October 20, 2015
How quickly emotions have changed since August. Worry? Angst? It’s already priced into the markets, according to some experts.
Last week, Barron’s
published the results of its Big Money Poll, a biannual survey of professional
investors and money managers. A majority of those surveyed (55 percent) were
bullish about U.S. markets’ prospects through June 2016, 29 percent were
neutral, and 16 percent were bearish. That’s a big shift. Last spring, just 45
percent of those polled were bullish and nearly one-half were neutral. This time
around, things are different:
“After a wild and crazy summer for U.S. stocks, marked
by an 11 percent correction in August, Wall Street’s bulls are showing conviction
again…the pros expect stocks to rise by as much as 7 percent through the middle
of 2016, propelled by a growing economy and gains in corporate profit. The Big
Money investors see fresh value in beaten-up energy stocks and financials, as
well as dividend-paying blue chips. And, they don’t expect a likely
interest-rate hike – when it comes – to break the bull’s stride for long.”
Investors who participated in the American Association of Individual Investors’ October 14 Sentiment
Survey weren’t quite so optimistic. The survey showed just 34 percent of
investors were bullish, 39 percent were neutral, and 27 percent were bearish. The
bulls were down 3 percent from the previous week, and the bears gained a
percent. Uncertainty seemed to be the name of the game, though, as the number
of investors who held neutral opinions increased by 4 percent.
As an interesting side note, the professionals
surveyed by Barron’s estimated the
number of investors who weren’t sure where markets are headed was much larger –
76 percent!
If you’re a contrarian – an investor who does not
subscribe to popular opinion – there are a lot of opinions to consider.
Data as of 10/16/15
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500 (Domestic Stocks)
|
0.9%
|
-1.3%
|
9.2%
|
11.8%
|
11.4%
|
5.5%
|
Dow Jones Global ex-U.S.
|
0.4
|
-3.1
|
-0.9
|
2.6
|
0.3
|
1.8
|
10-year Treasury Note (Yield Only)
|
2.0
|
NA
|
2.2
|
1.7
|
2.5
|
4.5
|
Gold (per ounce)
|
2.5
|
-1.5
|
-4.6
|
-12.2
|
-2.9
|
9.6
|
Bloomberg Commodity Index
|
-1.4
|
-14.0
|
-23.6
|
-14.9
|
-9.3
|
-6.6
|
DJ Equity All REIT Total
Return Index
|
1.2
|
1.2
|
10.7
|
10.7
|
11.7
|
7.9
|
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg
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 Total Return 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.
it’s not always a good idea to rollover
company stock from a 401(k) plan to
an IRA. In fact, doing so might mean you pay more in taxes to Uncle Sam than
necessary.
If
company stock held in an employer-sponsored 401(k) plan has appreciated, the
difference between the amount paid for shares (the cost basis) and the current
value of those shares is known as net unrealized appreciation (NUA). For
instance, if an investor paid $10 a share for 1000 shares ($10,000) for stock
that is now worth $15 a share, then the investment is worth $15,000, and the
NUA is $5,000.
If
the shareholder completes a rollover from a 401(k) plan to an IRA, those shares
of company stock will be liquidated, along with the other assets in the
account, and moved to an IRA where the assets will have an opportunity to
continue growing tax-deferred. When the assets are distributed from the IRA,
they may be taxed as ordinary income. If the investor is in the 28 percent tax
bracket, the taxes owed would be about $4,200.
There
is an alternative that could be a better choice tax-wise. An investor can request
company stock be distributed in-kind and sent to a taxable account. The stock
is not liquidated. The shares are moved to the new account. The investor may
owe ordinary income taxes (and penalties if he or she is not yet age 59½) on
the cost basis ($10,000). However, the net unrealized appreciation ($5,000)
will not be taxed until the shares are sold. Taxes on the cost basis would be
about $2,800.
If
the investor takes a distribution right away, and the shares have been held for
more than one year, the proceeds may be taxed at the long-term capital gains
tax rate, which is currently lower than the ordinary income tax rate. If the
investor is in the 15 percent capital gains tax bracket, another $750 would be
owed in taxes. In this example, the investor could save about $650 in taxes
overall.
Please
keep in mind this is a hypothetical example and is not representative of any
specific situation. Each investor is
unique and your results may vary. Executing
an NUA strategy seems pretty straightforward, but it can be tricky and not
everyone is eligible. If you would like to learn more, please give your tax
professional a call.
Weekly Focus – Think About It
“If you wish to forget anything on the
spot, make a note that this thing is to be remembered.”
--Edgar Allan
Poe, American poet
Best regards,
Leif M. Hagen
Leif M. Hagen, CLU, ChFC
LP Financial Advisor
Securities
offered through LPL Financial Inc.,
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. 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
afternoon gold price as reported by the London Bullion Market Association.
The gold price is set twice
daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in
U.S. dollars per fine troy ounce.
* The Bloomberg 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
Total Return 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.
* Economic forecasts set
forth may not develop as predicted and there can be no guarantee that
strategies promoted will be successful.
* 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.
* Stock investing involves
risk including loss of principal.
* To unsubscribe from the
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Sources:
http://www.barrons.com/articles/bulls-gain-ground-in-barrons-fall-big-money-poll-1445055740?tesla=y&mod=BOL_twm_ls?mod=BOL_hp_highlight_1 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/10-19-15_Barrons-Bulls_Gain_Ground_in_Barrons_Fall_Big_Money_Poll-Foonote_1.pdf)
