Solis Wealth Management Report – June 2, 2014

The Markets

If you’re a fan of home renovation TV shows then you’re probably familiar with the types of bad news home inspections can uncover. Last week, the Commerce Department inspected its previous estimate for real gross domestic product (GDP) growth during the first quarter of 2014 and found some bad news. As it turns out, the rate of economic growth in the United States declined by 1 percent rather than increasing slightly, as previously thought.

The revision sparked debate among economists and politicians about the health of the U.S. economy. According to The Guardian, some economists found the revised numbers difficult to reconcile because they seem to contradict other first quarter economic data – such as expansion of non-farm payrolls, healthy manufacturing activity, and stronger retail sales – which indicate a more positive growth trend.

News that the U.S. economy might have shrunk slightly didn’t deter investors at all. The Standard & Poor’s 500 Index finished the week at a new record high. This could mean investors are confident economic growth will rebound in the second quarter of 2014 or it may reflect a belief economic weakness in the United States will encourage a more stimulative monetary policy.

The Wall Street Journal suggests signs of slower growth in the United States and Europe are behind the resurgent popularity of emerging markets. If you recall, investors pulled about $60 billion from emerging countries early in 2014 as they worried these markets would be affected negatively by the U.S. Federal Reserve’s less stimulative monetary policy. In May, a Reuters’ poll found 51 investment houses in the United States, Japan, and Europe had reduced their cash positions to the lowest levels since last November and invested the proceeds in emerging markets.

One expert cited by The Wall Street Journal called the rush into emerging markets a “global chase for yield.” No matter what you call it, last Friday, Morgan Stanley Capital International’s emerging markets stock index rose to its highest level since October 2013. It was up 3 percent for the year.

Data as of 5/30/14 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 1.2% 4.1% 16.3% 12.7% 15.3% 5.6%
10-year Treasury Note (Yield Only) 2.5 NA 2.1 3.1 3.7 4.7
Gold (per ounce) -3.2 4.1 -11.5 -6.6 5.0 12.2
DJ-UBS Commodity Index -1.4 6.4 1.9 -7.0 0.7 -1.5
DJ Equity All REIT Total Return Index 0.9 15.1 8.0 10.3 21.3 10.0

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 Total Return 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.

HOW DO YOU MAKE A PEANUT BUTTER AND JELLY SANDWICH? If you’ve ever been asked to write clear instructions for a seemingly simple task, you know the challenge is in the details. To illustrate how to make a PB&J, you start with bread, peanut butter, jelly (in a squeezable bottle), and a knife. Then you need to remember to tell the reader to open the bread bag, unscrew the top of the peanut butter jar, and turn the jelly bottle upside down before squeezing it. You have to provide a lot of very concise information.

Communicating financial and investment ideas effectively also can be challenging. It appears a significant number of Americans are not receiving all of the information they may need. For several years, the Financial Industry Regulatory Authority’s (FINRA) Investor Education Foundation has employed a five-question quiz to evaluate financial literacy. The questions include fundamental concepts related to financial knowledge and decision-making.

In 2012, about 30 percent of Americans were able to answer three of the five quiz questions correctly. That was about the same number of questions that were answered correctly when the quiz was first offered in 2009. The percentage of respondents who were able to answer four or five quiz questions correctly varied significantly by generation:

  • 24 percent of Millennials (born between early 1980s to early 2000s)
  • 38 percent of Gen Xers (born between early 1960s to early 1980s)
  • 48 percent of Baby Boomers (born between 1943 to early 1960s)
  • 55 percent of the Silent Generation (born between 1925 to 1942)

When a similar quiz was offered to people in countries throughout the world, financial literacy was linked (in all countries) to retirement planning or participation in private pension plans. In most countries, people who were financially literate were more likely to plan for retirement which requires an understanding of interest rates, risk, and diversification.

If someone you care about would benefit by knowing more about financial matters, please give us a call. We would be happy to sit down and talk with them about a specific topic or recommend some good reading materials.

Weekly Focus – Think About It

“Courage is the most important of all the virtues, because without courage you can’t practice any other virtue consistently. You can practice any virtue erratically, but nothing consistently without courage.

–Maya Angelou, American author and poet

What’s happening at Solis Wealth Management?

Please enjoy this week’s commentary from ~ Kris Placencia, Director of Client Relations

I love summer!  I know many of you who have homes elsewhere have already escaped the heat and those of you who live in the Desert full-time don’t like the heat but I have to say after 28 years, I really don’t mind it (ask me again in September and I may change my tune!)  I do however enjoy the slower pace, less traffic, BBQs with family and friends and the opportunity to vacation.  My summer felt like it started early as Hannah came home from college the first weekend of May.  I’ve enjoyed spending quality time with her and she is a huge help but running errands for me and taking care of things around the house.  While she has had quite of bit of rest and downtime (much needed after a full year of school….she took Organic Chemistry, Genetics and Biology plus two labs this past semester!) she has also been busy preparing for her trip to Bolivia.  She leaves on June 15th for a month.  Over the past 4 months she has raised over $3,200 and we are so grateful for those people in our lives that have supported her in this and believe in her and her vision and mission for the future.

Hannah will be going to Cochabamba, Bolivia which is located in the western central part of South America.  Brazil forms its eastern border, Peru and Chile on the west and Argentina and Paraguay on the south.  It is approximately 418,000 square miles; the size of Texas and California put together and has a population of just over 9.9 million (to put that in perspective…New York City has a population of approximately 8 million).  The primary language is Spanish and 95% of the population is Roman Catholic.

While there, Hannah will be participating in an organization called Hospitals of Hope.  Hospitals of Hope is a non-profit Christian medical missions organization whose aim is to “improve the healthcare of the underserved both locally and internationally.”  Their goal is to “use medicine as a vehicle into the hearts of people, to demonstrate Christ’s love by showing the value of each person they care for.”  Hannah and the 4 other pre-med women travelling with her will get first-hand medical missions experience by shadowing doctors and working in medical outreach clinics.  They will also get involved in the local community by visiting orphanages, reaching out to street kids and supporting the local Bolivian church through attendance and involvement.  I am so proud of her and know this will be a life-changing experience for her!  I look forward to updating you in my next commentary.

Until then….enjoy your summer! ~Kris

Greg R. Solis, AIF®
President

78-075 Main Street
Suite 204
La Quinta, CA 92253
Office: (760) 771-3339
Fax: (760) 771-3181

www.soliswealth.com
E-Mail: greg.solis@lpl.com

CA Insurance License #0795867

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://www.bea.gov/newsreleases/national/gdp/2014/pdf/gdp1q14_2nd.pdf

http://www.theguardian.com/business/2014/may/29/us-economy-growth-gdp-dip-recovery

http://www.reuters.com/article/2014/05/30/us-funds-poll-global-idUSKBN0EA10S20140530

http://online.wsj.com/articles/emerging-markets-bounce-back-1401301448 (or go tohttp://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/06-02-14_WSJ-Emerging_Markets_Bounce_Back-Footnote_4.pdf)

http://usfinancialcapability.org/downloads/NFCS_2012_Report_Natl_Findings.pdf(Pages 27 and 28)

http://www.finrafoundation.org/web/groups/foundation/@foundation/documents/foundation/p240590.pdf(Pages 2 and 4)

http://www.finrafoundation.org/web/groups/sai/@sai/documents/sai_original_content/p457507.pdf(Page 5)

http://www.brainyquote.com/quotes/quotes/m/mayaangelo120859.html