A Tale of Two Economies

Stocks added 5% to their 2014 gains during the second quarter. After negative GDP growth in the first quarter, the markets rallied as it became evident that weather alone had provided this glitch. We are now in the midst of corporate second quarter earnings announcements and they are expected to continue to be strong. As we stated in our last newsletter, history would indicate that the year after a major rally, such as 2013, would at least see a 10% return. As the barometer below shows, the Standard & Poor Composite is already up 7%.

National growth has been slower than most prior recovery eras and our employment growth has been mediocre at best. In the great recession of 2008-9 the nation lost 8.8 million jobs. This loss was finally recovered this year. So, we now have the same number of jobs, but with a population the Census Bureau projects at 317 million, ten million more people than in 2009. The bluecollar working man still struggles with a 6.3% unemployment rate, while another 4% of the 2007 work force no longer participate.

As of the end of June, the Standard & Poor Composite Index had nearly tripled since its 2009 lows. The Federal Reserve seems to have successfully diverted us from disaster, but the ones who are truly prospering are the wealthy, not the middle-class or poor. Those having assetsremaining after the collapse have benefited from these assets being reflated by Fed policy. Only the asset of residential real estate has not fully recovered, still down 20% from the 2006 highs, but up 25% the last four years. So most of us are either recovering or at least treading water. As long as the Fed provides low-interest money, banks, corporations and stockholders will do well, but it will take a lot more growth in the GDP for labor to see results.

VolkersAtLucasOil

Meanwhile, our six office consultants attended a conference in Indianapolis last month hosted by our broker dealer, Investment Planners, Inc. (IPI) based in Decatur, Illinois. The picture shown is taken from Lucas Oil Stadium, home of the Colts. As always, the annual conference encompassed investment strategy, product knowledge and regulatory issues. More than anything, the conference allows us the chance to interact with other consultants from around the Midwest.

Many of you have noticed IPI’s name over the years just above our name on business cards, signs, letterheads, etc. but perhaps you did not understand the vital role played by a broker dealer. We decided now would be a good time to expound upon IPI, its purpose, values and history, on the inside of this newsletter. Suffice it to say, that when we chose to join IPI over 17 years ago, we wanted to be yoked with like-minded people. It was true then and is now. We are very proud to be associated with this broker dealer.

PortfolioBarometerJune30-2014

Index information is used to represent market performance, but you cannot invest directly in an index. Past performance is not indicative of future results.
Advisory services provided through IPI Wealth Management, Inc. Securities offered through Investment Planners, Inc., member FINRA/SIPC.
The Volkers Group, LLC is not affiliated with Investment Planners, Inc.
Investment Planners, Inc. and The Volkers Group, LLC do not provide tax advice.

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