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Daily Capital

Stocks Continue Upward Climb at End of Remarkable Year

Market Digest – Week Ending 12/27

Christmas week featured low trading volume and little significant news-flow, but stocks continued their upward climb. Lower than expected weekly jobless claims provided evidence the US economy continues to accelerate. International stocks outperformed. The 10 Year US Treasury yield briefly crossed the symbolic 3% level, but finished the week just below it.

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Weekly Returns:
S&P 500: 1,842 (+1.3%)
FTSE All-World ex-US: (+2.0%)
US 10 Year Treasury Yield: 3.00% (+0.11%)
Gold: $1,214 (+1.0%)
USD/EUR: $1.374 (+0.5%)

Major Events:

  • Tuesday – Driven by an unexpected surge in last-minute online orders, UPS announced it would not be able to deliver all packages as scheduled for Christmas.
  • Wednesday – US stock market closed for Christmas.
  • Thursday – The Labor Department reported new weekly jobless claims of 42,000, below expectations.
  • Friday – A New York judge ruled the NSA’s phone surveillance is legal, setting the stage for a larger court battle ahead.

Our Take:

It has been a remarkable year for stocks, particularly domestic ones. For many, that may mean significant realized gains. There may still be time to take action to make your taxes due in April more palatable.

If you have unrealized losses, you’ve got until December 31st to harvest them to offset realized gains. Don’t forget to check your bond funds, as many were down this year. One widely misunderstood aspect of loss harvesting is that you don’t need long term losses to offset long term gains. Short term losses can be used to first offset short term gains first, but any additional short term losses can counterbalance long term gains. Even if you don’t have realized gains, you can take a $3,000 top of the line deduction by realizing up to that amount in losses. If you sell something to realize a loss, just remember you can’t buy back a “substantially equal” position for 30 days, so it is rarely worth selling something which is only down a few percent if it is an important part of your investment strategy.

Once the calendar flips, consider exchanging tax inefficient active mutual funds for more efficient index-based ETFs or a professionally tax managed strategy. It can be tough to swallow realized gains by selling mutual funds, but if you plan to hold them for many years, it is likely better to take the gains early in 2014 and transition to a better long term strategy. Taxes are important, but they are rarely a good excuse to maintain a sub-optimal portfolio over time.

Happy New Year, and thanks for reading.


The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.
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