Sherri’s Sidebar

3rd Quarter September 2012

The Markets

Stocks in both the US and abroad continue to march ahead, despite troubling news from the Middle East, with continued unrest there. Messaging from Europe indicates that as individual countries struggle to deal with unpopular austerity measures, the central banks continue to provide emergency funding for now.

Dr. Michael Hasenstab, Ph.D., the portfolio manager at Templeton Global Bond Fund, opined recently in a meeting I attended that there are two major risks in the global markets as he sees it:

  1. Hard landing in China (i.e. growth comes to a halt or significantly slows) and/or
  2. Germany pulls out of the Euro or other large European countries.

He gave compelling arguments as to why he didn't believe either were likely. China has $3 trillion in reserves that it could pump into their economy providing stimulus and supporting their banks. They do not have the debt overhang that many other countries have. If Germany were to become a standalone currency, they believe it would rise dramatically against all other currencies (the euro, the dollar, etc.), drastically reducing their export business, which they rely on heavily. A large portion of their GDP relies on export to both Eastern Europe and other countries. Consequently, Europe continues to kick the can down the road.

Financial Market Update* Year-to-date change as of September 30, 2012
S&P 500 Index 16.44%
NASDAQ Composite 19.32%
Russell 2000 14.23%
MSCI EAFE US$ (International) 10.08%
Barclay's Capital (Lehman) US Aggregate 3.99%
*Indexes are for illustrative purposes only. One cannot invest directly in any index. Assumes dividends are reinvested.
Source: Morningstar


The US election is a big question mark. The market "climbs a wall of worry," a saying often used in rising markets during troubled times. Company earnings are strong with cash reserves, and in some sectors will benefit, no matter what the economic environment. Federal Reserve chief Ben Bernanke has announced QE3, and interest rates will likely remain low for an extended period. This is good for borrowers and bad for savers. It is very tough for investors who need income, as well as insurance companies and pension funds who have managed their businesses around higher interest (above 5% typically).

The Fiscal Cliff

As we begin the 4th quarter, we don't believe we will get significant tax reform before November. While a short term extension of the Bush tax cuts is possible, we believe you should plan for the possibility of higher taxes in 2013 and beyond, which include a Medicare surtax on investment income, which we have talked about in previous newsletters. Attached is a summary of some of the new taxes currently slated for next year if tax cuts expire and strategies you might consider. If you want to discuss any of these or other strategies, please call us.

Plan sooner than later, if major gifts, Roth conversions or sales of appreciated assets are your objectives.

IRA Distributions: Michigan Withholding Minimum

Effective October 1, the Michigan state withholding minimum rate for IRA distributions changed from 4.35% to 4.25%.

Clients who currently have a periodic payment schedule in place can update their standing withholding elections to the new rate by submitting a new distribution form requesting the change.

For a summary of the new state tax changes go to the following link: taxes/Tax-Change-Summaries-- -Individual-Income-Tax-359807-7.pdf



S&P 500: An unmanaged index of 500 widely held stocks that’s generally considered representative of the U.S. stock market. NASDAQ Composite: An unmanaged index of securities traded on the NASDAQ system. Russell 2000: An unmanaged index of small cap securities which generally involve greater risks. MSCI EAFE: An unmanaged index that is generally considered representative of the international stock market. Barclay’s Capital: The U.S. Aggregate Index covers the USD-denominated, investment- grade, fixed-rate, taxable bond market of SEC-registered securities. Past performance may not be indicative of future results. Expressions of opinions are as of this date and are subject to change without notice. Any opinions are those of Sherri Stephens and not necessarily those of RJFS or Raymond James. Stephens Wealth Mgt Group is independent of RJFS. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investors should consult a tax advisor before deciding to do a Roth conversion. You should discuss any tax or legal matters with the appropriate professional.

How can we help you?

MICHIGAN5206 Gateway Centre, Suite 300 // Flint, MI 48507 //
Phone: 810.732.7411 // Fax: 810.732.8190 //
Map and Directions
FLORIDA712 S. Oregon Avenue // Tampa, FL 33606 //
Phone: 813.251.1879 // Fax: 813.251.1716 //
Map and Directions

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Stephens Wealth Management Group is not a registered broker/dealer, and is independent of Raymond James Financial Services. Raymond James financial advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered. Therefore, a response to a request for information may be delayed. Please note that not all of the investments and services mentioned are available in every state. Investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Contact our office for information and availability. © Raymond James Financial Services, Inc., member FINRA/SIPC | Privacy Policy

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.