Solis Wealth Management Report – April 7, 2014

The Markets

The first quarter of 2014 offered up all the excitement and chills of a thriller. First, stock markets careened like runaway mining cars during January. Next, in her first press conference as new Federal Reserve Chairwoman, Janet Yellen implied the Fed might tighten monetary policy sooner than anyone expected which unsettled markets. Finally, Russia annexed Ukraine’s CrimeanPeninsula, incurring sanctions from other countries, and tipping its economy further toward recession. As in many thrillers, after some devastation (Russia’s stock market lost billions as capital fled the country), the quarter ended on a more encouraging note with many of the world’s stock markets in positive territory.

Last year was a very, very good year for stock markets in general, thanks to a brightening economic outlook in many parts of the world and the stimulative monetary policies implemented by many countries’ central banks. By December 31, the Standard & Poor’s (S&P) 500 Index had gained about 29 percent for the year, Japan’s Nikkei was up more than 56 percent, and shares in Europe rose by about 16 percent.

January 2014 was breathtaking, too, but for an entirely different reason. Concerns about global economic growth, company earnings in the United States, and the resilience of emerging countries caused stock markets around the world to give back some of the previous year’s gains. The S&P 500 lost about 3.6 percent, the MSCI World Index lost 3.8 percent, Europe’s Stoxx Index fell 5.1 percent, and the MSCI Emerging Markets Index was down 6.6 percent.

Fortified by largely positive domestic economic data, U.S. stock markets recovered somewhat during February. Regardless, it looked like some major indices were going to finish March in negative territory until the Fed Chairwoman stepped to a microphone on March 31, and told a community development conference in Chicago:

“I think this extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers at the Fed. In this context, recent steps by the Fed to reduce the rate of new securities purchases are not a lessening of this commitment, only a judgment that recent progress in the labor market means our aid for the recovery need not grow as quickly. Earlier this month, the Fed reiterated its overall commitment to maintain extraordinary support for the recovery for some time to come.”

U.S. investors celebrated the idea the Fed would not begin to tighten monetary policy sooner than expected which pushed stocks higher. The S&P 500 finished the quarter with modest gains.

Outside the United States, markets delivered mixed performance during the first quarter. Portugal, Italy, Ireland, Greece, and Spain – labeled the PIIGS of Europe because of their economic woes following the financial crisis – delivered strong performance for the quarter.

The Shanghai Composite fell during the first quarter as investors worried China would not hit its growth targets for 2014. The State Council tried to assuage worries about the slowing pace of economic growth by pledging to move forward with approved infrastructure projects.

India was a top performer among emerging markets during the quarter. Stocks rallied as inflation eased, the rupee stabilized, and the country’s current account deficit was brought under better control. Markets also were boosted when foreign investment increased in anticipation of a pro-business government being elected.

As the new quarter began, the European Central Bank flirted with the idea of quantitative easing. Its overtures pleased investors who began to invest in some of Europe’s most indebted nations – countries that had been shunned during the debt crisis. The rally caused yields on Spain’s five-year notes to fall below those of five-year U.S. Treasuries for the first time since 2007, and rates on Italy’s five- and ten-year notes fell to the lowest levels they’ve reached since Bloomberg began tracking the data in 1993.

Data as of 4/4/14

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

 

0.4%

0.9%

19.6%

11.9%

17.4%

5.0%

10-year Treasury Note (Yield Only)

2.7

NA

1.8

3.4

2.9

4.2

Gold (per ounce)

0.2

8.0

-16.1

-3.3

8.3

12.0

DJ-UBS Commodity Index

0.0

7.2

0.8

-7.6

3.8

-1.1

DJ Equity All REIT TR Index

1.2

9.3

2.1

10.5

24.8

8.8

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.

IS IT TIME TO BE HOPEFUL ABOUT GLOBAL ECONOMIC GROWTH? Certified Financial Analysts (CFAs) are more optimistic and confident that both local and global economies may grow this year, according to the 2014 Global Market Sentiment Survey (pg 5). Sixty-three percent of CFA Institute members think the world economy may expand in 2014. That’s a big change from 2013 when only 40 percent were optimistic about global growth prospects (pg 8). Overall, the survey found CFAs think stock markets in the United States, China, Japan, and Germany may offer the best investment opportunities in 2014 (pg 11).

Optimism at the local level varies by region. The sharpest turnaround in perspective was among CFAs in Japan – just 11 percent thought their country could experience economic growth last year. This year, 73 percent are optimistic. There was a surge of positivity among CFAs in Europe, the Middle East, and Africa (EMEA), too. Fifty-six percent have positive expectations for local growth, up from 33 percent last year. In America, 62 percent of CFAs are optimistic about growth compared with 39 percent in 2013, and, in the Asia Pacific region, 69 percent expect to see things improve in 2014 as opposed to 32 percent the previous year (pgs 8-9).

Not everyone’s outlook is rosy, however. Chinese CFAs have guarded expectations – just 45 percent expect to see their local economies grow. In Hong Kong, Brazil, and India, CFAs are actually less optimistic than they were last year (pgs 8-9).

Survey participants in both emerging and developed markets said one of the biggest risks to local economic growth is political instability. Participants in the United States, India, South Africa, and Brazil – countries that are gearing up for general elections – shared the concern. Other risks that could affect economic growth included the end of quantitative easing and the possibility of a financial bubble developing in local markets (pg 14).

Since the report was written in late 2013, CFAs’ optimism may have been buffeted by the ups and downs of the year’s first quarter, but it could prove out over the longer term.

Weekly Focus – Think About It

“Education is the most powerful weapon which you can use to change the world.”

Nelson Mandela, Former President of South Africa

What’s happening at Solis Wealth Management?

Please enjoy this week’s commentary from ~ Tiffany Valentine, Director of Operations / Associate Wealth Advisor

I think I can honestly say that this weekend is the first time that I’ve had a chance to sit down and relax for a few minutes in about a month.  It has been a whirlwind of activity since February! Between birthday parties, Avery’s gymnastics and ballet classes, taking the kids to try horseback riding, and just normal errands, we are definitely ready for spring break in a couple weeks! All in all, I wouldn’t trade the craziness for the world.  In fact, Avery and Travis are finally entering a stage where they will play with each other for longer periods of time and are getting along great!  Travis has taken an interest in kicking around soccer balls so I see some YMCA toddler soccer in our near future for him.  Avery was moved up to level 2 gymnastics and continues to try her best at learning new moves.  She says she enjoys gymnastics much more than ballet, but continues to do ballet because her aunt (who she really looks up to) was a beautiful ballerina until her early 20’s.  Chris and I are doing great as well.  We are already looking ahead to the summer where we plan on sneaking away for a few days.  All in all, I feel that we are in a good place and a great season right now. I’m sure a lot of it has to do with my own personal spiritual growth and finding more balance in my life.  As I’ve said before, I’m always striving to stay thankful and focus on the big picture.

I’ve recently taken some time to reflect on my job here at Solis Wealth.  My bible study group has been doing a study on Colossians and recently, Colossians 3:17 really spoke to me.  The verse states “And whatever you do, whether in word or deed, do it all in the name of the Lord Jesus, giving thanks to God the Father through him.”  I love how it reads “whatever we do”.  I read it to mean that it doesn’t matter where you work or what your title is, what really matters that you do what you love and do your best at it; staying humble and thankful at the same time.  I consider myself so blessed because not only do I love what I do here, but I also get to call it my ministry.  I also have the privilege of working with amazing people who speak into my life; who help me grow and learn new things about myself and my faith every single week. Accepting the fact that I’m not perfect and that I will always be growing gives me an immense sense of peace.  I really believe that the more we choose joy and thankfulness, the more peace we will experience and the easier it becomes to work in our positions of strength and be the best we can be in all areas of our lives. And the more peace we feel, the easier it is to be joyful and thankful.  (See Isaiah 55:12) What a wonderful cycle to be in and a great legacy to leave to our children and grandchildren!  I pray that each and every one of you will be able to enjoy peace in your lives and am so thankful that we might play a small part in your lives to helping you achieve that peace.

Enjoy the rest of your spring season and have a wonderful and blessed Easter this month!! ~Tiffany

Best regards,

Greg R. Solis, AIF®
President

78-075 Main Street
Suite 204
La Quinta, CA 92253
Office: (760) 771-3339
Fax: (760) 771-3181www.soliswealth.com
E-Mail: greg.solis@lpl.com

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The Wealth Advisors of Solis Wealth Management are also Registered Representatives with and securities and advisory services are offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC

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* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

* Government bonds and Treasury Bills are guaranteed by the U.S. 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.  However, the value of fund shares is not guaranteed and will fluctuate.

*Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index

* The Standard & Poor’s 500 (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.

* 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.

*The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* 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. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* 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.

* To unsubscribe from the Solis Wealth Management Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject line.

Sources:

http://blogs.marketwatch.com/capitolreport/2014/03/20/many-economists-see-yellens-six-month-comment-as-rookie-mistake

http://www.businessweek.com/articles/2014-04-03/russias-crimea-grab-may-lead-to-economic-recession

http://www.reuters.com/article/2013/12/31/us-markets-global-idUSBRE96S00E20131231

http://www.nytimes.com/2014/02/01/business/daily-stock-market-activity.html?_r=0

http://www.businessinsider.com/january-global-equity-market-returns-2014-2 (See the Table)

http://wsj-us.econoday.com/reports/rc/2014/Resource_Center/Archives/IP-Archive/03-31-14/index.html?cust=wsj-us&lid=0

http://www.federalreserve.gov/newsevents/speech/yellen20140331a.htm

http://www.bloomberg.com/news/2014-03-31/yellen-says-extraordinary-support-needed-for-some-time-.html

http://forextv.com/equities/piigs-lead-the-major-equity-markets-in-1st-quarter-of-2014/

http://www.cnbc.com/id/101544075

http://www.bloomberg.com/news/2014-04-05/spain-yields-drop-below-u-s-s-as-europe-bonds-rally.html

http://www.cfainstitute.org/about/research/surveys/Documents/gmss_2014_whitepaper.pdf

http://www.brainyquote.com/quotes/quotes/n/nelsonmand157855.html