks? Markets may be more volatile this month than we’ve been accustomed to during a mostly placid 2014.21 

UPCOMING ECONOMIC RELEASES: The roll call of releases for the rest of August: June wholesale inventories (8/8), June business inventories and July retail sales (8/13), July’s PPI and July industrial output and the University of Michigan’s initial August consumer sentiment index (8/15), the July CPI plus July housing starts and building permits (8/19), the minutes of the July Fed policy meeting (8/20), July existing home sales and the Conference Board’s July index of leading indicators (8/21), July new home sales (8/25), the Conference Board’s August consumer confidence index, July durable goods orders and June’s Case-Shiller home price index (8/26), the federal government’s second reading of Q2 GDP and NAR’s July pending home sales report (8/28), and then July personal spending and the final University of Michigan August consumer sentiment index (8/29).

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. MarketingPro, 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. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. 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 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 Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea 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 BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The IDX Composite or Jakarta Composite Index is an index of all stocks that are traded on the Indonesia Stock Exchange (IDX). 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 Mexican IPC index (Indice de Precios y Cotizaciones) is a major stock market index which tracks the performance of leading companies listed on the Mexican Stock Exchange. The MERVAL Index (MERcado de VALores, literally Stock Exchange) is the most important index of the Buenos Aires Stock Exchange. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The S&P/ASX 200 is Australia's “premier” share market index. The Asia Dow measures the Asia equity markets by tracking 30 leading blue-chip companies in the region. 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 RTS Index (abbreviated: RTSI, Russian: Индекс РТС) is a free-float capitalization-weighted index of 50 Russian stocks traded on the Moscow Exchange. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The Europe Dow measures the European equity markets by tracking 30 leading blue-chip companies in the region. The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. The Global Dow is a 150-stock index of corporations from around the world created by Dow Jones & Company. 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. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 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 - blogs.marketwatch.com/thetell/2014/07/31/stock-market-live-blog-selling-as-european-argentine-worries-weigh-whole-foods-falls/ [7/31/14]

2 - online.wsj.com/mdc/public/page/2_3023-monthly_gblstkidx.html [7/31/14]

3 - biz.yahoo.com/c/ec/201431.html [8/4/14]

4 - briefing.com/investor/calendars/economic/2014/07/14-18 [7/18/14]

5 - marketwatch.com/story/us-adds-209000-jobs-in-july-to-keep-hot-streak-intact-2014-08-01 [8/1/14]

6 - latimes.com/business/la-fi-durable-goods-manufacturing-economy-20140725-story.html [7/25/14]

7 - investing.com/economic-calendar/ [7/25/14]

8 - marketwatch.com/story/wages-finally-rising-which-could-force-fed-to-hike-2014-07-31 [7/31/14]

9 - marketwatch.com/story/fed-plans-to-end-bond-purchases-in-october-2014-07-09 [7/9/14]

10 - americasmarkets.usatoday.com/2014/07/31/5-things-to-know-about-argentine-debt-crisis/ [7/31/14]

11 - money.msn.com/business-news/article.aspx?feed=BLOOM&date=20140711&id=17768873 [7/11/14]

12 - usa.chinadaily.com.cn/epaper/2014-08/04/content_18244118.htm13 [8/4/14]

13 - tinyurl.com/kj9dxa3 [7/24/14]

14 - mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html [7/31/14]

15 - money.cnn.com/data/commodities/ [7/31/14]

16 - online.wsj.com/mdc/public/npage/2_3050.html?mod=mdc_curr_dtabnk&symb=DXY [8/4/14]

17 - cbsnews.com/news/new-home-sales-plunge-8-1-percent/ [7/24/14]

18 - freddiemac.com/pmms/archive.html [8/1/14]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F31%2F13&x=0&y=0 [7/31/14]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F31%2F13&x=0&y=0 [7/31/14]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F31%2F13&x=0&y=0 [7/31/14]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=7%2F30%2F04&x=0&y=0 [7/31/14]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=7%2F30%2F04&x=0&y=0 [7/31/14]

19 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=7%2F30%2F04&x=0&y=0 [7/31/14]

20 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [8/4/14]

21 - money.cnn.com/2014/08/02/investing/stock-market-lookahead/ [8/2/14]

Paul Stein Presents:

MONTHLY QUOTE

“If we are to learn to improve the quality of the decisions we make, we need to accept the mysterious nature of our snap judgments.”
 

– Malcolm Gladwell

MONTHLY TIP

As you plan to pay for your child’s college education, think about breaking the effort into thirds. A third of projected college costs could come from your savings, another third from family or student loans, and the last third from your current income plus financial aid.

MONTHLY RIDDLE

A farmer feeds a total of ten goats and dogs with 56 biscuits. The dogs each eat six biscuits and the goats each eat five biscuits. So how many goats and how many dogs does he have? 

Last month’s riddle:
An ancient invention (still used the world over) permits people to see right through walls. What is it?

Last month’s answer:

A window.

July 2014

THE MONTH IN BRIEF
A geopolitical crisis in the Middle East didn’t halt the advance of U.S. stocks in June. Indicators did much to bolster investor confidence – the housing market seemed to have pulled out of its winter slump, manufacturing PMIs for the U.S. and China were reassuring, and consumer confidence improved even as consumer prices increased. Gold and oil futures pushed north during the month while mortgage rates more or less stayed put. Again, the bull market found some fresh legs.

DOMESTIC ECONOMIC HEALTH
Households felt better about the economy in June. The month saw a 3-point rise in the Conference Board’s consumer confidence index (to a mark of 85.2) and also an advance for the University of Michigan’s consumer sentiment index (a final reading of 82.5).1

Consumer spending held up as inflation pressure increased. The Federal Reserve’s PCE index showed yearly inflation hitting 1.8% in May, a 19-month peak; the May Consumer Price Index recorded a 1-month advance of 0.4% and a 12-month increase of 2.1%. The Commerce Department measured a 0.2% gain in personal spending for May (along with 0.4% wage growth). Retail sales improved 0.3% for May, and the Commerce Department revised the April increase to 0.5%.2,3,4

On the factory front, the Institute for Supply Management’s June manufacturing PMI came in at a solid 55.3 (it was at 55.4 for May), indicating continued sector expansion. ISM’s service sector PMI had displayed a 56.3 May reading. Headline durable goods orders slipped 1.0% for May (but just 0.1% with transportation orders removed). Wholesale inflation actually declined 0.2% in May (the biggest dip since October), even as the Producer Price Index showed a 2.0% yearly advance.1,5,6

Further evidence emerged of the U.S. economic recovery. Labor Department data showed 217,000 new hires in May, marking the fourth straight month in which payrolls expanded by 200,000 or more. By May, the economy had gained back 100% of the 8.7 million jobs lost during the recession.4

In the federal government’s final estimate, Q1 GDP was even poorer than previously thought. The economy shrank 2.9% in the opening three months of 2014, with consumer spending rising only 1%. Still, economists widely projected Q2 growth between 3-4%.2

GLOBAL ECONOMIC HEALTH
The Islamic State in Iraq & Syria (ISIS), a militant Sunni faction set on creating a new nation, captured key cities in northern and western Iraq and part of Syria in June on its way to declaring a caliphate (and shortening its name to the Islamic State). As peace in Iraq came undone, the bulk of the country’s oil supplies had yet to be threatened: the majority of oil production in Iraq happens in its southern half, and its northern regions haven’t exported oil since March. Still, the ambition of ISIS and its fast conquest of so much territory sent oil prices higher in June and bred worries about the fighting quickly spreading into neighboring nations.7,8

In more positive news, global manufacturing seemed in decent shape. China’s official factory PMI stood at 51.0 for June, and June’s eurozone manufacturing PMI had a decent 51.8 reading. The United Kingdom’s June factory PMI was up at 57.5 and Germany’s reached 52.0; France’s official PMI showed sector contraction with a mark of 48.2.9

Deflation was a growing concern in the euro area: the European Central Bank measured yearly inflation at just 0.5% in June. The ECB’s annual inflation target is currently 2.0%, and its deposit rate is at -0.10%, which essentially punishes banks for parking euros. The latest data from China showed yearly inflation running at 2.5% in May, relatively high in current global terms but relatively placid in historical terms (it contended with 28.4% inflation in 1989 and 2.2% deflation in 1999).10,11

WORLD MARKETS
Generally speaking, stocks did better in the Far East and in the Americas than they did in Europe. The Sensex went +4.94%, the Hang Seng +0.47%, the Shanghai Composite +0.45%, the Nikkei 225 +3.62%, the Manila Composite +2.96% and the Kospi +0.36%; the Asia Dow went +1.90%. Australia’s ASX 200 fell 1.76%. Canada’s TSX Composite rose 3.71% for June, Mexico’s IPC All-Share 3.32% and Brazil’s Bovespa 3.76%.12

On the other hand, the Europe Dow lost 0.45% in June and the STOXX 600 retreated 0.69%; Germany’s DAX pulled back 1.11%, France’s CAC 40 slipped 2.14% and Ireland’s ISEQ lost 4.06%. The United Kingdom’s FTSE 100 declined 1.47% on the month. Russia’s RTS was an exception, recording a 5.43% June climb. The Global Dow advanced 1.58% for June, while the MSCI World Index rose 1.65% and the MSCI Emerging Markets Index gained 2.25%.12,13

COMMODITIES MARKETS

Oil futures closed out the month at $105.37 a barrel in New York, going +2.46% for June. Natural gas futures fell exactly as much as oil rose, but unleaded gasoline advanced 1.49% and heating oil 2.98% for the month.14  

Gold rallied to $1,322.00 on the COMEX at month’s end, rising an impressive 6.23% in 30 days. Silver soared 12.05% for the month, settling at $21.01 on June 30. Copper futures gained 1.43% in June, platinum futures 2.30%. The U.S. Dollar Index dipped 0.73% on the month, ending June at 79.78.14,15

Ag futures were up and down for June, as follows: coffee, -2.68%; wheat, -9.92%; cocoa, +2.75%; corn, -9.25%; soybeans, -5.89%; cotton, -14.94%; sugar, +1.55%.14

REAL ESTATE
The May home sales data was terrific, wiping away anxieties about the real estate market stalling out. The fifth month of the year saw a 4.9% improvement in existing home sales according to the National Association of Realtors, plus an 18.6% leap in new home buying. Census Bureau data showed new home sales were at their hottest pace since May 2008.16

Associated real estate statistics also brought some reassurance. NAR said that pending home sales improved a whopping 6.1% in May; analysts at Briefing.com thought they would rise but o.5%. Home prices were up 10.8% year-over-year through April, as measured by the 20-city S&P/Case-Shiller index. The one sour note concerned builders: the Census Bureau measured a 6.5% May drop in housing starts, along with a 6.4% reduction in building permits.1,3,5

Mortgage interest rates barely budged during June. Freddie Mac’s Primary Mortgage Market Survey recorded the following movements in average interest rates on these home loan types from May 29 to June 26: 30-year FRM, 4.12% to 4.14%; 15-year FRM, 3.21% to 3.22%; 5/1-year ARM, 2.96% to 2.98%; 1-year ARM, 2.41% to 2.40%.17

LOOKING BACK…LOOKING FORWARD
Bearish analysts have contended for months that the bull market is due to end. In June, their case looked weak.

June ended with the S&P 500 at 1,960.23; it rose 1.91% for the month. The Nasdaq pulled off a 3.90% June gain, and the Dow advanced another 0.65%; at the close on June 30, the Nasdaq stood at 4,408.18, the Dow at 16,826.60. Small caps did much better than the blue chips in June – the Russell 2000 gained 5.15% for the month to go +2.52% YTD. While the crisis brewing in Iraq pushed gold and energy futures higher in June, it only took the CBOE VIX up 1.49%; the “fear index” closed June at 11.57, down 15.67% on the year. The Nasdaq Biotech index rose 7.30% in June while the Dow Jones Utility Average gained 5.69%; after two quarters of 2014, those indices were respectively up 13.37% and 17.41% YTD.12

Sources: online.wsj.com, bigcharts.com, treasury.gov - 6/30/1412,18,19

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

Bullish sentiment certainly hasn’t evaporated this year, even as YTD stock market performance has moderated to something more akin to the status quo. The S&P entered July having gone more than 1,000 days without a correction, one of the more astonishing market statistics of late. That’s 33 months without a 10% drop. (If you’re curious, the record is seven years. The S&P went 2,553 days without a correction across 1990-97.) Even the unrest in Iraq hasn’t rattled U.S. markets to any lasting degree; lately, investors have seemed almost as focused on economic developments in America and China. Things could certainly change, and change for the worse, but for the moment little seems to be impeding U.S. stock gains.20 

UPCOMING ECONOMIC RELEASES: Here’s the schedule for the balance of July: the June jobs report from the Labor Department and the ISM June service sector PMI (7/3), the June 18 FOMC minutes (7/9), May wholesale inventories (7/10), May business inventories and June retail sales (7/15), a new Federal Reserve Beige Book, June industrial output and the June PPI (7/16), June housing starts and building permits (7/17), the Conference Board’s June leading indicator index and the University of Michigan’s initial July consumer sentiment index (7/18), June existing home sales and the June CPI (7/22), June new home sales (7/24), June durable goods orders (7/25), June pending home sales (7/28), the Case-Shiller home price index for May and the Conference Board’s July consumer confidence index (7/29), a Fed policy statement, the first Q2 GDP estimate from the Bureau of Economic Analysis, and the July ADP employment change report (7/30) and the July Challenger job cuts report (7/31). August 1 sees the release of the June personal spending report and the final University of Michigan July consumer sentiment index.

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. MarketingPro, 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. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. 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 BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). 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 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 Philippine Stock Exchange PSEi Index is a capitalization-weighted index composed of stocks representative of the Industrial, Properties, Services, Holding Firms, Financial and Mining & Oil Sectors of the PSE; it was formerly named the PSE Composite. The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. The Asia Dow measures the Asia equity markets by tracking 30 leading blue-chip companies in the region. The S&P/ASX 200 is Australia's “premier” share market index. 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 Mexican IPC index (Indice de Precios y Cotizaciones) is a major stock market index which tracks the performance of leading companies listed on the Mexican Stock Exchange. 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 Europe Dow measures the European equity markets by tracking 30 leading blue-chip companies in the region. The STOXX Europe 600 Index is derived from the STOXX Europe Total Market Index (TMI) and is a subset of the STOXX Global 1800 Index. 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 ISEQ Overall Index is a capitalization-weighted index of all official list equities in the Irish Stock Exchange, excluding U.K.-registered companies. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The RTS Index (abbreviated: RTSI, Russian: Индекс РТС) is a free-float capitalization-weighted index of 50 Russian stocks traded on the Moscow Exchange. The Global Dow is a 150-stock index of corporations from around the world created by Dow Jones & Company. 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. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 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.

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