Halftime

Today makes the end of the first half of 2014, and it's been a pretty good year for the stock markets, if not quite as roaring as 2013 was. As of Friday, the S&P 500 had gained 6.1 percent on the year, after seeing an increase of around 30 percent last year. The Dow Jones industrial average is up 1.7 percent, and the Nasdaq up 5.3 percent.

The strongest sectors in the S&P were utilities, up 15.5 percent, and energy, up 11.6 percent. Among the index's ten sectors, only one suffered a loss, and that was the narrowest possible one: Consumer discretionary stocks were down 0.1 percent.

One of the biggest surprises of the first half was that the yield on the ten-year Treasury bond fell, after looking like it was rebounding for good in 2013. The yield opened the year at 3.03 percent but has since slid all the way down to 2.53 percent. Since bond prices move in the opposite direction of yields, that is a sign of strength in the bond market.

The Growing Power of Women

The annual U.S. Trust Insights on Wealth and Worth survey, which was released last week, points up how the financial landscape has evolved here in America, particularly in response to the demographic changes that have transformed our nation. One of the most important trends, one that shows no sign of abating, is the increasing importance of women in forming estate plans.

According to U.S. Trust, more than half  - 52 percent - of women came into their marriage or relationship with financial assets equal to or greater than their spouse or partner. One third of all women are now the primary income earner in their household, or contribute equally to the household's wealth. 

One estimate shows women controlling $14 trillion in assets right now, which is about 50 percent of the nation's total wealth. That figure that is expected to grow to $20 trillion by 2020.  

What Happened to GDP?

There was some startling economic news yesterday, as the Commerce Department's third and final estimate for first quarter GDP growth in this country came in at a negative 2.9 percent, revised downward from a minus 1.0 percent. That makes Q1 of 2014 the worst economic quarter since the first quarter of 2009, in the middle of the recession, when the economy shrank by 5.4 percent.

It's unusual for the economy to perform that badly when we're not in recession, which is technically defined as two consecutive quarters of GDP loss. Outside of recessions, there have only been two other quarters since World War II where the economy shrank by as much as 2 percent.

Still, economists don't seem to have panicked much. For one thing, the poor economy is still being blamed in part on that old standby, last winter's harsh weather. The other big factor was a huge drop in health care spending: After initially being estimated at having grown by 9.9 percent in the first quarter, the final estimate showed health care spending dropping by 2.9 percent.

The New Definition of Small

At the end of this week, Russell Investments will introduce its annual recalibration of its indexes. If that sounds like an arcane process, it actually has some ramifications for investors. The Russell 2000 has become the most widely used benchmark for small-cap stocks, and when it is redefined, it will change what is considered a small cap.

For 2014, the new limit for the market value of companies listed in the Russell 2000 will be $3.1 billion after the redefinition, up from a limit of $2.6 billion in 2013. Thirty years ago, back in 1984, no company with more than $255 million in market value could be considered small cap.

These redefinitions of the indexes are necessary in part because stocks' value grows (or shrinks) so much within the course of a year. According to Russell, the largest stock in the Russell 2000 now has a market cap of more than $9 billion - which is no one's idea of a small-cap stock.

The Sleepy Stock Market

The S&P 500 closed at all-time highs three times in a row last week, gaining just over 1% by Friday. But you can be excused if you think this market has been rather unexciting, despite the new records. None of them have been the result of especially big days, and the weekly gains have begun to look like what we used to expect in a day.

Yesterday, the S&P finished marginally lower, so we didn't set another record, but the movement, if anything has gotten even smaller. The S&P 500's intra-day range was just five points, or just 0.25 percent. That's the third lowest daily range we've had in the last 20 years, and marked the 46th straight trading day in which the S&P closed with a move of less than 1%. We haven't had a stretch with so little movement since 1995.

Part of this is that trading remains very light, as it usually is during the summer. With many traders on vacation, volume is among the lowest it's been all year. We could see this market remain sleepy all summer.

Two Ways of Looking at Inflation

The Federal Reserve has long set its target for inflation at 2 percent, and by some measures, we have arrived there. According to a report from the Labor Department last week, the consumer price index has risen by 2.1 percent over the past 12 months.

On the other hand, the Fed prefers to use the Commerce Department's price index for personal consumption expenditures. Unlike the CPI, this index tries to adjust for the American consumer's changing spending habits, rather than the price of a fixed basket of goods. And this index has risen by just 1.6 percent over the past 12 months.

Whichever measure you choose, it should be noted that economists don't currently expect inflation to get much higher than it already is. The IMF has forecast that inflation in the U.S. is likely to stay below 2 percent through 2017.

Signs of Life in Gold

A somewhat forgotten investment had a big day yesterday, on the heels of what has been a big year. The price of gold increased by 3.3 percent on Thursday, marking the precious metal's best one-day performance in nine months, a day after the Fed said interest rates would stay low at least into next year.

Yesterday's rally pushed gold up a total of 9.3 percet so far this year, which means it has had a better 2014 than stocks, bonds and oil. Then again, it had a long way to come back from. The price of gold dropped 28 percent in 2013, for its first yearly drop in 13 years.

Part of this just points up how volatile gold has been in recent years, and how little anyone knows about what direction it's likely to move. Even with the rally this year, gold is still down roughly 30 percent from the record high it reached back in August 2011.

The Fed Looks Forward

The Federal Reserve yesterday updated its economic forecasts for the remainder of the year, and the first quarter's disastrous GDP number - the economy contracted by 1 percent - forced a revision of its estimate of 2014's growth. Rather than the 3 percent estimate the Fed offered last March, it now thinks the economy will grow by 2.2 percent this year. But the estimates for future years remain unchanged: 3.0 percent to 3.2 percent growth in 2015, and 2.5 percent to 3 percent growth in 2016.

The Fed also forecast when interest rates would likely start to rise. It estimated that the benchmark federal-funds rate would rise from near zero today to 1.2 percent by the end of 2015 and 2.5 percent by the end of 2016. As of March, the Fed had estimated those figures at 1.125 percent in 2015 and 2.4 percent in 2016.

On unemployment, the Fed expects joblessness to continue to drop. They forecast that the jobless rate would falling from the current 6.3 percent to 6 percent or 6.1 percent by the end of the year-end, and to the mid 5 percent range in 2015.

American Generosity Keeps On Growing

Another day, another milestone reached in the realm of "since the recession": Total charitable giving reached $335.17 billion in 2013, according to the new annual report from Giving USA. That's the biggest that number has been since 2007, when it was at $349.5 billion.

On average U.S. adults donated $1,016 apiece in 2013, while each household donated an average of $2,974. In the last decade, total giving has increased by $34.6 billion in inflation-adjusted dollars. Since the recession ended, charitable contributions have gone up by 12.3 percent.

Last year's figure was an increase of 4.4 percent over 2012, and included an increase of  $9.69 billion in gifts made by individuals over 2012. That increase of 4.2 percent in giving from individuals was the single largest contributor to the increase in gifts.

Home Prices Still Not Back Yet

While the housing crisis wasn't as bad here in New Jersey as it was in many other states, our real estate market has had a tough time recovering to pre-recession levels. That's the upshot of a new study from CoreLogic, looking at how far home prices fell in the recession for each of the states, as well as how much they've rebounded.

Home prices fell by about 30 percent in the Garden State after peaking in June 2006. That could have been a lot worse - they fell by 40 percent in Michigan, about 50 percent in Florida and Arizona, and nearly 60 percent in Nevada. But the market hasn't come back very strongly here - it's still down by 23.3 percent.

The strongest home market is in booming North Dakota, the only state that has seen significant price increases since before the housing collapse. The worst is poor old Nevada, where home prices are still off 40 percent from their peak.

Help Wanted, Again

In the latest release from the Bureau of Labor Statistics, we learned that the American economy has finally replaced all the jobs that were lost in the recession. We have also reached another post-recession employment milestone: The number of job openings in the U.S. has climbed to its highest level in seven years, according to the Labor Department. This past April, there were 4.5 million job openings in the U.S.

In that same month, there were 4.7 million workers hired, which isn't quite back to pre-recession levels. For the few years before 2008, there were usually more than 5 million American workers hired each and every month.

Meanwhile, there have been about 2.5 million American workers quitting their jobs each month.  That figure was little changed in either April or March.

The Safety of Data on the Internet

Do you trust your personal financial information to Web sites? Most American consumers don't, according to a new survey from Gallup. The security breach at Target last Christmas, combined with the Heartbleed bug and the hacking of eBay, seems to  have alerted Americans that their information isn't necessarily secure at such places. Gallup found that just 21 percent of Americans have "a lot of trust" in businesses or companies to keep their personal information secure.

Over the course of the past year, 37 percent of the people Gallup surveyed said their trust in keeping their data safe has eroded, either by a little or a lot. Meanwhile, just 10 percent of American said their trust had increased in the past year.

The type of intsitution that garners the most trust is banks and credit card companies, with 39 percent of consumers saying they have a "lot of trust" in them. The least trustworthy? Just 2 percent of Americans think social networking websites can be trusted to keep their data safe.

What Dropping Correlations Mean to You

While most people look just at the way the S&P 500 index and Dow Jones Industrial Average are rising (or falling) to measure the health of the stock market, there are underlying figures that can show even more about what's going on. One of these measures is the market's correlation. Do stocks tend to move together as a group, or are they rising and falling on their own?

The answer this year is that stocks have tended to move on their own. In May, the average correlation of the 10 S&P 500 large-cap sectors to the index itself was just 70.6 percent, which is the second-lowest that figure has been since October 2009. And it's been dropping: The correlation was at 79 percent in April, 85 percent three months ago and around 95 percent during 2011.

The upshot is that investors can't just depend on the market itself to generate their profits. Stock-picking is becoming more and more important - a landscape in which the active management that Echelon Wealth Strategies relies on is more likely to thrive, and serve its clients well.

A Quieter Summer Gas Season

It used to be that the onset of June made gas traders nervous about what was going to happen to the nation's energy reserves. Hurricanes have a tendency to knock Gulf Coast drilling rigs offline for weeks, putting a crimp on the supply line. That's why we saw record-high natural gas prices in 2005, the year that Hurricanes Katrina and Rita swept through the Gulf of Mexico.

But the dawn of the age of shale gas has put an end to hurricane worries. The Gulf accounted for about 14.9% of U.S. gas production in July before 2005's storms hit. Now that number is down to about 3.7%, according to the U.S. Energy Information Administration, thanks to the shale-oil production in North Dakota and other regions of the U.S.

Gas prices are still susceptible to a wide range of influences, of course. And they tend to rise in the summer anyway, because of the increased demand. But hurricane-related price jumps appear to be a thing of the past.

Chopping Apple

The big news on Wall Street yesterday was that Apple's unusual seven-for-one split finally arrived. The stock price went from around $650 per share on Friday to $93 yesterday. Their robust-seeming dividend also got chopped in sevenths, dropping from $3.29 a share to just 47 cents.

Why is Apple doing this? The primary purpose is to make the stock more liquid, easier to be traded. It also makes the stock more easily assimilated into the venerable Dow Jones average, which is a price-weighted measure. That means a $600-plus stock - as Apple used to be - would overwhelm the other stocks in the index.

This isn't the first time Apple has split its stock. The company earlier had two-for-one splits in 1987, 2000 and 2005. If not for those earlier splits, combined with yesterday's split, a single share of Apple would now be trading at more than $5000.

Put It on Plastic

Have you been using your credit card very much lately? If you're like most Americans, you have been shopping on credit a lot more lately - a lot more than you have been in a long time. In a world where we're used to measuring sticks that go back to the onset of the recession, we used our credit cards more in April than we had in 13 years.

According to a report from the Federal Reserve released on Friday, the amount of outstanding revolving credit — a figure that’s mostly credit-card debt — rose at a seasonally adjusted annual rate of 12.3% to $870.44 billion in April. That was the fastest rate that credit had increased since November 2001, when annual growth was 12.33%.

Overall consumer credit, which includes student and car loans but not mortgages, increased by $20.85 billion, or at a 10.23% annual rate. All these measures show a renewed consumer confidence - and an increased willingness on the part of banks to extend credit.

Another Strong Jobs Report

May proved to be another strong month in the employment market, with the economy adding 217,000 jobs for the month. That marked the fourth straight month in which we gained more than 200,000 jobs in this country. The headline unemployment figure remained unchanged at 6.3 percent.

That consistency is worth noting. Since we emerged from the recession, this is the first time we've seen four consecutive months with more than 200,000 jobs added to the economy. Moreover, it's the first time in more than ten years we've had four straight months like that.

There was another milestone reached with the May report: The economy had shed 8.7 million jobs during the recession, bottoming out in February 2010. Since then, we have now added 8.8 million new jobs, so we're at least back to where we were before the crisis hit.

Home Buyers Paying With Cash

One interesting trend that has been helping to restore some luster to America's housing market: More and more people are forgoing a mortgage and paying for a home with cash. In the first quarter, 29 percent of non-investment home  buyers used cash, the highest on record for the period, according to data compiled by Bloomberg.

Loans for mortgages, on the other hand, continue to fall. Lending to buy homes dropped to $115 billion in the first quarter, the lowest that figure has been in three years, according to the Mortgage Bankers Association. In addition to cash purchases, home buyers appear to be putting down healthier down payments on their houses. In the first quarter of this year, home buyers put down $105.1 billion of their own money, up from $84.7 billion a year earlier.

There's one group that generally does pay cash for homes, and that's real estate investors. Curiously, the share of purchases made by investors has dropped to its lowest first-quarter level since 2010.

Emerging Markets Are Emerging Again

For a while earlier this year, stocks in emerging markets looked like the worst idea in the world. After falling by nearly 5 percent in 2013, the benchmark MSCI Emerging Markets Index plunged by another 6.6 percent in January of this year, off the bad economic and political news coming out of places like Russia and China.

But this asset class has staged a remarkable comeback this year. The MSCI index was up by right around 3 percent in both February and March. After holding steady in April, it was up another 3 percent in May. All told, for 2014, the emerging markets have appreciated by about 2.5 percent, even after that disastrous January.

And investors have been responding. For ten straight months, emerging markets mutual funds had reported net outflows - until they added a net $13.2 billion over the course of April and May.

The Stock Market Says "Oops"

There were some weird shenanigans going on with the stock market yesterday, as a key economic indicator kept getting revised - and kept moving the market. The Institute for Supply Management released its May report on manufacturing growth at 10:00 a.m., and it was a disappointing 53.2, down from a reading of 54.9 in April. The S&P 500 dipped some on the news, at one point sitting down 0.4 percent on the day.

But then the ISM announced a revision. The May figure was actually 56, an increase from April's reading, and above the consensus expectation of 55.6. Then at noon, came a third reading: The May index was really 55.4, and there it remained for the rest of the day.

The S&P recovered as the number was revised upward. Eventually, it closed with a very marginal increase of 0.07 percent for the day. But the day's entire roller coaster ride seems to be attributable to simple series of mistakes.

Summer Bummer

Yesterday was the first day of June, and also marked the beginning of the historically worst time of the year for stock prices. Since 1985, the Standard & Poor's 500 index has averaged a positive performance in each of the first five months of the year - until we get to June, when it has averaged a drop of 0.1 percent.

And it doesn't get much better from there. Over the four months of summer - June, July, August and September - only July has seen an average increase in the S&P since 1985. In August it has dropped 0.6 percent, and September it has dropped 0.7 percent.

Those three months are the only calendar months in which the S&P has fallen on average. That's one reason you'll sometimes hear the adage: "Sell in May, and then go away."