Solis Wealth Management Report – September 23, 2013

The Markets

We’re going to do it…We’re going to do it…We’re not going to do it…Yet.

Last week, the U.S. Federal Open Market Committee gave stock markets a gift that, on a scale of thrills, might have been on par with Marilyn Monroe singing happy birthday to JFK. On Wednesday, the FOMC announced (without a trace of breathiness):

“Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases. Accordingly, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.”

The ensuing euphoria pushed many of the world’s stock markets higher. The Dow Jones Industrial Average set a new record, Germany’s DAX closed at a new high, and Japan’s Nikkei delivered its best performance in eight weeks. Emerging markets also reaped positive benefits.

The Quantitative Easing or QE-sugar buzz abated when St. Louis Fed President James Bullard told Bloomberg the Fed may decide to begin buying fewer bonds at its next meeting in October. This surprised some as analysts already had predicted it wouldn’t happen until December which caused markets to slump a bit last Friday.

It’s possible that, by mid-October, the Fed’s ‘lather-rinse-repeat’ commentary on quantitative easing may have become background music for another event that has the potential to deliver a macroeconomic jolt: the U.S. congressional debate over the debt ceiling.

Data as of 9/20/13

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

1.3%

19.9%

17.1%

14.4%

7.2%

5.3%

10-year Treasury Note (Yield Only)

2.7

NA

1.8

2.7

3.8

4.2

Gold (per ounce)

2.3

-20.3

-23.3

1.8

8.7

13.4

DJ-UBS Commodity Index -0.8  -7.7

-12.3

-2.5

-6.7

0.8

DJ Equity All REIT TR Index

2.3

6.5

8.4

12.3

7.2

10.2

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.

THERE’S SOME GOOD NEWS AND THERE’S SOME BAD NEWS… The good news is the rate of global gross domestic product (GDP) growth increased during the second quarter, according to The Economist. Greater economic strength in developed countries helped push the world’s GDP 2.4 percent higher during the second quarter of 2013 as compared to the second quarter of 2012. That’s only the third time that has happened in three years. The bad news, according to The Economist, is:

“The world is dangerously dependent on China… Since the beginning of 2010 it alone has contributed over one-third of global GDP growth, with another 40% coming from the rest of the emerging world. Weighed down by debt since the financial crisis, the rich world’s growth has been sclerotic. Excluding America, it has provided just 10% of global growth since 2010; America has contributed another 12.5%.”

China’s GDP has been growing at a pretty fair pace although the rate of growth has slowed. Forbes reported China’s GDP grew at an annualized rate of 7.5 percent during the second quarter of 2013, falling just short of first quarter’s 7.7 percent growth. The slowdown was expected. China is rejiggering its economy in an effort to stimulate domestic demand and consumer spending rather than continuing to rely on investment-driven growth.

Here’s another tidbit to consider. Forty percent of the world’s growth has been attributable to emerging markets (ex-China). Changing expectations for U.S. monetary policy have interrupted the flow of capital into those markets. The Economist’s Capital Freeze Index, which assesses the vulnerability of emerging markets to a freeze in capital inflows, found that nine of 26 emerging countries examined are at relatively high risk of this happening. That has the potential to affect the world’s GDP growth rate, too.

What’s happening at Solis Wealth Management?

Please enjoy this week’s commentary from ~ Greg Solis

This summer ended great!  LPL Financial held its annual conference, Focus 2013, at the San Diego convention center.  I left four days before the conference began for our last summer getaway with the whole family.  We stayed at the Manchester Hyatt and had a great time.  Jack and I woke up really early and surfed every day.  To kick off the conference, LPL Financial invited the band Train to play.  Train happens to be one of our kid’s favorite bands, and of course they worked their way to the front of the arena.  We enjoyed a great concert and had a blast.

We took two cars up to the conference so Monica could get back to the desert a day early with the kids for their first day of school.  All three of the kids are doing well and are excited for the school year.

Jack has entered his freshmen year of high school and he’s off to a really good start.  He is adjusting well to high school and he seems to love it.  Since he’s not involved in any fall sports this year he has been playing a lot of golf after school and on the weekends.  He really enjoys golf and has played in several local tournaments.

Nicole is in her first year of middle school and adjusting very well (which is no surprise; she’s great in new situations).  She is, however incredibly busy with extracurricular activities.  She is doing dance, soccer, and volleyball and she is doing fantastic in all of them.

Emily is also involved with soccer and dance.  Dance is by far Emily’s favorite activity.  She is enrolled in four different dance classes; jazz, ballet, modern, and tap.  Recently she was moved to ballet 2.  She was so excited to be moved up a level and was proud of the fact that she is the youngest one her class. She is so happy and loves the third grade.

Monica and I are very excited to be going to our annual marriage conference called Rendezvous.  The conference is put on by an organization that I am involved with: NationalCenter for Fathering.  This year it will be held at PebbleBeach and we will be staying at the Spanish Bay Inn.  I’ve never been to PebbleBeach , so I am very excited to be going there.  The conference will last three and half days. There are always a lot of great speakers and awesome information to be shared.  It will also be a great little getaway for us without the children.

Other than that, all is well with the family and the business.  I appreciate your trust and confidence and I look forward to seeing you when the weather cools off here in the desert.  God bless. ~Greg

Best regards,

Greg R. Solis, AIF®
President

Solis Wealth Management
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

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.

* 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.

* 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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Sources:

http://www.federalreserve.gov/newsevents/press/monetary/20130918a.htm

http://www.theguardian.com/business/2013/sep/19/world-markets-federal-reserve-stimulus-feelgood-factor

http://www.bloomberg.com/news/2013-09-20/bullard-says-weaker-data-prompted-borderline-fomc-taper-delay.html

http://www.reuters.com/article/2013/09/20/us-usa-fed-poll-economists-idUSBRE98J0UF20130920

http://www.washingtonpost.com/world/asia_pacific/asian-stock-markets-quiet-amid-public-holidays-2-days-after-federal-reserve-fueled-big-rally/2013/09/19/a3036758-21a7-11e3-ad1a-1a919f2ed890_story.html

http://www.economist.com/news/economic-and-financial-indicators/21586611-world-gdp

http://www.forbes.com/sites/simonmontlake/2013/07/14/chinas-2q-gdp-growth-slows-to-7-5/

http://www.economist.com/news/finance-and-economics/21584331-four-worlds-biggest-lenders-must-face-some-nasty-truths-giant-reality-check?zid=306&ah=1b164dbd43b0cb27ba0d4c3b12a5e227

http://blogs.cfainstitute.org/investor/2013/08/26/resources-for-the-asian-currency-crisis-currency-and-capital-flows/