Stocks Continue Upward Climb at End of Remarkable Year

in Market Commentary by

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.

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 following two tabs change content below.
Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk is a member of the Personal Capital Advisors Investment Committee. He also serves as Vice President of Portfolio Management. Prior to Personal Capital Advisors, he was an integral leader within the portfolio management team at Fisher Investments. During Craig’s time there, the company increased assets under management from $1.5 billion under management to over $40 billion. His responsibilities included risk management, portfolio implementation oversight, and management of all securities and capital markets research analysts. Mr. Birk graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

Leave a Reply

Your email address will not be published.

Disclaimer. This communication and all data are for informational purposes only and do not constitute a recommendation to buy or sell securities. You should not rely on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific situation. Third party data is obtained from sources believed to be reliable. However, PCAC cannot guarantee that data's currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.