Happy Thanksgiving and a Quick Market Update

I just wanted to post a quick note to wish you and yours a very Happy Thanksgiving Holiday.  Here’s hoping that you are celebrating it in good health surrounded by family and friends.  Without both, life would be such a drag.

I am thankful for my family and friends, good health and the best clients and readers in the world.  I can’t imagine myself doing anything else that I would enjoy more in life than what I’m doing now.  I hope that you feel the same way about what you do, and if not, I hope you’ll take steps in your life to move closer to the activities that bring you joy and happiness.  It’s really about getting what you need and want out of the day rather than getting through the day.

A Quick Stock Market Update

The last few weeks have been quite volatile in the stock markets, and to be honest with you, it was really all my fault.  Right after I sent out my last newsletter update about the Federal Reserve pumping up the markets, we entered into a long overdue correction (a decline in prices).  As I had mentioned, the markets had gone straight up during September, October and early November, so it was no surprise that a correction was coming. We have swung up and down and sideways without much upside and thankfully without much downside either.

In some cases, I took advantage of this correction to “prune” (sell) certain client positions to lock in profits or avoid losses.  This past Tuesday, a day when everything was trending downward and things looked like they were about to fall apart (a day where about 90% of all asset classes were down) due to the events in Europe and South Korea, I took 95% of our available cash and invested it at the lows of the recent market range.  We were immediately rewarded yesterday as all the markets were up “big” to kick off what I hope to be a great year-end Santa Claus rally.  Seasonally, this period of the year tends to be the strongest for gains in the markets.  While we are technically still in a correction phase, I expect the uptrend to resume soon (but my crystal ball is still in the shop).  Recent economic news has been very positive, some much better than expected, and first time unemployment claims this week surprised nicely to the downside.

I still remain optimistic about a positive finish to the year and the rally continuing into 2011 as the economy recovers.  I believe that this is the best time to be invested in the markets as Uncle Sam has told us that he wants the markets higher. Consider taking advantage of this recent market correction to dip your toes into the market.  I like that most are pessimistic about the markets since that tends to propel them higher.  Yes, we have economic worries, future inflation, high unemployment and a moribund housing market, but those problems didn’t develop overnight, so they won’t be solved overnight either.  We are making progress, and that’s what really counts.

Later in December, I will send out my 2011 market and economic outlook newsletter.  In the meantime, year-end tax planning is in full swing and hopefully you’ve benefitted from my year-end tax planning newsletter and tips.  Remember, if you’re thinking about an IRA to Roth conversion in 2010, you only have about five weeks to complete it.  Don’t hesitate to contact us to discuss whether this option is appropriate for you. I am also available to help with your year-end financial or tax planning.

Enjoy your holiday weekend and please let me know if I can be of any help.  And remember: 50%+ off sales are great, but the best sales are those that save you more than 100% (that is, when you save and invest the money instead..sorry I couldn’t resist).  By the way, I was recently quoted in another online financial story-see the link below about Six Ways to Gift Money to Family.

New: 6 Ways To Gift Money to Family http://bit.ly/aDG90W

Sam H. Fawaz CFP®, CPA is president of YDream Financial Services, Inc., a registered investment advisor. Sam is a Certified Financial Planner (CFP®), Certified Public Accountant and registered member of the National Association of Personal Financial Advisors (NAPFA) fee-only financial planner group.  Sam has expertise in many areas of personal finance and wealth management and has always been fascinated with the role of money in society.  Helping others prosper and succeed has been Sam’s mission since he decided to dedicate his life to financial planning.  He specializes in entrepreneurs, professionals, company executives and their families.

All material presented herein is believed to be reliable, but we cannot attest to its accuracy.  Investment recommendations may change and readers are urged to check with their investment advisors before making any investment decisions.  Opinions expressed in this writing by Sam H. Fawaz are his own, may change without prior notice and should not be relied upon as a basis for making investment or planning decisions.  No person can accurately forecast or call a market top or bottom, so forward looking statements should be discounted and not relied upon as a basis for investing or trading decisions. This message was authored by Sam H. Fawaz CPA, CFP and is provided by YDream Financial Services, Inc.

Market Update and A Caution For The Week Ending 5/29/2009

The markets ended up for the third month in a row with a late day rally on Friday, capping one of the best (albeit volatile) months in two years. With the exception of the Dow Jones Industrial Average (of 30 stocks), all indices are positive for the year.  GM traded below $1 a share today as bankruptcy is likely to occur on Monday.

Opinions about the markets’ direction run the gamut from “drunken bulls” to “raging bears”, with everyone taking each up or down day to prove their point.  But the solid fact is that the market is in a confirmed uptrend, and no opinion can argue with that.  But that’s all they are: opinions.

Economists predict that the recession will end by the 3rd quarter of this year, but the recovery will be slow.  For states like Michigan and California, recovery will likely begin in the 1st or 2nd quarter of 2010.  In the meantime, we still have to deal with waning consumer demand and higher unemployment.  Nonetheless, consumer confidence rankings jumped nicely in April, a bullish sign for the markets and the economy.  Remember, the stock market usually leads an economic recovery by 6-9 months.

Our investment approach remains a cautious, defensive one as we closely monitor the markets for signs of sell-offs.  Over the past few months, I’ve slowly increased clients’ allocations to equities and bonds to take advantage of the markets’ rallies.  However, I continue to maintain a healthy allocation to cash as a defensive move should the markets begin to move against us.  Any move this high, this fast, is a good reason to be cautious.  Fortunately, technical indicators confirm that the bullish sentiment is higher than bearish negativity and therefore give reason to be optimistic.  As billions of dollars of economic stimulus hits the streets, it can’t help but “lift all boats.”

Many prognosticators and so called experts predict that the low on March 9 was not the bottom, and that we’re merely experiencing a bear market rally.  Some even predict that we may have a severe 35-40% drop from here before the economic recovery and the “real bull market” kicks in later this year.  That drop could begin next week, next month, or next quarter—no one really knows.  I would be remiss if I didn’t warn you about this possibility. I don’t know if they’re right or not, but everyone should nonetheless be prepared for that possibility.

For my clients, I will continue to take advantage of the upside of the markets as long as it lasts and will not simply wait on the sidelines for the bears to arrive.  If or when the bears return, I am prepared to make the necessary tactical adjustments to minimize the effects on client portfolios and lock in as much of the recent gains as possible.  If the bears decide to stay for awhile, then we’ll take advantage of those conditions and attempt to profit from such bearish conditions.

In any case, future annualized returns on equities and bonds are likely to be in the single digits for some time.  Nonetheless, there’s no substitute for regular saving and continuous financial planning.  That combination can help overcome any lower expected returns.  Remember, it’s never too late to start.

I welcome your comments and feedback and invite you to read the below articles.  If you have any questions, please feel free to get it touch with me and share this with your friends and colleagues.

http://www.ydfs.com

Market Update For Week Ending 5/29/2009
Index

Close

Net Change

% Change

YTD

YTD %

DJIA

8,500.33

+223.01

2.69

-276.06

-3.15

NASDAQ

1,774.33

+82.32

4.87

+197.30

12.51

S&P500

919.14

+32.14

3.62

+15.89

1.76

Russell 2000

501.58

+23.96

5.02

+2.13

0.43

International

1,317.31

+27.10

2.10

+79.89

6.46

10-year bond

3.47%

+0.02%

+1.22%

30-year T-bond

4.34%

-0.05%

+1.65%

International index is MSCI EAFE index. Bond data reflect net change in yield, not price. Indices are unmanaged and you cannot directly invest in an index.

Market Wrap
A volatile post-holiday week ended with the bulls back in control of Wall Street and most major equity indices in positive territory for both the week and the year to date. The Dow industrials continued to lag, held back by developments at component General Motors in particular, but other benchmarks gained 3% to 5%. Foreign shares also ended in the black, while bond markets were mixed. For more on recent trading activity, please read:
http://finance.yahoo.com/news/Stock-market-fluctuates-after-apf-15385078.html

Consumer Confidence Revives
The American public’s battered sense of the economy’s health revived somewhat in April. Analysts warn that while the light at the end of the recessionary tunnel may finally be in sight, it will take some time for a true recovery to begin. In fact, while the business environment seems to be improving in many parts of the country, conditions in the Midwest in particular appear to be getting worse as the auto industry lurches from crisis to crisis. For more on the latest economic indicators and what they mean for the economy, please read:
http://bloomberg.com/apps/news?pid=20601087&sid=aYRGnAW70og8

Is The Recession Nearing An End?
Some economists now say the longest and most savage economic contraction in six decades may finally be winding down. But while consumers are in relatively high spirits, both labor markets and home prices remain fragile at best as layoffs and foreclosures continue. Where are the “green shoots” that some see heralding a new cycle of economic growth? And where are the storm clouds ahead? For more, please read:
http://www.msnbc.msn.com/id/30979615/

Sam H. Fawaz CFP®, CPA is president of YDream Financial Services, Inc., a registered investment advisor. All material presented herein is believed to be reliable, but we cannot attest to its accuracy.  Investment recommendations may change and readers are urged to check with their investment advisors before making any investment decisions. Opinions expressed in this writing by Sam H. Fawaz are his own, may change without prior notice and should not be relied upon as a basis for making investment or planning decisions.  No person can accurately forecast or call a market top or bottom, so forward looking statements should be discounted and not relied upon as a basis for investing or trading decisions.

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