Americans have long relied on standards and averages to help them gauge the performance of everything from intelligence to athletics to the economy. So far, in 2014, American stock markets have been grinding along without making much progress in either direction and that has left many people looking for guidance about what they can expect in the future.
Last week, a writer at Barron’s enlisted Jeremy Siegel, a finance professor at Wharton, to help explore the question by updating data used in a 2009 article. That piece had looked at the performance of the U.S. stock market over 142 years and found “below-average returns over five- and 10-year periods generally are followed by above-average returns in the next five and 10 years.” In the new article, Siegel and his associates looked at rolling five-, 10-, 20-, and 30-year return periods through the end of 2013 and found:
“For the 60 months ended in April, the compounded annual real return was nearly 17 percent, well above the median 7.17 percent for all five-year periods. (Taxes and investment fees aren’t included.) That suggests the next five years could run below the average.
While that might temper bullishness, in the 120-month period ended April, the compounded annual real return was just 5.58 percent, a full percentage point below the 6.64 percent median 10-year annual return for all the periods measured – again, since 1871.”
Despite the mixed signals provided by long-term averages, Siegel told Barron’s“the odds-on bet” is the Dow Jones Industrial Average will hit 18,000 by the end of the year (although there may be corrections along the way). His expectations are interest rates will remain lower than has been suggested and earnings will experience strong growth.
It’s a good idea to take the esteemed professor’s thoughts with a grain of salt. An eight-year study of market pundits found they were right about 47 percent of the time.
|Data as of 5/16/14||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor’s 500 (Domestic Stocks)||-0.2%||1.6%||13.8%||12.2%||15.6%||5.7%|
|10-year Treasury Note (Yield Only)||2.5||NA||1.9||3.2||3.2||4.7|
|Gold (per ounce)||0.8||7.5||-6.5||-4.9||7.0||12.9|
|DJ-UBS Commodity Index||-1.1||7.6||3.3||-5.3||2.5||-0.9|
|DJ Equity All REIT TR Index||1.9||14.9||0.3||11.3||22.6||10.7|
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.
THE MARKET ISN’T THE ONLY THING THAT CAN PUT A HITCH IN YOUR FINANCIAL PLAN’S GIDDY-UP. The overall rate of divorce in the United States trended lower between 2000 and 2011 (the latest dates the Centers for Disease Control has made available). In 2000, there were about four divorces or annulments per 1,000 Americans (total population). By 2011 that rate had fallen slightly to 3.6 per 1,000. As they often do, Baby Boomers bucked the trend. The divorce rate for Americans over age 50 has trended higher. The New York Timeswrote:
“A half-century ago, only 2.8 percent of Americans older than 50 were divorced. By 2000, 11.8 percent were. In 2011, according to theCensus Bureau’s American Community Survey, 15.4 percent were divorced and another 2.1 percent were separated. Some 13.5 percent were widowed.
While divorce rates over all have stabilized and even inched downward, the divorce rate among people 50 and older has doubled since 1990, according to an analysis of census data by professors at Bowling GreenStateUniversity in Bowling Green, Ohio. That’s especially significant because half the married population is older than 50.”
Anytime you experience a significant life change, such as a divorce late in life, it’s important to let us know. We can offer strategies to help compensate for any cash flow disruption and tactics for managing taxes when splitting large assets, such as qualified retirement plans. In addition, we can help with essential (and often forgotten) steps, including reviewing and revising beneficiary designations (on retirement plans, investment accounts, and insurance policies) as well as modifying powers of attorney, named trustees, and other designations. We also can coordinate our efforts with those of your attorney and/or accountant.
Weekly Focus – Think About It
“Good judgment comes from experience, and a lot of that comes from bad judgment.”
—Will Rogers, American humorist and commentator
What’s happening at Solis Wealth Management?
Please enjoy this week’s commentary from ~ Tiffany Valentine, Director of Operations/Associate Wealth Advisor
I think its time to say that summer is officially here! Avery only has 2 more weeks of Kindergarten left before she will officially be a “1st grader”. It’s amazing to see how much the little Kindergarten class has grown since the first day of school. They are all taller, wiser and older looking. I swear Avery started the year as a toddler and has now grown into a beautiful little girl. I’ve been more intentional about pulling out my Nikon to get some great, frame-able pictures of the kids. It’s so easy to get used to using my iPhone and posting pictures on social media, but we hardly ever go back and look at the thousands of photos we’ve taken and shared. I am already out of memory on one hard drive, just from photos and my kids are only 5 ¾ and 3!!
Avery is planning on continuing in level 3 gymnastics through the summer; she’s up to 6 hours a week. I don’t know how she does it, but she absolutely loves every minute of it. Travis is starting to get interested in it now. Whenever Avery starts doing cartwheels and headstands in the living room (which is 80% of the time we are home), Travis will stand next to her with arms held high and announce that he’s ready to do a head stand. He’ll then roll over into a somersault. It’s just about the sweetest thing you’ll ever see.
We are looking forward to a great start to the summer! Avery will be home with her grandma and plans on spending tons of time at the water park, library and museums. Travis is still in daycare so it will be great Grandma-Avery bonding time. Avery and I are planning a special trip out of town on Friday the 30th. It’s a surprise to her, but I’m going to take her to the Queen Mary to see the Princess Diana exhibit. She is absolutely obsessed with Princess Kate and all things princess, so I’m pretty sure it will be a great time for the both of us.
Travis is still a total cuddle bug and I can’t get enough of it! He definitely speaks up for himself now, but he and Avery play together so well. I’m pretty sure he grew an inch overnight, judging by how all his clothes are starting to look a little smaller. His favorite things to do are play with his construction and trash trucks and race his cars around the house. When he and Avery play, it usually consists of him crashing into her Barbie’s and pretending to be the monster while she plays the princess in distress. I don’t interrupt when they play but do try to peek in and just watch them now and then because it’s just precious.
We are praying for all of you in the San Diego area as you are dealing with a rough fire season so far!! I hope everyone is staying safe, wherever you are. Have a great summer and remember we are here for you anytime! ~Tiffany
Greg R. Solis, AIF®
78-075 Main Street
La Quinta, CA 92253
Office: (760) 771-3339
Fax: (760) 771-3181
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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.
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http://online.barrons.com/news/articles/SB50001424053111903301904579566851681930782?mod=BOL_hp_we_columns (or go tohttp://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/05-19-14_Barrons-Stocks_End_Flat_After_Setting_New_Highs-Footnote_1.pdf)
http://www.cdc.gov/nchs/nvss/marriage_divorce_tables.htm (scroll down to the 2nd table on the page)