December 18, 2012
THE DOWLING GROUP WISHES YOU ALL A HAPPY HOLIDAYS!!
Special Note: The horrible tragedy at Sandy
Hook Elementary School tugs at the heart of all of us. We pray for
the innocent victims and their families and hope they may find some
measure of comfort and healing in their time of great pain.
Federal Reserve Announcement
There they go again.
Doing its part to keep the economy afloat, the Federal
Reserve announced last week, "that it would enter 2013 with a plan
to purchase $85 billion a month of mortgage-backed securities and
Treasury securities, part of a continuing attempt to drive
down long-term interest rates to encourage borrowing, spending, and
investing," according to The Wall Street Journal.
In other words, the money printing not only continues, but
Prior to the financial crisis, the Federal Reserve's
balance sheet stood at about $900 billion. Now,
after previous rounds of securities purchases, it weighs in
at about $2.9 trillion. With last week's announcement,
it's on track to reach about $4 trillion by December
2013. And, based on the Fed's guidance last week,
it could hit $6 trillion before the Fed rests.
There are two schools of thought on the wisdom of this balance
sheet expansion policy. One school says it will lead to
massive inflation and destroy the value of the dollar. The
other school says it's necessary to keep the economy
stimulated while giving fiscal policymakers time to fix the
structural issues with the economy.
For its part, the Fed says it can manage its balance sheet
without causing unwanted inflation.
So far, inflation is calm, the financial markets have
stabilized, and the unemployment rate has dropped steadily over the
past two years. By those measures, the Fed's policy has
been reasonably effective. Yet, as The Wall Street
Journal points out, "Many critics of the central bank
believe it has already gone too far in its quest to boost economic
growth, and say it might be exposing the financial system
to new risks of inflation or a financial bubble by pumping so much
money into banks."
We are concerned about the potential long-term consequences of
the Fed's unprecedented money-printing actions and we'll continue
to keep a close eye for any sign of the market "rejecting" it.
|Data as of 12/14/12||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor's 500 (Domestic Stocks)||-0.3%||12.4%||16.7%||8.3%||-1.2%||4.8%|
|DJ Global ex US (Foreign Stocks)||1.3||12.3||15.7||1.3||-6.2||7.4|
|10-year Treasury Note (Yield Only)||1.7||N/A||1.9||3.6||4.2||4.1|
|Gold (per ounce)||-0.3||7.7||5.8||14.7||16.5||17.7|
|DJ-UBS Commodity Index||-0.7||-0.1||2.9||1.5||-4.9||2.4|
|DJ Equity All REIT TR Index||-0.6||16.2||23.8||17.6||5.1||11.5|
Notes: S&P 500, DJ Global ex US, 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, djindexes.com, London Bullion
Past performance is no guarantee of future results. Indices are
unmanaged and cannot be invested into directly. N/A means not
THE BEST PERFORMING STOCKS BETWEEN ELECTION DAY 2008 AND
ELECTION DAY 2012 in the S&P 500 index are quite a
varied group. It's interesting to see what companies performed well
during this time because it encompassed a good chunk of the Great
Recession and the stock market recovery that ensued.
Without naming names, here are the industries represented
by the top 12 performing stocks, according to a list from
- Grocery Stores
- Auto Dealers
- Computer Systems
- Auto Manufacturers
- Footwear and Accessories
- Residential Construction
- Data Storage
The cumulative return during the 4-year period for these
companies ranged from 373 percent for company #12 to 1,107 percent
for company #1. By contrast, the S&P 500 index rose 47 percent
during the period, according to data from Yahoo!
Notice that only one industry - leisure - is represented by two
different companies on the list. This suggests the top performers
were indeed a diversified group.
Are you ready for a quiz? See if you can name three companies on
the list given the following hints:
Company #1 on the list: Their spokesperson has gone "where no
man has gone before."
Company #2 on the list: It's sometimes referred to as "whole
Company #6 on the list: Their commercial, which aired only once
on TV in 1984, was rated the 12th best ad campaign of
the 20th century by Advertising Age.
Stumped? See below for the answers. Let us know how many you got
Weekly Focus - Think About It...
"(Holiday) gift suggestions:
To your enemy, forgiveness.
To an opponent, tolerance.
To a friend, your heart.
To a customer, service.
To all, charity.
To every child, a good example.
To yourself, respect."
—Oren Arnold, novelist, journalist, and humorist
Answers to quiz:
Company #1 is Priceline.com
Company #2 is Whole Foods Market
Company #6 is Apple
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
Please feel free to forward this commentary to family,
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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 DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices.
- 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.
- This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.
- 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.
- Consult your financial professional before making any investment decision.
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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
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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
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