What Does the Market Decline Mean for You?

February 7, 2018

Market drops are scary, especially when they come day after day. The decline on Monday, February 5, was particularly bad. In fact, it has been billed as the largest point drop ever for the Dow Jones Industrial Average. Looking at that, it’s normal to think that the stock market is in a downward spiral. History shows, however, that this is often not the case. Although declines like we have seen in the past week are not fun, they generally are not reason to panic.

Putting the decline in context

Let’s look at this more closely. February 5 was a bad day; the last time we had a day like that was in 2011, about seven years ago. This tells us two things about how we should react. First, this was an unusual event, so we should be paying attention. Before we get to the second, though, answer this: Do you remember when the market had that bad day in 2011? Has it affected your life since then? The answer for almost everyone is no, which tells us the second thing—that bad market days don’t really matter over time. What matters is how markets perform over the long term. If you ignored that bad day, and forgot about it, you probably ended up doing quite well.

Here’s something else to consider. This market drop has taken us back to the levels of late November 2017. So, the drop, in fact, doesn’t look all that bad. We are still near all-time highs. And we are still above the long-term trend lines that support further market gains. In other words, from a market perspective, we are still in good shape.

This is possible because the economic fundamentals remain very strong. Consumer and business confidence are high, hiring and investment continue, and economic growth appears more likely to accelerate than to slow. Corporate earnings are growing rapidly, and expectations are getting better, not worse. The factors that have driven the market to all-time highs are still there, ready to support it despite the recent declines.

So, what is driving the market down? In short, a break in confidence. Perhaps investors started to worry when interest rates moved up at the end of January. Or maybe they are growing more concerned about the pending debt ceiling debate. Whatever the reason, they became less confident—and decided to sell. The question now is whether that loss of confidence will hold or not.

The strong economic fundamentals suggest that confidence will come back—and with it, so will stock valuations. We saw the same situation in early 2016, the last time the market declined significantly, when confidence faded and then returned—and with it, so did the stock market. We have seen this movie before, and it had a happy ending.

Keep your focus on the long term

Happy endings aside, we could certainly see a further decline from here. These confidence-led declines tend to be sharp, so more downward moves are possible and even likely. They also tend to be short, however, burning themselves out relatively quickly.

The biggest risk for most investors is panicking over short-term volatility. If you had sold on that bad day in 2011—the one you don’t remember today—you would have missed out on years of gains. Short-term pain is, unfortunately, the price we pay for long-term gains.

None of which is to minimize how real that short-term pain is, of course. We all feel it. The right solution, though, is to understand where that pain comes from—and do our best to ignore it. That way, we can remain focused on maintaining a well-diversified portfolio aligned with our long-term financial goals.

Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results.

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Authored by Brad McMillan, managing principal, chief investment officer, at Commonwealth Financial Network®.

© 2018 Commonwealth Financial Network®

Should you Pay Off Your Mortgage?

October 27, 2017

After years of dutiful payments, you find yourself in the enviable position of having enough accumulated savings or discretionary income that you could aggressively pay down—or completely pay off—your mortgage. But should you? Are there better ways to ensure your financial security?

Making the best choice for you
Paying down your mortgage faster—or paying it off in a lump sum—seems like a no-brainer. For most Americans, a mortgage represents both the highest monthly expense and the largest liability on a net-worth statement. Intuition tells us that debt is bad, and being out of debt is akin to increased financial security.

While it’s true that you can save thousands of dollars in interest by paying off the loan early, the interest rates for fixed-rate mortgages are historically low, and your mortgage interest is tax deductible. Depending on your circumstances, there may be better ways to use that extra money to boost your short- and long-term financial security.

With that in mind, here are some questions to consider before you aggressively pay down—or pay off—your mortgage:

  • Do you have higher interest or nondeductible debt? If so, it makes sense to pay that off before paying down your mortgage. Credit card debt in particular should be a priority, as it has very high interest rates, and the interest is not tax-deductible the way mortgage interest is.
  • Are you already maximizing the employer match on your 401(k) and your annual contributions to IRAs? If not, you may want to prioritize this over paying down your mortgage. An employer match is essentially free money, and qualified retirement accounts grow tax deferred (or generally tax free for Roth IRAs). These are critical opportunities to boost your retirement savings, and because there are annual limits to how much you can contribute, money you don’t invest now is a lost opportunity.
  • How is your emergency fund? It is generally recommended that you keep between three and six months of household expenses set aside for emergencies. You’ll sleep better at night knowing you have liquid assets if you need them. If your emergency fund is light, it’s probably wise to build it up before reducing your mortgage.
  • How is your health insurance coverage? Whether it’s life, medical, disability, or long-term care, your financial security could be undermined if you’re not properly insured. The type or amount of insurance that’s right for you comes down to your comfort in managing risk, but addressing potential shortfalls in coverage might be a higher priority than paying down your mortgage.
  • Do you have children? If you have kids, putting extra money into a college savings plan now will allow you to maximize tax-deferred savings and growth. You could even be eligible for a state tax deduction for your contributions, depending on where you live and the plan you choose.

While paying down—or paying off—your mortgage early is a worthy goal, it is important to align it strategically with other goals and within the bigger picture of your long-term financial security. If you have questions, we are happy to assist you in planning for these important decisions.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

© 2017 Commonwealth Financial Network®

Market Update for the Quarter Ending June 30, 2017

July 10, 2017

Mixed returns in June cap strong second quarter

U.S. markets led the way in June. Large-cap equities did well even as technology stocks ran into turbulence. The Dow Jones Industrial Average and S&P 500 Index posted solid gains of 1.74 percent and 0.62 percent, respectively. But the Nasdaq suffered from weakness in technology and finished the month down 0.87 percent.

Quarterly results were better. The S&P 500 was up 3.09 percent, and the Dow gained 3.95 percent. Despite its slight pullback in June, the Nasdaq did best, climbing 4.16 percent. Year-to-date, the Dow and S&P 500 have risen a strong 9.34 percent and 9.35 percent, and the Nasdaq has gained an impressive 14.71 percent. The three indices remain strong on a technical basis as well. All remained above their 200-day moving averages for the quarter, ending the first half of 2017 near all-time highs.

Earnings growth continues to support the stock market. After strong earnings growth in the first quarter, the second quarter looks good, too. According to FactSet, as of June 30, the S&P 500’s estimated earnings growth rate for the second quarter is 6.6 percent. This figure is slightly lower than the number anticipated at the end of the first quarter but may be good enough to drive stocks higher. Analysts expect nine sectors to show earnings growth.

International equity markets experienced a similar month and quarter. The MSCI EAFE Index, which represents the stocks of developed markets, declined 0.18 percent in June. But it managed a total return of 6.12 percent for the quarter. The MSCI Emerging Markets Index fared better, posting a 1.07-percent return for the month and a 6.38-percent gain for the quarter. Year-to-date, the EAFE is up 13.81 percent, and emerging markets have soared 18.60 percent. Technicals have been healthy for the two major international indices as well. Both remained above their trend lines for the month and quarter.

The renewed earnings growth and a supportive economic environment have driven the strong market performance year-to-date. The current synchronized global economic expansion is the first since the financial crisis, and it should continue to support faster growth.

Results for fixed income markets were mixed. The Federal Reserve (Fed) interest rate increase—though expected—forced market adjustments. The Bloomberg Barclays Aggregate Bond Index declined 0.10 percent in June, as the rate on the 10-year Treasury rose from 2.21 percent at the beginning of June to 2.31 percent by month-end. Longer-term results were better. The index returned 1.45 percent for the second quarter and is up 2.27 percent year-to-date.

The Bloomberg Barclays U.S. Corporate High Yield Index performed better for the month, gaining 0.14 percent in June and 2.17 percent for the quarter. The high-yield market remains popular; spreads are near post-recession lows, supporting returns. Default rates are still below historical average levels.

Economic data supports growth

First-quarter gross domestic product growth (GDP) was stronger than the initial estimate. The figure was revised upward, to 1.4 percent, which is double the original 0.7-percent estimated rate.

Positive revisions to consumer consumption numbers were the major drivers of the improved GDP rate. Consumption rose from an initial estimate of 0.3-percent growth to a robust 1.1-percent increase. The revisions, as well as the recent trend of weak first quarters to be followed by stronger subsequent quarters, represent a good start to the year.

Second-quarter data is also looking positive. Consumer income and spending rose 0.4 percent in April, and the figures for March were revised upward. Solid job and wage growth engendered the good results.

Data toward the end of June was less positive. Income growth has been strong, but spending growth has declined to 0.1 percent. This is actually better than it looks. The drop was due to lower gas prices—an overall positive—and moderating auto sales, which is a continued adjustment down from very strong previous sales levels. Combined with the decline in inflation, these factors seem to indicate that the decrease in spending may not be a concern yet.

The May jobs report was also weak, with only 138,000 jobs created. This figure was well below expectations, although the unemployment rate fell to its lowest level in 16 years. The slowing pace of job growth may be due to a lack of qualified job seekers, not a lack of jobs. Indicators point to job growth picking up; so, again, this situation is not yet a concern.

Despite some weak data, the Fed remains positive about the outlook for the economy. It raised the federal funds rate 25 basis points at its June meeting. The increase was anticipated and largely interpreted as a sign of continued confidence.

Housing rebounds following a weak April

Perhaps the most encouraging data for the quarter came from the housing sector. Some results for May were stronger-than-expected and offset a slight slowdown in April. Existing home sales in May were up 1.1 percent, though analysts had forecast a decline. New home sales also increased by more than expected for the month. The upticks were notable given the low level of supply on the market—existing housing stock is at its lowest level since 1982. Supply is expected to remain tight.

Home builder confidence dropped unexpectedly in May, as did housing starts and building permits. These declines were of some concern—especially given the low levels of housing supply. They could indicate that building costs are increasing.

Healthy demand drove the strength in housing. The S&P/Case-Shiller U.S. National Home Price Index showed that home prices had surpassed pre-recession highs (see Figure 1). Sales have continued to increase despite all-time highs in prices. This signals that many consumers are confident enough in the economy to make a long-term investment.

Figure 1. S&P Case-Shiller U.S. National Home Price Index, 2000−2017

Business and consumer sentiment still strong

The largely positive hard data reported in June was bolstered by continued strength in business and consumer sentiment. Business confidence remained high in May. This was reflected in the surprise increase in the ISM Manufacturing Index, which analysts had expected to remain flat.

Core durable goods orders, which are a proxy for business confidence, increased slightly during May. And although the ISM Non-Manufacturing Index was down for the same period, this measure is still in healthy expansionary territory.

Consumer confidence is still high, despite a small pullback in some surveys in June. The Conference Board Consumer Confidence Survey declined slightly, yet its three-month average is at the highest level since 2001. The high levels of confidence are providing a solid tailwind for continued growth.

Political risks remain

As has been the case for much of the year, politics continue to add uncertainty to the markets. The major domestic concern has been the Republican effort to reform heath care. To add to the uncertainty, the fate of wide-ranging tax reform is partially tied to the success of the administration’s health care efforts. Republican lawmakers are looking to use savings from health care reform to offset potential revenue losses from corporate and personal tax cuts. At this point, expectations are low, so the downside risk is probably low as well. There may be some upside potential if Congress is able to move forward.

Internationally, political risks remain. But given the better-than-expected results from recent European elections, these seem less pressing than earlier in the year. Progress has been made in dealing with economic issues. For example, the Italian banking system has started to resolve some of its problems. Market volatility could still arise from upcoming Italian election results and a worsening of the situation with North Korea.

Strong first half is a good sign for the rest of 2017

Risks remain and there have been signs of slowing growth, but the outlook for the U.S. economy is positive. High levels of confidence combined with increasing income and spending bode well for second-half growth. And, as growth speeds up in the rest of the world, the U.S. should benefit.

The positive outlook notwithstanding, we are bound to see volatility in the short and intermediate terms. A well-balanced portfolio designed to match objectives and hedge against the inevitability of less positive conditions in the future remains the best means to achieve financial goals.

All information according to Bloomberg, unless stated otherwise.

Disclosure: Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg Barclays government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg Barclays U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.

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 Authored by Brad McMillan, senior vice president, chief investment officer, and Sam Millette, fixed income analyst, at Commonwealth Financial Network®.

© 2017 Commonwealth Financial Network®

Market Update for the Month Ending January 31, 2017

February 8, 2017

Markets rally into January

January was a great month for global financial markets. Domestically, the Dow Jones Industrial Average, S&P 500 Index, and Nasdaq were all up, gaining 0.62 percent, 1.90 percent, and 4.35 percent, respectively.

Fundamentals were also strong. Per FactSet, with 34 percent of companies in the S&P 500 having reported earnings, the blended average growth rate for the fourth quarter of 2016 was 4.2 percent, up from 3.1-percent rate forecast on December 31.

Technical factors for all three U.S. indices were also supportive in January, remaining above their respective 200-day moving averages for the month.

International markets had a strong January as well. The MSCI EAFE Index notched a gain of 2.90 percent while the MSCI Emerging Markets Index climbed 5.48 percent. Technical factors were healthy for both indices, as they stayed above their trend lines throughout the month.

Fixed income was volatile in January, with interest rates fluctuating on concerns about faster growth and rising inflation. At month-end, however, rates were stable, and the Bloomberg Barclays Aggregate Bond Index posted a slight gain of 0.20 percent. U.S. high-yield corporate bonds fared better, as the Bloomberg Barclays U.S. Corporate High Yield Index rose 1.45 percent.

Economic fundamentals improve but at a slower pace

The news was also good for the economy, with fundamentals continuing improve, albeit at a slower pace. Perhaps the most evident example of this slowdown was the first estimate of gross domestic product (GDP) growth for the fourth quarter of 2016; at 1.9 percent, it was below expectations.

Even with lower-than-expected GDP growth, business and consumer expectations were at elevated levels. The ISM Manufacturing and Non-Manufacturing indices beat expectations for December and were in healthy, expansionary territory. Consumer confidence fell slightly in January from December’s 16-year high but remained very strong.

Also on the manufacturing side, industrial production increased at year-end, surpassing expectations for growth in December. Manufacturing output and core durable goods orders showed modest growth, too, despite the ongoing strength of the U.S. dollar. Additionally, improving trends internationally suggest that this growth could continue.

Jobs were another area where growth moderated, as the economy added 156,000 jobs in December (see Figure 1). Though this number was below expectations, positive revisions to previous months offset some of the shortfall. Wage growth of 2.9 percent year-over-year was at its highest level since 2008.

Figure 1. Change in Total Nonfarm Employment, 2007−2016

Headline retail sales rose 0.6 percent in December, below expectations but a healthy rebound from November’s slower growth. Unfortunately, core retail sales, excluding autos and gas, were flat for December.

Housing stayed strong but also slowed in January, pulling back slightly from previous highs. Existing and new home sales declined more than expected, but homebuilder confidence was near historic highs, as housing permits and starts increased more than expected.

Inflation and the Federal Reserve

The headline and core consumer price indices advanced in January, with the former showing a 2.1-percent year-over-year increase and the latter increasing to 2.2-percent year-over-year growth. With inflation above the Federal Reserve’s target and employment healthy, future rate increases remain likely.

Policy risks move back to center stage

Although economic fundamentals are strong, risks remain, especially in politics and trade. Much of the increase in confidence for the past two months was based on expectations of business-friendly policies from the new administration and Congress, but concerns have resurfaced in recent weeks.

Political uncertainty versus economic strength

Although U.S. growth may have slowed, high levels of consumer and business confidence should keep it going and may accelerate it. International growth also appears to be accelerating, which should help.

It remains to be seen how the U.S. will engage with the world in the coming months, but the continuing growth of the global economy and the return of corporate earnings growth indicate that prospects are encouraging despite risks. A well-diversified portfolio, with a time horizon that meets investment goals, can provide the best opportunity to attain financial objectives.

All information according to Bloomberg, unless stated otherwise.
 Disclosure: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg Barclays government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg Barclays U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.

The Trump Era: What Happens Now? Posted by Brad McMillan

November 18, 2016

Here is a recent post from Commonwealth’s Chief Investment Officer, Brad McMillan.

The Trump Era: What Happens Now? 

Market Update – Month Ending October 31, 2016

November 15, 2016

Presented by Kathy Hamm, Barry Ransick and Jereme Ransick

October held tricks and treats for financial markets

Equity markets around the world had a tricky October. The Dow Jones Industrial Average posted a loss of 0.79 percent for the month while the Nasdaq and S&P 500 indices were down 2.27 percent and 1.82 percent, respectively. All three spent most of the month in the red, as concerns about weak economic news and the upcoming presidential election weighed on returns.

Despite the trick in returns, a treat came in the form of better corporate earnings, where both expectations and results for the third quarter of 2016 have improved substantially. As of the end of October, with 58 percent of S&P 500 companies having reported earnings, the blended third-quarter earnings growth rate was 1.6 percent, up from the 1.7-percent decline expected at the start of the period.

If we do see earnings growth for the quarter, it will be the first year-over-year growth in earnings since the first quarter of 2015. Because the growth reported thus far has been widespread─with all 11 S&P 500 sectors reporting higher growth rates than expected─it seems quite possible that we will end up with earnings growth. This would help support U.S. equity markets going forward.

October’s market declines notwithstanding, technical trends remained positive for the major U.S. indices. All three were comfortably above their respective 200-day moving averages, signaling healthy technical support.

Developed international markets also had a tricky October. The MSCI EAFE Index was down 2.05 percent on concerns about the rocky path leading to a recently ratified trade deal between Canada and the European Union. But, again, technical trends stayed positive, as the index spent the entire month above its 200-day moving average, suggesting that the longer-term outlook continues to be positive.

Emerging markets, as represented by the MSCI Emerging Markets Index, ended October up 0.25 percent. Technicals were strong, as the index was above its 200-day moving average for the month.

The U.S. fixed income sector had a difficult October, with the Barclays Capital Aggregate Bond Index posting a 0.76-percent loss. Much of the weakness can be attributed to an increase in interest rates, as the 10-year Treasury yield rose from 1.60 percent at the end of September to 1.84 percent at the end of October, matching highs last seen in May. The increase was due to rising expectations of an interest rate hike by the Federal Reserve (Fed) at its December FOMC meeting.

U.S. corporate high-yield bonds─less correlated to interest rate changes than fixed income offerings─performed better in October. The Barclays Capital U.S. Corporate High Yield Index finished the month with a gain of 0.39 percent. Performance was again driven by spreads on high-yield bonds, which tightened to their lowest levels in more than a year as confidence in corporate credit remained high.

Economic data recovers from slowdown

The economic data released in October held more treats than tricks, as the economy continued to reverse the slowdown of earlier months. Employment growth was strong, with a healthy 167,000 jobs added in September, and both hours worked and wages increased. Average hourly earnings growth continued an uptrend, as illustrated in Figure 1, moving toward a post-recession high.

Figure 1. Average Hourly Earnings, 2008−2016

monthly-market-update

Despite the positive employment and income news, consumer confidence dropped somewhat, although it remained at reasonably healthy levels. Interestingly, the decline was due in large part to a downturn in how consumers felt about present conditions, which may have been associated with the election campaign, as longer-term expectations continued steady. This metric will be worth watching next month.

Although consumer confidence moderated, business confidence increased. Both the ISM Manufacturing and Non-Manufacturing indices rebounded in October, with the manufacturing index returning to expansionary territory and the non-manufacturing index hitting an annual high. These results indicate that the previous declines may have been temporary blips rather than signals of a sustained slowdown.

Even though much of the economic data reported in October was good, there were a few tricks. Durable goods orders declined slightly, indicating that businesses may be postponing large purchases, possibly due to the uncertainty around the U.S. presidential election. Housing also retreated a bit, with a slowdown in starts and new home sales; however, confidence remained strong, as existing home sales increased. Here, again, the end of election season could provide more clarity and lead to faster investment and construction growth.

Gross domestic product (GDP) growth exceeded expectations

The first estimate of third-quarter GDP growth was a treat, at 2.9 percent, well above expectations and more than double the growth seen in the second quarter. This solid number shows that the economic recovery is continuing despite the slowdown earlier in the year.

The report’s details, however, did include some tricks, as a large portion of GDP growth was driven by increases in exports and inventories. The export growth shows that the headwinds caused by the strong U.S. dollar may be passing, and the inventory uptick may help offset the five straight quarters of declines that had dragged growth down. That’s good news. But the trick may be that these are exceptional events and not guaranteed to continue. Nevertheless, at minimum, these trends should no longer slow growth.

Most risks are now political

With international risks still restrained during October, the U.S. election took center stage. Although many polls and betting markets favor a Clinton presidency, changes to that expectation have the potential to increase political and economic uncertainty, perhaps creating volatility in the financial markets. For example, the recent announcement that the FBI is investigating e-mails related to a high-level Clinton staffer caused a major swing in global equity and foreign exchange markets toward month-end, and we may see more swings like that.

Apart from the election, the Fed has created uncertainty around whether it will raise interest rates in December. Although the market expects it to do so, the FOMC has cautioned that any rate hike would depend on economic conditions; a failure to hike rates when expected could rattle markets.

Short-term volatility likely, but fundamentals look good

Heading into year-end, with investors uncertain about the election and the Fed, market volatility is possible. That said, positive economic news combined with the return of earnings growth should help bolster markets. As always, even though short-term swings can be worrying, a well-diversified portfolio matched with a long-term perspective continues to offer the best path to reaching financial goals, despite any setbacks along the way.

All information according to Bloomberg, unless stated otherwise.

Disclosure: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Barclays Capital Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Barclays Capital government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Barclays Capital U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.

Authored by Brad McMillan, senior vice president, chief investment officer, and Sam Millette, investment research associate, at Commonwealth Financial Network®.

© 2016 Commonwealth Financial Network®

A Financial Checklist You Can Handle

August 30, 2016

A Financial Checklist You Can Handle

With the end of 2016 rapidly approaching, you may be setting goals and resolutions for the New Year. Starting fresh is always a great feeling, but the scale of what we set out to accomplish sometimes becomes overwhelming as the year progresses. The question is, how can you stay motivated to meet your financial goals in the coming year?

Financial tips for every month

For many people, checking off items on a long list of to-dos brings a great sense of satisfaction. To help you keep moving toward your goals, we’ve created a month-by-month checklist of some key financial tasks to consider throughout the year. You might even find that you’ve completed some of these items already!

January

  • Establish a will or trust with an estate attorney. Although many people avoid thinking about estate planning, getting your affairs in order is one of the greatest gifts you can give your loved ones. If you’ve already established a will or a trust, sit down and review the documents with your attorney, making any necessary changes.
  • Create a budget. Establishing a monthly plan for spending and saving is an excellent way to help keep your finances in check, whether you’re reevaluating your financial life or just trying to maintain good habits.
  • Get ahead on your mortgage. If you can swing it, consider making a full extra payment toward your mortgage principal, which may help shorten the length of your loan.

February

  • Review life, home, and auto insurance. It’s a good idea to check your coverage regularly. Have you experienced a major life event in the past year, such as a marriage or birth? Any significant changes in your personal life may require you to reevaluate your coverage.
  • Revisit beneficiary designations for life insurance/retirement accounts. Do you need to add a new beneficiary or change a designation? Review your accounts to ensure that the correct people are listed.

March

  • Check your investment portfolio allocations and current holdings. As your financial advisor, we monitor your investment portfolio and holdings regularly. Nonetheless, you should be aware of where and how your assets are invested.
  • Explore loans, grants, and other sources of financial aid. There are many ways to finance college and postgraduate education expenses. If you have a college-bound child, it’s wise to get an early start researching the options available to you. The government-sponsored website http://studentaid.ed.gov is a great place to begin.

April

  • Review your online social security statement. Check your benefits information and earning record, and update any outdated personal information, such as your address or phone number.

May

  • Review 401(k), IRA, and SEP plans. No matter your retirement goals, keeping an eye on your balances and making regular contributions is essential. Depending on your circumstances, consider increasing the amount you contribute. (Retirement planning is equally important for self-employed individuals, who can take advantage of many of the same savings vehicles.) We encourage you to meet with us to discuss the investment allocations in your 401(k) or other plan.

June

  • Check your credit report. Request your free credit report at annualcreditreport.com and review it carefully for mistakes or suspicious charges, which could be a sign of identity theft.
  • Shred old documents. Any financial documents that you no longer need, such as bank and investment statements, should be destroyed to ensure that they don’t fall into the wrong hands.

July

  • Research 529 savings plans. Withdrawals from 529 plans are tax-free when used for qualified higher education expenses, making them an excellent way to save for a child or grandchild’s schooling.

August

  • Review online accounts. Take a look at the usernames and passwords you currently use for your online accounts. If the passwords are too basic or if you’ve held onto them for too long, consider changing them as a security precaution.

September

  • Assess your overall investment goals and strategy. It’s wise to reevaluate your financial goals every year, especially if you’ve had any major changes or unexpected events in your life. We can discuss your situation and help you adjust your financial plan accordingly.
  • Revisit your budget. Look back at the plan you made in January and decide whether to adjust your budget or stick to your current strategy.

October

  • Contact your CPA for year-end tax planning. Before tax season hits, it’s a good idea to speak with a certified accountant about changes in your personal circumstances, expiring tax breaks, and so on.
  • Consider charitable giving. Donating to charity at year-end is a popular way to do good while reaping potential tax deductions. Charitable giving may be another item you wish to discuss with your CPA.

November

  • Review the balance in your flexible spending account (FSA). FSAs require special attention so that you don’t lose unused funds at year-end. Under a new law, employers may allow employees to roll over $500 in FSA funds to the next year. Be sure to check the rules of your FSA plan and review your available balance.

December

  • Consider refinancing high-interest debt. Consolidating your mortgage, credit card, or car loan payments can make your financial life more efficient (and possibly lower your overall interest rate).
  • Pay off credit card balances every month. For the New Year, make a resolution to pay off your credit card balances every month, if you’re not doing so already.

Milestone events

In addition to the monthly tasks outlined here, keep these significant planning milestones in mind as you near retirement age:

  • Age 50: Consider making catch-up contributions to IRAs and qualified retirement plans.
  • Age 55: You can take distributions from 401(k) plans without penalty if retired.
  • Age 59½: You can take distributions from IRAs without penalty.
  • Ages 62–70: You can apply for social security benefits.
  • Age 65: You become eligible for Medicare.
  • Age 70½: You must begin taking required minimum distributions from IRAs, 401(k)s, and 403(b)s.

Although this may seem like a lot of information to take in at once, glancing at the checklist each month and being ready for important retirement-related dates can greatly improve your sense of financial security, granting you confidence in 2017—and beyond.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.

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© 2016 Commonwealth Financial Network®

Quarterly Market Update

July 6, 2016

Market Update for the Quarter Ending June 30, 2016

Presented by Kathy Hamm, Barry Ransick and Jereme Ransick

Markets down but not out

Despite a dramatic pullback on the unexpected vote by Britain to exit the European Union, U.S. markets rallied at month-end. The S&P 500 Index ended June up 0.26 percent. The Dow Jones Industrial Average performed slightly better, gaining 0.95 percent, while the Nasdaq underperformed, losing 2.06 percent for the month.

For the quarter, results were similar. The S&P 500 led the way with a gain of 2.46 percent, the Dow was up 2.07 percent, and the Nasdaq lost 0.23 percent. All three indices were positive for the period until the sharp drop following the surprising Brexit vote in late June.

A decline in expected corporate earnings also weighed on market performance. Per FactSet, the estimated earnings drop for the second quarter is 5.2 percent, down from a March 31 estimate for a 2.8-percent decline. Moreover, expectations for a further decline are widespread.

Technical factors also weakened in June. All three indices dipped below their 200-day moving averages, though only the Nasdaq ended the quarter below this level.

Developed international markets fared worse than U.S. markets for the month and quarter. The MSCI EAFE Index of developed markets around the world was down 3.36 percent in June and 1.46 percent for the quarter. Technical factors were also weak, as the index fell below its 200-day moving average at June’s end.

The MSCI Emerging Markets Index performed significantly better than the EAFE, gaining 4.10 percent in June and a smaller 0.80 percent for the quarter. Technical factors remained positive.

The broad fixed income markets had a strong month and quarter. The Barclays Capital Aggregate Bond Index rose 1.80 percent in June and 2.21 percent for the quarter. The Barclays Capital U.S. Corporate High Yield Index also performed well, up 0.92 percent and 5.52 percent for the month and quarter, respectively.

U.S. economic news continues to support growth

Domestic economic news for the quarter was mostly positive, with strength in housing and consumer data offsetting a worrying drop in job creation. Also positive was the upward revision of first-quarter gross domestic product (GDP) growth to 1.1 percent.

Despite a disappointing May jobs report, consumer confidence increased to the highest level since last October (see Figure 1) and personal spending continued to increase, up 0.2 percent in May with an upward revision for April to a gain of 0.5 percent.

Figure 1. Conference Board Consumer Confidence, 2006–2016

Consumer Confidence

Housing also supported the economy during the quarter. Existing home sales increased from 5.33 million to 5.53 million in May, higher than initial estimates. Additionally, the 2.4-percent year-over-year increase in pending home sales in May indicates continued growth in the sector.

International risks continue to drive global markets

Negative headlines around the world moved markets during the quarter, with the Brexit vote in particular roiling equity markets at the end of June. Although the referendum result increased uncertainty, its long-term impact on the U.S. economy will likely be minimal.

Looking toward Asia, China’s growth has continued to disappoint. To counter the slowdown, China has been devaluing the yuan, leading to that currency’s lowest level against the U.S. dollar since December 2010.

More U.S. growth and international risk

We end the quarter in a similar position to where we started. U.S. growth continues, with some concerns and risks. International political and economic risks still ebb and flow.

At the same time, we have made progress. Consumer confidence and spending are on the upswing, we survived the Brexit vote without serious damage, and economic headwinds continue to abate. The U.S. economy leads the developed world, and U.S. markets are still attractive to global investors. Though international markets look risky, as we have just seen, even real risks won’t necessarily derail the recovery. As always, we continue to recommend a well-diversified portfolio; it is the best path for arriving at a long-term financial destination despite short-term uncertainty.

All information according to Bloomberg, unless stated otherwise.

Disclosure: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Barclays Capital Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Barclays Capital government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Barclays Capital U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.

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Co-authored by Brad McMillan, senior vice president, chief investment officer, and Sam Millette, investment research associate, at Commonwealth Financial Network.

© 2016 Commonwealth Financial Network®

2016 Midyear Update: Second Half to Bring Repeat Performance?

June 13, 2016

Presented by Kathy Hamm, Barry Ransick & Jereme Ransick

It has been an exciting year so far. With U.S. markets dropping 15 percent in the first quarter before rebounding, and many international markets having done worse, the red flag has been raised for market risks. With Europe continuing to wrestle with economic and political challenges, the prospect of a breakup of the union via a British exit (aka Brexit) has never been more real. And with Chinese growth continuing below expectations, we see risk everywhere we look.

At the same time, there is lots of good news. U.S. hiring continues at a strong pace, despite recent weakness. European growth continues positive, and the European Central Bank is finally fully committed to helping that growth along. The Chinese government has always had the resources, but recently it has also found the will to support its own economy again.

For the remainder of 2016, we may see neither boom nor collapse, just more of the same back-and-forth slow growth of the past two years. There could, however, be moments of exhilaration, moments of depression, and moments of sheer panic. Let’s take a look at where we are now and then look toward the future to see what some of those moments may look like.

Where we are now

Growth in the first quarter was anemic. The slowdown from the last quarter of 2015 continued, driven by continued weakness in oil prices, which hurt business investment; slow wage growth, which affected consumer spending growth; and general uncertainty, driven by troubles in Europe and Asia.

There are signs the slowdown is ending, however. The service sector remains in positive territory, after several months of weakness. The manufacturing sector has moved back into the positive zone after months in contraction. Europe and Asia have continued to grow, despite the uncertainties there. And even wage growth continues to trend up. Although it’s been a first half primarily characterized by slow growth, the second half is looking somewhat better.

Corporate America is showing the same trends. After suffering from a meltdown in the energy sector and a collapse in export growth due to the strong dollar, company earnings expectations were cut by the greatest amount since the financial crisis. The fact is, though, that even as earnings estimates have been cut, both of the negative macro trends have reversed. In addition, many companies have been doing their best to cut costs and become more competitive. With improvements both in general conditions (as oil prices rise and the dollar sinks) and in company competitiveness, the chances of profits beating these depressed expectations are better than is generally expected. We might not actually return to growth in the second half of the year, but we can see it coming.

Overall, the second half of 2016 has the potential to be one of economic growth here in the U.S. and around the world, based on a combination of organic growth in employment, demand, and global central bank stimulus. With that said, there are risks that could derail the recovery.

What are the risk factors?

The U.S. election is certainly one risk factor, as there is more uncertainty than we have ever seen from a policy perspective. But the biggest risks are international—with the potential for real shocks that could shake the U.S.

The U.S. election. In this election season, most of the press attention has been on the candidates. But it’s the policies that really matter. With investors waiting for more certainty around policy outcomes, and businesses doing the same, the potential for the election to cause slower economic growth and market tremors is very real.

Brexit. Just as in the U.S., the political uncertainty in Europe continues to rise. Although the U.K.’s June referendum on leaving the EU may rattle markets, significant disruption in 2016 is unlikely. Even if Britain were to vote to leave the EU, this would simply mark the start of a multiyear negotiation about exactly what this exit would mean.

U.S. corporate earnings. With a likely fourth quarter in a row of declining earnings, declining margins, and market valuation levels still at exceedingly high levels, the risk imposed by continued weakness is very real and very likely. Increased consumer spending growth, as well as higher oil prices and a weaker dollar, could help offset these factors, which could help the top line and help preserve profits even as margins decrease.

Chinese currency devaluation. This is the big one. Much of the global uncertainty in late 2015 came from China’s surprise currency devaluation, which threatened to create a vicious downward cycle of cuts to spending and investment. That risk has subsided for the moment, as the Chinese government has increased fiscal and monetary stimulus to kick-start growth again. Unfortunately, the stimulus is no longer as effective as it once was. If stimulus fails, further currency devaluation might be China’s only course.

Such a devaluation would export deflation to the rest of the world, making an existing global problem worse. It would also hurt other trading nations by stealing their exports, and it would encourage other countries to do the same, potentially starting a worldwide currency war.

China appears willing and able to continue its current stimulus policies for at least the rest of 2016. But the political winds could change at any time, with potentially serious consequences.

Higher oil and commodity prices. For all the concern about the negative impact of low oil prices on the world economy, the effects have been quite positive overall. Benefits for American consumers have been offset by a decline in energy-sector employment and investment, but elsewhere in the world, the benefits have been more pronounced. Europe and China, for example, import two to three times more petroleum products as a percentage of gross domestic product (GDP) than the U.S. Economic growth in those regions likely would have been substantially worse with higher oil prices.

Therein lies the risk. Much of the recovery we have seen can be attributed to the effects of low oil prices. As prices rise, that recovery may be in jeopardy. Again, we would be less exposed to such damage here in the U.S., but the damage of a price spike could be widespread and the benefits limited.

Such a spike is unlikely to happen in 2016, due to very high levels of oil stocks in storage and ongoing overproduction. On the other hand, given wars in Syria and Yemen, unrest in Libya, and the potential for a difficult Iranian reentry into the market, a supply shock and subsequent price spike isn’t out of the question.

What are the expectations going forward?

Given all of the above risk factors, what are the expectations for the global recovery?

  • The world economy is likely to continue to grow slowly. With signs of organic growth continuing in the U.S. and emerging in Europe, substantial stimulus continuing in the U.S. and on the rise in Europe and China, and energy and currency markets returning to normal, much of the damage has already happened. It would likely take a substantial external shock to derail the global recovery in 2016.
  • The potential for such shocks, however, is very real, particularly in Europe. On balance, the bad possibilities substantially outweigh the good ones. It is hard to see what might generate an upside surprise and all too easy to see what might knock us down.

What might investors expect?

  • With growth slow and downside risks high, don’t expect central banks around the globe to tighten substantially, or at all, during 2016. Even in the U.S., any tightening is likely to be limited. Moreover, at the long end of the market, rates in the U.S. will still be held down by low rates elsewhere. Interest rates are likely to increase only modestly, if at all, and may well decline.
  • Stock markets are, in general, not cheap, but there is a wide range of valuations. With growth likely to stay low, market appreciation will probably come only from organic growth or multiple expansions.

On balance, we believe the following are reasonable expectations for the rest of 2016:

  • GDP growth: Around 2.5 percent for the rest of 2016 and 2.2 percent for 2016 as a whole
  • Fed funds rate:75 percent–1.00 percent at year-end after two rate hikes
  • 10-Year U.S. Treasury rate:50 percent
  • S&P 500 average: 2,050–2,100

 A repeat of the first half

There is quite a bit of good in the global economy and particularly here in the U.S. Employment continues to grow, and although consumer spending is not growing as quickly as it could, there are signs that this trend may be changing. Although business has suffered from lower oil prices and a strong dollar, it has largely weathered the challenge and is now poised to potentially benefit as those headwinds abate. The foundations of the economy—total employment (growing), consumer spending (increasing), and the service sector (expanding)—remain reasonably stable, and the rest of 2016 may see faster growth than the first half.

Financial markets may also benefit from this faster growth. Still, corporate earnings are not doing as well as the larger economy. Even the expected resumption of earnings growth will be hard pressed to match current valuation levels. As such, markets are likely to bounce around current levels and show limited, if any, appreciation through the end of the year.

For both the economy and the markets, then, we expect the second half of 2016 to look somewhat better than the first—with continuing, and perhaps accelerating, growth but a volatile stock market. Over that period, the risks appear generally balanced, with the possibility of accelerating U.S. growth offsetting, at least for the U.S. itself, the systemic risks in the rest of the world. Moving into 2017, global risks could become more meaningful, but we are not there just yet.

Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. Diversification and asset allocation programs do not assure a profit or protect against loss in declining markets. No program can guarantee that any objective or goal will be achieved. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor’s. Emerging market investments involve higher risks than investments from developed countries and also involve increased risks due to differences in accounting methods, foreign taxation, political instability, and currency fluctuation.

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Authored by Brad McMillan, CFA®, CAIA, MAI, senior vice president, chief investment officer, at Commonwealth Financial Network.

© 2016 Commonwealth Financial Network®

Q2 2015 Market Update

August 6, 2015

Click here to watch and listen to the Q2 Market update by Brad McMillan, Senior Vice President at Commonwealth Financial Network.

Market Update

Five Simple Steps to a Tidy Financial House

July 7, 2015

Tidy financial house1) Check your credit report and score. Having a good credit rating can affect everything from gettinga home loan to the way applications for insurance and even employment are considered. Since you’re entitled to one free annual credit report from each of the three credit reporting agencies- Equifax, TransUnion and Experian– why not check to ensure your report is accurate. This is also a smart way to catch any signs of identity theft. See where you stand at www.annualcreditreport.com.

2) Revamp your emergency fund. 3 months of expenses is the recommended amount to set aside in your emergency stash. Factors you should consider in determining the size of the fund are family size, current debt and insurance coverage. If you already have an emergency fund, great job! Now consider boosting it to 6 months of reserves. Feeling prepared is a great stress reducer.

3) Revisit credit cards. Check out the terms and conditions of your credit cards to make sure they’re still in line with what you signed up for. Some good news about newer credit cards is that they can be equipped with computer chips that provide unique identifiers for each transaction, so hackers can’t reuse your information on another purchase.

4) Go paperless. Online banking, electronic bill payment and E-delivery of investment statements are great for the environment and remove the clutter of paper statements. Automated electronic payment also makes it simple to effortlessly pay everything on time.

5) Do an overall financial review. Take the pulse of insurance policies, annuity contracts, retirement plans, and educational savings accounts. Are you reaching your goals? Are your beneficiary designations current? Do you have any questions and are we in the loop with any changes in your situation so we can update your plan accordingly?

Tips and Tools for Raising a Smart Investor

April 16, 2015

investThe sooner, the better. It’s a saying that applies to many facets of life, including educating children about money. By introducing sound financial habits early on, you’ll give your child a head start on the path to becoming an informed investor. Here are some creative ideas, as well as book and website suggestions, for raising a financially savvy kid.

Toddler. Although it may seem early to begin instilling investment know-how in your child, the first few years of life are critical for mental development. Toys that incorporate counting, such as building blocks, can help your child develop mathematical skills. Other educational toys include:

  • LeapFrog Learn & Groove Animal Sounds Guitar. Through rhythm, rhyme, and sing-along songs, children can rock out while sharpening their counting skills.
  • Learning Resources Counting Cookies. This set of 10 numbered cookies (each with a corresponding number of chips) makes learning to count delicious.
  • Chicco Teddy Count-With-Me. Children can learn their first numbers and words in English and Spanish with this bilingual talking bear.
  • Infantino Development Toy, Counting Penguin. Your child inserts colored fish into a penguin’s mouth and learns to count from 1 to 10.
  • ABC 123 Magnetic Poetry kit. For older toddlers, these magnets promote learning their letters and numbers.

Ages 5 and over. Board games are an entertaining way to teach kids about managing finances. Monopoly covers all the bases—earning money, saving and spending, capital budgeting, risk and reward, and taxes. This classic game now comes in an electronic banking edition and even as a smartphone or tablet application. Other options for a fun-filled family game night include the Game of Life, Billionaire Tycoon, Moneywise Kids, and Payday.

Ages 8 to preteen. At this stage, many children start to accumulate income from allowances, cash gifts from birthdays and special occasions, and even small businesses, like lemonade stands or shoveling driveways. As your child begins dealing with actual money—no matter how small the amount—talk to him or her about saving and spending. Because many kids in this age group are Internet experts, online games can be an effective teaching tool.

Teenage years. As a teen, your child may take his or her first summer job or build income through part-time work like babysitting. Visit the local bank together and set up personal savings and checking accounts in his or her name. This will give your child a sense of responsibility and help familiarize him or her with different banking transactions. Plus, banks often offer useful resources geared toward young customers.

Prologue to success: books

Books on personal finance kill two birds with one stone: getting children to read while teaching them an important life skill. Full of illustrations on all aspects of money and finance, Neale S. Godfrey’s Ultimate Kids’ Money Book is a great resource for children ages 7–12. For young people ages 13 and up, Growing Money: A Complete (and Completely Updated!) Investing Guide for Kids by Gail Karlitz and Debbie Honig focuses solely on investing.

Written especially for parents, Yes, You Can . . . Raise Financially Aware Kids by Jack Jonathan includes activities that you can do with your child to put financial concepts into practice.

Wired for wealth: online games

One of the best websites for teaching kids about money is www.monetta.com/game.htm, presented by the Monetta Young Investor Fund, a mutual fund that invests in companies familiar to children and teenagers. Although most of the games can be found elsewhere online, the site brings them all together and organizes them by age group. The games are free and range from basic quizzes to more advanced activities.

Of course, there are plenty of other websitinvest2es that aim to help children build their financial literacy. But, remember, although the Internet can be a valuable tool, it’s no substitute for one-on-one conversations and your own good example.

Start early!

As with many financial matters, the best advice is to start early. The sooner children learn financial fundamentals, the more likely they are to become informed investors later in life. You may even benefit from learning alongside your child! If there are areas where you could use a refresher, take the time to review those topics as you approach them with your son or daughter.

Authored by the Investment Research team at Commonwealth Financial Network.

© 2014 Commonwealth Financial Network®

Market Update for January 2015

January 8, 2015

Brad McMillan, Commonwealth Financial Network’s (PWA’s broker/dealer) Chief Investment Officer, kicks off 2015 by providing a market update on the U.S. and global economic recoveries, the dropping price of oil, and the strength of the U.S. dollar.  Read the highlights below:

Another Strong Year for U.S. Markets

For the second year in a row, U.S. markets were the place to be, closing 2014 with a very strong fourth quarter despite a weak December. The Dow Jones Industrial Average was up 0.12 percent in December but a much stronger 5.20 percent for the quarter. The S&P 500 Index was down 0.25 percent in December but posted a 4.93-percent gain for the quarter. The Nasdaq lost 1.16 percent for the month, though it gained 5.40 percent during the quarter.

Gains for the year were widespread, with the Dow and Nasdaq up 10.04 percent and 13.40 percent, respectively. The S&P 500 did best, gaining 13.69 percent for the year.

U.S. economic growth accelerated, with the most recent report on gross domestic product (GDP) growth announcing a 5-percent gain for the third quarter. Corporate revenues and earnings also increased.

An increase in market valuation levels supported share price gains. At year-end, U.S. markets were at or close to all-time highs, and technical factors remained strong.

International markets underperformed U.S. markets over the month, quarter, and year. The MSCI EAFE Index, representing developed international markets, was down 3.46 percent for December and 3.57 percent for the quarter. The MSCI Emerging Markets Index did worse, declining 4.82 percent in December and 4.88 percent for the fourth quarter.

For the year, developed markets were down 4.90 percent, and emerging markets dropped 4.63 percent. Technical factors were soft, with both indices well below their 200-day moving averages.

The Barclays Capital Aggregate Bond Index was up 0.10 percent for December and 1.79 percent for the fourth quarter, contributing to a 5.97-percent gain for the year. This strong performance was driven by a consistent, and unexpected, decline in interest rates throughout 2014. Rates on the benchmark 10-year U.S. Treasury bond declined from 3 percent to 2.17 percent during the year, largely driven by uncertainty elsewhere in the world.

Economic Recovery Hits Escape Velocity

The major economic story for the fourth quarter was the Fed’s decision, driven by ongoing economic improvement, to stop buying bonds, signaling that, in its judgment, the economy didn’t need the support. In fact, by year-end, the U.S. recovery was moving from strength to strength. The 5-percent third-quarter GDP number was the strongest since 2003. Moreover, as our chart shows, there has been a consistent increase in GDP in recent years.

Welcome to The PWA Blog

November 26, 2014

Hello, and welcome to our brand new blog!  We recently did a major overhaul of our entire website, and we think you’ll enjoy perusing all of the new-and-improved pages.  We hope this revamped design will provide a great experience for our clients as well as those just passing through.

The blog will be your place to find market updates and pertinent news that will keep you, our readers, better informed about things that may affect or interest you financially.

If there are any topics you’d like us to write about, please send us an email at info@principledwealth.net.  In addition, you can keep up-to-date with all of the latest posts by clicking the “Subscribe” button below.  We hope you do!