HALF-TIME 2013HALF-TIME 2013
Tuesday, July 30th 2013 | 155 Bovet Rd, 1st Floor Conference Room, San Mateo, CA
Greek Medical System
5 Euro for a visit at the county hospital which includes: blood test, EKG, X-ray and antibiotic
Words We Learned (or made up) in 2013
Tapering
What does this word mean?A) Taping two pieces of paper togetherB) Changing the width of your pantsC) The Federal Reserve is lowering the amount of
assets they buy
Words We Learned (or made up) in 2013
The Great Rotation
What does this phrase mean?A) The planets are realigningB) A Chicago Blackhawks hockey playC) Theory that there will be massive flows of money
out of bonds and into equities
Words We Learned (or made up) in 2013
Sequestration
What does this word mean?A) Method used to make orange juiceB) Ryan Seacrest is taking over your TVC) Large cuts in government spending
Words We Learned (or made up) in 2013
The Most Popular Word on Tabloid Covers in the Last Year?
A) ShockingB) WeddingC) Baby
Where We’ve Been
2013 Performance (Through 6.30.2013)
S&P 500(Domestic
Stocks)
+12.6%
DJ Global ex US (Foreign Stocks)
-1.1%
10-year Treasury
Yield+2.49%
Gold-28.2%
Indices are unmanaged and cannot be invested into directly. Past performance is no guarantee of future results.
Experts Opinions
“The great bond bear market has begun” – Bill Miller
Legg Mason
From January 11, 2013 NY Times article
Experts Opinions
“I’m afraid there’s going to be ashes in our stockings this year, and that applies to all asset classes. Bonds are priced not just for perfection, but with close to 0 percent yields. The juice has been squeezed out of the orange.” – Bill Gross
Pimco
From January 11, 2013 NY Times article
Experts Opinions
“There are a lot of reasons to be optimistic, but cautiously so.”
– Karl Case Wellesley College
From January 11, 2013 NY Times article
All-Time Highs
Stocks have rallied to fresh all-time highs in 2013 Best first half for stocks since 1999 Is the rally sustainable? Historically speaking,
unwise to sell at all-time highs
Average rally following all-time high is 28%
Based on the S&P 500 Index from 1928-2013
Government Austerity
Government spending cuts are a drag on economic growth
U.S. tax increases plus sequestration estimated to reduce GDP by nearly 2% in 2013
Consumers Remain Resilient
Despite higher taxes, consumers continue to spend more and gain confidence
Consumers confidence at five-year highs
The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watchhttp://www.conference-board.org/data/consumerconfidence.cfm
Wage Growth Stubbornly Low
Even those fortunate to have jobs aren’t getting big raises
Wage growth has mostly remained below 2% since 2009
Meanwhile, consumers continue to deleverage U.S. consumer debt is $1.37 trillion below its 2008
peak
Where are the Jobs?
Job growth remains weak Job growth remains weak Unemployment rate stubbornly high Labor force participation has sunk to multi-year lows
Is Housing Back?
Housing bubble burst was a major contributor to previous recession
Finally starting to see signs a recovery is underway Home prices rising at double-digit pace New housing starts picking up
Bernanke Signals Exit
• Federal Reserve Chief Ben Bernanke surprised investors by signaling economy is healthy enough to slow QE later this year
• Based on improved forecasts, asset purchases will conclude sometime in 2014
Inflation? What Inflation?
Easy Federal Reserve policy hasn’t resulted in inflation
Two key measures, PCE and CPI, indicate the rise in U.S. consumer prices has been consistently below 2%
Interest Rates Increase
Investors preparing for shift in Fed policy have stampeded out of previously best performing asset classes
U.S. treasury yields have increased, while Gold has gone down
Where We Are
Rising stock and home prices creating “Wealth Effect”
U.S. is still a “Tale of Two Nations” Consumers gaining confidence despite
structural economic issues Corporations have lowered expectations Geopolitical tensions bubbling Stocks trading just below all-time highs
Geopolitical Tension
U.S. has decided to send weapons to aid Syrian rebels fighting the Assad regime
Russia isn’t pleased with this response Ex-CIA employee
Snowden situation has created more tension with both China and Russia
What to Watch
Fed Exit – Impact on Financial Markets China’s Economy Slowing European Economy Money Flows: Will We See Great Rotation? Geo-Political Risks
Fed Exit – Impact on Financial Markets
Federal Reserve believes economy is strengthening
If they’re right, will interest rates continue to rise? Can consumer spending hold up as borrowing
costs rise?
Money Flows: Great Rotation?
Some market experts predicted a “Great Rotation” will begin in 2013
Massive outflow of $ from bonds back into stocks Finally started to see some movement after
Bernanke signaled change in Fed policyBond mutual fund flows
http://www.businessinsider.com/el-erian-explains-the-great-rotation-2013-2http://www.valuewalk.com/2013/06/june-worst-month-bond-mutual-funds/
Geopolitical Risks
Should military conflict arise with another major economy, the effects could be severe
Tensions with China and Russia are higher than at any time in recent history
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All
performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
Investing is subject to risks including possible loss of principal. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. Bonds are
subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. The fast price swings in commodities and currencies will result in significant volatility in an investor’s holdings.
Leonidas Maheras is a LPL Financial Advisor with, and securities and Advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.
Thank You For Your Continued Support!
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