Highlights of this Month’s Review:
- Save the date for our annual Client Appreciation Event: October 8th OR October 13th. Invitations coming.
- Additional Social Security educations workshops added.
- August brings added volatility to global stock markets and negative results.
- S&P 500 only off 4.21% year-to-date after August ends.
- Comparisons to 2008 show few similarities.
- S. economy shows some improvement and appears stable.
- Stay the course and let us help you review your own long term financial plan/goals.
Save the Date:
This year for our annual client event we are going to offer two different dates for an intimate evening out and dinner at one of Oklahoma City’s new and premier restaurant and chop house. We will be offering either Thursday, October 8th or Tuesday, October 13th due to size restraints as well as provide you all with more flexibility in scheduling. Formal invitations will be mailed out soon with full details. We are excited to provide you with this new format and venue.
Additional Social Security Workshops Added:
Because this information is so important to those trying to make a decision on when and how to take their
Social Security benefits, we have added more sessions to assist in providing as much information to you as possible. This workshop covers:
- How much Social Security you (and your spouse) stand to receive over your joint lifetime
- Rules and guidelines for when spouses should apply for benefits
- How the decisions you make in your 60s can determine the amount of income you – or your surviving spouse – will have in your 80s and 90s
- How spouses with little or no prior earnings can take advantage of Social Security benefits
- How a little-known rule passed in 2000 has opened the door to creative spousal strategies
- The number-one most important thing all higher-earning spouses should do
- Two key things you need to know about Social Security survivor benefits
- How remarriage affects survivor benefits from a former spouse
- How to avoid mistakes at your Social Security office
The workshop will be added for the following dates and times:
Wednesday, September 2nd: 10:30AM -12:00 Noon
Tuesday, September 8th: 3:00PM -4:30PM
Friday, September 18th: 10:00AM-11:30AM
Seating is limited so call us today at 844-9826 to reserve your seats and feel free to bring a friend or family member that could benefit from this information. All sessions will be held in our conference room.
August brought additional volatility to the world’s stock markets, with most major stock indices across the globe logging negative returns. In the U.S., the Dow Jones Industrial Average dropped 6.57% in August from its July closing level, and is now down 7.27% this year. The broader based Standard & Poor’s 500 stock index gave up 6.26% for the month and now off 4.21% since the end of 2014. It’s official – the broad-based S&P 500 Index, which measures the stock performance of 500 large U.S. corporations, entered correction territory for the first time in four years. Since closing at a peak on May 21st (St. Louis Federal Reserve), the index had slipped 12.35% as of last Tuesday’s close.
In market jargon, a correction is officially defined as a 10.0% drop from the closing high to the closing low of a major market index, typically the S&P 500 Index. Since WWII, it’s an event that has occurred about every 20 months (Dow Jones, Morningstar, Bloomberg, Reformed Broker) so we were overdue. Moreover, the average correction (a 10-20% drop) lasts 71 days, recording a 13.3% decline. Remember, stocks never move up in a straight line, but we recognize the sharp volatility we’ve witnessed is unsettling. The S&P 500 has since proceeded to rally off that low to actually end up .91% for the week ended last Friday. (Google Finance)
Oil prices actually ended August slightly higher on the month, with West Texas Intermediate Crude closing out August at $48.07 per barrel compared with $47.13 at the end of July. (CNBC) Gold actually rose slightly in August, closing at $1,134.40 per ounce, up $39.30 from the end of July. For 2015 however, gold prices have fallen from $1,206.50 on December 31st, for a decline so far in 2015 of approximately 6%. (MarketWatch)
Interest rates rose slightly in August, with the yield for the 10 year U.S. Treasury ending at 2.22% compared with 2.18% at the end of July. The yield stood at 2.17% at the beginning of this year. (MarketWatch) Remember, in general, when bond yields move higher, prices move lower. The national average for a 30 year fixed rate mortgage was at 3.95% today, and the 15 year rate is at 3.05%.
While shares have recovered from the deep bear market tied to the 2008-09 financial crisis, the scars have yet to fade. And some are asking if we are set to repeat 2008. So it may make sense to look at some comparisons of today’s situation to 2008 – see Table 1.
Table 1: Then vs now
|Subprime loan crisis
|Interest Rates to Rise, Bond Bubble?
|Credit markets were freezing up, Liquidity Crunch
|Credit markets are functioning normally, Liquidity not an Issue
|Bear Stearns takeover, bank failures, Federal takeover of Fannie, Freddie, and AIG, Lehman collapses, worries about counterparty risk
|Bank capital positions are much stronger, financial and direct economic exposure to China are limited
|Employment was in decline
|Employment is growing; weekly jobless claims remain at historically low levels
|Housing bubble bursts – housing activity and prices begin a steep decline
|Housing activity and prices are rising
|Retail sales in decline
|Retail sales are improving modestly, auto sales are strong
|Surging commodity prices, including oil
|Tumbling commodity prices, including oil
|ISM Mfg and ISM Services at or below 50 (contraction territory)
|ISM Mfg is soft – low 50s; ISM Services at 60.3 is highest of the expansion
|Pricey stock valuations
|Pricey stock valuations
Source: ISM, Wall Street Journal, Bureau of Labor Statistics, U.S. Commerce Dept, Bloomberg, and various other sources
Simply put, the U.S. economy is expanding today and is not the epicenter of a financial crisis as it was in 2008. Though several of the global economies aren’t in the best shape, the U.S. economy is relatively strong. For example, last week’s strong upward revision to the second quarter Gross Domestic Product from 2.3% to 3.7% (U.S. Bureau of Economic Analysis) was encouraging and helped fuel gains in stocks.
While we very likely could see more volatility tied to the global environment, including China and emerging markets, economic growth at home and low rates have historically aided stocks over the medium and longer term. Currently, leading economic indicators, including housing, inflation, the yield curve, and layoffs (U.S. Census, U.S. Bureau of Economic Analysis, Federal Reserve, Dept. of Labor) aren’t signaling an impending contraction in the U.S. economy.
In fact, the recent data have been encouraging, including the upward revision to the second quarter Gross Domestic Product.
At this time, we feel the appropriate strategy is to stay the course with long term investment plans based on risk, and have tried to take advantage of recent stock market volatility where possible. It will be important to prepare for further volatility ahead and to “buckle up” so we can continue to maneuver through any market turbulence that might occur in the coming weeks. It might be a good time for us to review your long term plan/goals and utilize our MyWealth system. Call us today to schedule your own personal review.
We appreciate the privilege to serve each of you and look forward to working together in the years to come. Please don’t hesitate to call us at any time if you have any questions or concerns, or if we can be of further service at any time.
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.
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.