11-22-2013 03:36 PM
By Matt Freund, Chief Investment Officer, USAA Mutual Funds
Next week marks the start of holiday shopping, and the outlook points toward one of the most competitive seasons for retailers in recent years. For buyers, it could mean a season of good cheer as stores offer attractive deals during the busiest retail period of the year.
The latest Consumer Price Index numbers for October showed a dip of 0.1% for the month after rising 0.2% in the previous month. For the year, inflation is low, with the CPI up only 1%.
Worries that the Fed would soon begin to taper its $85 billion per month bond-buying program heightened this week. The minutes of the Federal Open Market Committee’s latest meeting revealed that the taper will likely begin “sooner rather than later,” which led to lower prices in the segments of the bond market more sensitive to interest rate changes, as well as a drop in the price of gold.
The S&P 500 for the first time ever closed above 1,800 to end the week at 1,804.76. The Dow hit record territory yet again and surpassed the 16,000 mark to close at 16,064.77. The Nasdaq ended at 3,991.65. U.S. Treasuries fell, with yield on the 10-year down 0.04% to 2.75%, while gold closed the week at $1,243.63 per troy ounce, down 3.6%.
The Thanksgiving holiday means a short market week with little new data coming out. A key release, however, will be the latest new housing starts. This week we learned that existing home sales saw a big 3.2% drop in October, attributed to higher mortgage rates, the government shutdown and lower inventory. Orders for durable goods in October will also be reported next week.
Due to the holiday, we will not produce a weekly commentary next week. We will return to our regular schedule on Dec. 6.
For more insights on the markets, read our investment outlook for the third quarter.
USAA Investments Managed Portfolio Outlook
Our view of caution toward risk assets remains unchanged. We remain slightly overweight in bonds and cash in our diversified managed portfolios. For investors interested in income-oriented bond investments, the USAA Intermediate-Term Bond Fund, the USAA High Income Fund and the USAA Income Fund are examples. For investors interested in tax-free income, the USAA Tax Exempt Long-Term Fund, the USAA Tax Exempt Intermediate-Term Fund and the USAA Tax Exempt Short-Term Fund are examples.
We also have a small position in gold and precious-metals mining stocks, which we view as an attractive long-term inflation hedge. For investors seeking exposure to precious-metals mining stocks, the USAA Precious Metals and Minerals Fund is an example. The USAA Real Return Fund also provides potential protection against the risks of long-term inflation.
Emerging markets represent another opportunity. Though they were hit especially hard recently, we believe that emerging markets remain attractive. They offer both an interesting long-term prospect for growth and compelling valuations. The USAA Emerging Markets Fund offers exposure to stocks in less-developed countries.
As always, we encourage investors to speak with one of our financial advisors, who can help determine which investment vehicles are best suited for you based upon your individual goals, objectives, risk tolerance and time horizon.
This material is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing.
Consider the investment objectives, risks, charges and expenses of the USAA mutual funds carefully before investing. Contact us at 1-800-531-8910 for a prospectus containing this and other information about the funds from USAA Investment Management Company, Distributor. Read it carefully before investing.