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February 19, 2015


February 19, 2015 Perspective

February 19, 2015 by Lesjak Planning

As tax season quickly approaches, the scramble begins to organize the reams of paper and forms it takes to prepare a return. Add to that frustration the news coming from the IRS that due to budget cuts, their service will be very poor this year and refunds will be delayed, and you get the feeling the system is broken.

Supposedly, tax reform is back on the table this year with our elected officials. We will wait and see. Regarding the timing of some forms you may need, Form 1099 which reports dividends and capital gains should all be available and mailed by the 15th of February. Form K-1 for limited partnerships and private placements have no specific mailing deadlines. From past experience, don’t expect them prior to the first week of April.

The tax season also affects the investing markets to a degree. On the negative side, shares are sold to pay the tax liability of the previous year’s gains which if large enough, can move markets lower. In most years though, more of an impact is felt on the positive side as taxpayers add to their IRA’s and employers contribute the balances to retirement plans before the April 15th deadline.

This year to date has seen volatility return in remarkable fashion. While the market indices are up slightly year-to-date, we have witnessed numerous fluctuations of more than one percent a day both to the upside and the downside. Volatility is expected to continue for the near term, but as we look farther out, the prospect of prices continuing to move higher is quite promising. As always we are constantly having to digest news on a worldwide scale regarding oil prices, interest rates, terrorist activities, European economic problems, etc., etc. As the media bounces from issue to issue, speculation increases and with it trading and volatility. For short term traders this brings perceived opportunity. For the long term investor this is background noise that in reality does little to affect the revenue and earnings of the companies you hold in your portfolios. This is proven by the long term performance charts which illustrate that at any given period volatility can be unnerving, but in the long run they matter little in overall performance. (see chart below)

The opportunities we see coming in the future that will improve the quality of life around the world are very exciting and will provide excellent potential. Our focus is on the future and how we can participate in the prosperity to come.

Graph of the S&P 500 January 30, 1970 through February 18, 2015 showing Growth of $10,000 in investments

2014 was an interesting year in such that the various market sectors had wide disparities in performance.

Prior year leaders stumbled and prior losers performed well. Small companies, precious metals, commodities and International sectors all declined while large companies, transportation companies, utilities and real estate gained nicely. The year was a perfect example of the benefits of a diversified allocated portfolio. Returns were acceptable while reducing overall risk.

We expect this year to continue to be uneasy as the world decides on what the proper price of oil should be, response to the increasing threat of terror groups, the fate of Greece and the European Union, Russia’s intentions and climate change just to name a few from the long list. While the times seem different, history tells us that we have always had times of trouble and chaos.

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Lesjak Planning

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