Tax Alert: Your Weekly Update - European Growth Softens

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Weekly Market Recap

The economic data that was reported this week for the US came in as expected. We saw continued good housing and jobs data. US manufacturing activity grew slightly less than anticipated, but still in positive territory. US unemployment is now at 5.1%, its lowest level in 7 years.

In Europe, economic growth in the second quarter was 1.2% on an annual basis. This was softer than projected and, as a result, the European Central Bank (ECB) to announce lower growth forecasts. However, the ECB restated its resolve to stimulate the European economy further if warranted. In Asia, South Korean exports fell. Key commodities such as oil and copper have increased in price in recent weeks, after earlier protracted declines. This may prove helpful to many emerging market economies.

Overall, August proved to be an unusually bad month for stocks. In fact, it was the worst in 3 years for the S&P 500 and the worst in 5 years for the Dow. However, in this context, FutureAdvisor portfolios performed fairly well from a relative standpoint. The specific, diversified fixed income instruments that we select for portfolios such as Treasury Inflation Protected Securities (TIPS), domestic bonds, and international debt all held up far better than stocks. We would expect this during periods of stock market decline. So, although the absolute declines we saw in August were painful for investors, FutureAdvisor investors can take some comfort that their allocation and diversification, like bonds, helped reduced some of the downside volatility when compared to major stock benchmarks.

Finally, remember that months like August, though infrequent, are an integral part of long term investing, and the markets have experienced many similar, or worse, months over history. However, there are also plenty of exceptionally good months as well. For example, just as August was weak, note that this February saw the biggest monthly gains the S&P 500 has seen in over 3 years. Despite rough months like August, stocks continue to be an attractive long term asset class based on history.

Disclaimer:
The views expressed herein are not intended to serve as a forecast, a guarantee of future results, investment recommendations or an offer to buy or sell securities by FutureAdvisor. Differences in account size, timing of transactions and market conditions prevailing at the time of investment may lead to different results, and clients may lose money. Past performance is not indicative of future results. The tax loss harvesting strategy discussed should not be interpreted as tax advice and it does not represent in any manner that the tax consequences detailed will be obtained or that its tax loss harvesting strategy will result in any particular tax consequence. Clients should consult with their personal tax advisors regarding the tax consequences of investing.