Weekly Market Commentary July 8, 2013

The Markets
The second quarter offered a level of drama often found in homes with teenagers. When investors realized their good friend, quantitative easing, might have an earlier-thanexpected curfew, they threw a hissy fit that resounded through global markets. The outburst interrupted the trajectory of Standard & Poors 500 Index, which finished June lower after hitting record highs in May. As stocks fell, yields on the benchmark 10-year Treasury bond hit a 22-month high. Higher treasury yields and a strengthening greenback proved attractive to investors and capital flowed out of emerging markets during the quarter. As interest rates moved higher, the cost of borrowing rose sharply in many emerging countries. That may impede economic growth, which has slowed already, in many developing countries. Economies in emerging Asia, Latin America, and Europe grew by about 4 percent on average year-on-year during the first quarter as compared to 6.4 percent on average during the past decade. When compared to growth rates in developed countries, such as the European Union (EU), thats still a pretty attractive growth rate. The EU has suffered seven consecutive quarters of recession. Its hard to say the recovery is going well, but experts are hopeful because the Spanish economy is contracting at a slower rate, Italian business activity isnt declining as fast as it once did, the French downturn is moderating, and the German economic growth is in positive numbers. Its a different story in the United States. By the end of second quarter, economists were predicting 2014 could prove to be the best year for U.S. economic growth since 2005. The Wall Street Journals monthly survey found that, Economists expect gross domestic product to expand at a 2.3 percent annual pace this year and 2.8 percent next year. The Federal Reserve edged up 2014 growth forecasts to between 3 and 3.5 percent, from a March estimate of 2.9 to 3.4 percent. Encouraging economic signs include:
Housing market vigor: Experts say housing market strength will be critical to economic performance in the second half of the year. Employment gains: Unemployment has dropped from double-digits to 7.6 percent, although there are still about 2.4 million fewer jobs than there were before the recession. Confident consumers: After years of paring spending and paying down debt, Americans are feeling optimistic. Consumer confidence now stands at a five-year high.

While optimism about the American economy is good news, its important to remember world economies are like members of a family. What happens to one country or region often has a significant influence on what happens in the others.

Data as of 7/5/13 Standard & Poor's 500 (Domestic Stocks)

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

10-year Treasury Note (Yield Only) Gold (per ounce) DJ-UBS Commodity Index DJ Equity All REIT TR Index

1.6% 2.7 1.7 0.9 0.0

14.4% N/A -28.4 -9.7 5.6

19.3% 16.7% 1.6 2.9 -24.4 0.1 -10.4 0.4 8.8 19.8

5.4% 3.9 5.8 -11.5 8.5

5.0% 3.7 13.3 0.7 10.5

Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barrons, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

SHE CAN BRING HOME THE BACON AND FRY IT UP IN A PAN From 1960 through 2011, the percentage of households with children under the age of 18 and mom as the primary or sole breadwinner increased from 11 to 40 percent. According to the Pew Research Center report, Breadwinner Moms fall into two distinct groups: married moms who earn more than their husbands (37 percent) and single mothers (63 percent). The earnings gap between the two groups tends to be very large: The median total family income of married mothers who earn more than their husbands was nearly $80,000 in 2011, well above the national median of $57,100 for all families with children, and nearly four times the $23,000 median for families led by a single mother. Its interesting to note an educational gap has been developing between husbands and wives, as well. A growing proportion of married women are better educated than their husbands. According to Pew Research, the share of couples in which the mother has attained a higher education than her spouse has gone up from 7 percent in 1960 to 23 percent in 2011. This probably shouldnt be a surprise since more women than men have been receiving college degrees of all types associates, bachelors, masters, and doctorates every year since 1982. Perceptions about womens roles in both the workplace and the family appe ar to be changing, too. According to another Pew report, almost three-fourths of American adults say having more women in the workforce has been a change for the better. About 60 percent say family life is more satisfying when both spouses work and they share responsibility for housework and child care.

Weekly Focus Think About It

"If we become increasingly humble about how little we know, we may be more eager to search." --Sir John Templeton, Global investing pioneer Best regards, Steve

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