Markets experienced some volatility as stocks pulled back early in the week amid worries that the Fed may be tapering off its bond-buying program soon. However, investors soon regained their positivity after realizing that the Fed would not slow its quantitative easing activities without a simultaneous improvement in economic growth. In other good news, data showed that consumer sentiment is on the upswing, reaching its highest level since July 2007, according to the Thomson/Reuters University of Michigan index.[ii]

The rate of economic growth has been expected to fall in the second quarter as sequestration and higher taxes continue to bite; however, improvements in the labor market, housing market, and retail sales show that the recovery is still ongoing. While a measure of volatility is expected, many analysts are upbeat about the year’s market prospects. JP Morgan raised its year-end target for the S&P 500 to 1,750 from 1,500, indicating that their analysts expect additional upside this year.[iii] Although we don’t want to dwell too much on technical indicators, preferring a long-term strategy driven by research and quality investments, we like to see that analysts are remaining optimistic about market performance this year.

This week will see the release of important housing and manufacturing data, which will hopefully give additional support to the market rally. Ben Bernanke will speak about the economy before the Joint Economic Committee of Congress on Wednesday. Analysts will watch carefully to see whether he believes the economy is strong enough to justify paring back the Fed’s bond-buying activities any time soon.

Overall, we’re pleased with how equity markets have been performing this year and we’re glad to see the economic recovery advancing. Even so, we are determined not to become complacent, but rather, to remain alert for both risks and opportunities. Thank you for allowing us to serve you. We hope you have a great week!

May is Disability Insurance Awareness Month and the perfect time to highlight why younger generations should be prepared for unexpected illness or injury. The Social Security Administration states more than 25 percent of today’s new entrants into the workforce will experience an income-disrupting disability during their working years. Still, only 35 percent of young adults own a disability insurance policy through work or on their own, and only 57 percent have life insurance, according to a recent survey by LearnVest and The Guardian Life Insurance Company of America. Young people are also less likely to have an emergency fund in place should they need to leave the workforce. 

Disability is often viewed as a catastrophic injury, which can explain why younger, invincible-minded people feel they will never need disability insurance, according to Lawrence Hazzard, vice president of Product Strategy at Berkshire Life Insurance Company of America, a Guardian company. The Council for Disability Awareness lists the most common causes for disability as muscle, back and joint disorders, spine and nervous system-related disorders, cardiovascular and circulatory diseases and cancer. Disability can also include complications from pregnancy and childbirth, and mental disorders including depression.

Without proper income protection, your children or grandchildren are a risk to themselves and to your family. Should a disability result in the loss of income, you may find your own finances supporting others who were unprepared. Choosing appropriate disability insurance takes careful consideration of not only current life situations but future circumstances – and the worst-case circumstances at that. We can work with you and your family to discuss the benefits of disability insurance as a need to ensure incomes continue to flow even if they (or you) can’t go on working.  Give your Denver financial planner, Jordan Dechtman, a call at 303-741-9772, email him at Jordan@JordanDechtman.com or visit our website to schedule an appointment.

As we near the end of earnings season, 90% of S&P 500 companies have reported in, with 67% beating earnings expectations. If all remaining companies post numbers in line with estimates, earnings will be up 5.3% over the first quarter of 2012. However, most companies are still missing their revenue estimates, with only 46% beating their own revenue projections. Next week, a handful of major retailers are due to report, which, along with Monday’s retail sales report, will give sector analysts a lot to think about.[ii]

After markets closed for the weekend, Federal Reserve officials announced their strategy for unwinding QE3, their unprecedented $85 billion per month bond-buying program. While they didn’t confirm the timing of intended moves, officials said they plan to reduce bond purchases in careful, measured steps as they monitor the job market and inflation. Because it doesn’t look like the Fed intended this announcement to mark the end of quantitative easing, it appears they meant to signal their flexibility in managing the programs in the months ahead.[iii]

Looking ahead, the bulls could keep running next week as long as economic reports on labor, retail sales, industrial production, and manufacturing don’t disappoint. However, with equities reaching new highs, there are plenty of opportunities for weakness to end the run. If investors think that markets are overbought, some consolidation might occur. The market activity thus far suggests that investors are betting on increasing economic growth, and the Fed’s announcement seems to indicate that officials aren’t too worried about the U.S. economy at this time. As always, we’ll keep an eye on the action and will keep you informed.

Do you feel comfortable with what you’ll leave behind?  How do you want people to remember you when you’re gone? More importantly, how can you make sure people remember you in death, as you were in life? Estate planning has become an important tool in deciding how your life’s work will be viewed. Without it, the courts may decide who gets what. With the proper planning, you decide which individuals or charities receive your assets.

Think Ahead: Before preparing the most crucial documents needed for estate planning, sit down and decide who you’ll put in charge to make medical and financial decisions for you. You’ll also want to decide who gets what. Picking out beneficiaries and an executor of your estate are two of the most critical decisions you can make. If you have younger children, decide what would happen to them in case of an emergency.

Know which documents you’ll need: In general, you should have a financial power of attorney, a medical power of attorney and a living will. These documents designate who will make decisions when you’re gone, or if you’re alive but unable to make important choices regarding medical care or finances.

Survey your finances: Know what you’ll owe when you die, including the costs of probate. Subtract that from your assets and have a general idea of how much money you’ll have left over. By keeping tabs on your remaining assets, you’ll be more prepared to know what you’ll pay in taxes.

When planning your estate, you want to be prepared in all areas of your life. From medical to financial decisions and everything in between, it can be an uncomfortable subject, especially when you involve your family in the planning. In the end, you want your legacy to be protected. By working with our office to carefully plan your estate, you can take the proper steps to protect your family’s future.  Call your Denver Registered Investment Advisor, Jordan Dechtman at 303-741-9772, email him at Jordan@JordanDechtman.com or visit our website for an appointment.

Friday’s Employment Situation report showed that the economy added a solid 165,000 jobs in April, dropping the headline unemployment rate to 7.5%. Even better, the report showed revised numbers for February and March, indicating that economic activity was stronger than originally estimated.[ii] On the downside, when we dig deeper into the jobs report, we see threats to consumer spending as the average weekly hours worked dropped to 34.4 while wages increased just 0.2%. Furthermore, what economists believe to be the widest measure of unemployment, the U-6, rose slightly to 13.9%, its lowest point since December 2008.[iii] The U-6 includes frustrated workers who have given up looking for a job, plus people who are working part-time because they can’t find full-time work. All factors considered, the jobs picture looks lukewarm.

We realize this information could raise some questions, so briefly, let’s take stock of how the recovery is progressing:                                              

Hiring and unemployment are both growing at a measured pace. On the employment front, the economy has been adding an average of 196,000 jobs per month in 2013; this is far better than the 179,000 monthly average in 2011 and 2012, but still not as good as we would like. At the current rate of growth, the U.S. won’t reach pre-recession hiring levels for at least another year. The unemployment rate has improved drastically from its 10% peak in 2009; however, at 7.5%, the current rate is still recession level, and the Fed doesn’t expect to hit 6% until 2015 at the soonest.[iv]

The economy is improving slowly. The economic recovery from the recession is the slowest since WWII. The economy grew 2.12% in 2012 and 2.5% in Q1 2013; in a normal economic cycle, these growth numbers would be perfectly respectable, but we need higher growth during recovery periods to generate enough jobs to bring down unemployment. Economists had hoped to see stronger growth this year (even as high as 3-4%), but the combined effect of the new payroll tax and across-the-board sequestration cuts is dragging down economic performance.[v]

Economic fundamentals and stock market performance are looking better. Despite worries about higher payroll taxes, consumers spent at the strongest pace in two years during Q1 2013. This is good news since consumer spending accounts for 70% of economic growth. The housing market is booming, fueled by record-low mortgage rates and higher housing prices. New-home sales were up 18.5% in March (from the prior year), and homebuilders were working on more than 1 million new homes in March for the first time in five years. Markets are also performing well above expectations: For the year, the Dow has gained over 14% and the S&P 500 has increased by more than 13%, showing that investors are ready to pile onto any good news.[vi]

All told, the U.S. economy is doing pretty well. We could wish for a faster recovery, but we have to work with the hand we’re dealt. While we may see a slower second quarter, economists still expect healthy economic growth in 2013.

Using the Council for Disability Awareness’ Earnable Income Quotient tool, a 40 year old who nets $75,000 annual income will earn $1.875 million over the next 25 years until retirement – and that’s assuming their income never grows. That’s an asset worth protecting.

Disability insurance protects your ability to earn income. Say “disability,” and many people visualize impairment from an accident, but the majority of long-term disabilities are because of illnesses and reoccurring injuries. In fact 2012 research by Unum Group lists cancer as the top reason for long-term disability claims for the 12th year, followed closely by back disorders. In 2010, 17 percent of adult Americans reported a disability, and of those with a disability, less than 46 percent were employed. According to the Council for Disability Awareness, one in seven employed Americans will have a period of disability five years or longer before age 65. A typical, healthy 35-year-old has a 24 percent chance of a disability lasting longer than three months and a 38 percent chance that the disability would last five years or longer.

Europeans and Australians may have the right idea in calling disability insurance “income insurance.” Your chances of becoming disabled are much higher than of dying – and if you become disabled, you continue to require living expenses like food, clothing and shelter, not to mention medical care – with no income to pay for them.

Choosing appropriate disability insurance takes careful consideration of not only your current situation but your future circumstances – and the worst-case circumstances at that. If you depend on your current income to live, you need to ensure it goes on flowing even if you can’t go on working. We can help you determine what resources you may have in the event you can no longer earn a salary and ways you can protect yourself and your family from financial hardship. Call your Centennial CO Investments Advisor, Jordan Dechtman at 303-741-9772, email him at Jordan@JordanDechtman.com or visit our website for an appointment.

Earnings data and a handful of economic reports drove most of the market action last week. According to our first peek at preliminary first quarter GDP data, the economy grew at an annualized rate of 2.5%, which is up significantly from the 0.4% gain in the fourth quarter of 2012, but still below consensus expectations of around 3.0%.[ii] While the data is preliminary, a deeper look suggests we may face slower growth in the second quarter. Let’s break down the numbers to see why:

Nearly all the gains in Q1 came from consumer spending and inventories. Consumer spending is expected to drop in the spring as Americans continue to feel the effects of the 2% payroll tax increase. Inventory growth, driven by farmers stocking up their silos after last year’s drought, made a strong contribution to last quarter’s growth; however, the activity was unusual, and unlikely to continue into Q2. Furthermore, government spending, which accounts for a significant part of economic activity, is declining rapidly – dropping 4.1% in Q1 alone. Most analysts expect government spending to continue to slide as the effects of sequestration become more pronounced.[iii]

On the earnings front, more than 30% of the S&P 500 has reported and, while results are uneven, the news is mostly good. Blended earnings are up 2.4% in the first quarter, which is great since most analysts had low expectations. Two standout sectors thus far are technology, which benefited from strong consumer electronics sales, and building materials, which is getting a boost from the housing sector.[iv]

On the downside, there are a lot of revenue misses happening; so far, only 39% of companies have beat revenue expectations, which is far below the historic average of 61%. This indicates that demand is still soft and companies are achieving their results by cutting costs. Anemic revenue growth seems to be tied to slow global demand, which is a particular problem for large multinational corporations that do a lot of business abroad. Demand in Europe is essentially flat, and sales volume is down across the board, making it difficult for companies to improve their margins.[v]

Next week will see the release of a slew of economic data, along with the steady march of more earnings reports. Analysts will be closely watching consumer spending and consumer confidence data, as well as the jobs report to see whether more market upside is possible. As always, we’ll continue to monitor earnings reports and economic data and keep you updated.

Long term care insurance may alleviate the potential burden of you or your spouse becoming the primary caregiver for the other in the event of chronic illness or disability. If you have hereditary conditions that may be passed on to your children, purchasing long term care insurance for them when they turn 18 may help prevent them from being ineligible for coverage later in their lives.

Health care costs, including long term care services provided in the home or in an assisted or skilled facility, can greatly impact your retirement finances. A 2012 study from the Center for Retirement Research at Boston College found that 54 percent of middle-income adults and 44 percent of high-income adults are at risk for a lower standard of living in retirement. Those rates would be even higher if they took health care and long term care into account, the center said.

As with every product, long term care insurance has its pros and cons, but a large number of Americans haven’t even considered this product as part of their overall retirement plans. And while long term care insurance isn’t for everyone, it may be worth considering, as the cost of medical care doesn’t seem to be slowing down. Contact your Denver financial planner, Jordan Dechtman, at 303-741-9772, email him at Jordan@JordanDechtman.com or visit our website today to determine if long term care insurance is right for you.

It was also a difficult week for equity markets, as major indices experienced their biggest drop so far this year, pummeled by earnings reports and global concerns. For the week, the S&P 500 lost 2.11%, the Dow fell 2.14%, and the Nasdaq trimmed 2.70%.[i]

Earnings drove much of the selloff last week. Although the earnings reported thus far have largely beat estimates, disappointing reports from a handful of companies had an oversized effect on markets.[ii] While 70% of the reports have beaten earnings estimates, only 44% have beat revenue expectations. This indicates that earnings results have largely been achieved by cost-cutting measures rather than organic growth. One factor that appears to be driving the weakness in revenue growth is soft demand overseas.[iii]

Markets reacted poorly to China’s unexpectedly poor first-quarter GDP report, which showed a weak 7.7% growth instead of the 8%+ growth analysts had been expecting.[iv] This indicates that China’s recovery may still be fragile. Coupled with concerns about Europe, it’s clear that global economies still have a long way to go. 

On the positive side, investors responded well to Tuesday’s upbeat economic data, which shows that the news isn’t all bad. On the housing front, the Commerce Department reported that March housing starts increased by 7.0% from February’s estimate, while building permits declined slightly (though they are still 12% above March 2012 numbers).[v] A key measure of inflation also declined, supporting Fed chairman Ben Bernanke’s position that inflation is not an issue for now. Manufacturing also appears to be on the upswing; the Fed’s report shows that industrial production increased by 0.4% in March, beating expectations.[vi]

In recent weeks, disappointing jobs numbers, slumping consumer confidence, and other weak data has indicated that the economy could be slowing down. However, the Fed’s most recent Beige Book survey shows no sign of such a slowdown. The report shows that despite prevailing concerns, the economy continued to grow at a moderate pace, bolstered by a vibrant housing sector and auto sales.[vii] With so much conflicting data to review, many people struggle to make sound investment decisions. If you have any questions about how certain factors could affect you or your portfolio, please don’t hesitate to reach out to us. We pride ourselves on helping our clients cut through the clutter to develop strategies that are suitable for them and their goals.

As mentioned earlier, our thoughts are with the victims of Monday’s Boston bombing and those affected by the Texas plant explosion. It can be hard to think positively during such times, but we are proud of the swift work of first responders and investigators, and the way Americans have reached out in support of those in need.

Building a financial emergency kit helps ensure you have the information you need to keep yourself and your family safe, clothed and fed during and after a disaster. For some items, your bank safe deposit box will suffice. Just make sure your key is in the kit, along with the following other items suggested by About.com:

• Copies of driver’s license, Social Security card, birth certificate and insurance card for every family member, along with a photo ID and/or passport
• Checkbook(s), a supply of cash and change, and copies of the front and back of credit cards and debit cards
• Contact information for your bank, financial advisor, insurance agent and employer, plus websites, usernames and passwords for financial sites you use
• Insurance policies, living wills and advance directives
• Marriage certificate, citizenship papers, divorce or separation papers, real estate deeds
• Certificates of deposit, stock certificates and IRAs
• Photo or video inventory of personal property such as jewelry, art and antiques
• Contact information for your utility, phone, cable and cell phone companies
• Keys to your house, cars, garage, storage unit, etc.

The Federal Emergency Management Agency (FEMA) created a tool that helps you organize your financial and contact information. You can download the Emergency Financial First Aid Kit at http://www.operationhope.org/emergency-kit/.

If you need help in compiling your important documents to create an emergency financial kit, please contact our office. We’re happy to work with your tax, legal and insurance advisors to make sure you have everything you need to recover from a disaster.  Give your Centennial Colorado financial planner, Jordan Dechtman, a call at 303-741-9772, email him at Jordan@JordanDechtman.com or visit our website to schedule an appointment.