2014 2nd Quarter Economic Update

After a long, brutal winter, this week’s scorching heat is a welcome change. Summer is finally here! Although the weather was not kind to us this year, at least the markets were.

Unlike 2013, the first half of 2014 has been influenced more by growth than politics and policymakers. It brought solid returns, transcending asset classes and geography. This occurred despite lingering concerns about the pace of economic recovery in the developed world and the state of emerging markets. What is certain is that the world is in the midst of an economic recovery and volatility has been historically low across major markets. U.S. equities are set to record their sixth straight quarterly gain, long-term bonds posted double digit gains and commodities are up approximately 8%. It does not seem likely that the three asset classes will continue to rise in unison, though.

One of the major surprises in the first half was the drop in the benchmark U.S. Treasury and German Bond yields, which led the way to outstanding returns in almost all segments of the fixed-income market. This was contrary to 2014 forecasts at the start of the year. Unfortunately, bond returns will likely not be as strong in the second half as yields rebound globally due to stronger economic data. It is expected that the federal funds rate will begin to rise in the latter half of 2015 in the United States but signals from the Fed will likely cause short term rates to rise sooner.

We are in the middle of the economic cycle and historically, stock market returns tend to be solid during this time as individual investors inject large sums of money into the market. In fact, it is only recently that investors have regained the courage to return to the stock market. This is likely because the trailing one, three and five year returns for stocks have been in the double digits. This part of the economic cycle also tends to be the stage where corrections are most common, though. Investors should be mindful that the broad market has not experienced a major correction since the summer of 2012.

Some great news…Our custodian, Schwab Institutional, has modernized their processes with new technology that will allow clients to sign documents electronically, opening accounts in a matter of minutes. Account wires and transfers can also be approved with a few taps on your phone or clicks on the Schwab Alliance website, allowing funds to get to you faster. In order to benefit from this new technology, you will need to have Schwab Alliance access and an updated cell phone number on file. An email will be sent in the coming weeks with more information on this.

Lastly, I would like to welcome Deborah Scott to Mussett Wealth Management as our new administrative assistant. She will be responsible for the day to day operations and administrative functions of the firm. Deborah is a librarian who recently returned to the workforce after taking time off with her family. She can be reached at Debbie@mussettwealth.com or our main phone number 518-328-8104.

We wish you a sunny and relaxing summer!As always, if you have any questions or wish to discuss your portfolio, please contact our office.


Olivia A. Mussett, CFP®