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2013 Wrap-up

December 21, 2013 by Lesjak Planning

As another year ends, we look back and reflect on a year that many thought would be tough for the markets. Equities started off the year moving higher and except for a slight pullback in June due to the Federal Reserve’s comments about stopping their quantitative easing program, continued to make new highs right into this year’s end. Declines due to worries over inflation, Syria, Iran and the various political scandals never materialized leaving the majority of investors sitting on the sidelines missing the year’s gains.

While caution is still warranted as prices continue to climb, there are many reasons to believe that we could still have substantial room for upward movement in the markets. The discovery of all the new natural gas and oil reserves and ability to extract them has kept gasoline and energy prices low. This puts extra money in the pockets of all Americans. Manufacturers can plan on stable energy costs for their plants which allows long term growth plans to be made including investments in facilities and workers. A manufacturing shift back to America?

America’s debt burdens are as low as they have been in decades due to the effort to pay it down over the last five years. The savings rate is actually increasing for the first time in quite a while. Household net worth has reached an all-time high of $129 trillion. All of this has led to a general rise in consumer confidence. Yet many investors still feel the pain and emotions of the last two market declines and are hesitant to commit monies back to the equity markets.

This hesitancy to invest the large amount of cash still on the sidelines in savings accounts and bonds could bode well for the equity markets. Along with the major sums of money coming from bond funds as interest rates rise, the large cash positions still held can provide substantial fuel to move markets higher in the future.

So, as we approach the beginning of a new year, there are as many varying opinions of the markets and the economy’s direction as there are analysts. If you look at investing as a lifetime process as we do, our experience and history confirms that prices will rise and fall but most importantly, since the very first stock trade, values overall have continually trended upwards to new highs. We suggest that trend will continue.

2014 will bring many challenges to America and the world which may drastically affect the various investment markets. Since it is impossible to predict those temporary events, diversification is essential in a well thought out long term plan of accumulating assets.

As one analyst comments; “markets do not care about good or bad, but merely if things are getting better or worse. And things are definitely getting better.”

Merry Christmas with wishes for a healthy New Year!

Of course it would be foolish to invest if the markets were currently vastly overvalued and in “bubble” territory, but the valuations do not indicate that.

Most corporate profits and earnings continue to come in at or above estimates. Price-earnings ratios are near market norms and nowhere near the highs in 2000 and 2008. New, exciting technology in the medical, manufacturing, and communications fields are coming to market. Markets ebb and flow and at any point in the short term can be temporarily overbought or oversold, so investing should be a structured plan and not done as quick, compulsive buying or selling.

We continue to believe that as interest rates rise due to natural market forces over the next few years, that bond values will stagnate or even decline. As of this writing the Federal Reserve is holding meetings to decide when to stop flooding the markets with cash to keep interest rates low. Those that moved to the bonds looking for safety after the stock decline in 2008 will feel the pain and withdraw those funds. Some of that money will be redirected to stocks.

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Lesjak Planning

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