Portfolio

Making estate planning decisions can sometimes bring up uncomfortable topics for clients, but Holly Thomas, the founder of Holly P. Thomas, LLC, in Tampa, Fla., said it's a vital part of any financial plan.

Hold on to your hat. We may be headed for a double-dip recession. In fact, when more current economic data arrives a few months from now, it may turn out that we're already in one, according to a pair of economists at Moody's Capital Markets Research Group.

A majority, 63%, of middle-class Americans thinks that the U.S. is in a doubledip recession, the First Command Financial Behaviors Index shows, up from 50% who thought the U.S. had reverted back into recession last summer.

Taking Stock: Northern Trust, BlackRock Say Little ChangedPrinter Friendly Email Reprints Reader Comments Share | August 8, 2011Tom Steinert-ThrelkeldAs securities markets in the United States prepare to open widely lower Monday morning, Northern Trust and BlackRock each said that the decision by the Standard & Poor’s bond ratings agency to downgrade U.S. Treasury debt for the first time would not affect their views of the U.S. bond market or the solvency of the U.S. government.Like what you see? Click here to sign up for Securities Technology Monitor's weekly newsletter to get the latest news and analysis that matters to the effective operation of capital markets.Chief Investment Officer Bob Browne said Northern Trust has no plans to sell U.S. Treasuries as a result of the downgrade.“Northern Trust does not see any fundamentally new information in the downgrade about the state of the U.S. economy and the country’s capacity to pay its debt,” said Browne.Using credit default swaps as a guide, U.S. beats Wal-Mart.Underscoring Mr. Browne’s position, Northern Trust’s Chief Investment Strategist, Jim McDonald, last week released a research commentary in which he analyzed the deal to raise the government debt ceiling and the political environment that created it. McDonald noted that U.S. fiscal problems, if left unaddressed, were likely to manifest themselves through a weaker dollar rather than higher bond yields. The U.S. government’s financial strength still remained higher than that of almost any other nation and of major corporations, including Wal-Mart (see chart).Northern Trust investment experts believe that growth and inflation expectations will determine U.S. bond yields over the next few years much more than the level of deficits.“Looking globally, S&P downgraded Japan to AA- in January of this year; that country's bond yields have declined since then and remain substantially below those of the United States," Browne said.With regard to money market funds, Browne noted that short-term ratings of the U.S. remain unchanged by S&P, remaining at A1+, the highest level. A Northern Trust report can be found here.BlackRock, in a statement, said the downgrade of U.S. sovereign credit by S&P“reflects facts that have been well known to the market for some time. So, it does not imply a fundamental increase in risk, and we don’t believe that investors should change their behavior based solely on the downgrade. However, in combination with continued economic weakness and regulatory uncertainty, this may provide a signal to some investors to reassess their risk appetite.”BlackRock said it had been preparing for the possibility of downgrade over the past month, and, the firm has no need to execute any “forced selling of securities” in response to the S&P downgrade.BlackRock said it also is prepared for “continued downgrades into next week of the many other issuers and issues that derive their rating from the U.S. government rating – including governmental entities and corporate issues.Weakness in labor markets, when combined with only modest levels of growth, argues for a high likelihood that the Federal Reserve will maintain its Fed Funds policy range at historically accommodative levels for at least another year and perhaps through 2012, BlackRock said.BlackRock said:Nonetheless, we think it is vital to underscore the fact that the U.S. Treasury sector remains the largest and most liquid fixed income market in the world with the greatest degree of price transparency and few genuine alternatives.As securities markets in the United States prepare to open widely lower Monday morning, Northern Trust and BlackRock each said that the decision by the Standard & Poor’s bond ratings agency to downgrade U.S. Treasury debt for the first time would not affect their views of the U.S. bond market or the solvency of the U.S. government.

Consumer confidence, as measured by the Discover U.S. Spending Monitor, fell for the second straight month in July, to its lowest level in two years. Since January, the monitor, based on a daily poll of 8,200 consumers, has dropped 11 points, to 82.7.

Even though the government reached an agreement to raise the debt ceiling, 54% of Americans surveyed said the debate over the debt ceiling has made them feel less confident in the economy, the RBC Consumer Outlook Index for August found.

Keating Capital, a pre-IPO fund, concluded its public offering, raising $86.8 million. Next, the fund plans to list its stock on Nasdaq by the end of the year.

Exchange-traded-fund assets are on the rise, and price appreciation has little to do with it, according to an analysis by Standard & Poor’s.

International Funds Set to Outpace Domestic Counterparts: S&PBy Dave LindorffAugust 4, 20112011 has not been a great year for international equity mutual funds, especially compared to domestic U.S. fund counterparts. But this situation could very well change and investors in the near future, according to analysts at Standard & Poor's Equity Research.Like what you see? Click here to sign up for Financial Planning's daily newsletter to get the latest on advisor market trends, investment management, retirement planning, practice management, technology, compliance and new product development.First the numbers.After having two great years, in the first half of 2011 through the end of June, the average gain for international equity funds was a paltry 1.7%. This compared to an average gain of 3.4% for funds invested exclusively in U.S. domestic stocks.But Alec Young, an S&P international equity strategist, and colleague Todd Rosenbluth, an S&P mutual fund analyst, said that a slowing U.S. economy going forward could make it hard for domestic-invested funds to continue outperforming international funds -- especially if the dollar continues its slide against the Euro and other currencies (it’s down 7% so far this year).As Young explains, international funds that invest in companies that denominate their overseas returns in local currencies see their returns rise when those overseas earnings in foreign currencies get converted to dollars.Even so, he said that for international stocks and international mutual funds to really take off in the second half would require a convergence of a number of factors, not all of which are looking particularly likely.These factors, he said, would include an easing of sovereign debt “stress,” greater momentum in international manufacturing, commodity price stabilization, and a more robust U.S. recovery. With both the U.S. and global economies looking weaker, Young told On Wall Street that there were “still two things that could happen that would help international equities funds: a QE3 program by the Federal Reserve, or an expansion of the European Economic Stability Fund.” The Fed at the end of June ended its latest quantitative easing program, called QE2, of buying Treasuries and, at that time, Fed Chairman Ben Bernanke said he did not anticipate having the Fed engage in a third such program.But some economists and Fed watchers think that the dramatic change in the outlook of the U.S. economy evident in recent days may make him rethink that view. Also, there are many experts in Europe who think that the economic stability fund established to prop up the economies of Greece, Portugal and other weaker Euro Zone states is too small and may need to augmented. Looking at the universe of international funds available to investors, S&P’s analysts are recommending three which they say are both top performers and which are invested in companies with strong credit profiles and/or a history of earnings and dividend stability. They include:-- Lazard International Equity Portfolio fund (LZIOX), a relatively small fund with only $38 million in assets that has returned 5.8% so far in 2011 with below average volatility.-- Templeton Foreign Fund (TEMFX), up 5.3% this year, and a fund with relatively low turnover.-- MFS Research International Fund (MRSAX), up 5.1% this year, and a fund that has outperformed its peers for the past five calendar years.

2011 has not been a great year for international equity mutual funds, especially compared to domestic U.S. fund counterparts. But this situation could very well change and investors in the near future, according to analysts at Standard & Poor's Equity Research.