Wealth Management Blog | WrapManager | Michael J. O'Connor (10)

Michael J. O'Connor

CWS®, Vice President Investments

"Here We Go Again" - Will the Debt Ceiling Debate Affect Your Portfolio?

Posted by Michael J. O'Connor | CWS®, Vice President Investments

September 30, 2013

On August 26, Treasury Secretary Jack Lew sent a letter to Congress warning them that the U.S. will likely reach the debt ceiling by mid-October. He noted that if Congress doesn’t raise it, the financial implications could be adverse for our economy and potentially the global financial system.¹

The first thought for many investors is, “here we go again.” As frustrating as these political battles might be, over the past couple of years the debt ceiling debate in Congress hasn’t had much impact on the direction of the stock market, which has been trending higher.

Will this time be different? What does the debt ceiling debate mean for your portfolio? A look at history might help us address these questions.

The Debt Ceiling Debate Has Been Going On For Over 75 Years

The debt ceiling debate is not a recent phenomenon, nor is it unique to any one political party. Since March 1962, Congress has changed the debt limit 77 times, and since the late 1950’s Congress has raised the limit every year, with the exception of fiscal year (FY) 1969 and between FY 1997 – FY 2001. More recent changes to the debt ceiling came through the Budget Control Act of 2011, under which the debt ceiling was raised on three separate occasions. The most recent change came in May of this year, when the debt limit was set at $16.669 trillion, where it stands today.²

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Investment Planning

What’s the Difference Between Traditional Medicare and Medicare Parts C and D?

September 23, 2013

In our previous post on Medicare Parts A and B, we outlined some of the basic features of Traditional Medicare, which provides hospital and medical coverage to those enrolled. While Traditional Medicare will cover many of your basic medical needs, some people choose to explore other types of healthcare plans because of various costs and different types of coverage available. In this piece, we’ll explore Medicare supplemental insurance plans as available through Medicare Advantage and Medicare Part D. Both are offered through private insurers, and most plans require premiums, co-payments and deductibles. Medicare Part C (Medicare Advantage): Costs and Benefits Medicare Part C is an alternative to Medicare Parts A and B, and it must by law provide coverage “equivalent” to Parts A and B.1 If you purchase a Medicare Part C plan it will replace your coverage through Medicare Parts A and B. With a Medicare Part C plan, you don't have to pay Medicare Part A and Part B deductibles and co-payments, because Medicare Part C plans have their own deductibles and co-pays. You would, however, still have to pay Part B premiums.2 [+] Read More

Investing in Emerging Markets - What to Do - Cambiar Investors

September 19, 2013

Cambiar Investors comprehensive report on the Emerging Markets investing climate asks what should investors do with their emerging markets portfolio, and reviews the unique challenges of an atypical business cycle, investing in China, and what lies ahead for many emerging markets countries. [+] Read More

How Does Traditional Medicare Factor Into Your Healthcare Coverage in Retirement?

September 18, 2013

Traditional Medicare is another name for Medicare Parts A and B. Most people are automatically enrolled in Parts A and B and receive their benefit cards 3 months before their 65th birthday. You’ll be automatically enrolled if you’re already receiving Social Security retirement benefits when you turn 65.1 If you’re not automatically enrolled and want to apply, there is a seven month window to join: three months before your 65th birthday, the month of your 65th birthday, and three months after your 65th birthday. If you miss that window, there is “General Enrollment” every year between January 1 and March 31.1 Below we’ll break down the differences between Medicare Part A and Part B. Medicare Part A: Costs and Benefits Part A usually requires no premium payments, though there are some deductibles and coinsurances associated with coverage (more on these costs below). Part A covers hospitalization, or inpatient care. This includes hospital care, nursing facility care, nursing home care, hospice, and home health services.2 [+] Read More

Understanding Your Options for Healthcare Coverage in Retirement

September 17, 2013

The Basics of Medicare Parts A, B, C, D, and Medigap As you enter retirement or approach the age of 65, there are a lot of questions about what happens next: When should I start taking Social Security? How should I diversify my portfolio to ensure my long-term investment goals are met? Equally important is setting up your healthcare coverage. You’ll need to consider your healthcare needs, what coverage options are available to you, what the cost is going to be, what your budget allows, and so on. In our four-part series on Medicare, we’ll examine details about your healthcare options in retirement, to give you a foundation for making informed decisions as you build your comprehensive financial plan. [+] Read More

Navellier & Associates - "War Fever" Spooks Nervous Investors

September 4, 2013

Louis Navellier discusses the latest impact that the Syrian "war fever" is having on the US and other markets around the globe. "The S&P 500 fell 1.84% last week and 3.13% in August. The Dow fell 4.45% in August. On Friday, Blackrock reported thatAugust was its biggest month for ETF withdrawals in more than three years (since January 2010), with $16.1 billion inredemptions through last Thursday. The S&P 500 SPDR alone had $13 billion in outflows. These withdrawals will likely causethe strength and breadth of the market to deteriorate, but it could also increase demand for many higher-quality stocks." Download Navellier's Full Commentary Here Get Free Research Reports on Navellier & Associates [+] Read More

Is the Chinese Economy Stabilizing?

September 1, 2013

WrapManager’s Weekly Summary of Market and Economic News According to recent data released by the National Bureau of Statistics, the Chinese economy is stabilizing and should be able to meet growth targets on the year of 7.5%. The government has recently introduced policy measures of eliminating taxes on small businesses and increasing investment in urban infrastructure and railways to help give the slowing economy a boost.1 China’s Long-Term Economic Goals Over the long-term, China continues to indicate that they will tolerate lower growth rates as they move to reform the economy. Their goal is to rely less on exports and debt-finance construction for growth, and focus more on domestic demand while also reducing pollution and social inequality.1 Is the US Economy Slowing Down? Many analysts were optimistic there would be a pickup in economic activity in the second half of the year, but recent data point to a potential softening in the US economy. Spending, which accounts for approximately two-thirds of the US economy, was fairly weak in July, rising by a modest 0.1%. Inflation for the month was also tame, rising only 0.1% to 1.4%.2 [+] Read More

The Dangers of Short-Term Market Timing Strategies

August 31, 2013

As we established in our recent posts “Assessing the Probability of a Stock Market Correction” and “Are There Strategies to Handle Stock Market Corrections?,” market pullbacks are fairly normal occurrences within bull markets. We also pointed out some features that identify stock market corrections - they’re relatively short in duration, vary in size, and perhaps most importantly, they’re unpredictable when it comes to identifying when they’ll start and end. It’s the last point that makes short-term market timing strategies not only difficult to execute, but also potentially harmful to investors. Stock Market Corrections Are Unpredictable With stock market corrections, there are no clear warning signs for when investors should sell out of equities or when it’s time to reinvest. That creates two clear risks to short-term market timing strategies: An investor sells out of equities in an attempt to time the market correction correctly, but the stock market continues to rise. An investor might get it right and sell out of equities before a stock market correction, but then it becomes a question of when to reinvest. There is the risk that he or she misses out on the upside of the recovery. [+] Read More

Lazard Asset Management - Time to Invest in Developing Markets?

August 25, 2013

Lazard's Developing Markets equity team explains why they are excited about their growth-at-a-reasonable-price philosophy in developing markets. "We think this phenomenon of paying a high premium for perceived stable growth is a reaction to the global financial crisis that has led many investors to anticipate another large shock to the global economy even as central banks have worked to reduce that risk. This bias could persist but should fade as any of the following begin to occur..." Download Lazard Asset Management's Full Commentary Here Get Free Research Reports on Lazard Asset Management [+] Read More

Are There Strategies to Handle Stock Market Corrections?

August 24, 2013

In our recent piece “Assessing the Probability of a Stock Market Correction,” we explained the nature of corrections and examined the probability of a stock market correction occurring this year. We concluded we would not be surprised if a stock market correction occurred sometime in the future. Is there something that investors could or should do to prepare for the possibility of a stock market correction? Is There a Way to Avoid the Downside of a Market Correction? Given that stock market corrections are normal in a healthy market but unpredictable and short in nature, it’s nearly impossible to time it correctly. However, one strategy to avoid locking-in the downside of a market correction would be to remain invested throughout the correction. Below is a chart of the S&P 500 similar to the one we used in our “Assessing the Probability of a Stock Market Correction” piece, which illustrates the performance of the S&P 5001 from December 31, 2010 – August 14, 2013 (Click on the chart for a larger version): [+] Read More