HIGHLIGHTS IN THIS UPDATE:
- Call us with any questions on your 2015 income tax information or corrected tax packet.
- BE SURE to utilize the available file to download your 2015 transactions for your tax return preparation.
- Good Friday-March 25th: U.S. stock markets closed as well as our office.
- Regular monthly account distributions will be sent on Monday, March 28th due to Good Friday.
- S. stock indices have continued to rally off their February lows.
- Our stock models were revamped in early January and took advantage of stock valuations.
- Oil prices gain and a look ahead for gasoline prices.
- FED meets this week with no change in interest rates anticipated by most analysts.
READ FURTHER FOR ADDITIONAL DETAILS……………………………………….
2015 Income Tax Corrections/Data:
Recently many of you may have received a “corrected” tax packet from the Trust Company of America. This was due to several mutual fund companies “re-categorizing” the way their capital gains (short term vs. long term) were originally reported. This happens almost every year and only affects taxable accounts, not IRA’s or retirement plans. If you have already filed your returns, chances are the changes were very small, and in most cases probably would not warrant an amended return. Call us if you have any questions.
NOTE: Be sure to utilize the “CSV” (Excel) file available on Liberty to download all the portfolio transactions directly into most tax preparation software programs. We encourage you to notify us when you are ready to file your returns so we can provide this valuable information to your tax preparer for you. If you will provide us their name and email address, we can be sure they receive all the necessary information from your portfolio to complete your return. The “CSV” file can also be downloaded to TurboTax as well. We are here to help and make tax time as smooth as possible for you. Using this data can save both time and money when completing your 2015 income tax return.
Good Friday Schedule:
The U.S. stock markets are going to be closed next Friday, March 25th in observance of Good Friday. Our offices will be closed that day as well. If you receive a monthly income distribution from your account the Friday Holiday will push the March 25th normal distribution date to Monday, March 28th. Also, Rick will be out of the office next week, March 21-25, but both Chris and Sam will be available to take care of anything you might need in his absence.
The U.S. stock indices continued to rally off their February lows through last week, and now the Dow Jones Industrial Average is off just 1.22% for 2016 as of March 11th, while the Standard & Poor’s 500 is down just 1.06%. The NASDAQ Composite is still 5.17% lower since the first of the year.
Interest rates remain low, with the yield for the 10 year U.S. Treasury at 1.962%, still under the 2.27% at the start of this year. (U.S. Treasury, MarketWatch) Mortgage rates now range between 3.5-4.0% for a 30 year fixed rate mortgage, and 2.625-3.0% for a 15 year fixed rate. (Bankrate.com)
So far this year, our stock models have focused on specific, value oriented positions. By adjusting our portfolios in all risk levels back in early January, we were able to pick up some stocks at very reasonable or even low valuations as well as above average dividend yields. To date, our stock models as a whole have been able to outperform the broad, Russell 3000 stock index by a good margin as of last Friday, March 11th. (Past performance cannot guarantee future results)
In early in 2015 we opted to increase the average number of issues to 20-25 in each of our three stock models in order to provide greater diversification in anticipation of increasing volatility. This means your portfolios could hold around 50 stocks or so except the “Capital Preservation” risk, since this risk level only holds the Level One stock model. All other risk levels hold a combination of two of the actual stock models (Level 1, Level 2, or Level 3), depending on your overall portfolio’s risk. We are able to do this since the transaction fee to buy/sell stocks is now just .0045 per share when we place trades based on all clients in a specific risk level at the same time. This is less than one-half-of-one cent per share, and allows us to hold more positions, regardless of account size, that may be typical while providing greater overall diversification. We do not receive any compensation on transactions, which also helps keep your trading costs very low.
Spring, Summer, and Gasoline Prices
While we could point to a number of factors that created a negative backdrop for the market as the year began, the extremely close correlation between what’s happening to oil prices and stocks can’t be ignored.
Oil’s bottom on February 11 ($26.19—Energy Information Admin (EIA)) happened to coincide with the most recent bottom in the S&P 500 Index of 1,829 (St. Louis Federal Reserve). Last Friday the S&P 500 stock index closed at 2,022. With oil prices on the upswing and gasoline prices starting to climb (EIA), now seems like a good time to review what may happen this summer.
Of course, any forecast (an educated guess is a more apt term) depends how the many variables in the oil price equation interact. These include what OPEC and large producers like Russia do, how the fracking industry responds to the recent upswing in oil prices, and the dollar’s direction.
That said, let’s take a look at the historical trend over the last 16 years. If you suspected the price of gasoline jumped heading toward summer, you were right.
The price of oil mimics a similar pattern, but its rise as we head to summer is less pronounced (EIA data).
Reasons for the historical pattern for gasoline include—
- Rising oil prices boost gasoline prices
- Refiners in parts of the country switch to more expensive summer blends
- Upcoming summer driving season, which boosts demand for gasoline
- Restraints on refinery capacity
Even if gains are in line with the seasonal trend, prices will remain well below what we’ve seen in recent years. And a rise in oil prices relieves some pressure on oil companies that are heavily burdened with debt. Plus, it has been a positive for stocks.
The Fed’s two-day meeting begins on Tuesday and concludes on Wednesday of this week. Most analysts expect no change in interest rates. But the U.S. economy is experiencing a small uptick in inflation, continued job growth, and is weathering headwinds from slowing global growth. So an April or June increase could still remain on the table.
We appreciate the privilege to be of service, and if you have any questions, or we can be of further service in any way, please don’t hesitate to call or email at any time. Have a great Easter!
Your TEAM at F.I.G. Financial Advisory Services, Inc.
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Past performance is not a guarantee of future performance. Different investments involve different degrees of risk, and there can be no assurance that the future performance of any investment, security, commodity or investment strategy that is referenced will be profitable or be suitable for your portfolio.
The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.
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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.
2 The NASDAQ Composite is an unmanaged index of 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.