Brighton Perspective

Don’t Pay Tax Twice

Reinvestment can be a crucial component of the wealth accumulation process, as the reinvested amount compounds and grows over time. Yet if you are reinvesting dividends and capital gains (“distributions”) in funds you hold in your taxable account, it can be important to ensure that you're not paying more tax than necessary. You pay tax on those distributions in the year in which you receive them. But if you don’t keep good records, you could end up paying tax on those distributions again when you sell. For example, say you bought 1,000 shares of a fund for your taxable account at the end of 2011; you paid $18 per share for a total of $18,000. In 2012, with the share price still at $18, the fund made a dividend distribution of $0.50 per share, or $500 for your 1,000 shares. You'd owe tax on the $500 on your 2012 taxes, whether you reinvested the money or took the cash in hand. (The taxes would be deferred if you held the fund in a tax-sheltered account). If you reinvested the money in the fund, you’d now own 1,027.78 shares: your original 1,000 plus the nearly 28 additional shares that you were able to buy (at $18) with the $500 dividend distribution. If you sell now, with the fund's net asset value at $20, you’d think you’d owe taxes on your $2,555.56 profit ($20,555.56 minus $18,000), right? Wrong. You would only owe taxes on $2,055.56 ($20,555.56 minus $18,000 minus $500). Otherwise, the $500 dividends would be taxed twice. Investments are subject to risk of principal and risk of loss. Dividends are not guaranteed. Retirement accounts are tax-deferred vehicles designed for retirement savings. Any withdrawals of earnings will be subject to ordinary income tax and, if taken prior to age 59½, may be subject to a 10% federal tax penalty. This should not be considered tax or financial planning advice. Please consult a tax and/or financial professional for advice specific to your individual circumstances.

source: Morningstar 2013

Market Week: May 13, 2013

The Markets And the beat goes on: Amid a week that was relatively light on economic influence, equity markets continued to set new records (except the Nasdaq, which still has a long way to go). The Dow, S&P 500, Nasdaq, and Russell 2000 all appear poised to reach the midyear point nearing or above a 15% gain, while the Global Dow is not far behind. Will the breakneck pace continue? While no one can say for sure, there is certainly no dearth of opinion on the matter. Stay tuned.

Market/Index 2012 Close Prior Week As of 5/10 Week Change YTD Change DJIA 13104.14 14973.96 15118.49 0.97% 15.37% Nasdaq 3019.51 3378.63 3436.58 1.72% 13.81% S&P 500 1426.19 1614.42 1633.70 1.19% 14.55% Russell 2000 849.35 954.42 975.16 2.17% 14.81% Global Dow 1995.96 2189.49 2209.77 0.93% 10.71% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.78% 1.90% 12 bps 12 bps Equities data reflect price changes, not total return. Last Week's Headlines The U.S. monthly budget surplus reached a level not seen in five years in April, the Treasury Department said on Friday. The higher-than-anticipated $113 billion surplus is due largely to record high tax receipts. Although April surpluses are not unusual due to the month's income-tax-filing deadline, this year's figure was almost double the surplus recorded in April 2012. The number of Americans filing new claims for unemployment insurance fell to its lowest weekly level in more than five years to 323,000, said the U.S. Labor Department. The four-week moving average was 336,750. Both figures were below the 350,000 benchmark that economists consider indicative of an improving job market. The nearly $8 billion in new debt that American consumers incurred in March was almost half the previous month's $18.6 billion increase, according to the Federal Reserve. Most of the borrowing increase was for major purchases such as cars or education, while revolving credit such as credit card debt fell at an annual rate of 2.4%. The dollar surpassed the noteworthy benchmark of ¥100 for the first time in more than four years on Thursday, fueling a Friday rally in the Japanese stock market and gains in the dollar versus other currencies. The surge was likely due to positive U.S. economic data combined with last month's moves by Japan's central bank to stimulate growth in that country. During a speech at a Fed conference in Chicago, Fed Chairman Ben Bernanke said that U.S. banks could face even more stringent regulation in the future. Indicating that there is still some concern about large, interconnected financial institutions being "too big to fail," Bernanke said that banks may face higher capital requirements intended to encourage them to reduce their complexity. For the first time, the Securities and Exchange Commission charged a local municipality of allegedly misleading investors in its municipal bonds. Harrisburg, PA settled the suit, and no criminal charges were filed against any individuals. The suit charged that city officials failed to fully disclose problems with its finances from 2009 to 2011--for example, a downgrade of the city's credit rating--after bonds were issued. Eye on the Week Ahead With earnings season coming to a close, investors may turn their attention to the flood of manufacturing-related data this week. And given the recent records in equities prices, options expiration at week's end could be accompanied by some volatility. Key dates and data releases: retail sales, business inventories (5/13); import/export prices (5/14); wholesale prices, industrial production, Empire State manufacturing survey, international capital flows (5/15); consumer prices, housing starts, Philly Fed manufacturing survey (5/16); leading economic indicators, options expiration (5/17). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Social Security for the Self-Employed

If you thought that running a successful business on your own was hard enough already, think again. As a self-employed individual, defined by the IRS as someone who operates a trade, business or profession, (either by yourself or as a partner), you are required to pay self-employment tax as well as income tax. Self-employment tax consists of Social Security and Medicare taxes, similar to those withheld from the pay of most wage earners.  Failure to comply with IRS regulations may result in your business operations being jeopardized. The following are a few key facts to keep in mind:

1. The Social Security tax rate for 2013 is 15.3% on self-employment income up to $113,700. Should your net earnings exceed $113,700, you continue to pay only the Medicare portion of the Social Security tax, which is 2.9%. Starting this year, the Medicare tax rate for net earnings in excess of $200,000 ($250,000 for joint filers) is increased to 3.8%.

2. You need to have worked and paid Social Security taxes for a certain length of time to get Social Security benefits (no more than 10 years of work, which is equivalent to 40 credits). In 2013, if your net earnings are $4,640 or more, you earn the yearly maximum of four credits. If your net earnings are less than $4,640, you could still earn credit (depending on how you report your earnings).

3. Certain income does not count for Social Security and should not be included in figuring your net earnings. These include dividends from shares of stocks and interest on bonds, interest from loans, rentals from real estate, and income received from limited partnerships.

Tax law is ever-changing and can be quite complex. It is highly recommended that you consult with a financial or tax professional with any tax-related questions or concerns.

source: Morningstar 2013

Market Week: May 6, 2013

The Markets Records were made to be broken: Despite some volatility, generally positive earnings reports and a better-than-expected employment picture helped equities continue to power upward. The jobs report sent the S&P 500 to a new record close above 1,600 on Friday. The Dow industrials briefly topped 15,000 but couldn't quite hang on to that gain, though it also ended the week at a record level. And for a change, the tech sector helped the Nasdaq take the lead for the week.

Market/Index 2012 Close Prior Week As of 5/3 Week Change YTD Change DJIA 13104.14 14712.55 14973.96 1.78% 14.27% Nasdaq 3019.51 3279.26 3378.63 3.03% 11.89% S&P 500 1426.19 1582.24 1614.42 2.03% 13.20% Russell 2000 849.35 935.25 954.42 2.05% 12.37% Global Dow 1995.96 2151.66 2189.49 1.76% 9.70% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.70% 1.78% 8 bps 0 bps Equities data reflect price changes, not total return. Last Week's Headlines The unemployment rate continued to inch downward in April. The 165,000 new jobs created during the month cut the unemployment rate to 7.5%--the lowest level since December 2008--and the February and March new jobs figures were revised upward. The loss of 11,000 government jobs partly offset the private sector's 176,000 new jobs, where the biggest gains were in professional/business services, leisure and hospitality, and education. Americans' incomes rose in March, but the extra money didn't stay in bank accounts for long. Both personal incomes and consumer spending were up 0.2% for the month, according to the Bureau of Economic Analysis. The rise in spending was the smallest in three months, and higher utility bills caused by unseasonably cold weather were responsible for part of the increase. The savings rate remained at 2.7% of income for a second month. As expected, the Fed will continue its bond purchases, though it may increase or decrease the amount depending on economic performance. The Fed's statement also blamed current tax and spending policies for restrained economic growth. Meanwhile, as eurozone unemployment hit a record 12.1%, the European Central Bank will attempt to stimulate the contracting economy there by cutting its key interest rate to 0.5%, and ECB President Mario Draghi hinted that it might go still further. A 0.3% increase in home prices during February helped put prices in 20 cities measured by the S&P/Case-Shiller index 9.3% higher than a year earlier. It was the second straight month of year-over-year increases in all 20 cities. U.S. manufacturing slowed for the fifth straight month, according to the Institute for Supply Management. The ISM's gauge of manufacturing activity hit 50.7%; though that still indicates growth, slipping below 50% would represent contraction. Meanwhile, the ISM's services index also showed slowing growth as it hit 53.1%. A 48% drop in the volatile nondefense aircraft sector helped cut new factory orders for manufactured goods by 4% in March, according to the Commerce Department. The U.S. trade deficit fell by 11% in March, its second major decline in four months. While exports were down, they fell less than imports, especially imports of consumer goods. However, part of the decline in imports may be tied to the Chinese lunar new year holiday and could be temporary. The Treasury Department said reduced federal spending and higher tax receipts, in part from seasonal income tax filings, will enable it to pay off $35 billion in bonds this quarter. It's the first such payment on the national debt in six years, and could help delay another battle over the debt ceiling, though the reduction is seen as temporary. Construction spending fell 1.7% in March, according to the Commerce Department, though it was still almost 5% higher than a year earlier. Private construction was down slightly, by 0.6%, but public construction fell 4.1% during the month. Eye on the Week Ahead In a week that's practically bereft of economic data, investors may focus on the few earnings reports that are left, since there will be little else to guide them in trying to assess the chances of equities continuing their spectacular run. The G8 nations are scheduled to meet Friday, and demand at two U.S. Treasury auctions will be watched. Key dates and data releases: consumer credit use (5/7); 10-year Treasury note auction (5/8); 30-year Treasury bond auction (5/9). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Month: April 2013

The Markets Despite some bumps along the way, both the S&P 500 and the Dow industrials soared to new all-time records, and the Nasdaq set a new closing high for the year. The Dow followed its best week of 2013 with its worst week of 2013, while the S&P surpassed its previous record close on the last day of the month. The small caps of the Russell 2000 saw their worst week since June 2012, which contributed to the index's first monthly loss since October. The announcement of fresh monetary stimulus in Japan and hints that the eurozone might begin to refocus on growth as well as austerity helped the Global Dow beat the domestic indices decisively, though it continued to lag them for the year. A one-day loss of $140 an ounce sent gold to lows not seen since early 2011, though it subsequently regained more than half of the month's loss to end at almost $1,470 an ounce. Silver also lost roughly 14% during the month, while oil prices fell below $90 a barrel. Demand for Treasuries sent the 10-year yield down as prices rose. Market/Index 2012 Close Prior Month As of 4/30 Month Change YTD Change DJIA 13104.14 14578.54 14839.80 1.79% 13.25% Nasdaq 3019.51 3267.52 3328.79 1.88% 10.24% S&P 500 1426.19 1569.19 1597.57 1.81% 12.02% Russell 2000 849.35 951.54 947.46 -.43% 11.55% Global Dow 1995.96 2108.55 2178.44 3.31% 9.14% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.87% 1.70% -17 bps -8 bps Equities data reflect price changes, not total return.

The Month in Review The U.S. economy grew 2.5% during the first quarter of 2013, according to the Bureau of Economic Analysis. However, that pace was weaker than expected, and growth for the previous quarter was revised downward to a paltry 0.4%. Gains in consumer spending, business inventories and capital investments, exports, and residential investment were partly offset by lower exports and government spending cuts at federal, state, and local levels. The unemployment rate fell slightly to 7.6%, according to the Bureau of Labor Statistics' April report for March. However, the 88,000 new jobs represented the slowest job growth in almost a year, and much of the decline in the unemployment rate resulted from half a million people leaving the workforce. The housing market continued to be a cornerstone of economic recovery. The 20 cities of the S&P/Case-Shiller index saw home prices that were 9.3% higher than a year earlier. New home sales were up 1.5% in March, and 18.5% higher than the same time last year, according to the Commerce Department. The National Association of Realtors® said sales of existing homes were up 10.3% from a year ago, though tight inventories cut sales by 0.6% for the month. And a 7% increase for the month put new residential construction at its highest level since 2008; the Commerce Department said that's almost 47% higher than a year earlier. Lower energy costs after a sharp run-up the month before helped cut inflation at both the consumer and wholesale levels. The Bureau of Labor Statistics said a 0.2% monthly decline cut the annual consumer inflation rate to 1.5%. Wholesale prices were down 0.6% for the month, and the 1.1% year-over-year increase was the smallest since last July. Lower gas prices also affected U.S. retail sales, which the Commerce Department said were down 0.4% for the month but 2.8% higher than a year earlier. Consumer spending also rose 0.2% during the month, though it was the smallest increase in three months and higher utility bills were responsible for much of it. Manufacturing data was mixed. The Fed said Q1 industrial production saw its biggest gain in a year. However, the Empire State and Philly Fed manufacturing surveys saw monthly declines, and the Institute for Supply Management found growth slowing in both the manufacturing and services sectors. Also, the Commerce Department said a drop in spending on commercial aircraft cut durable goods orders 5.7%; it was the second monthly dip in three months. The Bank of Japan announced a massive expansion of its quantitative easing efforts to try to drag the country out of the deflation that has plagued it for years. Meanwhile, there were signals that Europe might be easing its push for austerity as Ireland, Portugal, and Spain were granted more time to meet deficit reduction targets. The Chinese economy showed weaker-than-expected growth during the first quarter. According to China's National Bureau of Statistics, gross domestic product rose 7.7% rather than the 7.9% the quarter before. Eye on the Month Ahead The equities rally could face a challenge from any "sell in May, go away" sentiment and/or potential economic fallout from the sequester's budget cuts. Any fresh clarity from the Fed about the timing of quantitative easing's end also could have an impact. Key dates and data releases: FOMC announcement, U.S. manufacturing, construction spending, auto sales (5/1); balance of trade, business productivity/labor costs (5/2); unemployment/payrolls, U.S. services sector, factory orders (5/3); retail sales, business inventories (5/13); import/export prices (5/14); wholesale prices, industrial production, Empire State manufacturing survey, international capital flows (5/15); consumer prices, housing starts, Philly Fed manufacturing survey (5/16); leading economic indicators, options expiration (5/17); home resales, FOMC minutes (5/22); new home sales (5/23); durable goods orders (5/24); home prices, Dallas Fed manufacturing survey (5/28); revised estimate of Q1 GDP (5/30); personal income/spending (5/31). Data sources for non-equities performance: U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflects price changes, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: April 29, 2013

The Markets Despite major technological snafus and mixed economic data, stocks ended the week higher. Tuesday afternoon, domestic equities tumbled briefly, but dramatically, when hackers infiltrated the Associated Press's Twitter account and sent out a false report of explosions at the White House that injured the president. Although markets recovered within minutes following clear evidence that the tweet was false, the incident prompted many to ponder social media's power in influencing market movements. Two days later, Chicago Board Options Exchange traders were frustrated by computer glitches that shut down trading for several hours. Releases announcing gross domestic product (GDP), existing home sales, and durable goods orders all proved disappointing, while an increase in new home sales indicated continuing strength. On a percentage basis, technology, small caps, and global stocks led the week's gains.

Market/Index 2012 Close Prior Week As of 4/26 Week Change YTD Change DJIA 13104.14 14547.51 14712.55 1.13% 12.27% Nasdaq 3019.51 3206.06 3279.26 2.28% 8.60% S&P 500 1426.19 1555.25 1582.24 1.74% 10.94% Russell 2000 849.35 912.50 935.25 2.49% 10.11% Global Dow 1995.96 2097.42 2151.66 2.59% 7.80% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.73% 1.70% -3 bps -8 bps Equities data reflect price changes, not total return. Last Week's Headlines In Friday's initial estimate, the Bureau of Economic Analysis reported that GDP posted a weaker-than-expected 2.5% uptick in the first quarter. Personal consumption expenditures, private inventory investment, exports, residential investment, and nonresidential fixed investment all contributed positively. These gains were partially offset by dips in government spending at federal, state, and local levels. Imports increased during the quarter as well. The finalized GDP figure for Q4 2012 was a paltry 0.4%. The National Association of Realtors® released existing home sales data that showed a slight slip from February's figures, which the organization attributed to tight inventory that is also helping to increase prices. Sales declined 0.6% to a seasonally adjusted 4.92 million in March, down from 4.95 million in February. However, March sales figures were up 10.3% year over year, marking the 21st consecutive month of sales increases. Prices have been rising for 13 consecutive months. New home sales rose 1.5% in March to a seasonally adjusted rate of 417,000, according to the Census Bureau and the Department of Housing and Urban Development. This rate is 18.5% higher than the March 2012 figures. The Census Bureau also reported that durable goods orders dropped 5.7% in March, following a rise of 4.3% in February. The March decline was the second monthly dip in three months. Transportation equipment, specifically nondefense aircraft and parts, led the decline. Weary air travelers grew even wearier last week as sequester cuts forced the Federal Aviation Administration to begin implementing furloughs among air traffic controllers. By week's end, the public outcry over the ever-increasing travel delays reached Capitol Hill, and both the Senate and House passed legislation providing budgeting flexibility to the FAA. President Obama signed the bill into law on Friday, and by Sunday work schedules were expected to be back to normal. European Commission President Jose Manuel Barroso indicated he believed the continent's austerity measures may have reached their limit, as Spain joined the list of countries needing more time to meet their targets. Indicating that it needed an additional two years to meet its deficit numbers, the Spanish government unveiled a series of reform measures designed to stimulate the country's economy. Eye on the Week Ahead Next week's home prices data may provide further indication of the impact tight inventories are having on price levels. We'll also hear from the Fed and get fresh unemployment data. Key dates and data releases: personal income/spending (4/29); home prices (4/30); FOMC announcement, U.S. manufacturing, construction spending, auto sales (5/1); balance of trade, business productivity/labor costs (5/2); unemployment/payrolls, U.S. services sector, factory orders (5/3). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

The Tax Impact of a 529 Rollover

Thirty-four states offer some sort of tax deduction or tax credit for contributions made to a 529 plan. But in 29 of those 34 states, the tax break is available only for contributions made to an in-state plan. Only Arizona, Kansas, Maine, Missouri, and Pennsylvania give residents a tax break for contributing to any state's plan. If you own an out-of-state 529 plan, you may be missing out on this tax break advantage, and it may be worthwhile to do some research and consider rolling your out-of-state plan to an in-state one. The tax break can be a real plus, but the quality of the 529 plan (its investment options and fees, in particular) is important, too. If you've already opened an out-of-state 529 plan a while ago, you may want to revisit that decision because 529 plans can change over time. If your state now offers a better plan, check with the plan or a tax professional to see if there are tax advantages to rolling funds over. Many states do not provide a tax break for inbound 529 rollovers, but some do. States that do may limit deductions to just the contribution portion of the out-of-state 529 or let you deduct the entire amount including earnings. 529 plans are tax-deferred college savings vehicles. Any unqualified distribution of earnings will be subject to ordinary income tax and subject to a 10% federal penalty tax. An investor should consider the investment objectives, risks, and charges and expenses associated with municipal fund securities before investing. More information about municipal fund securities is available in the issuer's official statement, and the official statement should be read carefully before investing. Tax law is ever-changing and can be quite complex. It is highly recommended that you consult with a legal, tax, or financial professional with any questions or concerns. source:  Morningstar 2013

Market Week: April 22, 2013

The Markets It was a tumultuous week, though the volatility of financial markets paled in comparison to the tragedies in Boston and at a Texas fertilizer plant. Domestic equities made an attempt to recover from Monday's 266-point collapse in the Dow industrials, but quickly reversed any progress, giving the Dow its worst week in almost a year. Gold followed up on the previous Friday's fiasco by plunging $140 an ounce on Monday; the more than 9% loss cut the spot price to $1,360, which hasn't been seen since early 2011. Weak inflation data contributed to a weak auction of five-year Treasury Inflation Protected Securities (TIPS), which in turn helped spur selling of TIPS generally. Finally, oil prices hit a four-month low of $88 on reduced demand.

Market/Index 2012 Close Prior Week As of 4/19 Week Change YTD Change DJIA 13104.14 14865.06 14547.51 -2.14% 11.01% Nasdaq 3019.51 3294.95 3206.06 -2.70% 6.18% S&P 500 1426.19 1588.85 1555.25 -2.11% 9.05% Russell 2000 849.35 942.85 912.50 -3.22% 7.44% Global Dow 1995.96 2146.27 2097.42 -2.28% 5.08% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.75% 1.73% -2 bps -5 bps Equities data reflect price changes, not total return. Last Week's Headlines U.S. industrial production increased 0.4% in March, according to the Federal Reserve. As a result, output for the first quarter rose at an annual rate of 5%, its biggest gain in a year. Usage of the nation's manufacturing capacity also rose to 78.5%--1.2% higher than a year earlier, but still below its long-term average. However, both the Empire State and Philly Fed regional manufacturing surveys fell slightly in April. Housing starts hit their highest level since 2008 in March, fueled mostly by multi-unit construction. The Commerce Department said the 7% monthly increase helped push new residential construction almost 47% higher than last March. Building permits, an indicator of future activity, dropped almost 4%, but were still more than 17% higher than a year ago. Lower gas prices in March continued to lower the consumer inflation rate. The Consumer Price Index fell 0.2%, largely because of a 2.6% decline in energy costs. The Bureau of Labor Statistics said that put inflation for the last 12 months at 1.5%. The Chinese economy showed weaker-than-expected growth during the first quarter. According to China's National Bureau of Statistics, gross domestic product fell to 7.7% from 7.9% the quarter before. Eye on the Week Ahead The first peek at Q1 economic growth data could suggest whether a "sell in May, go away" mentality will challenge equities' strong year-to-date performance. Housing data also is on tap. Key dates and data releases: home resales (4/22); new home sales (4/23); durable goods orders (4/24); initial estimate of Q1 GDP (4/26). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: April 15, 2013

The Markets Despite a brief slide early on Friday, the Nasdaq and S&P 500 had their strongest week since the first of the year, and both the S&P and Dow industrials continued to set new all-time highs. Meanwhile, gold, which had been slipping for months, plummeted more than 4% on Friday into official bear market territory; it ended the week at roughly $1,500 an ounce, its lowest close in almost two years.

Market/Index 2012 Close Prior Week As of 4/12 Week Change YTD Change DJIA 13104.14 14565.25 14865.06 2.06% 13.44% Nasdaq 3019.51 3203.86 3294.95 2.84% 9.12% S&P 500 1426.19 1553.28 1588.85 2.29% 11.41% Russell 2000 849.35 923.28 942.85 2.12% 11.01% Global Dow 1995.96 2077.92 2146.27 3.29% 7.53% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.72% 1.75% 3 bps -3 bps Equities data reflect price changes, not total return. Last Week's Headlines President Obama submitted a controversial $3.8 trillion budget proposal for 2014 that the White House said would reduce the national deficit by more than $1.8 trillion over the next 10 years. That estimate would not include existing deficit reduction measures, some of which could be replaced by new budget provisions. Some of the proposals most likely to provoke debate include a change in the way Social Security and other government payments are adjusted for inflation; cuts in payments to Medicare providers; a roughly $3 million limit on tax-deferred retirement savings account balances; a 28% cap on tax deductions/exclusions for higher-income households; a requirement that households with incomes over $1 million pay at least 30% of their income (after charitable giving) in taxes; business tax credits for hiring new employees and offering retirement savings plans; a higher top estate tax rate and lower estate tax and gift tax exclusions beginning in 2018; a change in the tax treatment of carried interest; and additional spending on infrastructure projects, education, and research. Minutes of the most recent Federal Open Market Committee meeting showed that members continue to debate how long the Fed's monthly bond purchases should continue. The minutes were released early after it was learned that the minutes had been distributed the day before to some congressional employees and many top Wall Street firms. A 3.4% drop in energy costs after a sharp run-up the month before helped cut inflation at the wholesale level by 0.6% in March, according to the Bureau of Labor Statistics. However, not including food and energy prices, which can change greatly from month to month, wholesale prices rose 0.2%. A decline in gas prices also helped lower retail sales, which fell 0.4% in March. The Commerce Department said spending at gas stations was down 2.2%; electronics and general merchandise also took a hit. However, overall sales were still 2.8% higher than last March. European finance ministers agreed to let Ireland and Portugal take seven extra years to repay their bailout loans despite a Portuguese court's recent rejection of some of the government's proposed austerity measures. Meanwhile, the head of the Bank of Japan said that recent quantitative easing measures there could last longer than the scheduled two years if necessary. Eye on the Week Ahead As earnings season moves into high gear, several key financial and tech companies will release reports. Manufacturing and housing data also are on tap. Investors in precious metals also will watch anxiously for any sign of a halt to gold's sharp selloff. Key dates and data releases: international capital flows, Empire State manufacturing survey (4/15); consumer inflation, housing starts, industrial production (4/16); Fed "beige book" report (4/17); Philadelphia Fed manufacturing survey (4/18); options expiration (4/19). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: April 8, 2013

The Markets The Dow industrials and the S&P 500 set new record closing highs on Tuesday. Unfortunately, it was mostly downhill after that as investors looking for a reason to take profits found them in a disappointing jobs report, fresh geopolitical tension, and mixed manufacturing data. Domestic equities went into an early tailspin on Friday, though they had recovered most of their losses by the close. However, the small caps had their worst week since June. The renewed anxiety sent the benchmark 10-year Treasury yield to its lowest level since December as demand drove prices up.

Market/Index 2012 Close Prior Week As of 4/5 Week Change YTD Change DJIA 13104.14 14578.54 14565.25 -.09% 11.15% Nasdaq 3019.51 3267.52 3203.86 -1.95% 6.11% S&P 500 1426.19 1569.19 1553.28 -1.01% 8.91% Russell 2000 849.35 951.54 923.28 -2.97% 8.70% Global Dow 1995.96 2108.55 2077.92 -1.45% 4.11% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.87% 1.72% -15 bps -6 bps Equities data reflect price changes, not total return. Last Week's Headlines The U.S. unemployment rate fell slightly to 7.6% in March, but that wasn't a reason to celebrate. The 88,000 new jobs created represented the slowest job growth in almost a year, and the drop in the unemployment rate was largely the result of roughly half a million people leaving the workforce. Meanwhile, the European statistical agency said the eurozone's 12% unemployment rate was the highest since record-keeping began in 1995. U.S. manufacturing grew more slowly in March; the Institute for Supply Management's index fell almost 3 points to 51.3% (any figure above 50% indicates growth). Commerce Department figures showed February factory orders up 3%, driven largely by orders for commercial aircraft; excluding transportation-related orders, new orders were up just 0.3%. The ISM's gauge also showed slowing growth in the services sector as the index fell from 56% to 54.4% in March. The business production and new orders components of the index fell even more, dropping 5.4% and 6.4% respectively. Construction spending continued to provide some good news; the Commerce Department said construction spending was up 1.2% in February, with private construction responsible for most of the increase. February's figure also is nearly 8% higher than the previous February's. The Bank of Japan under its new governor announced a massive expansion of its quantitative easing efforts to try to push the country out of the deflation that has plagued it for years and toward a 2% annual inflation target. The BOJ will inject money into the country's financial system by doubling its purchases of Japan's sovereign bonds over the next two years. Meanwhile, the European Central Bank left interest rates unchanged. Higher exports helped shrink the U.S. trade deficit in February by 3.5%, from $44.5 billion to $43 billion. Eye on the Week Ahead The Q1 earnings season, which unofficially kicks off with Alcoa's report after Monday's close, will give investors something to focus on other than economic data. Reports will be watched not only for earnings but for management guidance about future prospects in light of tax increases and federal budget cuts. Minutes of the Federal Open Market Committee's most recent meeting will be parsed for smoke signals about the future of quantitative easing, while retail sales will suggest the state of the consumer economy. Key dates and data releases: FOMC minutes (4/10); wholesale inflation, retail sales (4/12). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: April 1, 2013

The Markets Domestic equities returned to their winning ways after the previous week's downdraft. The S&P 500 finally squeaked past its October 2007 closing high, setting a new record close--by four points--on the quarter's last trading day.

Market/Index 2012 Close Prior Week As of 3/29 Week Change YTD Change DJIA 13104.14 14512.03 14578.54 .46% 11.25% Nasdaq 3019.51 3245.00 3267.52 .69% 8.21% S&P 500 1426.19 1556.89 1569.19 .79% 10.03% Russell 2000 849.35 946.27 951.54 .56% 12.03% Global Dow 1995.96 2118.34 2108.55 -.46% 5.64% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.93% 1.87% -6 bps 9 bps Equities data reflect price changes, not total return. Last Week's Headlines Durable goods orders leaped 5.7% in February, but the Commerce Department said a big part of the reason was that new orders for commercial aircraft were almost double those of the month before. Not including transportation, orders for durable goods actually fell 0.5%; it was the first such decline in six months. Business spending on capital goods was up 10%. Home prices in 20 U.S. cities measured by the S&P/Case-Shiller index were up 0.1% in January, putting them 8.1% higher than last January. Phoenix--one of the markets hit hardest by the housing bust--saw the biggest yearly increase (23%). All 20 cities had year-over-year price increases, and in all but one, those increases were accelerating. However, that still leaves the average home price where it was almost 10 years ago. Following the strongest month of new home sales since September 2008, the pace slowed in February. However, the longer-term trend was positive. Though sales of new single-family homes were 4.6% lower than the month before, they were still up 12.3% from last February, according to the Department of Commerce. However, according to the foreclosure tracking firm RealtyTrac®, the inventory of homes in foreclosure during the first quarter was up 9% from Q1 2012 (though the number is almost a third lower than in December 2010). U.S. economic growth during 2012's final quarter slowed substantially. According to the Bureau of Economic Analysis, the 3.1% growth seen in the third quarter shrank to 0.4% in Q4, while corporate after-tax profits rose 3.3% during the quarter (though they were down 1.1% year-over-year). After a sharp decline in January caused by accelerated bonuses paid a month earlier, U.S. incomes rose 1.1% in February, according to the Bureau of Economic Analysis; even adjusted for inflation, incomes were up 0.7%. Spending also rose 0.7% during the month. The head of the eurozone finance ministers' group called the bailout agreement with Cyprus, which involved imposing a tax on large bank deposits, a "template" for managing future eurozone debt problems. The reference raised fears of a possible run on Cyprus's banks and potentially those of other troubled countries; those fears were partly responsible for a brief halt in the trading of Italian bank stocks. Cyprus's central bank said that 37.5% of deposits over €100,000 at the country's largest lender would be converted to special shares in the bank, while another 22.5% will be frozen in non-interest-bearing accounts while the country restructures its banking system. Eye on the Week Ahead As usual, Friday's unemployment report will be key; manufacturing, construction, and services data also are on tap. Japan's central bank will hold its first meeting under its new governor, and the European Central Bank's meeting will be of interest in light of the Cyprus situation. Key dates and data releases: U.S. manufacturing, construction spending, auto sales (4/1); factory orders (4/2); U.S. services sector (4/3); unemployment/payrolls, balance of trade (4/5). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: March 25, 2013

The Markets Global equities took a hit from uncertainty over Cyprus. Domestic equities fared better; though they slid much of the week, optimism about a possible bailout agreement led to a rally on Friday that left them down only slightly. Market/Index 2012 Close Prior Week As of 3/22 Week Change YTD Change DJIA 13104.14 14514.11 14512.03 -.01% 10.74% Nasdaq 3019.51 3249.07 3245.00 -.13% 7.47% S&P 500 1426.19 1560.69 1556.89 -.24% 9.16% Russell 2000 849.35 952.48 946.27 -.65% 11.41% Global Dow 1995.96 2142.93 2118.34 -1.15% 6.13% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 2.01% 1.93% -8 bps 15 bps Equities data reflect price changes, not total return. Last Week's Headlines In a bipartisan vote, Congress agreed to continue to fund the federal government through September, the end of the current fiscal year. The bill generally maintains the spending levels mandated by the sequester, but allows greater flexibility in how both defense and nondefense cuts will be implemented. Next up in the ongoing arm-wrestling over federal finances will be the issue of whether to raise the debt limit again sometime after May. After the Cypriot parliament rejected a tax on bank depositors as part of a bailout deal, the country reached a last-minute deal with its international lenders (known as the troika) to restructure the country's banks and impose a tax on deposits over €100,000 to help pay part of the country's debts. The agreement would enable Cyprus to qualify for €10 billion in financial assistance. Saying that economic gains have been modest, the Fed will continue its current level of bond purchases. However, the amounts may start to vary from month to month if the pace of improvement picks up. The Fed also will continue to maintain interest rates at current levels until the unemployment rate falls to 6.5% from its current 7.7%. Housing starts rose 0.8% in February, putting them almost 28% ahead of the same time last year. The Commerce Department also said building permits, an indicator of future activity, were up 4.6% for the month and almost 34% higher than last February. There was more good housing market news from the National Association of Realtors®, which said sales of existing homes were up 0.8% in February. It was the 12th straight month of year-over-year increases in sales, and the 20th month of year-over-year price increases. Eye on the Week Ahead The reaction of Russia--a major depositor in Cyprus's banks--to news of a bailout agreement will be of interest to global markets, while data on consumer spending and housing will suggest the state of the U.S. economy. Key dates and data releases: home prices, new home sales, durable goods orders (3/26); final Q4 2012 gross domestic product (3/28); personal income/spending (3/29). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: March 18, 2013

The Markets The S&P 500 came tantalizingly close to its all-time high but couldn't quite manage to top it. Meanwhile, the Dow's 10-day winning streak finally came to an end on Friday. Nevertheless, all four domestic indices pulled off a positive week, with the small caps of the Russell 2000 in the lead once again.

Market/Index 2012 Close Prior Week As of 3/15 Week Change YTD Change DJIA 13104.14 14397.07 14514.11 .81% 10.76% Nasdaq 3019.51 3244.37 3249.07 .14% 7.60% S&P 500 1426.19 1551.18 1560.69 .61% 9.43% Russell 2000 849.35 942.50 952.48 1.06% 12.14% Global Dow 1995.96 2127.81 2142.93 .71% 7.36% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 2.06% 2.01% 5 bps 23 bps Equities data reflect price changes, not total return. Last Week's Headlines A 9% spike in gas prices was largely responsible for pushing consumer inflation up by 0.7% in February; that's the biggest monthly increase since June 2009. The Commerce Department said consumer inflation has increased prices overall by 2% since February 2012. Not including food (up 0.1% because of higher produce costs) and energy, prices rose 0.2% during the month. Meanwhile, wholesale prices also were up 0.7%, for a 1.7% annual inflation rate. U.S. industrial production rose 0.7% in February as utility output returned to normal seasonal levels. The Federal Reserve said utilization of the nation's manufacturing capacity rose to almost 80%, only slightly below its long-term average. Consumer spending rose 1.1% in February--the biggest increase since September, according to the Commerce Department. Though increased spending at gas stations accounted for part of the increased spending, retail sales other than gas also were up 0.6%, according to the Commerce Department. Total spending was 4.6% higher than last February. Testimony at a U.S. Senate hearing showed that J.P. Morgan Chase failed to give regulators timely information about the scope of its 2012 losses on its "London Whale" trades in credit default swaps, which cost the bank billions. The hearings have fueled renewed discussion of the so-called Volcker rule, which would restrict banks' ability to make certain speculative investments. The International Monetary Fund said that though banks in the European Union have made progress in stabilizing themselves, they still face substantial risk from lending losses resulting from continued weakness in the EU economy. Meanwhile, the Federal Reserve agreed to allow 14 U.S. banks to increase dividends or repurchase shares, but expressed concerns about the plans of 4 others. The tiny island nation of Cyprus may be required to tax bank depositors in order to qualify for a €10 billion bailout of the country's banks by the European Union and the International Monetary Fund. The Cypriot parliament is scheduled to vote on the bailout package Tuesday when banks reopen after a three-day holiday. Eye on the Week Ahead Investors will be watching Tuesday's vote in Cyprus because of its potential for a ripple effect in global markets if a rejection of the bailout package destabilized the country's financial system. Wednesday's Federal Open Market Committee announcement is unlikely to call a halt to quantitative easing, but could review some of the options for doing so at some point. Key dates and data releases: housing starts (3/19); FOMC meeting (3/20); home resales (3/21). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: March 11, 2013

The Markets The Dow finally managed to put the last five-and-a-half years behind it on Tuesday when it surpassed its all-time high of October 2007. Once that milestone was reached, the Dow never looked back, setting fresh records every day for the rest of the week. Meanwhile, the broader S&P 500 was only about 14 points from its own previous high. As money poured into equities, demand for Treasuries fell, sending the 10-year yield soaring.

Market/Index 2012 Close Prior Week As of 3/8 Week Change YTD Change DJIA 13104.14 14089.66 14397.07 2.18% 9.87% Nasdaq 3019.51 3169.74 3244.37 2.35% 7.45% S&P 500 1426.19 1518.20 1551.18 2.17% 8.76% Russell 2000 849.35 914.73 942.50 3.04% 10.97% Global Dow 1995.96 2080.15 2127.81 2.29% 6.61% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.86% 2.06% 20 bps 28 bps Equities data reflect price changes, not total return. Last Week's Headlines The unemployment rate fell to 7.7% from 7.9% in February as the economy added 236,000 new jobs. However, according to the Bureau of Labor Statistics, more than 40% of those without jobs have been unemployed for at least six months, and counting people who are underemployed or who have at least temporarily stopped looking for work would put the unemployment rate at 14.3%. All job gains were in the private sector; governmental agencies cut 10,000 jobs. U.S. services companies grew faster in February than they have in a year, according to the Institute for Supply Management's index, which rose to 56% from 55.2% the month before. Coupled with last week's encouraging ISM manufacturing report, the growth helped temper concerns about the potential economic impact of recent increases in the payroll tax and gas prices. After higher oil exports helped cut the U.S. trade deficit in December to $38 billion--its lowest point in three years--an increase in oil imports helped pushed the deficit back up again in January to $44 billion. The Department of Commerce said exports overall were down $2.2 billion, while imports rose $4.1 billion. The Federal Reserve's "beige book" report showed either modest or moderate economic improvement in 10 of the Fed's 12 districts, with Boston and Chicago reporting slow growth. Anecdotal reports indicated that most districts saw improved consumer spending, strong auto sales, modest improvements in manufacturing and labor markets, increased housing sales, and minimal price and wage pressures. Increased exports gave China a $15.25 billion trade surplus in February, slightly less than in January. Chinese stocks took a tumble early in the week after the nation's governing body announced plans designed to curb speculation in China's soaring real estate market. Global status quo: The European Central Bank, the Bank of Japan, and the Bank of England all kept their monetary policies and interest rates unchanged. However, the Bank of Japan's chairman is scheduled to be replaced in April, and a change of leadership could mean fresh stimulus measures there. Americans worked 2.5% fewer hours in Q4 2012, according to the Commerce Department. That helped cut business productivity for the quarter at an annualized rate of 1.9%. However, productivity rose 0.5% between Q4 2011 and Q4 2012, and was up 0.7% for all of 2012. New orders at U.S. factories fell 2% in January. However, the Commerce Department said that non-transportation orders were up 1.3%, while business inventories rose for the 15th time in the last 16 months. All but one of 18 bank holding companies passed the Federal Reserve's most recent stress tests, designed to see how well the banks would cope with extreme economic conditions. Only auto lender Ally Financial fell below the required minimum capital level under the Fed's scenarios. This is the third year such tests have been conducted, but the first under Dodd-Frank guidelines. Eye on the Week Ahead Investors will be anxious to see if the Dow's winning streak will continue, and whether the S&P 500 will join it in record territory. Retail sales will be of interest, while quadruple witching options expiration could increase volatility. Key dates and data releases: retail sales (3/13); wholesale inflation (3/14); consumer inflation, industrial production, quadruple witching options expiration (3/15). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Understanding "Sequestration"

If you like political drama, you're in luck. It seems like just yesterday the news was filled with references to the fiscal cliff. Now, coming to theaters everywhere, is "sequestration." Look for more political confrontation to unfold as sequestration gets under way.

"Sequestration" refers to a series of automatic, across-the-board spending cuts to federal government agencies that are scheduled to take place in fiscal years 2013 through 2021. The cuts, totaling $1.2 trillion, will be split evenly between defense and domestic discretionary spending. The cuts are effective March 1. (The cuts were originally scheduled to take effect January 1 but were postponed to March 1 as part of the last-minute fiscal cliff deal reached on New Year's Day.)

Sequestration was created from the August 2011 standoff over the U.S. debt ceiling. In conjunction with agreeing to raise the debt ceiling (which allowed the U.S. Treasury to pay its monetary obligations and avoid a default), Congress imposed approximately $2 trillion worth of spending cuts--$1 trillion that was spelled out in the debt ceiling bill (the Budget Control Act of 2011) and another approximately $1 trillion that would be implemented through sequestration--a broad, across-the-board series of default spending cuts that would take effect beginning in 2013.

The idea was that sequestration would be a measure of last resort, and that Congress could act to replace the sequestration cuts with an equal amount of alternate spending reductions. Indeed, the Budget Control Act of 2011 created a deficit reduction "supercommittee" that was charged with reaching consensus on additional budget cuts that would avoid sequestration. The supercommittee failed, paving the way for sequestration to take effect.

The automatic cuts are effective March 1, 2013. From 2013 through 2021, sequestration is scheduled to cut $1.2 trillion from government agencies, split evenly between defense and domestic programs. More than $500 billion is scheduled to be cut from the Defense Department and other national security agencies. The remaining cuts will affect a variety of domestic programs, including education, public safety, energy, national parks, food inspections, housing aid, transportation, and law enforcement.

Social Security, Medicaid, and Medicare benefits are exempt from sequestration. Although cuts to Medicare provider payments are on the table, they can't exceed 2% of current payments.

In 2013, the cuts will total $85 billion (sequestration originally called for approximately $109 billion in cuts this year, but the American Taxpayer Relief Act of 2012 reduced the required cuts by $24 billion). The Congressional Budget Office estimates that in 2013, funds for defense spending (other than spending for military personnel) will be cut by about 8%, and nondefense spending subject to automatic reductions will be cut by between 5% and 6%. (Source: Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2013 to 2023, February 2013)

 

You may have heard a great deal about what's going to happen as a result of the sequester, and much of it has likely been alarming. It's important to understand, though, that the government will not be shutting down. In fact, while it's hard to know exactly how things will play out as the cuts are implemented, most individuals are probably not going to notice a significant, immediate effect. Federal agencies will notify employees of possible furloughs, and the Defense Department will do the same with civilian employees, but those furloughs likely won't take effect for at least a month. In addition to potential layoffs and furloughs, individual agencies will begin announcing and implementing other cost-saving measures.

While it hasn't received the same level of attention as sequestration, there's another problem rapidly approaching--the government is running out of money again. Federal funding for the current fiscal year expires on March 27, 2013. Unless Congress authorizes additional funding, a partial government shutdown would result.

In addition, a few months later, expect another debt ceiling debate. The federal government reached its $16.394 trillion debt ceiling limit at the end of 2012. Congress subsequently suspended the debt ceiling limit until May 19, 2013, and although the U.S. Treasury has some ability to continue operations beyond that date, at some point the debt ceiling debate will need to be addressed. Thus, it's conceivable that any short-term agreement on sequestration would include provisions that address these deadlines as well.

Market Week: February 25, 2013

The Markets Equities spent Friday trying to recover from downdrafts earlier in the week. The Dow industrials managed to squeak back to 14,000, but the other domestic indices reacted more strongly to Fed discussions of how to wind down its bond-buying program. It was the first down week for the S&P 500 so far this year.

Market/Index 2012 Close Prior Week As of 2/22 Week Change YTD Change DJIA 13104.14 13981.76 14000.57 .13% 6.84% Nasdaq 3019.51 3192.03 3161.82 -.95% 4.71% S&P 500 1426.19 1519.79 1515.60 -.28% 6.27% Russell 2000 849.35 923.15 916.15 -.76% 7.86% Global Dow 1995.96 2098.72 2086.49 -.58% 4.54% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 2.01% 1.97% -4 bps 19 bps Equities data reflect price changes, not total return. Last Week's Headlines Stay tuned: The March meeting of the Federal Open Market Committee will focus on when and how to wind down the Fed's purchases of $85 billion worth of bonds each month. Minutes of the most recent meeting suggested that committee members are divided on how to ease out of quantitative easing without disrupting the economy. Staff members will report on the potential impact of various options, including varying the size of bond purchases from meeting to meeting and selling existing holdings gradually. New residential home construction fell 8.5% in January, though housing starts were still 23.6% higher than in January 2012. The Commerce Department also said building permits for single-family homes were up 1.9% for the month, while permits for buildings with 5 or more units were up 1%. Wholesale prices were up 0.2% in January. The Bureau of Labor Statistics said roughly 75% of the increase could be accounted for by a 0.7% increase in food prices, especially the 39% jump in the cost of vegetables. The January figure put the wholesale inflation rate for the last 12 months at 1.4%. The BLS also said raw materials were up 0.8% for the month. Meanwhile, the BLS said consumer prices were unchanged in January; increases in housing and apparel costs offset a 1.7% drop in energy prices, leaving the annual inflation rate at 1.6%. The FBI said it is joining a Securities and Exchange Commission investigation of possible insider trading related to Berkshire Hathaway's recently announced intent to buy H.J. Heinz Co. A U.S. court approved continuation of an SEC-requested emergency freeze on assets in a Swiss trading account; the account's unidentified owner allegedly bought a substantial amount of Heinz call options the day before the acquisition plans were announced. Sales of existing homes were up 0.4% in January, and were more than 9% ahead of last January. The National Association of Realtors® said tight inventory helped drive the median price for home resales up 12.3% from January 2012; the number of homes for sale fell almost 5% during the month and was at its lowest level since April 2005. The NAR said the inventory shortage is beginning to create a seller's market in much of the country. The European Commission (the eurozone's executive body) forecast a 0.3% contraction in the eurozone during 2013, and only 0.1% growth for the entire European Union. However, the EC forecasts 1.6% EU growth in 2014, with 1.4% growth in the euro area. Eye on the Week Ahead A steady stream of economic data will likely be overshadowed by the approach of the sequestered budget cuts. Unless Congress surprises the country with a last-minute plan for avoiding them, the $85 billion in cuts for 2013 are scheduled to begin taking effect on Friday. Key dates and data releases: new home sales, home prices (2/26); durable goods orders (2/27); 2nd estimate of Q4 GDP (2/28); personal income/spending, U.S. manufacturing, construction spending (3/1). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: February 19, 2013

The Markets Equities markets generally spent a second week digesting January's strong gains. The Dow continued to flirt with the 14,000 mark, while neither the small-cap Russell 2000 nor the S&P 500 have had a negative week so far this year.

Market/Index 2012 Close Prior Week As of 2/15 Week Change YTD Change DJIA 13104.14 13992.97 13981.76 -.08% 6.70% Nasdaq 3019.51 3193.87 3192.03 -.06% 5.71% S&P 500 1426.19 1517.93 1519.79 .12% 6.56% Russell 2000 849.35 913.67 923.15 1.04% 8.69% Global Dow 1995.96 2110.62 2098.72 -.56% 5.15% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.99% 2.01% 2 bps 23 bps Equities data reflect price changes, not total return. Last Week's Headlines U.S. retail sales bumped up 0.1% in January, according to the Commerce Department. Excluding autos, which slipped 0.1%, the monthly increase was 0.2%, with nonstore retailers and general merchandise stores performing the best. The increase put overall retail sales, which are not adjusted for price changes, 4.4% ahead of last January. Optimism about the European Union's economy got a reality check when the region's statistics agency reported that the eurozone's GDP fell by 0.6% in the final quarter of 2012 and was 0.9% lower than a year earlier. For all of 2012, the eurozone's economy shrank 0.5%. U.S. industrial production was down slightly in January; the Federal Reserve said a 3.9% decline in auto manufacturing contributed to the 0.1% drop. However, industrial production was still 2.1% ahead of a year earlier, though it's still only at 98.6% of its 2007 average. The Group of Seven industrialized nations issued a joint statement saying that members' monetary policies should not devalue currencies simply to bolster an individual country's economy by encouraging exports. European leaders have expressed concern about a rising euro, and Japan recently increased bond-buying efforts that resemble the U.S. Federal Reserve's and that have reduced the yen's value. American Airlines and United agreed to merge, forming the largest airline in the world, and Berkshire Hathaway (in conjunction with a private equity firm) announced plans to acquire H.J. Heinz. Eye on the Week Ahead In a holiday-shortened week, minutes of the Federal Open Market Committee's most recent meeting could shed light on members' thinking about winding down the Fed's bond-buying activity. Housing and inflation data also are on tap. Key dates and data releases: wholesale inflation, housing starts, FOMC minutes (2/20); consumer inflation, home resales (2/21). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: February 11, 2013

The Markets After suffering its first triple-digit loss of the year on Monday, the Dow fought to hang on to the prior week's 14,000 level but in the end just couldn't manage to do so. The other domestic indices managed minimal gains, and the S&P 500 hit its highest level since November 2007. Meanwhile, the Global Dow was hampered by anxiety about rising Spanish and Italian bond yields.

Market/Index 2012 Close Prior Week As of 2/8 Week Change YTD Change DJIA 13104.14 14009.79 13992.97 -.12% 6.78% Nasdaq 3019.51 3179.10 3193.87 .46% 5.77% S&P 500 1426.19 1513.17 1517.93 .31% 6.43% Russell 2000 849.35 911.20 913.67 .27% 7.57% Global Dow 1995.96 2124.94 2110.62 -.68% 5.73% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 2.04% 1.99% -5 bps 21 bps Equities data reflect price changes, not total return. Last Week's Headlines The nonpartisan Congressional Budget Office said the annual U.S. budget deficit as a percentage of the economy will shrink in 2013 for the fourth year in a row. The estimated $845 billion deficit would be less than $1 trillion for the first time in five years, and represent only 5.3% of GDP--roughly half the ratio of 2009. The bad news? Without tax and spending changes, the CBO said that the total national debt will be at 77% of GDP in 10 years and growing, largely because of rising health-care costs for an aging population and interest payments on federal debt. The U.S. trade deficit shrank to its lowest point in almost three years as a result of record oil exports. According to the Commerce Department, the trade deficit fell more than 20% to $38.5 billion. The U.S. Treasury said it will launch its first new investment product in 15 years when it auctions floating-rate notes sometime in 2013. The Treasury also said it plans to increase issuance of Treasury Inflation-Protected Securities (TIPS) this year. New factory orders were up 1.8% in December, with an 11.7% jump in transportation-related orders leading the way, according to the Commerce Department. It's the third increase in factory orders in the last four months. The U.S. services sector grew at a slightly slower pace in January. The Institute for Supply Management's index registered 55.2% for the month. That's slightly lower than December's 55.7%, but any figure above 50% represents growth, and it's better than the 53.1% of the ISM's manufacturing index. The U.S. Justice Department filed suit against Standard & Poor's, charging that during the three years prior to October 2007, the ratings service deliberately inflated its ratings of certain mortgage-backed bonds because of its own business concerns. Bond yields for Spanish and Italian sovereign debt rose to 5.4% and 4.5% respectively after Spanish Prime Minister Mariano Rajoy's political party was accused of taking kickbacks and as polls showed new strength by former Prime Minister Silvio Berlusconi as Italy's February 24-25 elections get closer. Eye on the Week Ahead As earnings season winds down, the approaching March 1 deadline for implementation of the sequestered federal budget cuts may begin to get renewed investor attention. Retail sales may give insight into the consumer mindset. Key dates and data releases: retail sales, business inventories (2/13); industrial production, options expiration (2/15). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: February 4, 2013

The Markets A stream of strong earnings reports helped the Dow industrials end their fifth straight week of gains by closing above 14,000 for the first time since 2007. The Nasdaq's best week since the first of the year helped it close the gap with the other domestic indices, while the small-cap Russell 2000 continued to lead the pack.

Market/Index 2012 Close Prior Week As of 2/1 Week Change YTD Change DJIA 13104.14 13895.98 14009.79 .82% 6.91% Nasdaq 3019.51 3149.71 3179.10 .93% 5.29% S&P 500 1426.19 1502.96 1513.17 .68% 6.10% Russell 2000 849.35 905.24 911.20 .66% 7.28% Global Dow 1995.96 2115.30 2124.94 .45% 6.46% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.98% 2.04% 6 bps 26 bps Equities data reflect price changes, not total return. Last Week's Headlines Hampered in part by fiscal cliff fears and Superstorm Sandy, the U.S. economy slowed substantially in 2012's final quarter. According to the Commerce Department's initial estimate, gross domestic product contracted during the quarter at an annual rate of 0.1%. That's dramatically lower than Q3's 3.1% growth, and is the first quarter of contraction since Q2 2009. A 22% decline in defense spending, lower state/local government spending, and reduced inventories and exports were major contributors to the contraction. The initial GDP estimate is subject to two revisions over the next two months. Businesses added 157,000 new jobs in January, according to the Bureau of Labor Statistics, and the figures for November and December were revised upward. Unemployment edged upward slightly to 7.9%; it has stayed within one-tenth of a percentage point of that level since last September. Congress passed legislation that would temporarily suspend the debt ceiling until May without requiring spending cuts. However, lawmakers' paychecks would be withheld if their chamber of Congress doesn't pass a budget resolution by April 15. Durable goods orders leaped 4.6% in December, in part because orders for transportation equipment, which had declined for two months, soared 11.9%. The Commerce Department said new nondefense orders--an indicator of capital spending by businesses--also were up 3.8%. Durable goods orders have now risen in seven of the last eight months. U.S. manufacturing saw solid growth in January as the Institute for Supply Management's index rose almost 3 points to 53.1 (any figure over 50 represents expansion). The ISM said that was the index's highest level since April 2012. Going into the holiday season, home prices in the 20 cities measured by the S&P/Case-Shiller index fell 0.1% during November. They were 5.5% higher than a year earlier, though the average price nationally was still 30% below its 2007 peak. Personal income jumped 2.6% in December. However, according to the Commerce Department, much of the increase resulted from lump-sum Social Security benefits, the rebound from Superstorm Sandy, and companies accelerating payment of dividends and bonuses because of uncertainty about 2013 tax rates; otherwise, the increase would have been 0.4%. The personal savings rate was also up dramatically, rising from 4.1% of disposable income in November to 6.5% in December; that's the highest savings rate since 2009. Steady as she goes: The Federal Reserve Open Market Committee reaffirmed its plan to continue its bond purchases and keep interest rates at current levels until unemployment falls to 6.5%. Eye on the Week Ahead Data on factory orders will be watched to see if they confirm last week's encouraging manufacturing data. Also, the European Central Bank will meet on interest rates. Key dates and data releases: factory orders (2/4); U.S. services sector (2/5); labor productivity/costs (2/7); international trade (2/8). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

MARKET MONTH: JANUARY 2013

The Markets Off to a flying start: Domestic equities soared after Congress struck a fiscal cliff deal in the wee hours of the new year, and those who believe that January suggests something about the rest of 2013 were rejoicing. The Dow industrials haven't seen a January this good since 1989; the index is now just over 2% away from its pre-2008 high. The S&P 500 had its best January since 1997, and is roughly 4% from achieving a similar milestone. The Nasdaq was hampered in part by Apple's fall from favor but still had its best month since last August, while the small-cap Russell 2000 handily beat the large caps. And the Global Dow gained in a single month more than half of the 10.8% it earned in all of 2012. The renewed interest in equities cut into bond demand; the 10-year Treasury yield rose above 2% for the first time since last April. Oil prices rose almost 5% to more than $97 a barrel during the month, while the dollar lost roughly 1.5% against a basket of six foreign currencies. Despite some volatility, gold ended January at roughly $1,680, only slightly higher than it started.

Market/Index 2012 Close Prior Month As of 1/31 Month Change YTD Change DJIA 13104.14 13104.14 13860.58 5.77% 5.77% Nasdaq 3019.51 3019.51 3142.13 4.06% 4.06% S&P 500 1426.19 1426.19 1498.11 5.04% 5.04% Russell 2000 849.35 849.35 902.09 6.21% 6.21% Global Dow 1995.96 1995.96 2122.15 6.32% 6.32% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.78% 2.02% 24 bps 24 bps Equities data reflect price changes, not total return.     The Month in Review After passing legislation that avoided a plunge off the fiscal cliff, Congress began working on ways to avoid hitting the debt ceiling in February. Investors began assessing the impact of the American Tax Relief Act of 2012, which permanently extended most tax rates and added a new one, made capital gains rates permanent and added a new rate for the wealthiest taxpayers, postponed spending cuts, and extended certain tax provisions, either permanently or temporarily. By month's end, Congress had agreed to suspend the debt ceiling temporarily until May without requiring spending cuts, though lawmakers' paychecks would be withheld if their chamber of Congress doesn't pass a budget resolution by April 15. Hampered in part by fiscal cliff fears and Superstorm Sandy, the U.S. economy slowed substantially in 2012's final quarter. According to the initial estimate, gross domestic product contracted at an annual rate of 0.1%. That's dramatically lower than Q3's 3.1% growth, and is the first quarter of contraction since Q2 2009. A 22% decline in defense spending, lower state/local government spending, and reduced inventories and exports were major contributors to the contraction, according to the Commerce Department. The GDP figure is subject to two revisions over the next two months. The unemployment rate remained unchanged at 7.8%, according to the Bureau of Labor Statistics' January report for December 2012. The economy created 155,000 new jobs, roughly the same as its 2012 monthly average. As European unemployment hit a new record of 11.8%, the International Monetary Fund forecast 3.4% global growth in 2013 (2% in the United States and a 0.2% contraction in Europe). However, it also said a European recovery could push global growth to 4.1% the following year. As Treasury Secretary Timothy Geithner departed, President Obama nominated White House chief of staff Jacob Lew to replace him. He also chose former federal prosecutor Mary Jo White to head the Securities and Exchange Commission and renominated the acting head of the Consumer Financial Protection Bureau, Richard Cordray. Sales of both new and existing homes fell in December, though both were up substantially from the year before and long-term trends continued to improve. The Department of Commerce said new home sales were down 7.3% for the month, while the National Association of Realtors® saw a 1% drop in December's home resales. Home prices in the 20 cities measured by November's S&P/Case-Shiller index also fell 0.1%; though prices were 5.5% higher than a year earlier, the index was still 30% below the market's 2007 peak. Meanwhile, an $8.5 billion settlement with 10 mortgage servicers was expected to help speed review of a backlog of faulty mortgage foreclosures. Inflation remained tame at both the consumer and wholesale levels as falling gas prices helped offset increases in the cost of food and shelter. The Bureau of Labor Statistics said the annual consumer inflation rate for the last 12 months was 1.7%, while the wholesale rate was 1.3%. Retail sales rose 0.5% in December, in part because of strong auto sales, and were up 4.7% from a year earlier, according to the Commerce Department. Personal incomes jumped 2.6% in December, though one-time factors such as accelerated payment of corporate dividends and bonuses accounted for much of the increase. The personal savings rate also rose dramatically, going from 4.1% of disposable income in November to 6.5% in December; that's the highest savings rate since the spring of 2009. U.S. manufacturing bounced back from a November contraction. Industrial production was up 0.3% in December, and the Fed said it would have been higher if not for the weather. Also, the Institute for Supply Management's gauges of manufacturing and the services sector both showed continued expansion.     Eye on the Month Ahead With the threat of a February Treasury default averted, investors will now focus on the upcoming budget debates and the sequestered spending cuts now scheduled to take effect March 1. Economic data will suggest whether the economy will shake off Q4's slump, as will the remaining weeks of earnings season. Key dates and data releases: unemployment/payrolls, construction spending, U.S. manufacturing (2/1); factory orders (2/4); U.S. services sector (2/5); labor productivity/costs (2/7); international trade (2/8); retail sales, business inventories (2/13); industrial production, options expiration (2/15); wholesale inflation, housing starts, FOMC minutes (2/20); consumer inflation, home resales (2/21); new home sales, home prices (2/26); durable goods orders (2/27); 2nd estimate of Q4 GDP (2/28).     Data sources for non-equities performance: U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflects price changes, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: January 22, 2013

The Markets The bulls continued to dominate 2013, encouraged by Friday's reports of a proposal that could postpone a debt ceiling confrontation for three months. A report that Apple had cut iPhone parts orders helped nibble at the Nasdaq's performance, but the tech-heavy index managed to remain positive. The other three domestic indices did even better as the Dow hit a level not seen in just over five years.

Market/Index 2012 Close Prior Week As of 1/18 Week Change YTD Change DJIA 13104.14 13488.43 13649.70 1.20% 4.16% Nasdaq 3019.51 3125.63 3134.71 .29% 3.82% S&P 500 1426.19 1472.05 1485.98 .95% 4.19% Russell 2000 849.35 880.77 892.80 1.37% 5.12% Global Dow 1995.96 2075.84 2087.80 .58% 4.60% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.78% 1.89% 1.87% -2 bps 9 bps Equities data reflect price changes, not total return. Last Week's Headlines The Fed's "beige book" report for the end of 2012 showed all 12 Federal Reserve districts reporting either modest or moderate recovery and more consumer spending. Real estate activity expanded or held steady in 11 districts, but the report said manufacturing was mixed and weak job growth continues to stand in the way of a robust economic performance. Housing starts and building permits both hit their highest annual level since the summer of 2008, according to the Commerce Department's December figures. Housing starts--most of which were for single-family housing--were almost 37% ahead of last December, while building permits (an indicator of future construction) were almost 29% higher than a year ago. Falling gas prices helped offset increases in the cost of food and shelter in December, leaving the monthly inflation rate unchanged. The Bureau of Labor Statistics said the annual consumer inflation rate for the last 12 months was 1.7%, while December's 0.2% decline in prices at the wholesale level--the third monthly decline in a row--put last year's wholesale inflation rate at 1.3%. The fiscal cliff didn't stop Americans from spending in December. According to the Commerce Department, strong car sales helped increase December retail sales by 0.5%, and they were up 4.7% from December 2011. Auto sales rose 1.8%, while furniture and home furnishings stores saw a 1.4% increase. Industrial production was up 0.3% in December. The Federal Reserve said the figure would have been higher if not for reduced production by utilities in the wake of unseasonably warm weather during the month. Eye on the Week Ahead Given Apple's recent swoon and influence over the Nasdaq, its earnings report on Wednesday will be closely watched. Also on tap for the holiday-shortened week are housing and manufacturing data. Key dates and data releases: home resales (1/22); U.S. manufacturing (1/24); new home sales (1/25). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Annual Market Review 2012

Resilience in the face of adversity seemed to be the theme for 2012. Hurricanes that shuttered Wall Street for two days and cut oil production, the threat of a "Grexit" from the euro, Europe's record unemployment and second recession in four years, Chinese growth that hit a three-year low, and uncertainty about elections here and abroad--such formidable obstacles slowed the progress of the global economy but didn't bring it to its knees. Debt-related news out of Europe continued to play a major role in global bond and equities markets. Despite cracks in the French/German alliance, the eurozone finally appeared more willing to take joint action to enforce fiscal discipline. In exchange for fresh austerity measures, Greece got a reprieve on its debt reduction deadline. Despite growth that went from explosive to merely robust, China chose new leaders for the next decade who are considered to favor existing policies. In the United States, strong U.S. corporate earnings had begun by year's end to show the toll taken by a slowing global economy. Solid if not robust economic growth, an improving housing market, lower unemployment, and low inflation all had to contend with concerns worldwide about the fiscal cliff. However, that resilience could be tested in 2013. Though a last-minute bargain averted a full-scale plunge off the fiscal cliff, headwinds could pick up if Washington can't reach an agreement (again) on the debt ceiling and spending cuts still scheduled to begin in 2013.

Market/Index 2011 Close As of 9/28 As of 12/31 Q4 Change* 2012 Change* DJIA 12217.56 13437.13 13104.14 -2.48% 7.26% NASDAQ 2605.15 3116.23 3019.51 -3.10% 15.91% S&P 500 1257.60 1440.67 1426.19 -1.01% 13.41% Russell 2000 740.92 837.45 849.35 1.42% 14.63% Global Dow 1801.60 1921.70 1995.96 3.86% 10.78% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.89% 1.65% 1.78% 13 bps -11 bps *Equities figures reflect price changes, not total return. Snapshot 2012 The Markets Equities: Though equities certainly experienced some volatility during the year, the stomach-churning declines of 2011 gave way to 2012's more moderate fluctuations and dramatically improved performance. Optimism about the prospects for an economic recovery powered equities to year-to-date highs in the fall that lost ground in the fourth quarter as the path to a detour around the fiscal cliff seemed rockier. Helped (and eventually hampered) by some key tech bellwethers, the Nasdaq's Q1 gain of almost 19% helped it set the pace for the domestic indices for much of the year and generally remain above its 2007 high. The Russell also powered back from 2011's loss, while the Dow--the strongest of the five indices in 2011--took a back seat last year. It was even outperformed by the Global Dow, which benefitted in the year's second half as Europe managed to avoid disaster. And the S&P 500's 13.4% gain for the year was a definite improvement over the 0.0% of the year before. Bonds: Rock-bottom Treasury yields somehow managed to drop even further as the 10-year bond briefly hit a record low of roughly 1.43% in July. Treasuries, corporates, munis, junk, internationals--bonds benefitted across the board from investor demand and the Fed's stepped-up quantitative easing efforts. Investors who continued to pull money out of stock funds put much of it into bonds, reassured that higher interest rates were at least a couple of years away from affecting bond prices. Oil: After starting 2012 at roughly $103 a barrel and remaining above $100 through the first four months, oil prices reversed the previous year's upward trajectory. Despite a slight bump in August/September, mounting concerns about a slowing global economy took oil to $85 a barrel before a year-end rally nudged it back up to end the year at roughly $93 a barrel. Currencies: After a spring surge pushed the U.S. dollar to the year's high against a basket of six currencies in June, the greenback lost 7.5% over the next three months before rebounding to end 2012 only slightly lower than where it started. Despite a couple of dips, the euro strengthened against the dollar, gaining roughly 2% over the year to end at roughly $1.32. Gold/silver: After plummeting almost 14% between late February and mid-May, gold spent the summer bouncing along on either side of $1,600 an ounce. By mid-July, a rebound had sent the price to the year's high of just under $1,800 before fading to end 2012 at $1,676. And after spiking more than 60% to a high of $48 an ounce in April, silver prices settled down, ranging between $26 and $37 for the rest of 2012 and ending at $30. The Economy Unemployment: The unemployment rate continued to meander downward, ending the year at 7.7%. Though the pace of improvement was frustratingly slow--the jobless rate didn't fall below 8% until September--the employment picture was still better than December 2011's 8.5%. However, the Fed has forecast only minimal improvement in that figure during 2013, and has promised to keep interest rates low until unemployment hits 6.5%. GDP: Despite a little spring slump, by the third quarter the U.S. economy was growing at an annualized 3.1%--more than double Q2's 1.3% and the fastest growth of 2012--and Q3 corporate after-tax profits were 3.2% ahead of the same time a year earlier. However, there were signs that growth had begun to taper off in the fourth quarter as anxiety about elections and the fiscal cliff mounted. Inflation: Modest improvements in the economy had little impact on prices at either the consumer or wholesale level. By November, annual consumer inflation was only 1.8%--well within the level the Fed considers acceptable and lower than 2011's 3%. The 1.5% increase in wholesale costs was slightly better, and was far more moderate than 2011's 4.7% wholesale price jump. Consumer spending and retail sales both showed gains for the year, though holiday shopping was reportedly slower than anticipated. Housing: While not completely healed, the housing market showed signs that a sustainable recovery was under way. By year's end, sales of new homes had hit their highest level since April 2012 and were 15.3% higher than a year ago, while home resales had their ninth straight month of gains. Home prices were up an average of 4.3% from a year earlier, while housing starts, construction spending, and building permits all had strung together several consecutive months of improvement. Data sources: Includes data provided by Brounes & Associates. Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Dept. of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprices.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: December 17, 2012

The Markets As the lack of progress on fiscal cliff talks left investors wondering whether to batten down the hatches, equity markets continued to produce more vacillation than direction. Even a fresh infusion of quantitative easing from the Fed and decent economic data failed to lift investors' spirits. Of the domestic indices, only the small-cap Russell 2000 ended in positive territory. However, the Global Dow saw its fourth straight week of gains.

Market/Index 2011 Close Prior Week As of 12/14 Week Change YTD Change DJIA 12217.56 13155.13 13135.01 -.15% 7.51% Nasdaq 2605.15 2978.04 2971.33 -.23% 14.06% S&P 500 1257.60 1418.07 1413.58 -.32% 12.40% Russell 2000 740.92 822.27 823.75 .18% 11.18% Global Dow 1801.60 1955.63 1973.39 .91% 9.54% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.89% 1.64% 1.72% 8 bps -17 bps Equities data reflect price changes, not total return. Last Week's Headlines The Fed said it will keep interest rates at current low levels until employment falls below 6.5% as long as projected inflation for the next 1 to 2 years doesn't exceed 2.5%. It's the first time the Fed has announced formal economic targets as guidelines for monetary policy decisions. Unfortunately, the Fed doesn't see unemployment reaching its target until mid-2015, and predicted the jobless rate would remain between 7.4% and 7.7% next year. The Fed also sees economic growth of 2.3% to 3% in 2013, and will continue into next year its monthly purchases of $85 billion in Treasury bonds and mortgage-backed securities. A 7.4% drop in gas prices cut consumer inflation by 0.3% in November, according to the Bureau of Labor Statistics. Excluding food and energy, which can be volatile from month to month, prices were up 0.1%. The decline left the annual inflation rate for the last 12 months at 1.8%. Wholesale prices fell even further in November; they were down 0.8% for the month, leaving the Producer Price Index up only 1.5% for the last 12 months. After spending 0.3% less in October, shoppers hit the cash registers again in November. Retail sales were up 0.3% for the month, and would have been higher if not for the sharp drop in gas prices. The Commerce Department said annual retail sales were 3.7% ahead of the year before, with nonstore retailers gaining more than 11% from last November. After losing 0.7% to Hurricane Sandy in October, U.S. industrial production rose 1.1% in November, according to the Federal Reserve Board. The rebound was helped not only by hurricane-related recovery but by a 4.5% increase in auto manufacturing. HSBC agreed to pay a record $1.92 billion to end a federal and state investigation into charges that the bank laundered money for drug cartels and terrorist organizations. In return, prosecutors agreed not to pursue criminal charges against the bank. And we're out: The Treasury Department sold the last remaining shares of stock in American International Group that it acquired as part of the largest single bailout of a financial institution during the 2008 financial crisis. The Treasury said it made $22.7 billion more than the $182 billion it took to bail out AIG. Eye on the Week Ahead Down to the wire: A data-heavy week may not make much difference to investors keeping an anxious eye on Washington. Anyone not doing last-minute holiday shopping will face the final Q3 GDP figure, housing and consumer spending numbers, and options expiration at week's end. And here's hoping the Mayans were a little overly pessimistic about the world's prospects after this week. Key dates and data releases: Empire State manufacturing survey, international capital flows (12/17); housing starts (12/19); final estimate Q3 gross domestic product, home resales, Philadelphia Fed manufacturing survey (12/20); personal income/spending, options expiration (12/21). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Month: November 2012

The Markets Politics and the weather were the primary factors driving equity investors in November. The elections, concern about potential gridlock in Washington, the beginning of year-end tax maneuvers, and the continued high-wire act in Europe all contributed to volatility during the month, and Hurricane Sandy's residual effects didn't help. All the uncertainty put pressure on equities, particularly the Nasdaq and small-cap Russell 2000. However, 3%-plus gains during Thanksgiving week left investors grateful that only the Dow ended November in the red for the month. The techs of the Nasdaq, which had been beaten down for several weeks, also saw the biggest gains, followed closely by--for a change--the Global Dow. The uncertainty helped bond prices, which rose as yields slipped. Oil prices edged up slightly to end the month just under $89 a barrel. Despite volatility, gold ended November at $1,727, roughly $10 higher than where it began. And despite a bump mid-month as a result of uncertainty over Greece, the dollar saw minimal gains, ending the month at just over $80 against a basket of six currencies.

Market/Index 2011 Close Prior Month As of 11/30 Month Change YTD Change DJIA 12217.56 13096.46 13025.58 -.54% 6.61% Nasdaq 2605.15 2977.23 3010.24 1.11% 15.55% S&P 500 1257.60 1412.16 1416.18 .28% 12.61% Russell 2000 740.92 818.73 821.92 .39% 10.93% Global Dow 1801.60 1920.16 1942.07 1.14% 7.80% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.89% 1.72% 1.62% -10 bps -27 bps Equities data reflect price changes, not total return. The Month in Review Third-quarter economic growth was better than previously thought. The Bureau of Economic Analysis said its second estimate showed gross domestic product rising by 2.7%. That's substantially better than either the initial 2% estimate or the 1.3% growth of a year ago, and was helped by higher private inventory investments and exports. Meanwhile, after-tax corporate profits rose $48.1 billion, or 3.3%; that's an improvement over Q2's 2.2% increase. Net dividends were up 1.5% for the quarter and were 7.5% ahead of Q3 2011. The U.S. economy added 171,000 jobs in October and job growth in the previous two months was revised upward, according to the Bureau of Labor Statistics. However, the unemployment rate ticked up slightly from 7.8% to 7.9%, in part because more people once again sought to enter the labor force. Europe battled its second recession in four years as a 0.1% contraction in its gross domestic product followed Q2's 0.2% contraction. In the wake of Greece's adoption of additional austerity measures, the country's three primary creditors agreed to a longer timetable for reduction of Greece's debt burden, paving the way for another €43.7 billion in financial assistance. The Chinese Communist Party rejected reform-minded candidates to lead the country's highest decision-making body over the next decade in favor of more conservative candidates. Xi Jinping will replace Hu Jintao as party chief and China's de facto leader. Meanwhile, China's manufacturing sector expanded for the first time in 13 months, according to HSBC's November survey of purchasing managers there. In the wake of the November elections, Washington turned its attention to talking about how to avoid the so-called fiscal cliff next year. Despite initial conciliatory noises, participants from both parties continued to disagree over spending cuts and tax increases. The housing market continued to heal. Home prices measured by the 20-city S&P/Case-Shiller index saw their sixth consecutive month of increases, while October's 3.6% increase in housing starts put them at their highest level in four years and 42% ahead of a year ago. The Commerce Department said sales of new homes slipped 0.3% in October, though they were 17.2% higher than a year earlier, while the National Association of Realtors® said sales of existing homes were up 2.1% for the month and 11% since last October. Finally, the Mortgage Bankers Association said mortgage delinquencies in the third quarter were at their lowest levels in almost four years. The biggest jump in housing costs since March 2008, along with higher costs for clothing and airfare, helped push up the Consumer Price Index in October, according to the Bureau of Labor Statistics. The 0.1% increase put overall consumer inflation at 2.2% for the last 12 months. Meanwhile, despite a 0.4% increase in foods, lower energy costs helped cut wholesale prices 0.2% for the month, leaving inflation at the wholesale level for the past year at 2.3%. Reports on consumer spending over the Black Friday weekend raised hopes for a robust holiday shopping season to come. Retail sales and consumer spending were slowed by Hurricane Sandy, though the Commerce Department said it couldn't quantify how much of October's declines of 0.3% in sales and 0.2% in spending could be attributed to the storm. Incomes rose less than 0.1%, though it was the 11th straight month of increases, and the personal savings rate rose slightly to 3.4% of income. Sandy's impact on the East Coast also did some damage to U.S. manufacturing activity. The Commerce Department said declines in auto- and aircraft-related activity left durable goods essentially unchanged in October, though nondefense capital goods orders other than aircraft were up 1.7%. The Federal Reserve said Sandy also was a strong contributor to the 0.4% decline in October's industrial production. Eye on the Month Ahead The approaching fiscal cliff and Washington's ability (or lack thereof) to agree on a detour will likely continue to drive investor sentiment. Any volatility from tax-related year-end portfolio tidying could be exacerbated unless there is an agreement before Congress's scheduled adjournment December 14. Key dates and data releases: U.S. manufacturing, construction spending (12/3); business productivity, factory orders, U.S. services sector (12/5); unemployment/payrolls (12/7); balance of trade (12/11); Federal Open Market Committee meeting/forecasts, import/export prices (12/12); wholesale inflation, retail sales, 30-year Treasury bond auction (12/13); consumer inflation, industrial production (12/14); Empire State manufacturing survey, international capital flows (12/17); housing starts (12/19); final estimate Q3 gross domestic product, home resales, Philadelphia Fed manufacturing survey (12/20); personal income/spending, options expiration (12/21); durable goods orders (12/24); home prices (12/26); new home sales (12/27). Data sources for non-equities performance: U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflects price changes, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: November 26, 2012

The Markets During a holiday-shortened trading week, equities had their best week in months. Encouraged by a more conciliatory tone out of Washington and improved economic data on Chinese manufacturing and U.S. housing, investors took advantage of light trading volumes to push stocks up, particularly the technology stocks that had been beaten up in recent weeks. The renewed appetite for risk sent the 10-year Treasury yield up as demand fell.

Market/Index 2011 Close Prior Week As of 11/23 Week Change YTD Change DJIA 12217.56 12588.31 13009.68 3.35% 6.48% Nasdaq 2605.15 2853.13 2966.85 3.99% 13.88% S&P 500 1257.60 1359.88 1409.15 3.62% 12.05% Russell 2000 740.92 776.28 807.18 3.98% 8.94% Global Dow 1801.60 1848.57 1926.45 4.21% 6.93% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.89% 1.58% 1.70% 12 bps -19 bps Equities data reflect price changes, not total return. Last Week's Headlines Dissension in Europe: European finance ministers failed to come to an agreement on how best to reduce Greek debt to 120% of GDP by 2020, but will meet again to try to resolve the issue so an additional €31.5 billion bailout payment can be released. Also, talks on the European Union's long-term budget broke down after British and German leaders split with France in rejecting the proposed budget for the European Commission while their domestic budgets are undergoing substantial cuts. Moody's became the second rating service to take away France's AAA credit rating. Citing rising risks from its exposure to the problems of other eurozone countries, its prospects for long-term economic growth, and reduced resilience to potential eurozone crises, Moody's downgraded the country's debt one notch to Aa1 with a negative outlook. A preliminary survey of Chinese purchasing managers showed manufacturing expansion for the first time in 13 months as the HSBC PMI index rose to 50.4 in November (any number above 50 represents expansion). The stream of encouraging news from the U.S. housing market continued. The 3.6% increase in housing starts in October put them at their highest level in more than four years and 42% higher than last year, according to the Commerce Department. Building permits (an indicator of future activity) were down 2.7%, driven primarily by a 10.6% decline in multi-unit buildings; permits for single-family homes were up 2.2%. Meanwhile, the National Association of Realtors® said sales of existing homes rose 2.1% in October and were almost 11% higher than last October, while reduced inventory helped push up the median home resale price by more than 11% from a year earlier. Based on a 0.2% rise in its index of leading economic indicators in October, the Conference Board said it expects a continued modest expansion in the U.S. economy. The Securities and Exchange Commission filed what it said is the biggest insider trading case in its history. The SEC accused former hedge fund advisor Mathew Martoma and CR Intrinsic Investors LLC of trading based on unpublicized information about drug trials that allegedly was provided by the chairman of the committee overseeing the trial. Preliminary reports on consumer spending over the Black Friday weekend raised hopes for a robust holiday shopping season to come. Eye on the Week Ahead U.S. economic data will compete with political news out of Washington and Europe for investor attention. Key dates and data releases: durable goods orders, home prices (11/27); new home sales, Fed "beige book" report (11/28); 2nd estimate of Q3 gross domestic product (11/29); personal income/outlays (11/30). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

"Fiscal Cliff"

There has been a lot of talk over the past week about the "Fiscal Cliff" and the potential impact on the U.S. economy if it is allowed to happen. Among the discussion points is a proposal to raise taxes on individuals earning over $200,000 and married couples earning over $250,000 per year.

This proposed tax increase would likely have little impact if enacted. Using data available from the Office of Management and Budget (OMB), individual income taxes have averaged 7.38% of GDP over the period 1937-2011 and total tax receipts have averaged 16.93%. For 2011, individual taxes were 7.3% and total taxes were 15.4% of GDP. Individual taxes contributed a maximum of 10.2% of GDP in 2000. The maximum total tax receipts as a % of GDP was 20.9% in 1944. IF we raise individual taxes and assume we do so such that we match the maximum % of GDP over this period, we would raise roughly $1.5 Trillion in new revenue annually. Unfortunately, that is only about 10% of our public debt ( approximately $15.2 trillion as of 12/31/2011 according to Treasury Direct). Even IF every dollar of new revenue raised from increased individual taxes went to debt reduction AND we didn't borrow another dollar going forward, it would take nearly 10 years to eliminate our current indebtedness. In reality it appears the proposed federal tax rate changes would impact roughly 5% of taxpayers, who account for roughly 40% of individual tax receipts according to the Congressional Budget Office (CBO), so the actual increase in revenue could be expected to be less $700 billion (roughly 40% of the maximum revenue increase).Additionally, significant components of government spending include annual cost of living adjustments. Consequently, it is likely the government will continue to issue debt. In fact, it is reasonable to assume the potential increased individual tax annual revenue would be insufficient to cover just annual new debt issuance.

Bottom line - comprehensive tax reform such as proposed by the Simpson-Bowles Commission is necessary. Solutions such as broadening the tax base, entitlement reform and corporate income tax reform would likely be more effective toward achieving long-term debt reduction.

 

Market Week: November 5, 2012

The Markets As the East Coast struggled to recover from Sandy, financial markets came back from their two-day hiatus down but not out. Despite some volatility on Thursday and Friday, domestic indices ended the week essentially flat. Meanwhile, a stronger U.S. dollar contributed to Friday's decline of roughly $38 an ounce in the spot price of gold.

Market/Index 2011 Close Prior Week As of 11/2 Week Change YTD Change DJIA 12217.56 13107.21 13093.16 -.11% 7.17% Nasdaq 2605.15 2987.95 2982.13 -.19% 14.47% S&P 500 1257.60 1411.94 1414.20 .16% 12.45% Russell 2000 740.92 813.25 814.37 .14% 9.91% Global Dow 1801.60 1915.30 1932.44 .89% 7.26% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.89% 1.78% 1.75% -3 bps -14 bps Equities data reflect price changes, not total return. Last Week's Headlines Estimates of the damage done by last week's superstorm, including not only property damage but lost revenue from business activity, reached as high as $50 billion. Some economists warned that Sandy's economic impact could cut as much as 0.5% from the nation's gross domestic product in the fourth quarter, though rebuilding efforts also could add to GDP in subsequent quarters. The U.S. economy added 171,000 jobs in October and job growth in the previous two months was revised upward, according to the Bureau of Labor Statistics. However, the unemployment rate ticked up slightly from 7.8% to 7.9%, in part because more people once again sought to enter the labor force. There was more good news from the housing market as home prices continued to rise in August, though at a slightly slower pace than the month before. The 0.9% increase in the S&P/Case-Shiller 20-city index, which followed July's 1.6% increase, put prices at their highest level since September 2010, and up 2% from August 2011. Consumers spent more in September, according to the Commerce Department, but they may have been dipping into their savings to do so. While spending was up 0.8%, the personal savings rates fell to 3.3% of income--the third straight month of declines in the savings rate. Meanwhile, personal incomes were up 0.4%, although they were essentially unchanged after accounting for taxes and inflation. U.S. manufacturing also saw some encouraging signs. New factory orders grew more during September--4.8%--than in any month in more than a year, according to the Commerce Department. Business productivity rose 1.9% in the third quarter--about the same pace as in Q2--and the number of hours worked was up 1.3%. Almost all of the gains came in the services sector rather than manufacturing, which has been hurt by reduced global demand. However, in October, the Institute for Supply Management's index of manufacturing activity saw a second month of accelerating expansion, rising to 51.7% (anything above 50% represents growth). Eye on the Week Ahead Let the games begin: Financial markets are likely to begin assessing how the election results might affect the January 1 fiscal cliff and renewed debate over the debt ceiling. Also, both the European Central Bank and Bank of England will meet, and the Greek parliament will vote on fresh austerity and budget measures. Key dates and data releases: U.S. services sector (11/5); balance of trade (11/8). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: October 22, 2012

The Markets Despite a relatively strong start to the week, weak earnings reports took the wind out of the sails of domestic equities. The Dow lost 205 points on Friday--coincidentally, the 25th anniversary of the stock market's single biggest percentage loss ever--while disappointing results from several key tech companies hit the Nasdaq hard.

Market/Index 2011 Close Prior Week As of 10/19 Week Change YTD Change DJIA 12217.56 13328.85 13343.67 .11% 9.22% Nasdaq 2605.15 3044.11 3005.62 -1.26% 15.37% S&P 500 1257.60 1428.59 1433.19 .32% 13.96% Russell 2000 740.92 823.09 821.00 -.25% 10.81% Global Dow 1801.60 1918.06 1959.01 2.13% 8.74% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.89% 1.69% 1.79% 10 bps -10 bps Equities data reflect price changes, not total return. Last Week's Headlines There was good news from the residential construction industry. Housing starts shot up 15% in September; that's the biggest increase since July 2008. The third straight month of increases put housing starts almost 35% ahead of last September. Even better, new single-family starts were up 11% for the month. Building permits, an indicator of future activity, also were strong, according to the Commerce Department; September's 11.6% increase meant that permits were more than 45% higher than a year earlier. The National Association of Realtors® said home resales fell 1.7% in September. However, the year-over-year picture is better, with an 11% increase from a year ago. A 1.1% jump in retail sales in September represented the third straight month of increased sales, according to the Commerce Department. That meant spending was 5.4% higher than the previous September. The largest increases were seen in electronics and appliance stores, which were up 4.5% during the month of the iPhone 5 launch; gas stations and nonstore retailers also saw solid gains. Gas prices also contributed to a jump in consumer inflation; the Bureau of Labor Statistics said September's 0.6% increase in consumer prices was primarily caused by gas costs that were up 7% for the month. Aside from volatile food and energy costs, prices rose 0.1% for the third straight month. That put the annual inflation rate at 2% over the past year, slightly higher than August's 1.7% annual figure. Moody's reaffirmed Spain's investment-grade bond rating, though it coupled the Baa3 ranking with a negative outlook. Meanwhile, representatives of European Union countries debated how quickly to set up a common banking supervisor. The new entity's legal framework is scheduled to be drafted by the end of the year, but the supervisory agency would not become functional until later in 2013. The Philadelphia Fed's manufacturing survey saw a sizeable increase in September; after five months of contraction, the survey rose to 5.7 from -1.9 in August. However, the -6.2 reading on the Fed's Empire State survey--the third consecutive negative figure--was less encouraging. Meanwhile, the Federal Reserve said oil and gas wells that had been sidelined by Hurricane Isaac resumed production, helping send industrial production up 0.4% in September; it's now up 2.8% since last year. For the seventh quarter in a row, China continued to see slower economic growth. The National Bureau of Statistics said Q3 gross domestic product there fell from 7.6% to 7.4%, its weakest level since early 2009. The Conference Board's index of leading economic indicators rose 0.6% in September after an August decline of 0.4%. Eye on the Week Ahead In light of last week, fresh earnings reports are likely to generate even more interest than usual, while the first estimate of third-quarter economic growth will doubtless fuel more political rhetoric on both sides about the state of the economy. Also, the Federal Open Market Committee will hold its last meeting before the election. Key dates and data releases: new home sales, FOMC announcement (10/24); durable goods orders (10/25); initial estimate of Q4 gross domestic product (10/26). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Quarterly Market Review: July-September 2012

The Markets Domestic equities confounded anyone worried about a possible repeat of August 2011 and reached year-to-date highs in mid-September. The Dow hit a level not seen since December 2007, while the S&P 500's quarterly gain left it up more than 14% for all of 2012. The Nasdaq has done even better, gaining more than 6% in Q3, and almost 20% so far this year. The Russell 2000 was in third place for the year despite being edged out during the quarter by the Global Dow, which trailed domestic equities year-to-date despite last quarter's nearly 5% advance. The 10-year Treasury bond yield hit a new low in late July as demand pushed prices up; however, it edged back upward a bit by the end of the quarter. After spiking close to $100 in mid-September, oil prices fell back to end the quarter at $92 a barrel, more than 8% higher than at the end of June. Gold moved steadily upward, gaining more than 10% for the quarter and ending at roughly $1,775 an ounce. Meanwhile, the dollar hit $84 in July against a basket of six foreign currencies, then gave up more than 5% to end the quarter at roughly $79.

Market/Index 2011 Close As of 9/28 Monthly Change Quarterly Change YTD Change DJIA 12217.56 13437.13 2.65% 4.32% 9.98% NASDAQ 2605.15 3116.23 1.61% 6.17% 19.62% S&P 500 1257.60 1440.67 2.42% 5.76% 14.56% Russell 2000 740.92 837.45 3.12% 4.88% 13.03% Global Dow 1801.60 1921.70 2.77% 4.92% 6.67% Fed. Funds .25% .25% 0 bps 0 bps 0 bps 10-year Treasuries 1.89% 1.65% 8 bps -2 bps -24 bps Equities data reflect price changes, not total return. Quarterly Economic Perspective It was Spain's turn to become the focus of concerns about eurozone financial stability as interest rates briefly topped 7% once again. Investors were relieved when a German court cleared the way for implementation of the eurozone's bailout fund. However, by the end of the quarter, protests against fresh austerity measures and tax increases coupled with worry about a potential downgrade of Spain's credit rating weighed on global equities. U.S. economic growth continued to slow; the Commerce Department said gross domestic product rose only 1.3% in the second quarter compared to Q1's 2% rate. Meanwhile, the Bureau of Labor Statistics said the unemployment rate remained stalled at 8.1% in August as increases in corporate jobs were partly offset by cuts in government payrolls. There was some encouraging news in the housing market. The S&P/Case-Shiller index of home prices saw three straight months of increases during the quarter, and by quarter's end were at their highest level in nearly two years. Meanwhile, the National Association of Realtors® said home resales were 9.3% higher than a year ago. And although sales of new single-family homes fell 0.3% during August, the Commerce Department said they were still almost 28% higher than the previous August, and the median home price of $256,900 was the highest it's been since March 2007. Finally, housing starts were almost 30% higher than a year earlier. The Federal Open Market Committee launched QE3, a new $40 billion bond-buying program that represents the third round of quantitative easing designed to help stimulate the economy, and set no time frame for the purchases to end. The Fed also said it now anticipates keeping its target interest rate at its current low level until mid-2015. U.S. manufacturing data was mixed. Hurricane Isaac helped cut the Fed's measure of industrial production by 1.7%, and a sharp drop in orders for commercial aircraft helped take durable goods orders down by 13.2% in August. Meanwhile, the Commerce Department said retail sales in August were 4.7% higher than a year ago, while the Bureau of Labor Statistics' yearly snapshot of consumer expenditures showed the first yearly increase in consumer spending in three years. In China--the world's third largest economy behind the United States and the eurozone--economic growth continued to slow in the second quarter, hitting a three-year low of 7.6%. While robust by U.S. standards, it's still a far cry from the 11.9% seen at the beginning of 2010. Eye on the Month Ahead Key dates and data releases: U.S. manufacturing, construction spending (10/1); auto sales (10/2); U.S. services sector (10/3); U.S. factory orders, FOMC minutes (10/4); unemployment/payrolls (10/5); balance of trade (10/11); wholesale inflation (10/12); retail sales, business inventories, Empire State manufacturing survey (10/15); consumer inflation, industrial production, international capital flows (10/16); housing starts (10/17); Philadelphia Fed manufacturing survey (10/18); home resales, options expiration (10/19); new home sales, FOMC announcement (10/24); durable goods orders (10/25); initial estimate of Q4 gross domestic product (10/16); personal income/outlays (10/29); home prices (10/31). Data source: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflects price changes, not total return. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment. The U.S. Dollar Index is a weighted geometric mean of the dollar compared to the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc.

Market Week: September 24, 2012

The Markets Equity markets paused to digest the strong gains of the previous two weeks, but still managed to remain close to multiyear highs. Small caps, which had seen the biggest gains recently, gave back the most.

Market/Index 2011 Close Prior Week As of 9/21 Week Change YTD Change DJIA 12217.56 13593.37 13579.47 -.10% 11.15% Nasdaq 2605.15 3183.95 3179.96 -.13% 22.06% S&P 500 1257.60 1465.77 1460.15 -.38% 16.11% Russell 2000 740.92 864.70 855.54 -1.06% 15.47% Global Dow 1801.60 1988.62 1973.65 -.75% 9.55% Fed. Funds .25% .25% .25% 0 bps 0 bps 10-year Treasuries 1.89% 1.88% 1.77% -11 bps -12 bps Equities data reflect price changes, not total return. Last Week's Headlines The housing market continued to strengthen. The National Association of Realtors® said August sales of existing homes were up 7.8% for the month and were 9.3% higher than last August. Also, the NAR said August was the sixth straight month in which prices were higher than the year before. Another encouraging housing report came from the Census Bureau, which said housing starts were up 2.3% in August from the month before and were almost 30% higher than August 2011. And though building permits were down 1% from July, they were still almost 25% higher than a year earlier. Manufacturing news was somewhat mixed. The Federal Reserve's Empire State manufacturing survey for September hit -10.4, its second straight negative monthly reading. However, a similar survey for the mid-Atlantic region, while still negative (-1.9), showed strong improvement in August after several consecutive months of declines. Eye on the Week Ahead As the end of the quarter approaches, housing and manufacturing data as well as the final estimate of the nation's Q2 gross domestic product will highlight domestic news. Spain will likely continue to dominate European news. The government is expected to release both its latest financial reform package and the results of stress tests on Spanish banks, and could also make a formal bailout request. Key dates and data releases: home prices (9/25); new home sales (9/26); final estimate of Q2 gross domestic product, durable goods orders (9/27); personal income/spending (9/28). Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.