So far, 2013 has been a good year for most portfolios, one exception being long maturity bonds. Forecasts now indicate that 2014 may be a year in which company profits, worldwide, will increase slightly over 2013. We believe this increase could be in the 3% - 4% range, which would equate to a 6% - 10% return, in theory. Companies are becoming very nimble at factoring in uncertainty; witness expectations being lowered recently for 2013 Holiday retail sales. Political factors, in only the near term, tend to increase the level of uncertainty. With overall expectations on the low end, any growth above that is a welcome surprise and the market reacts positively. We believe volatility will decrease as 2014 progresses, as we expect uncertainty to decline to some extent.
In the chart below, you can see improvement in the Leading Economic Index. This was driven by positive contributions from the financial indicators, initial claims for unemployment and new orders. In the six-month period ending September 2013, the leading economic index increased 3.0 percent (about a 6.0 percent annual rate), much faster than the growth of 1.2 percent (about a 2.4 percent annual rate) during the previous six months.
As we head towards the end of the year, we recommend that you keep the following things in mind:
- Required Minimum IRA Distributions IRA account owners who turned 70 1/2 prior to 2013 must take their annual RMD by December 31, 2013. IRA owners who turn 70 1/2 during 2013 have until April 1, 2014 to take their first minimum distribution.
- Gifting & Taxes
- Year end tax planning
- Charitable gifting of appreciated securities or other assets to Donor Advised Funds must be completed prior to 12/31/2013.
- So far, Congress has not extended beyond 2013 the ability to make a charitable contribution directly from your IRA. 2013 may be the last year to do so.
- There is a new 3.8% surtax on investment income for those with total annual income of $250k or greater for 2013.
- IRA Contributions – Although you have until April 15th, 2014 to deposit your 2013 IRA contribution, it is important to note that the contribution limits for both IRA’s & Roth IRA’s has increased to $5,500. If you were born in 1963 or earlier, you can put in an extra $1,000.
Heading into Thanksgiving weekend, and with the Holidays right around the corner, I want to thank each of you for your continued support over the past year. It is known in our industry that the most sincere form of thanks is often shown through your referrals. As a direct result, we are proud to say that we have added many new clients this year and look forward to continuing to learn and grow with clients both new & old. We truly appreciate your trust, and look forward to a prosperous 2014.
Please note that our offices will be closed on November 28th & 29th in honor of the Thanksgiving Holiday. Please also view the enclosed reminder regarding our upcoming Holiday Celebration on Friday December 6th, from 3:00 p.m. to 6:00 p.m. , here at our office.
As always, please feel free to contact us at any time, with any questions.
Best wishes to you this Holiday Season!
Donald S. Loveless CFA™ CFP® EA