Highlights of this Week’s Update:
- Tax Form 1099B will be mailed on Tuesday, February 17th for all taxable accounts. It will also be available online in the Liberty system.
- Stocks continue to climb, oil is stable, and interest rates move higher.
- Job and economic effects of sharply lower oil prices are just starting to be seen.
- Economic impact of less spending/jobs in energy sector still unknown.
READ ON FOR FURTHER DETAILS…………………………………………………
IMPORTANT TAX INFORMATION:
On this Tuesday, February 17th, form 1099B will be sent to all of you that had a non-retirement account (taxable account) in 2014. Tax forms will also be available online in the Liberty system as well as the “CSV” file that can be used to download 2014 transactions to most tax software programs. It is important to use this file as it can save both time and money in the preparation of your 2014 income tax return. If you need any assistance with your tax information, please don’t hesitate to call.
The Markets:
Last week the major U.S. stock indices continued their move higher, with the Dow gaining 1.09% pushing it into positive territory for the year, up 1.10%. The S&P 500 rose 2.02% for the week ending last Friday, and is now up 1.85% year-to-date. (MarketWatch)
Interest rates moved higher again, and oil ended at $52.65 per barrel, up $0.31. (U.S. Treasury, CNBC) Gold ended at $1,232.50 per ounce, off $8.50 for the week.
Mortgage rates rose from the previous week, with the average rate for a 30 year fixed rate mortgage ending the week at 3.90%, while the 15 year fixed rate was 3.07. (Bankrate.com) If you want to look at the possibility of refinancing your current mortgage and what affect it might have on your long term planning, call us and we can help provide you with evaluation of current options and the impact on your personal plan.
The Economy:
The effect of falling oil prices– it’s a transfer of wealth from oil producers and related activities to consumers and the non-energy sectors of the economy. While we await the longer-term benefits of lower prices at the pump, it seems as if a day doesn’t go by that there isn’t another report of layoffs in the energy industry or a company announces it is slashing outlays on exploration.
Some are now experiencing the pain of falling oil prices. Case in point, Pioneer Natural Resources (PXD $158) is among the leaders in the shale energy revolution. It announced last week it is slashing capital spending to $1.85 billion this year, or a 45% reduction from 2014. What’s fascinating is that it forecasts production could rise by as much as 10% in 2015 (Investor Relations).
Apache Corp. (APA $67) said last week it will average 17 oil rigs in 2015, down from 91 rigs in the third quarter of 2014; yet, oil production is expected to be “relatively flat” versus 2014 (Investor Relations). Those are incredible efficiencies being squeezed out of fewer wells, but it keeps production at elevated levels and could create headwinds for higher prices. Longer-term, that could be a plus for the overall economy.
Capital spending by businesses is an economic driver, and cutbacks could create a few bumps in the economic expansion, at least in the short-term. According to the latest Annual Capital Expenditures survey released by the U.S. Census Bureau, businesses spent $1.3 trillion in 2013 on new investments in structures and equipment. That’s a hefty sum.
What’s surprising to many is that oil and gas extraction and supporting activities led the way, accounting for $179 billion of that total. In fact, the oil and gas industry accounted for over $1 in every $8 businesses spent on new investments in 2013 – see Figure 1. Note that it has been taking an increasingly large share of overall capital spending.
Further it nearly topped the next three categories combined: electric power generation ($86.4 billion), hospitals ($51.8 billion), and telecom, cable and broadband providers ($49.2 billion).
While cutbacks won’t go unnoticed, we’re still waiting for consumers to spend their newfound windfall. Last month, retail sales fell 0.8%, as a 9.3% decline in sales at gasoline stations led the way (U.S. Commerce Dept.). There is one category that has seen a surge in spending. Sales at restaurants and bars are up 11.3% versus one year ago, according to U.S. Commerce Dept. data. It’s the best level since at least 1993.
We wish all of you a great week ahead. We appreciate the privilege to be of service.
God Bless,
Your TEAM at F.I.G. Financial Advisory Services, Inc.
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1 The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
3 The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
4 The FTSE Developed ex North America Index is an unmanaged index of large and mid-cap stocks providing coverage of developed markets, excluding the US and Canada. It cannot be invested into directly. Past performance does not guarantee future results.
5 New York Mercantile Exchange front-month contract; Prices can and do vary; past performance does not guarantee future results.
6 London Bullion Market Association; gold fixing pricing at 3 p.m. London time; Prices can and do vary; past performance does not guarantee future results.
Uncertainty and Volatility