As 2011 dawned, concerns about unemployment, economic growth, fiscal responsibility and inflation were topics being discussed when attempting to ascertain prospects for the continuation of our economic recovery. Spending initiatives in several states sparked controversy and healthy debate about programs, as well as the taxes that pay for them, to the point where even the Federal government managed to cut $6 billion from the current fiscal budget, and delay a shutdown of nonessential government offices. Meanwhile, the Dow Jones Industrial Average was on the way to its second largest first quarter gain in its history.
While the issues discussed above certainly are meaningful topics and impact our economy and the markets, the major factors affecting the global economy came out of the blue and weren’t on anyone’s radar. Those issues were summed up by Alan Abelson in Barron’s as he wrote, “The first three months encompassed just about everything shy of Armageddon. A fiery contagion of revolution and civil war in the Middle East and North Africa that toppled governments and sent dictators scurrying; a horrendous earthquake, nuclear meltdown and tsunami in Japan; chronic financial woes that beset and threatened to dismember the European Union, exploding oil and food prices - gad, we get the heebie-jeebies just reciting the lugubrious litany”.
The heebie-jeebies aside, it has been a remarkable quarter insofar as international events and the markets are concerned. Whether this revolutionary fervor will result in populations of Middle Eastern countries choosing less authoritarian Western style regimes, or succumbing to Hamas and Hezbollah remains to be seen. Securing the flow of oil from the area, as witnessed by the military incursion in Libya, forces us all to recognize the realities we face for our dependence on energy from this region. Whether you believe in “drill baby drill” or “green energy”, it is time for us to develop a comprehensive energy policy that utilizes all of the options available for our energy needs. Meanwhile, be prepared to pay more at the pump.
As I stated earlier, the DJIA* had a great first quarter climbing 6.4% and closing at 12,319.73 while the S&P 500* finished at 1,325.83 for a 5.4% increase. The NASDAQ* added 128.2 points and ended the quarter at 2,781.07 for a 4.8% gain. So much for the “New Normal” we discussed in the last issue.
These first quarter gains were achieved, despite a brief pullback in the various indices after the earthquake in Japan. The indices gave up all of their gains by mid March, only to absorb the shock and rebound to current levels. Where things go from here depends largely on earnings, employment, inflation, fiscal policy, monetary policy, international political events and of course, Mother Nature. The recent pullback in March does not even qualify as a correction (a 10% drop in an index), so with all of the issues facing us, one can never rule out a correction in the market coming at any time. The last correction was in July. As I have said many times before, corrections are healthy and present opportunities for deploying more capital. Of course, they are never pleasant.
As the second quarter unfolds, I expect to see oil prices settle down, inflation to remain benign and the Fed to begin discussing higher interest rates. The stock market is still 15% below the peak set in 2007, so a slow, steady ascent from here toward the 2007 highs would be welcome.
ONLINE ACCESS TO YOUR ACCOUNTS
For those of you who wish to access your account information online, the process is much easier than at any time in the past. Even if you have Pershing accounts, annuities or mutual funds with various companies, you can now access everything in one location from our website. Here is the link: Jersey Benefits Group, Inc.. Once you get to the Jersey Benefits website, you can access the link for your account under Securities Products or Investment Advisory. Under either heading go to the first choice, and look for the link for Pershing accounts only or Consolidated Statements. For Pershing only accounts, you need to contact me by phone or email for a password. There is a form to sign. For Clients with Consolidated Statements, you need to call or email to obtain a temporary password.
THE ECONOMIC AND POLITICAL OUTLOOK & MORE
Once again, earnings season is upon us, and the quarterly results of companies will compete with economic news, international events and commodity prices for investors’ attention. Continued improvement in earnings, and a positive outlook for guidance issued by US companies, could further improve the employment picture. Progress in the area of job creation is slowly being achieved.
The Labor Department reported jobless claims in the week ended March 26 fell to 388,000 and the unemployment rate fell to 8.8%, which indicates modest improvement for the labor market. Further evidence of improvement on the labor front came with the March payroll report, released by the Bureau of Labor and Statistics, indicating an addition of 216,000 jobs. The household survey, which is another measure of job growth, reported 291,000 additional jobs added in March . While these numbers leave us 7.25 million jobs down from the total number reported before the recession, any progress is welcomed.
As the government faces another possible shutdown as early as Friday, April 8th, Congress continues to bicker over whether to trim $55 billion more from the current budget. While it would be a small step in the right direction, it remains to be seen if a compromise can be reached. I certainly don’t mean to minimize the impact of $55 billion on the budget, but the reality is when you look at a budget of $3.7 trillion, about 1/3 of which is borrowed, one realizes something has to be done. Either $1.5 trillion needs to be cut, or taxes need to be increased to pay for the spending deemed important to the populace. The alternative is crushing debt on our children, which I don’t think is sustainable.
The price of gold has been flat for the quarter, but not without some volatility. In February the price swooned 7% but has since recovered its losses. Gold, silver and other commodities are positions which should be part of an investment strategy. Owning the physical commodities themselves is cumbersome and expensive, so my recommendation is to gain exposure through commodities funds, ETF’s or stocks of companies that mine or handle commodities. Obviously, we never want to put all of our money into one asset class, because concentrating risk is usually a recipe for disaster.
My philosophy is and always has been to diversify across as many sectors of the economy as you can afford, and dollar cost average into your portfolio often. While this strategy can’t guarantee against losses in the short term, as most of us have experienced over the last three years, patience and discipline do produce rewards. Thanks again for your continued confidence in me, and know that I truly appreciate your business. Feel free to call or email with questions.
* THE S&P 500, THE DJIA AND THE NASDAQ ARE UNMANAGED INDEXES THAT ARE WIDELY USED AS INDICATORS OF MARKET TRENDS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE PERFORMANCE OF THESE INDEXES DOES NOT REFLECT FEES AND CHARGES ASSOCIATED WITH INVESTING. IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX.
DOLLAR COST AVERAGING THROUGH A SYSTEMATIC SAVINGS PLAN IS AN EXCELLENT WAY TO BUILD AN ACCOUNT WITHOUT A SIZEABLE INITIAL INVESTMENT. SAVING A PORTION OF OUR PAY EACH MONTH IS VERY IMPORTANT. COMPANY SPONSORED PENSION PLANS ARE ONE METHOD TO SAVE AND SHOULD BE USED FOR RETIREMENT. OTHER SYSTEMATIC INVESTMENT ACCOUNTS, SUCH AS ROTH IRA’S, TRADITIONAL IRA’S, COVERDELL ACCOUNTS, 529 PLANS, BROKERAGE ACCOUNTS AND ANNUITIES CAN ALSO BE OPENED, AND DEBITED DIRECTLY FROM YOUR CHECKING OR SAVINGS ACCOUNT. FOR MORE INFORMATION, JUST CALL TO SET UP AN APPOINTMENT. REFERRALS ARE ALWAYS WELCOME.
COMPANY INFORMATION:
Investment Advisory Services offered through:
Jersey Benefits Advisors
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL 33758-9053
800-245-8250
Member FINRA & SIPC
Transamerica Financial Advisors, Inc. is
not affiliated with Jersey Benefits Advi-
sors.
Third Party Administration and Insurance
Services offered through:
Jersey Benefits Group, Inc
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are
solely those of John Kaighn & Jersey Benefits
Advisors.
LD 40098—04/11
