April 2014
by Mike McCort, Vice President & Wealth Advisor
What a difference a year makes!
The S&P 500 Index only returned about 0.5% for the first three months of 2014 compared to the spectacular jump of 10% we saw in the same quarter last year.
The first quarter cool-down for U.S. equity markets should not be entirely surprising, given the phenomenal gains by the S& P 500 in the fourth quarter of 2013 (up 9.9%) and last year overall (up
32%).
March 2014 marked the five-year anniversary of the start of the current bull market. Five years ago, the S&P 500 bottomed at
666, crude oil was below $40 a barrel, and the yield on the 10year Treasury was 2.87%. Today, the 10-year Treasury is only slightly changed at 2.74%, while the S&P 500 has moved to 1870 and crude oil has jumped to $102 a barrel, increases of roughly
180% and 170%, respectively.
U.S. equity markets, although unspectacular in the first quarter, have continued to outperform foreign markets overall. The broad
MSCI EAFE index was down marginally in the quarter after an 18% return in 2013. After struggling for much of the last five years, many of the European Union (EU) countries are returning to growth.
France, the U.K., and the Netherlands, among others, continue to show signs that they’re moving from economic contraction to expansion.
Emerging markets equities extended their recent struggles as the MSCI Emerging Markets index was down 2% for the quarter, which followed last year’s nearly 6% decline. Reflective of the returns, many developed economies appear to be moving toward a more robust economic activity and recovery, while emerging economies, as a group, face a number of challenges, including excess capacity, currency pressures, monetary tightening, and political risks. China, the world’s largest emerging economy, had their first corporate bond default, leading investors to question the country’s credit markets as well as overall economic health and growth potential. To add fuel to the fire, China’s total debt, public and private, is now closing in on 200% of GDP, a level some economists believe could further hinder lending and slow growth.
Political risk has been at the forefront of many investors’ minds as we are in the midst of the takeover of the Crimean region of Ukraine by Russia. Uncertainty reigns, as no one knows how the situation will play out. Later this year, we’ll watch major elections in India and Egypt, and voters in
Scotland decide whether the nation will become independent or remain part of the U.K.
The Federal Reserve continued their efforts to curtail their economic stimulus campaign, announcing recently, as expected, that it would further reduce its monthly purchases of U.S. Treasury and mortgage backed securities by $10 billion, to $55 billion. The Federal Open Market Committee
(FOMC) reiterated their commitment to keeping short-term interest rates low for “a considerable time.” Currently the
2-year Treasury is yielding about 0.43% and the 10-year
Treasury, 2.74%.
continued on back
Please join us in welcoming
Vice President & Wealth
Advisor, Cathy Rahab to our firm.
Cathy has over
26 years experience in asset allocation and portfolio management. Prior to joining Girard Partners, she spent the majority of her career as Senior VIce
President and Director of Evergreen Investments
(formerly Wachovia/Wells Fargo).
Cathy is a 1984 graduate of Villanova University’s
College of Commerce and Finance and holds a B.S. in
Business Administration.

April 2014 continued…
The mixed bag of economic data we’ve seen this year will certainly keep the debate going about the underlying strength of the economy. Strong economic growth in the third and fourth quarters of 2013 may be held back in the first quarter by a cold and snowy winter for a significant portion of the country. In particular, sales of autos and housing are expected to show weakness when the data is released, leaving other areas of the economy to pick up the slack. Economist estimates of 2014
GDP have slipped slightly from a 3.0%-3.5% estimate to a recent 2.7%. Will spring weather unleash pent up consumer demand and help re-ignite sales in housing and autos? Or was the harsh winter not the culprit behind the slower growth? Only time will tell.
The deadline to file individual tax returns for 2013 tax year is Tuesday April 15, 2014.
According to CCH Standard Federal Tax Reporter, there are currently almost 74,000 pages of U.S. tax code. That is 185 times more pages than 1913 when there were a mere 400 pages to contend with. A standard sheet of paper is 8.5 inches wide by 11 inches long and if we multiply the length by the
73,954 pages we get 813,914 inches, or about 68,000 feet!
That is almost 13 miles of tax code, so please be sure to consult your tax-preparer for your specific situation – we won’t be able to cover all of it here.
• Stay organized.
Keep a file with your W-2, 1099, and other forms, as well as records supporting your deductions.
Your return will be accurate, you’ll lessen your chances of overpaying, and also be able to answer questions should you be questioned or audited by the IRS.
• Be on time. You must file by the deadline of April 15th. Even if you are requesting an extension (IRS Form 4868), you still need to pay by the deadline if you owe to avoid penalties and interest.
• Be aware of changes.
One example: Last year you were able to deduct medical and dental expenses in excess of
7.5% of your adjusted gross income (AGI), but this year, those expenses must exceed 10% of AGI. Last year’s level still applies if you or your spouse are over age 65.
• Check and double check .
Before you submit your return, review it for mistakes and then review it again. According to tax pros, one of the most common mistakes made by taxpayers is using an incorrect Social Security number.
• Use the Internet to your advantage .
E-filing is an easy way to file, and combined with the direct deposit option, means your return is often processed faster and your refund received promptly.
• Get help if you need it.
The IRS website, www.IRS.gov, offers a Help & Resources section for do-it yourselfers, and if your return is more complex than you’re comfortable handling on your own, there are many local CPA’s and tax-preparers to help you maximize your filing.
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Insights is published quarterly by Girard Partners for informational purposes only and should not be construed as legal or professional advice. Girard
Partners disclaims any loss or liability, which is incurred as a consequence, directly or indirectly, of the use or application of the publication.