Mark Levy’s Economic Update – Tuesday, February 04, 2014

 None of our clients should be surprised by the current equity market correction we are in. I have been preparing you in these newsletters for the “pause that refreshes”. Declines that occur in bull markets are necessary for reinvigorating the next leg up. The challenge is of course that we never know when these drops will occur and they usually bring with them concern about the economy in some way.

The concern today is in emerging markets and some recent economic data that shows some softening. Auto sales, almost across the board, have been weaker of late. Well, I think the severe winter weather that occurred across the country certainly has had an effect on buyers. In fact, LPL Research discovered that December 2013 weather, on average, was 6 degrees colder than the average December temperatures.  In this week’s LPL Financial Economic Commentary (can be viewed on our LWP website), John Canally writes, “Our view for this year is that U.S. economic growth will accelerate to 3.0 percent from the 2 percent pace of 2013”. He also expects both the federal government’s lifting of fiscal drags and increased state and local government spending to boost economic growth this year.

The weakness in emerging markets should not be seen as a symbol of global economic decline. In fact, just the opposite – many emerging markets had become dependent on global economic weakness. The soft global economy of the past five years prompted the Federal Reserve (Fed) and other central banks to pump money into the global financial system, encouraging capital to flow into emerging markets and allowing them to run unsustainable current account and budget deficits. Now, as global growth is improving, we are seeing the Fed begin to slow its bond purchases, and that change is prompting some emerging markets to quickly adjust by devaluing their currencies and sharply slowing spending. So, much of the turmoil in the emerging markets is actually the result of the improving economic growth around the world and not a sign that it is weakening.

Here is an important tax reminder:  The IRS 1099 mailing deadline is February 18, 2014. In 2009 the IRS extended the due date to furnish the 1099 consolidated reporting statements to customers from January 31 to February 15.  Since February 15, 2014 will fall on a Saturday, the IRS has extended this date to February 18, 2014.  Additionally, clients can log on to Account View and get access to their tax statement online.   Revised 1099’s are issued now through March and the 1099-OID/Remic statements are due March 15.   Also note that the IRA contribution limit for 2013 is $5,500 and the IRA catch-up contribution limit (age 50 or over) is $1000.

This equity market correction could last a few months, so please stay balanced emotionally. 2013 was great but it has spoiled us a little in our return expectations. Our economy and global economies in general, continue to grow, and we should benefit from that over time. – Mark

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. * Stock investing involves risk including loss of principal. Economic forecasts set forth in this presentation may not develop as predicted. Past performance is no guarantee of future results.   Indexes are unmanaged and cannot be invested into directly.  Referenced material:  LPL Financial Economic Commentary and LPL Financial Weekly Commentary, both dated 2/3/2014.