“You can’t stop the future, you can’t rewind the past. The only way to learn the secret is to press play.”
~Jay Asher, The Thirteen Reasons Why
Change continues to evolve around us. As we just celebrated the open house of our new office location, I am thinking back on the past 11 months of hard work and am filled with excitement and anticipation as I look forward into 2014 with the additional tools, resources and capabilities we have to serve clients.
I believe we are going to see changes in the months ahead that will have a significant impact on the financial plans we oversee for our clients and the advice and guidance we provide in managing portfolios.
Change at the Fed
Current Fed Chairman Ben Bernanke gave one of his last speeches right here in Philadelphia last week and the architect of quantitative easing will go down in history as the man charged with addressing the great financial crisis of 2008. With Janet Yellen being confirmed to be the next Fed chairwoman, she will oversee the Fed taper program announced last month with many economists expecting the program to bring the yield on the 10-year treasury over 3.5%.
Change in Market Sentiment
Most investors saw tremendous gains in the stock portion of their portfolios with US indexes hitting record highs in 2013. Market valuations have increased dramatically over the past year and while most pundits see positive returns in stocks, even long time bulls like Bob Doll at Nuveen investments see a strong possibility for a 10% correction. In his latest piece on the outlook for 2014, Mr. Doll cites high valuations and weakening technical indicators as contributing factors to a mild pullback in the coming months.
Change in Outlook for Europe
After recent years of worries about bailouts, and concern over the long term viability of the Euro, many Wall St. firms are becoming more positive on Europe. Given the significant advances of other developed markets, Europe is cheap and is still in the early stages of what is likely to be a choppy, fragile recovery. We saw the report of economic sentiment in the Eurozone rising in December, with the region’s weaker southern economies, including Italy and Spain, improving more than those in Germany and France. The Eurozone sentiment index rose to a 29-month high in its eighth straight month of gains.
Change in the Pace of US Growth Prospects
The ever important employment report was released on Friday and it showed the US economy added only 74,000 jobs in December, a sharp contrast to a strengthening economic recovery. The unemployment rate fell to 6.7%, but that was tied to a drop in the labor participation rate to 62.8%, a 35-year low. The jobs gain was far below most economists estimates of 190,000 and less than the November number. This trend supports our view that the economy is still far from any concerns about inflation. The Fed set a target of 2% inflation before any consideration of raising interest rates. The lackluster growth in employment, manufacturing, and housing have most analysts speculating that we are at least 2 years away from hitting that number.
We will certainly see additional changes to the markets and economy. What will not change is our team being proactive to give you tactical directions in the stewardship of your assets to maintain our commitment to help you navigate the financial path before you.
_