4 important “Es” for 2012

January 25, 2012

When looking at 2012, as always, expect the unexpected. But for now, here are four expected influences on the markets: the 4Es.

Europe

Europe is potentially entering a recession as a result of its sovereign debt crisis. The continent is our largest trading partner, which means less potential demand for U.S. goods and services to help our own recovery. U.S. companies with businesses in Europe may see a downturn;
U.S. banks and investment portfolios likely face losses from European debt and equities. Most analysts, however, think that markets and companies have already factored in a European recession.

Emerging Markets

China’s expansion is slowing, but whether it will have a hard landing in 2012 remains to be seen. A Chinese downturn would mean lower demand for U.S. commodities, which means lower sales for companies like General Motors, for which China is a growing market. It’s important to remember, however, that emerging market countries have old-fashioned tools like capital controls, regulations and state ownership to help them avoid recession.

Employment

Employment is a bright spot for U.S. recovery. Weekly initial jobless claims are now at a rate consistent with ongoing employment growth. Layoff announcements are down sharply, and hiring intentions and online job advertising are back to 2008 levels. Hiring intentions of small business recently matched levels from before the 2008 recession; this is important because firms with fewer than 500 employees account for about half of private sector employment and non-farm private sector GDP.

Election

Markets hate elections because they’re unpredictable.  This being an election year, investors looking for clarity on policies, regulations, and key issues like debt reduction will have to wait until 2013. But history points out the S&P 500 has gone down in only three of the 21 presidential election years since 1928.

Net of the 4Es: uncertainty. There’s also, however, unquestionably more optimism in the country than there was six months ago. We advocate staying invested in a broadly diversified portfolio for the long term; we’ll be watching and evaluating opportunities to manage for both return and risk as the year progresses.

 James Copenhaver, Director of Investment Management

 

 

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Be It Resolved: Meet Your 2012 Money Goals

January 4, 2012

The time for those New Year’s resolutions is upon us.

In my opinion, making financial resolutions doesn’t have to be painful. If you follow some simple guidelines, financial and other resolutions don’t have to be overwhelming. Remember that the key to reaching any goal is to make it specific, achievable and measurable. Celebrate and reward yourself once you get there. And realize that it’s perfectly acceptable – and smart – to ask for a little help when needed.

Be it resolved: Health first
Before getting into financial resolutions, I want to mention how important it is to consider your health and make it a priority. This is a great place to start with resolutions because there are so many ways to improve health without spending much money. You can go for more walks, which are absolutely free. Or take an exercise class or buy (and use!) a cookbook that focuses on healthy foods. Try a healthy new activity and see if it gives you some extra energy and enthusiasm for your financial resolutions.

Be it resolved: Save and invest more
Based on my conversations with clients, family members and friends, saving more and spending less always seem to be the most popular financial resolutions. The two things go hand in hand and may sound simple, but many people find it difficult to build their savings to the level they desire. You need the right perspective and a specific, achievable savings goal in order to succeed.

Saving really boils down to paying yourself first. For most people, a realistic goal is to save 10 percent of your income. If your employer offers a retirement savings plan with matching contributions, resolve to make the most of it and contribute as much as you can. It is one of the best ways of boosting your savings. You may also want to open and begin making regular contributions to a Roth IRA, which allows you to make tax-free withdrawals of your direct contributions at any time.

Be it resolved: Pay off inefficient debt
If you are one of the many people who want to dump a debt burden this year, you need to know that not all debt is created equal.

Efficient debt isn’t so bad, but you will want to get rid of inefficient debt as soon as possible. Efficient debt works for you because it is tax-deductible and/or appreciates in value. Examples include a home mortgage or an investment in education that can increase your earning power. Inefficient debt includes high-interest credit card debt and debt used to buy things that depreciate and are not deductible, like automobiles and many other consumer goods. Resolve to pay off inefficient debt first.

Be it resolved: Consult a financial advisor
If you feel overwhelmed just thinking about financial resolutions, it’s the perfect time to consult with a financial advisor. A professional can help you get organized, identify goals, save time and find ways for you to maximize your financial efficiency this year.

Best wishes for a healthy and prosperous 2012!

Wealth Enhancement Group