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Monday, November 09, 2015

U.S. job growth surpassed expectations in October and more in today's PEEK of the WEEK financial newsletter from Leif Hagen

Peek of the Week

November 9, 2015

The Markets

And, the Bureau of Labor Statistics (BLS) said…

U.S. job growth surpassed expectations in October. About 271,000 jobs were created across diverse industries: professional and business services, health care, retail, construction, and others. That was a significantly higher number than predicted by economists who participated in a survey conducted by The Wall Street Journal. They expected to see 183,000 new jobs for October.

The BLS revised August and September jobs numbers higher overall and reported improvement on the wage front, too. Average hourly earnings increased by nine cents during October. For the year, hourly earnings are up 2.5 percent. Rising wages and a 5 percent unemployment rate “appear to indicate the labor market has reached full employment,” reported Barron’s.

Strong employment data supports the idea the Fed will begin to lift the Fed funds rate this year. On Friday, former Chairman of the Federal Reserve Ben Bernanke wrote in his blog:

“Wednesday was something of a trifecta for Fed watchers: Chair Yellen, Board Vice-Chair Stanley Fischer, and Federal Reserve Bank of New York president Bill Dudley (who is also the vice chair of the Federal Open Market Committee) all made public appearances. Moreover, the comments by all three members of the Fed’s leadership explicitly or implicitly supported the idea that a December rate increase by the FOMC is a distinct possibility. (The possibility of a rate increase is even more distinct with this morning’s strong job market report.)”

Markets responded swiftly, according to The Wall Street Journal, as investors repositioned their portfolios in anticipation of a rate hike. While stock market indices remained relatively steady, there was considerable volatility within certain sectors. An expert cited by the publication commented:

“…one of the big rotation trades on Friday was investors taking money out of companies such as utilities and real-estate-investment trusts, and putting it into those that are expected to benefit from higher rates, such as financial companies.”

Data as of 11/6/15	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	1.0%	2.0%	3.4%	13.7%	11.4%	5.6%
Dow Jones Global ex-U.S.	-1.0	-4.2	-5.6	2.4	-0.4	1.5
10-year Treasury Note (Yield Only)	2.3	NA	2.4	1.7	2.6	4.6
Gold (per ounce)	-4.7	-9.2	-4.9	-13.7	-4.8	9.1
Bloomberg Commodity Index	-2.5	-18.3	-27.1	-15.7	-11.1	-6.5
DJ Equity All REIT Total Return Index	-1.9	-0.3	3.1	10.4	10.6	7.6

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 wasn’t just about the budget. Last week, the bipartisan budget bill was signed into law, averting a U.S. default and deferring further battle over debt and spending levels until presidential and congressional elections are over, according to U.S. News & World Report.

The new law includes provisions that CBS Money Watch said are likely to strengthen Social Security and Medicare by improving the programs’ finances. Since the provisions also have the potential to reduce benefits for some Americans, they may not prove to be all that popular. Here are two of the changes that affect Social Security benefits:

· File-and-suspend strategies will be limited in 2016. This change could cost some Americans up to $50,000 in lifetime Social Security benefits, according to PBS News Hour. The strategy entails having a husband or wife file for Social Security benefits at full retirement age and then suspend the benefits immediately. This allows a spouse to claim a spousal benefit, while the husband or wife receives delayed retirement credits.

Effective May 1, 2016, no one will be able to voluntarily file and suspend benefits to make a spousal benefit available to a spouse or to protect the right to file for retroactive benefits.

· Restricted application strategies will not be an option after 2015. Restricted application also is a Social Security claiming strategy. It allows an applicant to receive spousal benefits while earning delayed retirement credits until age 70. Americans who meet age requirements in 2015 can employ the strategy; younger Americans cannot.

If you are currently employing these strategies, you are probably grandfathered. We’ll know more when the Social Security Administration offers some insight as to how the new rules will be interpreted. That’s expected to happen before the end of the year. In the meantime, if you have questions about how this may affect your retirement plans, please contact your financial advisor.

Weekly Focus – Think About It

“The easiest thing to be in the world is you. The most difficult thing to be is what other people want you to be. Don't let them put you in that position.”

--Leo Buscaglia, American author and motivational speaker

Best regards,

Leif M. Hagen

Leif M. Hagen, CLU, ChFC

LP Financial Advisor

Securities offered through LPL Financial Inc.,

Member FINRA/SIPC.

www.FINRA.com

www.SIPC.com

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If you would like us to add them to our list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

P.S.S. Also, please remind your friends and family members becoming Medicare eligible that we offer Medicare insurance and Part D options with NO COST to work with Leif as their agent

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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 “Peek of the Week”, please reply to this email with “Unsubscribe” in the subject line, or write us at: Hagen Financial Network, Inc. 4640 Nicols Road, Suite 203; Eagan, MN 55122.

Sources:

http://www.bls.gov/news.release/empsit.nr0.htm

http://www.wsj.com/articles/dollar-rallies-on-strong-u-s-jobs-data-1446818202 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/11-09-15_WSJ-Dollar_Gains_to_Nearly_13-Year_High-Footnote_2.pdf)

http://www.barrons.com/articles/job-numbers-add-up-to-december-rate-hike-1446875952?mod=BOL_hp_we_columns (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/11-09-15_Barrons-Job_Numbers_Add_Up_to_December_Rate_Hike-Footnote_3.pdf)

http://www.brookings.edu/blogs/ben-bernanke/posts/2015/11/06-fed-communication

http://www.wsj.com/articles/global-stocks-steady-ahead-of-jobs-data-1446800711 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/11-09-15_WSJ-Stock_Investors_Position_for_Rate_Increase_After_Strong_Jobs_Report-Footnote_5.pdf)

http://www.usnews.com/news/politics/articles/2015/11/02/obama-signs-2-year-budget-debt-deal-before-default-deadline

http://www.cbsnews.com/news/how-social-security-and-medicare-just-got-stronger/

http://www.pbs.org/newshour/making-sense/houses-proposed-budget-bill-will-devastating-effects-millions-social-security-benefits/

http://www.cnbc.com/2015/11/05/file-and-suspend-social-security-strategy-ending.html

http://www.forbes.com/sites/jamiehopkins/2015/11/04/the-state-of-file-and-suspend-where-the-new-social-security-rules-leave-seniors/ (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/11-09-15_Forbes-The_State_of_File_and_Suspend-Footnote_10.pdf)

http://www.bankrate.com/financing/retirement/social-security-changes-devil-is-in-the-details/

http://www.brainyquote.com/quotes/quotes/l/leobuscagl150300.html

Tuesday, September 08, 2015

Who or what is to blame for recent market weakness?

Peek of the Week

Sept. 8, 2015

The Markets

Who’s the culprit?

Speculating on who or what is to blame for recent market weakness is a popular pastime right now. Last week, Barron’s said the search for someone to blame is a lot like a game of Clue. So far, the most common conclusions are “the People's Bank of China with a devalued currency in Beijing,” and “Janet Yellen with a potential interest-rate hike in Washington.”

The article pointed out those theories might be flawed. After all, China’s slowdown wasn’t a surprise. Analysts have been factoring slower growth into their calculations for some time. U.S. rate hikes are highly anticipated and, even though some fear they could tip the American economy into recession (and argue recent stock price movement supports the claim), relatively strong economic data casts doubt on the idea. Some analysts believe the stock market can help predict where a country’s economy is headed. A significant drop in stock prices could be indicative of a future recession and a significant increase could suggest future economic growth.

So, why have markets headed south? Barron’s offered an alternative answer: Investors with volatility trading strategies (and/or a case of nerves) across the globe. The article pointed out the CBOE Volatility Index (VIX), a.k.a. the fear gauge, popped from a low of 13 to a high of 53 between August 18 and
August 24:

“That’s higher than when Standard & Poor's cut the credit rating of the United States in 2011, or at the peak of the European debt crisis in 2010, and seems extreme given the evidence. But volatility isn’t simply a measure of fear. It has been used to manage risk in portfolios that employ sophisticated trading schemes… Although each type of fund adjusts to market changes at a different speed, they all respond in the same way – by selling stocks… Don’t just blame the professionals. For months now, there have been warnings about overcrowding in the market’s best-performing stocks. And, when the market started to tumble in August, these stocks were among the hardest hit…”

So, who caused the market downturn? Take your pick.

Data as of 9/4/15	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	-3.4%	-6.7%	-3.8%	11.0%	12.0%	4.5%
Dow Jones Global ex-U.S.	-4.1	-8.8	-17.0	2.3	1.0	1.0
10-year Treasury Note (Yield Only)	2.1	NA	2.5	1.6	2.6	4.1
Gold (per ounce)	-1.5	-6.8	-12.1	-13.0	-2.2	9.6
Bloomberg Commodity Index	-1.0	-15.2	-29.0	-15.5	-8.2	-6.4
DJ Equity All REIT Total Return Index	-4.6	-9.0	-3.0	6.5	10.6	6.0

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.

the travails of emerging markets. Just a few years ago, emerging markets were the toast of the town. In general, emerging countries recovered much faster than developed countries following the financial crisis and global recession. The MSCI Emerging Markets Index delivered pretty remarkable (and highly volatile) performance during the past decade. According to the MSCI fact sheet, annual returns have ranged from down 53.33 to up 78.51:

Annual Returns (%)

2005 34.00

2006 32.14

2007 39.42

2008 -53.33

2009 78.51

2010 18.88

2011 -18.42

2012 18.22

2013 -2.60

2014 -2.19

Through September 4, the Emerging Markets Index was down 17.54 percent. While that’s a significantly smaller swing than some we’ve experienced during the past 10 years, any double-digit dip demands attention. The Wall Street Journal explained the downturn like this:

“China’s economic slowdown is having broad implications, hitting regional economies like Taiwan, Malaysia, and Vietnam where manufacturing data showed declines for August. Emerging markets are also nervous about the possibility of an interest-rate increase in the United States, which would encourage global investors to invest more there. China’s Shanghai Composite Index is down 39 percent after hitting a seven-year high in June.”

Indeed, money is moving back into the United States. Experts cited by The Economist said about $44 billion has been pulled from emerging markets since mid-July.

Christine Lagarde, Managing Director of the International Monetary Fund (IMF), indicated the IMF’s outlook for global growth was likely to be revised downward, in part, because emerging economies are at risk of being negatively affected by commodity price weakness, China’s slowdown, and America’s monetary policy.

How bad will it get in emerging markets? The IMF’s July projection was that emerging market and developing countries would grow by 4.2 percent in 2015 and 4.7 percent in 2016. Developed economies, on the other hand, were expected to grow by 2.1 percent in 2015 and 2.4 percent in 2016.

Please keep in mind, international investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.

Weekly Focus – Think About It

“I never blame myself when I'm not hitting. I just blame the bat and if it keeps up, I change bats. After all, if I know it isn't my fault that I'm not hitting, how can I get mad at myself?”

--Yogi Berra, Baseball player

Best regards,