January 21, 2014
What do the Pundits Say in2014
Predict, forecast, divine, foresee... Each year, pundits, analysts, and authorities from around the world offer investors insight to what the year may hold. While prognosticating brings to mind the words of British Prime Minister Winston Churchill who said, "It is always wise to look ahead, but difficult to look further than you can see." With that firmly in mind, let's take a look at what some experts have been saying about 2014.
Last week, economists at the World Bank released their latest growth forecast which projects global economies will expand by 3.2 percent this year. That's an improvement over last year's growth rate of 2.4 percent. Developing nations are expected to grow faster than high income countries. The Global Economic Prospects report cautioned, "Growth prospects for 2014 are, however, sensitive to the tapering of monetary stimulus in the United States, which began earlier this month, and to the structural shifts taking place in China's economy."
The 10 active money managers sitting at Barron's Roundtable found little to agree about as they discussed interest rates, stock prices, gross domestic product (GDP), and what to have for lunch. According to Barron's:
"The Roundtable's optimists expect the global economy to pick up, bonds to tick up, and stocks to mosey higher, notwithstanding the errant hiccup. The pessimists... see crippled economies here and abroad, rotten government policies, and a selloff in stocks that could rekindle fears of, yes, systemic risk. Yet, somewhere between these poles, all say, lie plenty of investments worth a wager..."
And, what does the new chairwoman of the U.S. Federal Reserve expect? After all, according to The Wall Street Journal which reviewed more than 700 predictions made by Federal Reserve officials about growth, jobs, and inflation, Janet Yellen made the most accurate forecasts from 2009 through 2012. In an interview published in Time Magazine this week, Yellen said the Fed's policymaking committee generally is hopeful that U.S. economic growth could be upwards of 3 percent during 2014. Additionally, she anticipates inflation will move toward 2 percent and the housing market will pick up and continue to recover.
Ms. Yellen offered no prediction about another subject of great concern to many Americans - the outcome of Super Bowl XLVIII.
|Data as of 1/17/14||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor's 500 (Domestic Stocks)||-0.2%||-0.5%||24.2%||12.4%||18.0%||4.9%|
|10-year Treasury Note (Yield Only)||2.8||NA||1.9||3.4||2.4||4.1|
|Gold (per ounce)||0.5||4.0||-25.4||-2.8||8.5||11.9|
|DJ-UBS Commodity Index||1.2||-0.5||-11.1||-8.3||2.5||-1.3|
|DJ Equity All REIT TR Index||0.4||2.7||1.9||10.3||19.9||8.9|
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
Change is the Only Constant
If you've ever doubted the idea that change is constant, just consider the last couple decades. Businesses that once were thriving have languished. Industries that were lynchpins of American capitalism have gone the way of the Pony Express. Here are a few examples of things that have changed in recent years:
- Telephones: More than 90 percent of American adults own cell phones, according to the Pew Research Center, and more than one-half rely on that Swiss army knife of communication, the smart phone. The popularity of cell phones put public payphones on the endangered species list and may prove to be the downfall of landlines. According to a Center for Disease Control and Prevention report, almost 40 percent of American homes have only cell phones. That's a big change from 2003 when the percentage was less than 5 percent of households.
- Books: Electronic publishing platforms mean authors have the option to publish carefully-scribed works themselves and make the books available to the public at bargain prices. Digital books have made access to the written word easier and, one can only hope, they may lead to primary and secondary schools being able to offer the most up-to-date textbooks to students.
- Movies: A new Harris poll found two-thirds of Americans go to the movies less often than they did a few years ago. The majority prefer the convenience of watching what they want, when they want, in the comfort of their homes. Instead of going to the theater, they own or rent DVDs and Blu-Rays, subscribe to movies-on-demand or streaming services, and record movies played on TV for later viewing. Of course, the medium for movie watching has also changed. In addition to the big screen, you can view a film on your tablet, smart phone, wall-sized television, or another device.
The world is changing all the time. While it is impossible to predict which trends have momentum and staying power, industries in transformation often open new opportunities for investors.
Weekly Focus - Think About It
"It's not that I'm so smart, it's just that I stay with problems longer."
—Albert Einstein, Theoretical Physicist
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
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- The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
- The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
- Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.
- The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
- The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
- Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Past performance does not guarantee future results.
- You cannot invest directly in an index.
- The S&P 500 is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
- Consult your financial professional before making any investment decision.
- This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.
- Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
- Stock investing involves risk including loss of principal.
http://online.barrons.com/article/SB50001424053111904681004579320804042634762.html?mod=BOL_hp_highlight_1&cb=logged0.8952979864057871#articleTabs_article%3D1(or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/01-21-14_Barrons-The_Good_Bad_and_Ugly-A-Guide_to_2014-Footnote_3.pdf)
http://online.wsj.com/news/articles/SB20001424127887324144304578624033540135700(or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/01-21-14_WSJ-Federal_Reserve_Doves_Beat_Hawks_in_Economic_Prognosticating-Footnote_4.pdf)
http://content.time.com/time/magazine/article/0,9171,2162267,00.html(or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/01-21-14_Time_Magazine-Janet_Yellen-The_Sixteen_Trillion_Dollar_Woman-Footnote_5.pdf)
ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.
IRS Circular 230 Disclosure: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter. Please contact us if you wish to have formal written advice on this matter.
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