2013 Charts of the Week

5 Investment Resolutions for 2014

Posted December 27, 2013

It's a popular time of the year to start thinking about New Year's resolutions. Along with the other goals you set for yourself in 2014, it's important to think about your financial well-being and retirement. Here at ICMA-RC, we offer you 5 ideas for 2014 resolutions.

Industrial Production Index

Posted December 20, 2013

The Industrial Production Index is a measure of U.S. industrial output, includes production from: manufacturing, mining, and utilities (electric and gas), and is published monthly by the Federal Reserve. Strong production generally indicates greater economic growth and higher corporate profits. Conversely, weaker production often indicates weaker economic growth and lower corporate profits.

S&P 500 Correlation Index

Posted December 13, 2013

"Correlation" is a measure of the extent to which security prices move in the same direction, but not necessarily by the same amount. This may sound complex, but think of correlation as a way to track "group thinking", commonly known in the investment world as herding behavior. Group thinking or "herding" generally occurs when macro economic issues dominate the market. For example, an unexpected negative event occurs with great media attention. If this event causes many investors to sell securities at the same time, correlation would rise. When correlation is high, security prices may generally be moving in the same direction and individual security selection may matters less. When correlation is low, security prices may generally be moving more independently and individual security selection may matter more. The correlation in the chart reflects the Chicago Board Options Exchange S&P 500 Implied Correlation Index ("JCJ") and it measures the expected average correlation of components of the S&P 500 Index ("SPX"). The S&P 500 index is used as a proxy for the stock market in general.

The True Cost of the "Twelve Days of Christmas"

Posted December 6, 2013

Since 1984, PNC Wealth Management ("PNC") has tracked the cost of the goods and services given as gifts in the classic "Twelve Days of Christmas" holiday song. The cost of true love has experienced its most expensive year ever. The 2013 cost was $114,651 for the gifts detailed in the verses of the song, including repetitions and its 6.9% increase outpaced the U.S. Consumer Price Index year-over-year increase, which stood at 1.0 % through October 2013.

US Equity Cash Flows

Posted November 29, 2013

The above chart provides estimates of the annual net cash flows into U.S. Stock mutual funds and ETFs as reported by Morningstar for each year from 2007 though 2012, and for the year-to-date period through October 2013. The closing price of the U.S. stock market, represented by the S&P 500 Index, is also shown over the same period (gold line).

Components of the Consumer Price Index

Posted November 22, 2013

Inflation is defined as a general rise in the prices of goods and services. One of the most widely followed measurements of inflation is the Consumer Price Index for All Urban Consumers ("CPI"). The CPI is published monthly by the Bureau of Labor Statistics and is calculated by measuring the weighted average change in the price of a basket of goods and services. The chart above separates CPI into its components. The size of each bubble represents the weight of each CPI component, the location of each bubble is the one year price change of each CPI component, and the dotted line is the overall change in CPI.

Earnings Expectations and the S&P 500 Index

Posted November 15, 2013

A Price/Earnings Ratio ("P/E ratio") reflects the price investors are willing to pay for a dollar of earnings. It can be calculated for an individual security or for a group of securities, such as those in an index. The calculation may utilize historical earnings or estimated future ("forward") earnings. The chart above illustrates the month-end closing prices of the S&P 500 Index ("S&P 500") and the corresponding P/E ratios based on forward earnings. While utilizing forward earnings reflects estimates that may or may not materialize, it is consistent with stock prices, which are believed to represent investor expectations of future earnings.

Rebalancing

Posted November 8, 2013

"Rebalancing" your portfolio is an investment strategy designed to help maintain your long-term portfolio allocations. When markets move up and down, the varying returns from different asset classes can cause a portfolio to move away from its intended allocation. As allocations shift, failing to rebalance can change the risk profile of the portfolio, as certain asset classes tend to be more volatile than others. Retirement savers should be aware of this risk and consider rebalancing periodically to keep their asset allocations close to target.

Fiscal Outlook of Cities

Posted November 1, 2013

The National League of Cities ("NLC") conducts a survey of city finance officers each year to review the fiscal condition of America's cities and to assess the perceived prospects for the future. This year's NLC survey showed that 72% believe their cities are better able to meet their financial needs in 2013 than in the previous year, the highest level since 2000. Confidence has grown steadily over the past few years, rising from a low point of 12% in 2009 at the end of the Great Recession. The NLC survey results are shown since 2000 in the chart above.

Fixed Income Sector Performance (Total Return as of 9/30/13)

Posted October 25, 2013

The fixed income market includes many different types of securities, and their performance can vary substantially. The chart above compares the performance of eleven major fixed income sectors for the one year periods ended September 30, 2013 ("current year") and September 30, 2012 ("prior year"). Only three of the eleven fixed income sectors produced positive returns for the current year, while eight of the sectors fell. In contrast, all eleven sectors produced positive returns in the prior year.

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