Good Friday

Today is Good Friday, and as always, the stock market is closed in recognition of the holiday. It's surprising that the market would be closed on a day that's not even a federal holiday, but this is in continuation of a tradition that dates back to 1908. No one is quite sure how this started, although there are several theories about it. Maybe the most plausible is that it provides traders with an Easter holiday, and also gives Jewish traders a holiday during the Passover season.

There are other theories, though.  One holds that the multitude of Irish Catholic exchange officials around the turn of the last century pushed for the market to be closed that day. Another rumor claimed that after a couple of ruinous Good Fridays during the 1890s, the exchange decided that it might be better off to stay closed instead.

We'll probably never know the true reason. But if you're celebrating the holiday today, we here at Echelon Wealth wish you and yours the best of the season.

First Quarter Winners

Since the stock markets are closed tomorrow for Good Friday, today is the last trading day for the month of March, which makes it the last trading day for the first quarter of 2013 as well. Here are the ten stocks from the S&P 500 that have had the biggest returns this quarter (as of the market close on Tuesday):

1. Netflix, up 105.9 percent
2. Best Buy, up 91.6 percent
3. Hewlett-Packard, up 65.9 percent
4. Micron Technology, up 56.5 percent
5. H&R Block, up 55.7 percent
6. Tenet Healthcare, up 46.5 percent
7. Avon Products, up 45.1 percent
8. Marathon Petroleum, up 44.3 percent
9. Safeway, up 43.7 percent
10. Dell Computer, up 43.0 percent

Time for a Springtime Swoon?

Are we heading for a slowdown in the stock market? The past few years have seen a pretty regular pattern in which the markets get off to a roaring start in the early part of the year, only to slow down come April. Consider this recent history:

• In 2012, the S&P 500 was up 11 percent on April 2, before declining nearly 10 percent from there till the beginning of June.   
• In 2011, the S&P 500 was up 10 percent on April 29, before declining more than 8 percent from there till the beginning of June.
• In 2010, the S&P 500 was up 9 percent on April 23, before declining 12 percent from there till the beginning of June. 

So far in 2013, the S&P 500 is up 6 percent as we head into April. Will history repeat itself?

Hard Times for Emerging Markets

While American stocks have been on fire lately - the Dow Jones already has seen the biggest increase of any first quarter since 1998, and we've still got a week to go - one investing sector has been hard-hit so far in 2013. Emerging markets stocks have lost ground this year, even as their big brothers in developed countries have done very well. The MSCI World Index is up a whopping 33 percent, but the MSCI Emerging Markets Index is down 3.8 percent.

It's odd for emerging markets to be doing so poorly while other markets are rallying. According to Bloomberg News, this is the first time since 1998 that the emerging markets have lost ground during a worldwide stock rally.

It's also odd that emerging markets would be trailing the developed global markets in such a dramatic fashion. Since 1988, emerging markets have outperformed developed markets by nearly half a percentage point during bull markets - a significant difference over the course of 25 years.

New Trends in Paying for College

Perhaps the single greatest financial challenge many of us face is paying for a child's college tuition. With the ever-expanding cost of tuition, people have gotten more creative about finding ways to cover those costs. One such strategy is the parent Plus loan from the federal government, which the Wall Street Journal reports was used by 17 percent of all graduates in the class of 2012.

They put the parents in a pretty big hole, though. Back in the 2007-08 academic year, the average amount taken out by parents using these loans totaled $23,300; now that number is up to $33,800. By contrast, the average student who takes out a student loan leaves college with a loan debt of $28,700.

That may be one reason why student loans are still the most popular vehicle for helping with college tuition. Some 66 percent of all college students  graduate with student loans, in contrast to that 17 percent of parents who do.

Older Americans' Debt Problems

Here’s a rather frightening new statistic from the Census Bureau: America’s senior citizens have become much more likely to fall into debt. Between 2000 and 2011, the median amount of debt held by households led by those 65 and over more than doubled.

In 2000, such households reported roughly $12,000 in overall indebtedness. By 2011, that number had risen to $26,000. Such indebtedness is especially dangerous for older people, who are often on a fixed income.

Levels of indebtedness for households of other ages also rose, although not at such a dramatic pace. Americans aged 55 to 64 also now carry more debt - a median of $70,000 - but the increase from 2000 to 2011 was just 64%. Overall, the typical U.S. household’s debt rose 37% over that period.

The Fed Looks Ahead

The Federal Reserve governors met earlier this week, and released a statement yesterday reiterating their basic policies. That means, primarily, that interest rates will stay at near-zero levels until unemployment - which is currently at 7.7 percent - drops down to 6.5 percent.

They also see the economy continuing to expand, but at a glacial pace. Their forecast was for the unemployment rate to drop only to 7.3 to 7.5 percent by the end of the year, and to 6.7 to 7.0 percent by the end of 2014. Their GDP growth forecast for the remainder of this year is 2.3 to 2.8 percent.

Inflation, the other side of the Fed's mandate, remains under control; the Fed expects it to stay around its target of 2 percent through 2015. Given the targets they've sent, the upshot is that interest rates are likely to stay at their current low levels until 2015.

Americans Unprepared for Retirement

Yesterday's Wall Street Journal featured a front-page story on something we've been talking about for a long time: Too many Americans are financially unprepared for their retirement. Some of the key figures from that article:

• The recession has reduced the number of people who feel like they can afford to save for retirement. The percentage of workers who have put some money away declined from 75 percent in 2009 to 66 percent today.
• In 2008, 49 percent of all workers said they had less than $25,000 put away for retirement, but now that number has risen to 57 percent.
• Defined benefit pensions have become almost nonexistent. In 1979, 28 percent of private-sector workers had a traditional pension, but today only 3 percent do.
• Only half of the retirees surveyed said they could come up with $2,000 for emergency purposes if the need arose.

Housing Down - for the Moment

There was a disappointing report on the housing market out yesterday: The National Association of Home Builders reported that its confidence index slipped in February, signaling that builders were growing less optimistic. But the report shouldn’t be taken as entirely negative. The NAHB said that demand wasn’t an issue; the problems like in a lack of available lots for building and rising costs for materials.

So as soon as the supply issues are resolved, the housing market should continue moving forward. In fact, home builders said in the same survey that they are optimistic that home sales will be stronger in March. Overall, even that lower reading in February was 64 percent higher than the same sentiment reading from a year ago.

The Commerce Department is scheduled to issue its report on February new home construction later this morning, which should give us a better handle on where the housing market stands. According to a survey of economists conducted by Dow Jones, the number of new homes is expected to have risen by 3 percent.

The Dow's Streak

Last Friday was a mildly disappointing day for the stock markets. The Dow Jones industrial average closed lower for the first time in ten trading days. But now that the ten-day winning streak has ended, it's worth looking back on what a remarkable feat that was.

It's not just that this was the Dow's first ten-day winning streak since 1996; we haven't even had a nine-day winning streak since then. Since World War II, there have been just eleven other ten-day Dow winning streaks, according to figures compiled by the Bespoke Investment Group.

But all that's over with now. The question is: Does the winning streak signal anything about the future? The data is promising in that area. After those nine- and ten-day streaks, the Dow has risen by an average of 2.5 percent over the next three months, and 68 percent of those three-month periods were positive.

Americans Slightly Less Worried About the Economy

Gallup conducts a monthly poll asking Americans what the country's biggest concern is, and lately, the top issue has been - of course - the economy. But in what has to be considered a sort of victory, the number of people saying their biggest worry is an economic issue has been declining recently, and is now at its lowest point since June 2010.

Still, 57 percent of Americans did name some aspect of the economy as their primary worry. "The economy in general" was cited by 24 percent, "unemployment/jobs" by 16 percent, and "federal budget deficit" was cited by 13 percent. The only non-economic factor in that range was "dissatisfaction with government," which 20 percent of the respondents answered.

The high point in recent history for the economy as a matter of national concern was in February 2009, when a whopping 86 percent cited economic issues as their top priority. By contrast, only 16 percent said so in December 2006, when the Iraq War was the nation's biggest concern.

Americans Keep Spending

The increase in the payroll tax that took effect as the result of the Fiscal Cliff negotiations at the beginning of this year had many people worried that it would limit Americans' purchasing power. So far, thankfully, there has been little evidence of that. The Commerce Department said yesterday that sales at U.S. retailers jumped by 1.1 percent in February, the biggest increase in five months.

That was far ahead of expectations. Not a single one of the economists surveyed by Bloomberg News projected that February would see such strong retail sales growth. One big factor was car sales: Ford reported that deliveries were up 9.3 percent, for its strongest February in six years, while GM's were up 7.2 percent.

All that activity has caused some people to reassess their view of the strength of the American economy. J.P. Morgan has raised its forecast for first-quarter GDP growth from 1.5 percent to 2.5 percent; Deutsche Bank raised its from 1.5 percent to 3 percent.

Know Your 401(k) Fees

Do you know what kind of fees you're paying on your 401(k) account? Most people don't, according to a new survey from LIMRA. But that's not necessarily bad news, since a lot of people assume they're paying far more than they actually are.

The survey found that a whopping 42 percent of all plan participants who ventured a guess thought they were paying 10 percent or more of their annual assets in fees, which isn't anywhere close to the case. Only a third estimated those fees as below 2 percent, which is far more accurate. Another 22 percent thought they were paying no fees at all. And half said they had no idea what those fees were.

For the record, fees for 401(k) plans with less than $2.5 million in assets average 1.46 percent of assets. For plans with more than $50 million in assets, those fees drop all the way down to 1.03 percent.

Earnings in the Book

Earnings season is drawing to a close, with 488 of the S&P 500 companies having reported their fourth-quarter earnings as of the close of business on Friday. And the results have been pretty strong: All told, earnings are up 5.8 percent over the same quarter a year earlier. After earnings were basically flat in the third quarter, that's a pretty positive figure.

The bad news is, that 5.8 percent figure is still well below the long-run median earnings growth of 9.8 percent per quarter, dating back to 1968. Moreover, given the earnings guidance companies have given for the first quarter of 2013, earnings growth is expected to decline all the way down to 1.4 percent for the current quarter.

Revenues also rebounded in the fourth quarter. They were up by 3.7 percent, after registering a slight decline in the third quarter of 2012. But their growth forecast for the first quarter is just 1 percent.

Month by Month

The S&P 500 Index made it through February with an increase of 1.1 percent. That may seem modest, but February has a track record of being pretty dismal for stocks. Since 1945, the S&P has recorded an average drop of 0.3 percent during that month, which makes it the second-worst, behind only September at negative 0.6 percent.

But March looks a lot brighter. The average month of March has seen an increase of 1.2 percent, making it the third-best month of all. Only December (with an average rise of 1.8 percent) and April (with an average rise of 1.5 percent) have seen better historical performance than March.

Altogether, the average monthly increase for the S&P 500 since 1945 is 0.7 percent. For the record, so far this March, the index is up a solid 2.2 percent.

A Strong Jobs Report

This morning brought us the best employment report we've seen in a while: The economy added 236,000 jobs in February, and the headline unemployment figure moved down from 7.9 percent to 7.7 percent. The economy has now added an average of more than 200,000 jobs over the past four months.

The industries adding the most jobs in February:

• Professional and business services added 73,000 jobs.
• Construction added 48,000 jobs, and has now added a total of 151,000 jobs since September.
• Health care was up by 32,000 jobs, including 14,000 new jobs in ambulatory health care, which means mostly outpatient clinics and doctors' offices.
• Retail added 24,000 jobs, and has added more than 250,000 jobs in the past 12 months.
• And the information industry added 20,000 jobs, with the Bureau of Labor Statistics noting that there were significant gains in the movie and recording industries.

Companies Love Their Own Stock

As the stock market continues to increase in value, more and more companies are thinking it wise to own more of their own stock. According to Birinyi Associates, 198 companies authorized stock buybacks in February, which is an increase of 28 percent from the same month a year earlier.

That added up to a staggering $117.8 billion worth of buybacks in February, the highest amount on record. The previous record was set in December 2007, when there was $89.1 billion in buybacks. A year ago, in February 2012, the number was just $68 billion.

At this pace, we can expect American companies to buy back about $827 billion worth of their own stock in 2013. That would be the second highest yearly total ever, edged out only by 2007, when the comparable figure was $863 billion.

Dow Record High!

The big news from Wall Street yesterday was that the Dow Jones Industrial Average closed at a new record high, 14,253. During intraday trading, it had gone even higher than that, peaking at 14,286. The old record close came back on October 9, 2007, when the Dow closed at 14,164.

Some more facts:

• The Dow reached a new high roughly a year faster than it had following the previous bear market, after the dot-com crash.
• Despite the record, the Dow's price-to-earnings ratio remains about 14 percent lower than its 20-year average.  
• The only Dow stock that has declined in value since the March 9, 2009, low point is Hewlett-Packard.
• For the pessimists among you, it's worth pointing out that the new record doesn't account for inflation. In 2007 dollars, the Dow is at the equivalent of 12,480, or 11 percent off the 2007 record in inflation-adjusted figures. 

Avoiding the Split

It used to be that as any stock grew in value to more than $100 a share or so, it become more and more likely for it to declare a split. According to data compiled by S&P Dow Jones Indices, in the 1990s, there was an average of 64 stocks every year that declared a split - basically, every one but Berkshire Hathaway.

That strategy has gone out of vogue, though. Nowadays, we have stocks like Google - trading right now at just over 800 per share - and Apple, which is at about 430 and has been rumored to be considering a split, but has made no announcements as of yet.

Altogether, since the economic crisis began back in 2008, the number of stocks declaring a split has dwindled all the way down to 10 per year. That's a big reason why the average price of a stock on the S&P 500 has risen from $31.36 in 2008 up to $63.17 now.

How to Save for College

Are you saving up for your child's college education? That's obviously of huge concern to most parents, given the spiraling costs of tuition, and one of the most common reasons that people turn to a financial advisor for help. A recent survey of people saving for college, though,  found that most people aren't taking advantage of the new vehicles specifically designed for that purpose.

Of those who said they were saving for a college tuition, 42 percent said they were using a simple savings account or CD for that purpose. Another 27 percent were using their checking account. The same amount, 27 percent, said they were making use of the 529 plans designed especially for college tuitions, with built-in tax advantages.

Interestingly enough, those using 529s have, on average, saved a greater amount than those simply using savings accounts, by a margin of $2,331 to $2,145. That's just a drop in the bucket, though: The average person said they hoped to put away $39,000 for each child's education.

Revising GDP

The first revision for 2012's fourth quarter GDP came out yesterday, and it was about as mild a revision as you can imagine, yet also, in another sense, highly significant. As you probably remember, the Commerce Department's first estimate of growth for that quarter came in at negative 0.1 percent. It's now been revised upward to a positive 0.1 percent, meaning the economy grew after all.

All told, domestic economic growth is now believed to have averaged 2.2 percent for the entirety of 2012. That's up from 1.8 percent GDP growth that we had in 2011.

There was one down number from today's revision: Consumer spending, originally believed to have risen by 2.2 percent on the quarter, ticked down to 2.1 percent. But business investment was revised upward significantly, from a 9.7 percent increase to 11.2 percent.