In our continued effort to improve your information delivery and provide excellent client support, we are adding a “Housekeeping” section to the Commentary. This section is designed to inform you of significant financial dates, Securities America related changes and revisions in financial guidelines.
Welcome to 2021! Planning for the New Year has begun and if you would like to schedule time to discuss your financial plans for the coming year with John, please don’t hesitate to contact us at email@example.com or call 425-453-6353 to schedule a time.
Baby sea otters can’t swim.
Their moms will wrap them in pieces of kelp while they hunt until the buoyant pups learn how to paddle around on their own. A raft of otters will also hold hands while they sleep so they don’t drift apart!
The Crown Jewels contain the two biggest cut diamonds on Earth.
They both came from the Cullinan Diamond, a 3,106-carat gem found in South Africa in 1905. The largest stone, called the Great Star of Africa, is in the Sovereign’s Sceptre, while the second largest is mounted in the Imperial State Crown.
There’s a world record for the most world record titles.
It belongs to Brooklyn, New York resident Ashrita Furman, who’s held more than 600 Guinness World Records in his lifetime, ranging from heaviest shoes walked in (323 pounds) to most baseballs held in a baseball glove.
Weekly Focus – Think About It
“I was gratified to be able to answer promptly, and I did. I said I didn’t know.”
–Mark Twain, American writer, humorist, and lecturer
Last week, as COVID-19 vaccination efforts continued, there was speculation about stock market corrections and asset bubbles.
On Sunday morning, Bloomberg reported 63 million doses of the coronavirus vaccine had been administered across 56 countries. In the United States, 21.1 million shots have been delivered – about 51 percent of the vaccinations that were sent to states. At that point, the pace of vaccination in the United States was just over one million doses a day.
Improvements in the pace of vaccinations could lift market optimism, according to Ben Levisohn of Barron’s, but a market correction is still a possibility:
“…the S&P 500 has been following a pattern typical of recessions since 1990, one that sees the recovery occur in three phases: an initial recovery, a period of consolidation, and a second rebound. The initial recovery has lasted an average of 10 months, with an average return of 48 percent. That was followed by a period of consolidation that lasted from two to seven months and saw stocks sink an average of 17 percent. That was then followed by another rally…The current bounce from the March lows has lasted about 10 months and produced gains of just over 71 percent. If the market follows the historical pattern, it should pull back by spring – but that will be a buying opportunity.”
A survey from Deutsche Bank sparked talk about the possibility of asset bubbles. In a CNBC interview, Jim Reid, who heads global credit strategy at Deutsche Bank, shared results of the company’s January survey. Of the 627 market professionals who participated, the vast majority of respondents (89 percent) saw some asset bubbles in markets. Reid explained central bank policies and stay-at-home trading were responsible, in part, for rising asset prices.
Solid fourth quarter 2020 earnings may be supporting asset prices, too. So far, 13 percent of companies in the Standard & Poor’s 500 Index have reported results. John Butters of FactSet wrote, “At this point in time, more S&P 500 companies are beating EPS [earnings-per-share] estimates for the fourth quarter than average, and beating EPS estimates by a wider margin than average.”
Last week, major U.S. stock indices moved higher. The Nasdaq Composite gained 4.2 percent, which was its biggest gain since November 2020.
|Data as of 1/22/21||1-Week||YTD||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor’s 500 (Domestic Stocks)||1.9%||2.3%||15.7%||10.7%||15.0%||11.5%|
|Dow Jones Global ex-U.S.||1.2||3.9||12.4||2.1||9.4||2.9|
|10-year Treasury Note (Yield Only)||1.1||NA||1.8||2.7||2.1||3.4|
|Gold (per ounce)||0.7||-1.9||19.0||11.6||11.1||3.3|
|Bloomberg Commodity Index||-1.7||1.4||0.6||-3.8||1.0||-7.0|
How Important is Financial Literacy? At the end of 2020, the FINRA Investor Education Foundation published a report that found, “…financial literacy has significant predictive power for future financial outcomes, even after controlling for baseline financial characteristics and a wide set of demographic and individual characteristics that influence financial decision making.”
In fact, financial literacy may be more important today than it has ever been. That’s because the responsibility for saving, investing, and generating income for retirement has shifted from companies (that managed defined benefit plan assets) to individuals (who manage 401(k), 403(b), and other defined contribution plan assets).
The researchers administered a quiz at the beginning and end of the research period (six years). The quiz included questions that were a lot like these, which are derived from questions asked by the National Financial Capability Study:
1. Suppose you have $100 in a savings account and it is earning 2 percent a year. After five years, how much money will be in the account?
a. More than $102
b. Exactly $102
c. Less than $102
d. I don’t know
2. Now, suppose the interest rate on your savings account is 1 percent a year and inflation is 2 percent a year. After one year, will the money in the account buy more than it does today, exactly the same as it does today, or less than it does today?
d. I don’t know
3. When interest rates increase, what typically happens to bond prices? Do they rise, fall, or stay the same? Or is there no relationship between interest rates and bond prices?
c. Stay the same
d. No relationship
e. I don’t know
4. Suppose you owe $1,000 on a loan and the interest rate you are paying is 20 percent per year, compounded annually. If you don’t pay anything on the loan, how many years will it take for the amount you owe to double?
a. Less than two years
b. Two to four years
c. Five to nine years
d. Ten or more years
e. I don’t know
If these answers generate questions for you, please give us a call.
1. A – More than $102.
2. C – Less.
3. B – Fall.
4. B – Two to four years.
John Klevens, CFP ®
P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.
Securities and Advisory Services offered by John Klevens through KMS Financial Services, Inc. Member FINRA/SIPC and an SEC Registered Investment Adviser. Klevens Capital Management and KMS are separate and unaffiliated. Portions of this newsletter have been prepared by Peak Advisor
* These views are those of Carson Coaching, and not the presenting Representative, the Representative’s Broker/Dealer, or Registered Investment Advisor, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named firm or broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* 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.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* 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.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* 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.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* 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.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.