Consumers Ride to the Rescue Again

Despite recurring unpleasant experiences with ice, sleet, snow, exceptionally low temperatures, wind and rain so far in 2014, consumers have kept on spending. On March 13, the Census Bureau gave us our first look at retail and food services sales for February.

The chart shows this story. After a 0.6 percent decline in January from December, total retail and food services sales posted a 0.3 percent increase in February from January. The total of $427.2 billion is the best February ever and 1.5 percent above February 2013.


It is the fourth-best month ever, behind only October, November and December (in descending order) of 2013. In what is undoubtedly at least partially due to the unusually bad weather endured by so many parts of the nation, by far the best increase (6.3 percent) above February 2013 was racked up by nonstore retailers. So long as people had electricity they could order over the Internet or by telephone.

The second biggest increase was posted by “Health and personal care stores,” where sales rose by 5.5 percent above a year before. “Building materials and garden equipment supplies dealers” were next with a 3.2 percent year-over-year rise.

Gasoline stations had sales 4.6 percent lower than a year earlier. That was the result of slightly lower crude oil prices and less demand.

No matter the weather, people kept eating. Sales at “Food and beverage stores” were up 2.8 percent from a year earlier with the grocery stores part up 2.4 percent. “Food services and drinking places” (aka bars and restaurants) saw sales rise by 2.6 percent.

Consumers remain reasonably optimistic about the economic future for good reasons. The demand for labor is rising, which means that jobs are easier to find while wages and salaries are also growing.

With rising incomes, consumers have more money to spend on goods and services. This causes increases in retail sales and new orders from retailers to restock shelves keep industrial production growing. That in turn leads to more employment and more income. Economists call this lovely situation a virtuous cycle.

While the period since the end of the recession in June 2009 is still the weakest expansion in over 100 years in the US, we are finally entering a virtuous cycle. This year should be the first year with real GDP growth above 3.0 percent since 2005. That would be very good news indeed. The weather will improve and most of the output lost in the first quarter will be made up in April, May and June.

There will be some impact on the monthly profile of retail sales in 2014 because Easter is several weeks later this year than last. This year it will be on April 20 and last year it fell on March 31. Thus, we may have to wait for May to get a clear picture of exactly how robust retail sales are.

The Census Bureau will release revised data on retail and food services sales for the period from January 2012-March 2014 on April 30. Those data may change our understanding of consumer spending patterns somewhat. They will undoubtedly reaffirm the vital contribution of consumer spending to US economic growth.

Dr. James F. Smith
Chief Economist


Market Update Through 3/14/2014

as of March 14, 2014        
  Total Return
Index 12 months YTD QTD MTD
Russell 3000 21.45% 0.57% 0.57% -0.85%
S&P 500 20.28% 0.07% 0.07% -0.88%
DJ Industrial Average 13.21% -2.53% -2.53% -1.47%
Nasdaq Composite 31.98% 1.90% 1.90% -1.41%
Russell 2000 25.60% 1.75% 1.75% -0.06%
EAFE Index 10.26% -3.54% -3.54% -3.78%
Barclays US Aggregate 0.56% 2.01% 2.01% -0.01%
Barclays Intermediate US Gov/Credit 0.60% 1.31% 1.31% 0.00%
Barclays Municipal  0.76% 3.34% 3.34% 0.19%
    Current   Prior
Commodity/Currency   Level   Level
Crude Oil    $98.89    $102.59
Natural Gas    $4.43    $4.61
Gold    $1,379.00    $1,321.60
Euro    $1.39    $1.38

Mark A. Lewis

Director of Operations

Market Update Through 2/28/2014

as of February 28, 2014        
  Total Return
Index 12 months YTD QTD Feb
Russell 3000 26.74% 1.43% 1.43% 4.74%
S&P 500 25.37% 0.96% 0.96% 4.57%
DJ Industrial Average 19.01% -1.07% -1.07% 4.34%
Nasdaq Composite 38.10% 3.36% 3.36% 5.15%
Russell 2000 31.56% 1.81% 1.81% 4.71%
EAFE Index 18.48% 0.26% 0.26% 3.74%
Barclays US Aggregate 0.15% 2.02% 2.02% 0.53%
Barclays Intermediate US Gov/Credit 0.31% 1.31% 1.31% 0.38%
Barclays Municipal  -0.21% 3.14% 3.14% 1.17%
    Current   Prior
Commodity/Currency   Level   Level
Crude Oil    $102.59    $100.30
Natural Gas    $4.61    $5.21
Gold    $1,321.60    $1,318.60
Euro    $1.38    $1.36

Mark A. Lewis

Director of Operations

Market Update Through 2/15/2014

as of February 14, 2014        
  Total Return
Index 12 months YTD QTD MTD
Russell 3000 24.29% -0.08% -0.08% 3.18%
S&P 500 23.45% -0.26% -0.26% 3.31%
DJ Industrial Average 18.46% -2.19% -2.19% 3.16%
Nasdaq Composite 34.42% 1.76% 1.76% 3.52%
Russell 2000 26.06% -1.14% -1.14% 1.67%
EAFE Index 17.62% -1.57% -1.57% 1.85%
Barclays US Aggregate 0.02% 1.45% 1.45% -0.03%
Barclays Intermediate US Gov/Credit 0.39% 1.01% 1.01% 0.09%
Barclays Municipal  -0.87% 2.21% 2.21% 0.26%
    Current   Prior
Commodity/Currency   Level   Level
Crude Oil    $100.30    $97.49
Natural Gas    $5.21    $4.94
Gold    $1,318.60    $1,239.80
Euro    $1.36    $1.34

Mark A. Lewis

Director of Operations

Market Update Through 1/31/2014


as of January 31, 2014    
     Total Return
Index 12 months YTD/QTD/JAN
Russell 3000 22.60% -3.16%
S&P 500 21.52% -3.46%
DJ Industrial Average 16.07% -5.19%
Nasdaq Composite 32.33% -1.70%
Russell 2000 27.03% -2.77%
EAFE Index 16.31% -3.36%
Barclays US Aggregate 0.12% 1.48%
Barclays Intermediate US Gov/Credit 0.41% 0.92%
Barclays Municipal  -1.07% 1.95%
  Current Prior
Commodity/Currency Level Level
Crude Oil  $97.49  $94.17
Natural Gas  $4.94  $4.33
Gold  $1,239.80  $1,238.30
Euro  $1.34  $1.35

Mark A. Lewis

Director of Operations

I Want it All

My husband and I are planning a trip to celebrate our 30th anniversary this summer. We love to travel, and we are fortunate to have taken some wonderful trips over the years. But, when it comes to planning a new trip, I have a weakness: I want it all. You see, there are many places still on my list to visit, and yet there are others we have visited and enjoyed so much, we want to return. It can take weeks for us to pull the trigger and settle on an option. I want it all and I want it right now.

So, it was with great amusement when I read the most recent blog post by the NY Times “Sketch Guy,” Carl Richards You see, having few options is bad, but having too many options can be debilitating.

In the world of financial planning, we most often see this debilitation when people try to time the market. When the market is up, people want to wait for a correction. When it is down, they think it hasn’t gone down enough. Just when they think it is safe to go back in the water, they have missed the biggest part of the upswing. The cycle continues.

This is why the right asset allocation and portfolio diversification play such an important role in your financial success. It may not be exciting and you may not beat the Russell 3000 year after year, or ever. But you are participating in the markets, you have the cushion that fixed income provides and sufficient cash for emergencies to ride out just about any storm. And if you stick with your plan, over the long term, you will be a winner. You definitely won’t get there by sitting on the sidelines.

We all want to make the best decision, invest at the best time, pay the perfect price, plan the perfect trip, etc. But all of the research in the world won’t guarantee success 100% of the time. In fact, waiting for the best often causes us to do nothing.

Richards’ suggestion is to accept that sometimes good enough is better than not at all. And I would have to agree. For now, we have settled on our travel plans. And with any luck, there will be another trip next year.

Tracy H. Allen, CFP®
Financial Planner

Retirement Plan Savings 101

This time of year there are many employee benefit emails being churned through inboxes. Some of these benefits are time sensitive and can only be changed during qualifying events. Many times these benefits include health insurance coverage, group life and disability insurance coverage, and Health Savings or Health Reimbursement account withholdings. One benefit that is available to many employees, and can be changed at any time, is a retirement savings account. The maximization of these account benefits can result in a large reduction of your year-end tax bill. Let’s take a look at a few of the major plans approved for use by the IRS.

The 401(k):

The 401(k) is the most popular defined contribution plan available. The plan sponsor (the company) sets up the rules for employer contributions, which is approved by the IRS. Participants (employees) also have some decisions to make in regards to contributing to the account. For employees younger than 50, the 2014 maximum funding is $17,500 and for those older than 50 the maximum is $23,000. This employee contribution is subtracted from the employee’s taxable income for the year. This can lead to significant tax savings, but will also reduce the amount of take home pay for the employee. Similarly, some plans allow for a Roth 401(k). This plan functions the same way as the traditional 401(k), except employees do not get to exclude contributions from taxable income. However, once the employee reaches retirement age, all withdrawals from the Roth 401(k) are tax free, unlike a traditional 401(k).

The 403(b):

The 403(b) functions very similarly to the 401(k) but is only offered in certain types of organizations. Primarily, the 403(b) is offered to employees in public education and most non-profit organizations. The contribution limits are the same as the 401(k), with a slight advantage with the “catch up” rules.


SEP IRAs and SIMPLE IRAs are two savings vehicles available to small business owners. These accounts give small business owners and their employees access to tax-deferred savings vehicles with lower administrative costs. The SEP IRA’s contribution limit is similar to the 401(k) and 403(b), but based on the discretion of the business owner. This is different from a 401(k), for which an employer is required to contribute a certain amount. The SIMPLE IRA has a maximum salary deferral of $12,000 for 2014, with a $2,500 catch-up for employees older than 50.

This just scratches the surface of the details involved with employer sponsored savings plans. If you have questions about whether you are making an appropriate deferral, contact your advisor for a review of your situation. If you own a business and are interested in establishing a company plan, contact Neal Nolan, our Director of ERISA for a comprehensive consultation.