This Week’s Summary:
- All 2013 Income Tax Information is now out and don’t forget the “CSV” file to download transactions!
- Markets moved last week on Fed’s comments but were able to end the week slightly higher. Dow still remains negative so far in 2014.
- Our outlook still unchanged, with continued underweighting in stocks/equities for all risk levels.
READ ON FOR MORE DETAILS…………………………………………………………………….
2013 Income Tax Information:
You should now have received all the pertinent income tax information for preparation of your 2013 tax return. We are more than happy to assist you in any way should you or your tax preparer have any questions or need additional help in getting your information together. PLEASE REMEMBER: There is a “CSV” (Excel) file available online that can be utilized to download all your transactions for 2013 into various tax preparation software programs, including TurboTax. This can save a great deal of time in the preparation of your 2013 return.
The Markets:
Last week the new chair of the Federal Reserve, Janet Yellen, appeared in her first post-Fed meeting press conference. It was supposed to be a fairly uneventful gathering given that another $10 billion reduction in monthly Fed bond buys was pretty much baked in. The Fed trimmed its monthly bond purchases from $65 billion to $55 billion as expected and continues to wind down what is popularly called quantitative easing, or QE.
What did capture the market’s attention, at least briefly, was an apparent gaffe by the new Fed chief in response to a question about a possible rate hike. During the press conference, a reporter with Reuters asked Yellen “how long of a gap we might expect” between the cessation of bond buys and the first increase in the fed funds rate (Fed provided transcript). Instead of directing her to the Fed’s press release that referenced a “considerable time,” Yellen surprised investors by saying “six months.” Was this a new transparency or a rookie mistake? In my opinion, it was probably the latter.
Let me share the exact quote taken from the video of the press conference available on the Fed’s website—
“So the language that umm we use in the statement is ‘considerable period’ uh so I, I, I, you know, this is the kind of term, it’s hard to define. But umm, you know, probably means uh something on the order of around 6 months or that type of thing.”
Note the hesitation and the uncertainty. We’ve all been there – our mouth just gets ahead of our brain, but then we aren’t in a position to move markets either. It was heavily qualified, but equity losses quickly accelerated after her remark, as traders weren’t expecting such an aggressive comment on the rate front. The major market indices were still able to eke out gains for the week, with the Dow Jones Industrial Average rising 1.48%. The Dow is still down approximately 1.65% year-to-date through Friday, however.
Interest rates rose, especially for shorter term U.S. Treasury securities, on the Fed comments. Bond yields were lower today from Friday’s close, with the 10 year U.S. Treasury bond yield at 2.74%. (Bloomberg) The national average for a 30 year fixed rate mortgage stood at 4.39% today and the 15 year fixed rate was 3.41%. (Bankrate.com)
The Fed adjusts its forward guidance-
By emphasizing to markets that rates are expected to remain low, the Fed hopes to keep investors interested in longer-term bonds, which would anchor yields (keep interest rates low) and continue to support the economy (borrowing and spending). For starters, mortgage rates and housing come to mind.
If successful, a faster growing economy will boost job growth and quicken the day when savers might once again earn a more acceptable return on safe, short-term investments via Fed rate hikes.
Our Outlook and Current Position:
We still feel the stock market could be in a topping process, and continue to see signs that could be indicating just that. Stocks/equities in general still appear overvalued, and we have limited our stock/equity exposure to individual companies that look to have more future potential than the overall markets. We are avoiding any stock/equity mutual funds at the present time. All risk levels are still underweighted in stocks/equities compared to our target amounts, and we hope to take advantage of future prices if and when the markets do experience a “correction” of some type. We will keep you advised.
We hope you all have had a great start to Spring. We are all looking forward to more sunshine, warm weather, and green grass/trees soon!
God Bless,
Your TEAM at F.I.G. Financial Advisory Services, Inc.
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