Mark Levy’s Economic Update – Tuesday, April 9, 2013

 I know I keep talking about a possible equity market correction, but it has yet to happen in the stock indices. This morning the Dow 30 Industrial Average is trading at 14,664, just 10 points from its all-time trading high. We like this of course, because it makes our portfolios look good, but the odds are increasing that some type of rest may soon occur. The S&P 500 index has now reversed direction on a daily basis 12 times in a row – something that has never happened in the 85 year history of the S&P 500 index. The two last times there were a number of days of reversing action, 1981 and 2002, the market corrected after both instances. Also, on the recent down days, selling volume has been increasing – 20% higher than on the up days. There has additionally been a rotation within the markets. Defensive stocks have led this recent market rise, while economically sensitive stocks, have not. These are tell-tale signs that we look at very closely and for these and other reasons, I believe investors should consider a slightly more defensive asset allocation in their investment portfolio.  However, while no one can predict market performance, I believe that any correction that occurs in the equity markets will be a temporary one and we fell that investors may want to consider rebalancing their portfolios to a more aggressive stance down the road if this aggressive stance is in line with their goals and risk tolerance.  Remember, we believe that any correction that occurs in the equity markets will be a temporary one and we plan to aggressively rebalance to a more aggressive stance down the road. Global news has been sobering of late. North Korea has been saber rattling and the United States has responded with missile defense systems sent to Guam. The Chinese stock market suffered last week after reports of the spreading bird flu, referred to as the H7N9 virus. None of the 21 confirmed cases in China have yet confirmed that the virus has spread from human to human, but in the past, news of this event has spurned markets to react. On a positive note, gasoline prices have not risen this time of year as much as usual. In the last week, retail gasoline prices were $3.65 per gallon, and have declined by $.20 per gallon over the past six weeks. While retail gasoline prices have increased by $.28 per gallon this year, they remain $.51 per gallon below the all-time high set in July 2008 at $4.16 per gallon. In a typical year, gasoline prices rise from January through the end of May, hit a plateau in the summer driving months of June, July and August, and prices decline from the beginning of September through year end. Why are prices not rising more? We are using 1 million barrels a day less than the peak in January 2007. 95% of the gasoline we use is produced domestically (a figure most Americans don’t realize). The programs of solar, wind and other alternative strategies are beginning to have affect, along with a consciousness of driving less, if possible. LPL research has an in depth gasoline report in the “Weekly Economic Commentary” that I recommend you read. You can access it from our website. Tax season ends Monday, April 15 – Thank Goodness! – Mark The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice.  We suggest that you discuss your specific tax issues with a qualified tax advisor. 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.  The Dow Jones Industrial Average is an unmanaged index and cannot be invested into directly.  Past performance is no guarantee of future results.”  References:   LPL Financial Weekly Economic and Weekly Market Commentary dated April 8, 2013.