Raffa Wealth Management

Raffa Wealth Management

Raffa Wealth Management is a boutique investment advisory firm. We can help you achieve your financial goals so you can enjoy the freedom to pursue your passion. We know that you’re working to accomplish great things for your families and in our communities. We’re proud to help you Grow it for Good!

Financial News for the Week Ending June 15th

By Mark Murphy | Published: June 17, 2013

All the news you need to stay informed about what’s currently driving the market – courtesy of Raffa Wealth Management, LLC.

US stocks posted a weekly loss on continued jitters before next week’s Fed meeting. The Dow sank 1.2% and the S&P 500 fell 1.0%. Europe edged down 1.4% as well. Japan’s stock market continued to be volatile snapping back from a 6.4% loss on Thursday for a 1.9% gain on Friday to finish the week down 1.4%. The 10 year Treasury yield, after reaching a 14 month high of 2.293% during the week, finished at 2.126% after increased Treasury buying. Atricle

Greece was removed from MSCI’s developed market indices and moved to an emerging market.

The 30 year fixed mortgage rate jumped to 4.15% in the first week of June its highest level since March of 2012. Article

The city of Detroit told investors it planned to stop making payments on some of its debts including a $39.7 million payment that was due Friday. The move could trigger a Chapter 9 bankruptcy filing. Article

S&P upgraded its outlook for the US’s credit rating from negative to stable citing recent economic improvement.

Initial jobless claims fell dropping the four week moving average to 342,250, the lowest level since early 2008.

Retail sales rose 0.6% in May up 4.3% from a year ago showing resilience from American consumers. Article

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Raffa Wealth Management is an independent investment advisor providing nonprofit organizations, high net-worth investors, and qualified retirement plans with a full range of investment consulting services. We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets. Visit us at www.raffawealth.com

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Financial News for the Week Ending June 8th

By Mark Murphy | Published: June 10, 2013

All the news you need to stay informed about what’s currently driving the market – courtesy of Raffa Wealth Management, LLC.

US stocks surged on the solid jobs report to end the week. The Dow posted it second best day of the year gaining 1.4% and rose 0.9% for the week. The S&P 500 added 1.3% on Friday and gained 0.8% for the week. Japanese stocks dropped 6.5% over the week as country’s stock market continues to retreat after its months long surge and Europe sank 1.8%. On the positive jobs news the 10 year Treasury rose to 2.16%.

Job growth continues to be slow and steady as employers added 175,000 jobs in May mostly in line with expectations. However, the report wasn’t so strong that it is likely to change the Fed’s course of buying $85 billion in bonds a month. The unemployment rate ticked up to 7.6% as more job seekers entered the workforce.

The Fed is expected to indicate after their next meeting later in June that they will begin to ease their bond buying program later this year.

Thirty year mortgage rates have jumped at the prospect of the Fed’s bond buying program subsiding. The average 30 year rate has risen to 3.81%, its highest level since May 2012.

US auto sales rose in May but the rally in car sales has shown sings on plateauing.

US manufacturing contracted in May having their worst month since the end of the recession. Europe’s manufacturing also contracted for the 22^nd straight month and even stalwart Germany sank for the third month in a row.

The ECB took no new steps at the conclusion of its most recent meeting, but lowered its forecast for growth for the year.

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Combating Rising Interest Rates

By Mark Murphy | Published: June 7, 2013

Interest rates in the US rose over the month on fears that the Fed would end its bond purchase program earlier than anticipated. The 10 year Treasury yield rose from 1.70% to 2.16% and the broad bond market fell 1.78%. As interest rates rise bond prices fall and thus large increases in interest rates can have a negative effect to a bond portfolio. As a result of potential rising interest rates, how is RWM positioning your portfolio to reduce interest rate risk?

RWM is taking several steps to combat the potential harmful effects of rising rates. First, we tilt the fixed income side of the portfolio from a market neutral allocation, which has an average maturity of approximately 7.3 years, to a shorter term position. Short Term bonds are not as negatively affected by rising rates and thus, all else equal, short term bonds will see smaller losses than longer term bonds.

Secondly, we diversify the portfolio broadly across bond sectors including corporate and government bonds. Different types of bonds react differently to rising rates depending on the market cycle. By diversifying the bond portfolio across many types of bonds it enables the portfolio to invest in bonds that are less sensitive to interest rate movements.

Finally, we diversify the portfolio internationally. While rates may rise in the US, interest rates can be moving in different directions globally. By exposing the portfolio to different yield curves it provides the potential to be invested in markets were rates are flat or falling. The diversification potential is shown by the performance of international bonds when interest rates in the US are rising. Since 1985, when viewing one year periods where rates have risen in the US, the index of short term international bonds has returned 4.8% compared to gains of only 2.3% for five year US government bonds and a loss of 0.3% for ten year government bonds.

The concern of interest rates rising is also a relatively short term issue. As rates are rising the bond funds held in the portfolio are continually reinvesting maturing bonds in new bonds at the prevailing higher interest rates. As a result the bond funds are buying bonds with higher yields and moving out of older lower yielding bonds, which help investors. Thus, price declines are temporary losses until bond funds move into holding a portfolio of bonds issued at the higher existing rates.

While US interest rates rose in May and are likely to rise more in the future, by having a shorter term portfolio that is broadly and internationally diversified an investor can help mitigate the short term effect rising rates have on a bond portfolio.

Index Performance May YTD Trl 1 yr.

US Stock (Russell 3000)                                 2.36%    15.55%   27.88%
Foreign Stock (FTSE AW ex US)                  -2.22%      4.67%     26.52%
Total US Bond Mkt. (BarCap Aggregate)     -1.78%    -0.91%       0.91%
Short US Gov. Bonds (BarCap Gov 1-5 Yr) -0.49%     -0.11%       0.35%
Municipal Bonds (BarCap 1-10yr Muni)       -0.91%     0.27%       1.90%
Cash (ML 3Month T-Bill)                                0.01%     0.03%       0.12%

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Financial News for the Week Ending June 1st

By Mark Murphy | Published: June 3, 2013

All the news you need to stay informed about what’s currently driving the market – courtesy of Raffa Wealth Management, LLC.

US Stocks slid to finish the week, but had another positive month on generally positive economic news. Volatility picked up to end the month as the market began to debate when the Fed would end its bond purchase program. The S&P 500 sank 1.1% for the week, but rose 2.1% for the month. The Dow dropped 1.2% over the week, but was up 1.9% for May. Both indices have seen six straight months of gains. Europe was down slightly less dropping 0.8% for the week, and was flat for the month. Japan had a shaky week as the Nikkei fell 5.7% and it finished the month down 0.6% ending a nine month winning streak. Yields on the 10 year Treasury climbed over the week to finish at 2.16%, the highest level since early April of 2012. Article

First quarter GDP was revised down slightly to 2.4% from the previous estimate of 2.5%. US consumers remain the driving force behind the growth. Article

Core prices in April rose 1.1%, the lowest increase since the Commerce Dept began tracking the number in 1960. Overall prices rose just 0.7%. The numbers take pressure off the Fed to wind down their bond purchase program due to any fear of accelerating inflation.

Consumer spending sank in 0.2% in April despite consumer confidence hitting a 6 year high.

The Euro zone unemployment rate hit a new record high of 12.2% in April.

Chinese firm Shuanghui International holdings, the largest meat processor in the country, reached an agreement to purchase Smithfield Foods, the world’s largest pork processor, for $4.7 billion. It would be the largest takeover ever for a Chinese firm of an American company. Article

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Financial News for the Week Ending May 25th

By Mark Murphy | Published: May 28, 2013

All the news you need to stay informed about what’s currently driving the market – courtesy of Raffa Wealth Management, LLC.

US stocks had their first down week in a month on concerns that the Fed may begin to reduce its bond buying program this summer. The S&P 500 fell 1.1% and Dow dropped 0.3% for the week. Europe fell 1.9% on global growth concerns and Japan sank 3.5% over the week driven largely by the midweek sell off were the index plummeted 7.3%. The 10 year Treasury yield rose over the week to finish at 2.01% its highest week ending level since mid March as bonds sank. Article

In testimony before congress Bernanke said the Fed could potentially begin to take steps to curtail its bond buying program in the “next few meetings.” However, the minutes released from the Fed’s early May meeting showed that some members wanted to start cutting down bond purchases as early as June. Article

Previously owned home sales rose 0.6% to the highest level in three years and new home prices hit a record high in April as builders limit the supply on the market.

Chinese manufacturing moved into contraction territory in May, the lowest level in seven months.

Yahoo agreed to purchase blogging site tumblr for $1.1 billion as Yahoo attempts to improve growth and move into the social media fray. Article

A senate investigation has found that Apple has paid no corporate income taxes on over $74 billion in revenue earned over the past four years that are held in subsidiaries in Ireland. Article

HP’s earnings and revenue sank in the quarter ended April 30^th as sales of personal computer continue to dip, but it was able to cut costs and raised its full year free cash flow forecast.

Eye care company Bausch and Lomb agreed to sell itself to Valeant Pharmaceuticals for $9 billion. The firm is owned by private equity groups led by Warburg Pincus, and the sale marks a strong gain from the $3.7 billion the firm paid to take the company private.

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Financial News for the Week Ending May 18th

By Mark Murphy | Published: May 20, 2013

All the news you need to stay informed about what’s currently driving the market – courtesy of Raffa Wealth Management, LLC.

US stocks had another record setting week on positive consumer sentiment and other economic readings. The S&P 500 gained 2.1% and the Dow rose 1.6% for the week. Japan saw stocks advance to a 52 week high gaining 3.6% and Europe rose 1.2%. On the positive upswing for stocks the 10 year US Treasury yield rose to 1.95% and gold sank to $1,364.90 an ounce. Article

IPOs are on pace to raise the most money since the financial crisis. So far in 2013, 64 companies have raised $16.8 billion in initial public offerings.

Retails sales rose 0.1% in April as declines in food and gas prices allowed consumers to spend more elsewhere.

Japan’s GDP grew 3.5% to start the year outpacing expectations, an early sign that Japan’s stimulus measures are having an effect on the economy. The mark was up from the 1% growth seen in the 4^th quarter. Article

The euro zone has now entered its worst slump since the end of World War II as first quarter GDP was -0.9%, the sixth straight quarter of contraction for the country bloc. The readings raise more questions about fiscal austerity and their remains a stark contrast between the slightly positive growth of the northern countries and the near depression conditions of the southern countries. Article

The CPI-U for April fell 0.4% driven by falling food and energy prices for the second straight monthly drop. The annual inflation rate is now at 1.7% excluding food and energy prices, well below the Fed’s target rate. Article

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Financial News for the Week Ending May 11th

By Mark Murphy | Published: May 13, 2013

All the news you need to stay informed about what’s currently driving the market – courtesy of Raffa Wealth Management, LLC.

US markets ended the week at another record closing on positive economic news as the Dow surged past the 15,000 level. The S&P 500 and Dow rose 1.0% for the week. Japan rocketed up 6.7% over the week on the country’s easy money policies and Europe increased 1.3%. The 10 year Treasury yield rose to 1.90%. Article

Germany’s DAX index was the first European index to move into record territory since the financial crisis.

Junk bond yields have fallen below 5% for the first time ever as investors hungry for yield have bid up the prices of the low credit quality securities. Article

The dollar rallied against many currencies over the week. It rose to 102 Yen, its highest level since October 2008, even with the Australian dollar for the first time since June and hit its highest level against the euro in a month.

Mortgage rates have fallen back near their November lows as the average 30 year fixed mortgage rate stands at 3.35%.

Jobless claims fell to their lowest level since November 2007 prior to the great recession. Article

Walt Disney, News Corp, Groupon and Toyota all issued positive financials over the week.

Fannie Mae and Freddie Mac has benefited from the housing rebound as they both posted near record profits. Fannie Mae announced it would make a $59.4 billion dividend payment to the Treasury. Article

Philip Falcone, the renowned hedge fund manager, agreed to a settlement with the SEC that calls for him to be sidelined from the securities industry for two years as a result of civil fraud charges that were brought against the manager and his firm Harbinger. He plans to return investors money, liquidating his funds.

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Sell in May and Go Away?

By Mark Murphy | Published: May 10, 2013

The Wall Street axiom, sell in May and go away, has a nice ring to it, but does it have any validity? The trading philosophy has its roots in the belief that stock market growth is significantly higher from November through April. Therefore, investors should buy stocks in early November, sell at the end of April, move to cash or bonds, and finally purchase stocks again in early November. Historically, the spring and summer months have underperformed the fall and winter as can be seen in the below chart.

Over the past three years the US stock market has seen significant spring downturns where the strategy of selling out of stocks in May and buying back in later in the year would have been beneficial. In 2012, 2011, and 2010 stocks reached a level at the end of April that they did not see again until August, February, and November, respectively.

To RWM this is just another market timing strategy, and market timing has been proven time and again that it doesn’t work. There is no basis behind the belief that stock prices will be down or flat in the middle of the year other than average historical trends, and there is no given history will repeat itself. The same reasoning applies to investing in the market based on the Super Bowl winner. If a team from the AFL (the majority of teams in the AFC) wins the Super Bowl than 80% of the time the market has fallen that year. Correlation does not mean causation. In addition, as can be seen in the chart, while stocks have not performed as well over the spring and summer months, they have still been positive in three of the five months. Also, even if this was a reliable occurrence, one must consider taxes and transaction costs. We believe any correlation to be spurious.

Looking at May 2013 so far, this strategy would not have paid off as the US stock market has climbed over 2% higher as of this writing. We believe trying to time the market is a loser’s game. Only by investing and then staying invested can one expect to benefit from the long term growth stocks have to offer. By sticking to a plan, your investment portfolio will be here to stay well past May.

Index Performance April YTD Trl 1 yr.

US Stock (Russell 3000)                                 1.64%    12.89%   17.21%
Foreign Stock (FTSE AW ex US)                  3.85%      7.05%    14.81%
Total US Bond Mkt. (BarCap Aggregate)      1.01%     0.89%    3.68%
Short US Gov. Bonds (BarCap Gov 1-5 Yr)  0.22%       0.38%     1.00%
Municipal Bonds (BarCap 1-10yr Muni)       0.70%       1.19%     3.28%
Cash (ML 3Month T-Bill)                               0.01%     0.03%     0.12%

*Chart via Business Insider

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Financial News for the Week Ending May 4th

By Mark Murphy | Published: May 6, 2013

All the news you need to stay informed about what’s currently driving the market – courtesy of Raffa Wealth Management, LLC.

The unemployment rate dropped to 7.5% reaching its lowest level since December 2008 and hiring rose by 165,000 in April surpassing expectations. Hiring was also revised up in February and March by a combined 114,000. Article

US Stocks reached new highs to end the week on a positive jobs report. The S&P 500 crossed the 1600 barrier finishing at 1614 and the Dow briefly crossed the 15,000 level before finishing at 14,974 on Friday. For the week the S&P 500 gained 2.0% and the Dow rose 1.8%. In Europe stocks also were up for the week gaining 1.7%, while Japan saw stocks slide 1.4%. On the positive economic news the Treasury yield rose to 1.74% as investors moved out of the safe haven. Article

Consumer spending rose 0.3% in March and consumer confidence bounced back in April.

Home prices continue to be a strong point of the economy as the February reading of the Case/Shiller index showed home prices rose 9.3% from a year earlier. It’s the fastest pace of growth since 2006. Article

The Fed concluded a two day policy meeting announcing it would carry on with its bond purchase program and said it could even increase the purchases if inflation or unemployment do not move with their expectations.

Unemployment rose to 12.1% in March in Europe, the highest level since records began, while inflation has fallen to 1.2% in April. The numbers provided more support for action from the ECB which announced it was cutting its key lending rate by 0.25% to a record low of 0.5% in a widely anticipated move in hopes of fighting back against recession the euro zone has entered. Article

Japan saw its industrial output rise for the 4th straight month in March as the country counties to shows steps toward recovery.

With more than half of S&P 500 companies reporting first quarter profits 73% have beaten analysts estimates for earnings, but fewer than half have beaten revenue estimates. Much of which is due to slowing sales driven by Europe and a rising dollar.

Apple made its first foray in 20 years into the bond market with the largest corporate bond deal in history; $17 billion. The debt was issued primarily to return money to shareholders as much of its cash is tied up overseas. Article

Facebook posted a 38% jump in revenue on mobile ad sales growth and a 6.8% increase in earnings.

Berkshire Hathaway’s profit skyrocketed up 51% in the first quarter driven by rising profits at railroads and improving operations at his insurance holdings. The numbers surpassed Wall Street expectations.

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Financial News for the Week Ending March 27th

By Mark Murphy | Published: April 29, 2013

All the news you need to stay informed about what’s currently driving the market – courtesy of Raffa Wealth Management, LLC.

US markets rose over the week on positive economic news. The S&P 500 gained 1.7% and the Dow notched a 1.1% gain. Internationally, Japan continued its march upward gaining 4.3% and Europe rose 4.2%. The 10 year Treasury edged down to 1.669%.

A Twitter hacker caused a temporary crash in the US stock market by announcing a bombing at the White House. Computerized trading programs seized on the news to send the market down and raised more questions about the trading approach. Article

First quarter GDP came in below expectations at 2.5%. The pace picked up significantly from the 4^th quarter, however fell below analyst estimates of 3.0%. Reductions in federal spending and meager spending from business will likely keep growth from expanding. Article

US Home prices rose 11.8% and sales fell 0.6% as a result of limited supply in March.

An early reading on manufacturing in China fell in April adding to fears about the country’s growth.

Europe saw its private sector weaken further in April and business activity fell in Germany for the first time since November. Spain’s unemployment rate jumped to 27.2% and France has the highest level of job seekers ever. The numbers are prompting a revisit of the austerity measures the countries have enacted.

The U.K. announced the first quarter saw growth of 0.3%, which was better than expected and it avoided falling into a third recession.

Apple’s first quarter earnings release helped ease investors concerns, but it posted its first drop in profits in a decade. The technology company posted strong gains in iPad and iPhone sales. The firm announced it would return $100 billion to investors through dividends and stock buy backs. Article

Netflix, Barclays, Boeing, Ford, Samsung and Proctor and Gamble all had positive earnings growth that beat expectations. However, a common theme during earnings announcements is firms offering a weak outlook.

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