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Tax increases. President Obama has said hed like to see taxes rise for couples earning more than $250,000 a year. Also, tax rates on dividends and capital gains may rise. Of course, these wont happen unless Congress passes them. Tax breaks. Both sides seem to agree that certain tax breaks and loopholes will have to go as part of any compromise. And, while this might avoid raising tax rates, it would mean a tax increase for those affected. Entitlement reform. Any grand bargain on the deficit will likely mean changes to Social Security and Medicare. In other words, we could see Democrats agreeing to reductions in benefits in exchange for Republicans agreeing to tax increases or closing tax loopholes. Easy money. With the Presidents reelection, Federal Reserve policy is likely to remain easy. This could mean more rounds of quantitative easing and continued low interest rates.
The economic issues facing our country are serious and the folks in Washington know it. They also realize it will take compromise to get things done. As CNN said, Both sides agree the best outcome would be a broad deal addressing the overall need for deficit reduction, including reforms to the tax system and entitlement programs such as Social Security, Medicare, and Medicaid. Lets hope our politicians put politics aside and do whats best for our country to get us growing strongly on the road to economic prosperity.
Aside from the pressing issues, is there a reason for optimism on the economy? Yes. According to Bloomberg, The median prediction of 37 economists surveyed by Blue Chip Economic Indicators is that during the next four years, economic growth will gather momentum as jobless people return to work and unused machinery is put back into service. Bloomberg also pointed out the following positive indicators: Banks have strengthened their balance sheets. Most households, which borrowed too much during the housing bubble, have pared their debt back to normal levels through a combination of frugality and default. Upper-income households balance sheets are in good shape, although mortgage debt remains a heavy burden at lower-income levels, says Mark Zandi, chief economist of forecaster Moodys Analytics as quoted by Bloomberg. Housing prices have gone from falling to rising, buoying confidence. Increased consumer spending should induce more business investment in a virtuous circle. Theres pent-up demand for residential and commercial construction.
Stepping outside the U.S., we still have major economic and budget issues in Europe, China is going through a once in a decade leadership change while its economy slows down, and the Middle East, as always, is a wildcard. As you can see, we have a lot on our plate to monitor! And, as your advisor, were doing our best to keep you well positioned to benefit no matter what Washington throws at us.
Data as of 11/9/12 Standard & Poor's 500 (Domestic Stocks) DJ Global ex US (Foreign Stocks) 10-year Treasury Note (Yield Only) Gold (per ounce) DJ-UBS Commodity Index DJ Equity All REIT TR Index 1-Week -2.4% -1.9 1.6 3.2 0.3 -2.0 Y-T-D 9.7% 6.8 N/A 10.4 0.1 14.4 1-Year 12.3% 3.1 2.0 -2.6 -5.3 20.3 3-Year 8.1% -0.3 3.5 16.2 1.8 19.6 5-Year -1.0% -6.8 4.2 15.9 -5.3 3.6 10-Year 4.7% 7.1 3.9 18.4 3.2 11.7
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 10year 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, Barrons, 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.
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* This newsletter was prepared by Peak Advisor Alliance. * 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. Precious metal investing is subject to substantial fluctuation and potential for loss. * 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. * To unsubscribe from the Patty Loris Weekly Commentary please reply to this e-mail with Unsubscribe in the subject line. Compliance Number:
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