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-698544612494665025873Quarterly Economic UpdateSecond Quarter 2015Your Name188087011811000With the most recent stock market volatility, many investors are looking over their shoulders and wondering if the gains of the past few years are in jeopardy. Many market strategists predicted that volatility would return to the equity markets in 2015 and the first half of the year has supported those forecasts. Despite all three major indexes hitting new highs this quarter, only the NASDAQ finished the first half of 2015 with much of a gain. By the end of the quarter, the Dow Jones Industrial Average was negative, down 1.1% for the year. The S&P 500 index finished up 0.2%, or about where it started. The NASDAQ rose approximately 5.3% for the first half of 2015.There continues to be talk and debate amongst financial analysts and publications about the remainder of 2015. At Barron’s midyear roundtable, the annual gathering of 10 investment market strategists felt that although the market isn’t cheap, they were still optimistic about the remainder or 2015. Some analysts are saying a long over-due correction is imminent. According to CNN Money, the U.S. stock market is long overdue for a big fall, but the solution isn't to exit stocks. Instead, they suggest that there may be opportunities during market dips. They remind investors that stocks often go up after a correction. Corrections do not always mean the bull market is done. (Source: CNNMoney 6/4/2015)According to Jeff Reeves at Market Watch, a market correction is not ‘due’. He suggests that perhaps the most important data point of all for the bears to remember is that rallies do not end simply because they’ve gone on for a few years and are “due” to correct. To support this theory, he suggests investors study the?bull market?of 1987 to 2000, which lasted 4,494 days and saw a roughly 585% increase in the S&P 500. He adds that this is not to discourage investors from thinking critically or skeptically about the numbers. Obviously, it’s human nature to wonder when the party is going to end, but he warns against predicting the end just because we’ve had a long run-up. (Source: MarketWatch, 6/15/2015 )Interest RatesAgain this quarter, interest rates and Fed watching continues to feel like a spectator sport for investors. Investors are carefully watching federal funds rates in anticipation of a rate increase. Fed statements, notes and pre- and post- meeting discussions have been monitored and debated by most financial media professionals and outlets.The federal?funds rate?is an important benchmark in financial markets. It is the interest?rate?that the borrowing banks pay to the lending banks to borrow?funds. It?is negotiated between the two banks, and the weighted average of this?rate?across all such transactions is the federal?funds effective?rate.37465188912500According to CNBC on June 23rd, Federal Reserve Governor Jerome Powell, a voting member on the policy-setting committee said he sees conditions for an interest rate liftoff as soon as September and an additional increase in December. Powell added that he believes the dollar and oil prices have broadly stabilized. He estimated the economy will grow at around a 2 percent pace this year. Powell said he's seen positive signs in the economy, including a pickup in wages and an uptick in the labor participation rate.(Source: , 6/23/2015)Currently, interest rates and the Federal Funds rate are at the center of many discussions for investment decisions. To combat the?financial crisis of 2008, the previous Federal Reserve Chairman?Ben Bernanke?lowered the rate by aggressively dropping it ten times in 14 months. The Federal Reserve policymakers have kept the Federal Reserve funds rate at near zero since December 2008 in an attempt to stimulate economic growth. Although the economy has still not fully recovered, it is stronger, suggesting that a small interest rate move is coming. Having said that, here are some common questions about interest rates and how the central bank uses them to try to help the economy.Exactly what interest rate is the Fed looking to raise?When you hear that the Fed is raising interest rates, they are referring to the federal funds rate. The reserves that banks are required to hold at the Fed are known as federal funds. Because these funds fluctuate daily, banks with a surplus of funds lend money overnight to banks with a shortfall. The interest rate that banks use for these overnight loans is known as the federal funds rate.How does the Fed control the federal funds rate?The decision to change the target federal funds rate is overseen by the 12 members on the Federal Open Market Committee, better known as the FOMC. Centered on the prevailing economic conditions, the committee votes on the desired target interest rate that they believe will help keep the economy running smoothly. Consistently, the targeted interest rate has always been a specific number. But since 2008, the targeted rate has been between zero to 0.25%.Why does the Fed maneuver the federal funds rate?The FOMC’s goal is to use the federal funds rate to prevent unnecessary shocks to the overall economy. Congress enacted the Federal Reserve with control over the federal funds rate to provide maximum employment, keep inflation low, and provide reasonable long-term interest rates. When the economy is straining, the federal funds rate is lowered to reduce borrowing costs for banks to help stimulate lending and increase economic activity. If the economy is growing too quickly, the rate is increased to raise borrowing costs and curb any growing inflation.The FOMC alters the rate to find a balance between economic growth and low inflation. Committee members keep a close eye on economic indicators to help them establish whether the economy is speeding up too quickly (causing inflation) or slowing down and shrinking (forming a recession). Fed policy makers raised the interest rate up to 20% in 1980-81 to stop runaway inflation during that time. And when the Great Recession hit in 2008, the Fed dropped Mid-year Concerns1Equity Markets Are Still Volatile2Potential Interest Rate Increase3Concerns From Greece and China4Investor Comfort Levelsrates as low as possible to the zero lower bound – from zero to 0.25%. The Fed hasn’t raised rates since June of 2006 when the federal funds rate was 5.25%. How does the federal funds rate affect other interest rates?While the federal funds rate is only directly applicable to banks that lend to one another, it has become a benchmark for consumer and business loan rates. Business executives and investors keep a close eye on the federal funds rate and the FOMC’s position on the economy to help them adapt their business plans accordingly.The prime rate, for example, is established by banks and is offered to their best customers. It is used to determine interest rates for a variety of loans, including credit cards, car loans, small business loans, and home equity lines of credit.While the Fed has no direct control over the prime rate, it has historically been three percentage points higher than the federal funds rate. When the Fed lowered the benchmark rate from 0.75% to near zero in 2008, banks followed in turn and lowered their prime rate from 4% to 3.25%.Does the federal funds rate influence mortgage rates?Because most mortgages are longer term and are affected more by supply and demand of the mortgage market, the federal funds rate has less of a direct effect. However, the federal funds rate can and does influence the mortgage market. Individual mortgages are regularly packaged into investment securities that are traded throughout the economy. The Fed can actually purchase these securities to drive up demand. This is known as quantitative easing. The Fed performed several rounds of quantitative easing after the housing market crash in 2007 by purchasing hundreds of billions of dollars in mortgage-backed securities and Treasury bonds to help lower mortgage rates and increase home value. Some analysts also say that long-term rates reflect the direction of a series of short-term interest rate changes. Therefore, multiple increases of the federal funds rate could raise mortgage and other long-term rates higher.We still live in a slow-growth, low inflation world that is likely to keep interest rates low for the immediate future. Currently, 27 of the world’s 34 major central banks are making an effort to suppress interest rates. Investors need to keep a watchful eye on interest rates, but also need to avoid over focusing on rate hikes. (Source: Fidelity 6/5/2015)Should you have any concerns about your holdings we would be glad to recheck your personal situation during your next review or at any other time.Greece’s Monetary IssueThe 2008 financial crisis put a strain on Greece's fiscal budget, which was already in poor shape. In 2010, the Greek government took billions of euros in bailout money from the European Union and International Monetary Fund. The lenders required Greece to implement heavy spending cuts and tax increases, which then created skyrocketing unemployment and plummeting living standards.Since then, Greece has faced a choice: either stick with the bailouts and endure the pain of austerity, or reject the terms of the bailout — likely leading to default and, possibly, leaving the Eurozone entirely.Greeks?elected a new government?in January 2015 that opted for a third option: renegotiating the terms of the bailout to require less severe austerity measures. This strategy failed, partly because Greek leaders have no leverage, and partly because European politicians?feared?that granting Greece's demands would anger other countries who've accepted bailout money — like Spain, Portugal, or Ireland.While this issue is still outstanding as of the quarter’s end, the Greek government has officially imposed?capital controls to try to contain the economic crisis. That means, for example, that it has shuttered all banks until after the referendum on the bailout deal and issued?strict regulations?on other use of financial institutions. ATM withdrawals are limited to €60 per day, per account. Transfers of money outside Greece are banned and exceptions require Finance Ministry approval. Pension and wage payments are to proceed as normal, as does internet banking and debit card transactions.The basic reason behind these rules is to prevent bank runs. If people take too much cash out of the country's banks, then they'll cease being able to make loans and the country will fall into a financial crisis.Greek citizens have strong reasons to want to take their money out of the banks. Deposits could be raided to help keep banks solvent, as happened in Cyprus. Another possibility is that Greece could abandon the euro, convert all deposits into its new currency (probably the drachma, the country's pre-euro currency), and then devalue that currency dramatically.If Greece vanished today, the world economy would contract 0.3 per cent, once. Economically, the loss would scarcely be noticed. Since Greece has only 11 million people, a financial crisis wouldn’t be the same as a United States or global financial crisis. It is not big enough to hurt. (Source: NBC World News)How will the Greek issues affect the markets?In reaction to Greece’s concerns, the Dow plummeted 350 points June 29th, its worst day of the year. Some analysts believe the effect may be short-lived: S&P Capital IQ published a 70-year historical analysis of past market shocks that found events like this produce an average decline of 2.4 percent on the next trading day, which has been recovered in an average of 14 trading days."Greece represents less than 2 percent of the EU's GDP," S&P strategist Sam Stovall wrote. "By itself, its default or exit won't upend the EU. … Yet if this drachma drama triggers a market decline in excess of 10 percent, not seen since October 2011, it may be a blessing in disguise. As history has shown, prior market shocks have usually proven to be better opportunities to buy than bail, primarily because the events did not dramatically alter the course of global economic growth." (Source: NBC World News)China’s Equity MarketsChina had a tumultuous quarter. The economy continued to slow, growing only 7% in the first quarter, the slowest in six years. Some analysts are concerned that what happens in the Shanghai stock market may not stay there.The Shanghai Composite, which was a rising star for the last year, is off nearly 22% from its peak in mid-June, including a 3.3% fall on June 29th.?China’s interest-rate cut on the prior weekend did little to restore investor confidence. Historically, the movements of China’s stock market have had little impact on the broader economy. After the last Chinese equity bubble burst in 2007 to 2008, China’s stock prices were low for more than five years. During this same time period China posted impressive GDP growth rates.The Chinese government has been pulling a number of levers to try to stimulate the economy. Despite this uncertain growth picture, the?Shanghai SE Composite Index, despite falling 7.3%?in the last month, has gained 14.1%?in the last three months, and 32.2% for the year to date.Fewer than 10% of Chinese households own shares, compared with more than half of American ones. The “wealth effect” that is seen in the U.S. and other developed countries, whereby households tend to feel wealthier when stocks rise, or poorer when they fall, and adjust their spending plans accordingly, hasn’t been as strong in China. However, some analysts are warning that it would be a mistake to assume that China will shrug off this market meltdown. (Sources: Morningstar 7/1/2015, Wall Street Journal 6/29/2015)Conclusion: What Should an Investor Do?Investors are concerned about return. After all, the market has been up. On June 24th, in an article entitled Will the DJIA hit 16,000 or 20,000 first?, the Chief Market Strategist for Convergex?noted that the Dow Jones Industrial Average was up 324 points for the year to date – which meant an increase of 1.8%.? Although there are 30 companies in this oldest broad market measures, just 2 names made up all that performance (and then some, actually).? Goldman Sachs was up 12% year to date, adding 174 points to the Dow and UnitedHealth’s 21% return was worth another 164.? You’d think it would be the other way around, but GS’s higher stock price gives it a heftier weighting. The other 28 names in the Dow netted out to zero impact for the year. (Source: )52070177228500The first half of 2015 was not easy for investors. By many measures, the equity markets are not cheap. However, experts are still upbeat for 2015. As advisors, we are faced with the tough task of balancing portfolios between risk free rates, risk premiums and market returns. (Source: Fidelity 6/15/2015)So what can investors do?Safety comes with a price. Rates on longer-term certificates of deposit got a small bump in ’s June 24 survey of interest rates. The average one-year CD yield was 0.27% for the 15th straight week. The typical five-year yield was up 1 basis point to 0.87% (a basis point is one-hundredth of 1%). Jumbo CDs sport slightly higher yields for a $100,000 deposit. The average one-year jumbo CD yield was 0.3% for the seventh consecutive week. The average five-year CD yield was up 1 basis point to 0.92%.For the 37th week in a row, the average money market account yield was 0.09%. (Source: ) For many investors these low fixed rates will not help them achieve their desired goals. Most investors attempt to build a plan that includes risk awareness. Many times this can lead to lower but safer returns. Traditionally, bonds have been the de facto standard to hedge against market risk, but with bond values at historical highs they no longer offer the kind of protection they once did and quite possibly pose a greater threat of loss than stocks. Investing is not about keeping pace with the market (who likes losing 40% during years like 2008?) or beating the market – it’s all about hedging risk so your portfolio suits your individual needs regardless of the market.Have a Strategy. Investors need to be prepared. Market volatility should cause you to be concerned, but panicking is not a plan. Market downturns do happen and so do recoveries. This is the ideal time to ensure that you fully understand your time horizons, goals and risk tolerances. Looking at your whole picture can be a helpful exercise in determining your strategy. Focus on your own personal objectives. During confusing times it is always wise to create realistic time horizons and return expectations for your own personal situation and to adjust your investments accordingly. Understanding your personal commitments and categorizingyour investments into near-term, short-term and longer-term can be helpful. Make sure you are comfortable with your investments. Equity markets will continue to move up and down. Even if your time horizons 37480611833200are long, you could see some short term downward movements in your portfolios. Rather than focusing on the turbulence, you might want to make sure your investment plan is centered on your personal goals and timelines. Peaks and valleys have always been a part of financial markets and it’s highly likely that trend will continue.Discuss any concerns with us.Our advice is not one-size-fits-all. We will always consider your feelings about risk and the markets and review your unique financial situation when making recommendations.We pride ourselves in offering: consistent and strong communication, a schedule of regular client meetings, andcontinuing education for every member of our team on the issues that affect our clients. A good financial advisor can help make your journey easier. Our goal is to understand our clients’ needs and then try to create a plan to address those needs. We continually monitor your portfolio. While we cannot control financial markets or interest rates, we keep a watchful eye on them. No one can predict the future with complete accuracy, so we keep the lines of communication open with our clients. Our primary objective is to take the emotions out of investing for our clients. We can discuss your specific situation at your next review meeting or you can call to schedule an appointment. As always, we appreciate the opportunity to assist you in addressing your financial matters.4249941-41286600For many Americans, the July 4th holiday symbolizes the start of summer. Adopted on July 4th, 1776, the Declaration of Independence was the official start of our nation.In 2015, United States celebrated its’ 239 anniversary. In 1777, Congress chose fireworks as a way to celebrate our nation’s first anniversary. This inaugural fireworks display took place in Philadelphia. The estimated population in the U.S. on July 4, 1776 was 2.5 million.The estimated population in the U.S. in July of 2015 is 321.2 million.5350510-75243100 _____________ is a Financial Planner with Retirement Planning Specialist, Inc. a registered investment advisor not affiliated with SagePoint Financial. He also offers securities as a Registered Representative of SagePoint Financial, Inc. – Member of FINRA/SIPCNote: The views stated in this letter are not necessarily the opinion of SagePoint Financial, Inc., and should not be construed, directly or indirectly, as an offer to buy or sell any securities mentioned herein. Investors should be aware that there are risks inherent in all investments, such as fluctuations in investment principal. With any investment vehicle, past performance is not a guarantee of future results. Material discussed herewith is meant for general illustration and/or informational purposes only, please note that individual situations can vary. Therefore, the information should be relied upon when coordinated with individual professional advice. This material contains forward looking statements and projections. There are no guarantees that these results will be achieved. There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment.All indices referenced are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results. The Standard and Poors 500 index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy. Through changes in the aggregate market value of 500 stocks representing all major indices. The Dow Jones Industrial average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors. The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The index tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.-81221-366661Help us grow in 2015!This year, one of our goals is to offer our services to several other people just like you! Many of our best relationships have come from introductions from our clients. Do you know someone who could benefit from our services?We would be honored if you would:Add a name to our mailing list,Bring a guest to a workshop, Have someone come in for a complimentary financial checkup. Please call Name at Business Name, (Phone) and we would be happy to assist you00Help us grow in 2015!This year, one of our goals is to offer our services to several other people just like you! Many of our best relationships have come from introductions from our clients. Do you know someone who could benefit from our services?We would be honored if you would:Add a name to our mailing list,Bring a guest to a workshop, Have someone come in for a complimentary financial checkup. Please call Name at Business Name, (Phone) and we would be happy to assist youDue to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.In general, the bond market is volatile, bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Sources: Barron’s, MarketWatch, CNNMoney, , Fidelity, NBC World News, Morningstar, Wall Street Journal, , , LA Times 6/15/2015) Academy of Preferred Financial Advisors, Inc. ? ................
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