September 2014 Newsletter to Clients

Enjoy this month’s edition which features a brief outlook on the economy and highlights some factors affecting the Dow Jones Industrial Average.

The stock market’s future is really positive according to Chris Hyzy, chief investment officer of the U.S. Trust Company. Hyzy suggests our stock market is ‘just five years into a 20-year bull market.’ The slowly recovering economy is resulting into what Hyzy categorized as an ‘elongated business cycle’ which we at Moneywatch have been talking about for the past year.

We believe it is pretty obvious that the American manufacturing sector is resurging. Thanks to the crushing recession the last decade a lot of corporate fat has been squeezed out of the system. Many people lost their jobs over the last five years and of course we are saddened by their misery but recessions are a necessary evil in all capitalist economic systems.

Our country is approaching energy independence and with it comes freedom from the Middle East. We will soon be able to let them fight their own wars and start to turn our ‘War Department’ tax money toward repairing infrastructure in our own country. Other countries do not like the United States interfering in their affairs. The sooner we leave those countries the better off we will be.

Back to the economy for a moment… home construction spending, so helpful to economic growth during most of the two previous decades, fell off the cliff in 2008 and 2009 but has now increased to its highest level in the past three and one-half years. We are witnessing the clearing of foreclosed homes which is so helpful. Any kind of construction spurs lots of economic activity like manufacturing of construction equipment, metal fabricating, tools, etc. Construction tends to be people heavy also. You may have noticed the two to three supervisors watching the work of a single ditch digger.

It is interesting to observe the past twelve months of stock market activity. The Dow Jones Industrial Average has risen a little over fifteen percent (15%). The significant ups and downs during this period have been +5.2%, -5.7%, +11.8%, -6.9%, +11.5%, -4.1%, + 4.1%. When the market rises in this slow, deliberate manner, it rarely suffers severe setbacks. We need to try to ignore the ‘weird’ market events (volatility) caused by the use of new-fangled financial instruments utilized by high frequency traders who have little ‘feel’ for the markets they trade.

We want to remind you that we employ top notch mutual fund managers who are backed up by large teams of economists, market technicians, strategists and stock and bond analysts. We view this team as part of ours with great pride.

Thanks for your continuing confidence.

Past performance is no guarantee of future results. The opinions expressed are those of Moneywatch Advisors, Inc. and are no guarantee of the future performance of any particular fund. This information is for educational purposes only and is not intended as investment advice. Please consult your financial advisor for more detailed information or for advice regarding your individual situation.