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Market Outlook

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Holding securities

It looks like the economic expansion is moving forward, employment data is stabilizing and the Institute of Supply Managers reports expanding orders and prices for both manufactured products and services. We have navigated through the roughest waters at the bottom of the cycle and the tide is finally beginning to move in and should carry investors forward. When looking at economic indicators it appears that the economy grew at a 3.5% to 4% annual rate last quarter and should accelerate this quarter. Unfortunately, the better than expected economic news is now being muted by the ugliness that is happening in the Middle East. The world and the stock market anxiously wait for what happens next. 

Even with the big problems in the Middle East, our market strategist believes market pullbacks will be short and shallow. Economic news should continue to lift investor expectations regarding earnings growth for this year and for most of the economic sectors. Energy stocks should continue to benefit as demand for oil and natural gas strengthens due to the global economy beginning to recover. They are also being sought as a hedge in case oil supplies are disrupted as a result of the Middle Ease conflict. Some sectors of the market will not improve until capital spending budgets are increased.

Many investors prefer to personally hold individual stock or bond certificates as opposed to depositing them with an investment firm. The reasons for doing this vary from personal satisfaction to a sense of possession and lack of knowledge. If you do choose to hold your stock certificates, here are a couple of important reminders. Your certificate should be kept a safe place where it cannot be lost, stolen or destroyed. It is also wise to let someone in your family know what stock you own and where the certificates are located. It can be cumbersome when selling stocks to deliver the certificate, sign a stock power and deal with mail delays; be sure to allow an extra day to complete paperwork. It is important to keep accurate records of stock splits, mergers, stock dividends and cash received from any stock transactions.

Many brokerage and security firms will hold securities for you at their corporate headquarters or at their National Securities Depository at no additional cost to you. You can have the convenience of having securities available in the account on trade date while retaining full control and decision making over your investments. SPIC (Securities Investor Protection Corporation) is insurance that will protect your account much like FDIC insurance that banks have. Please check individual companies for limits and details.

Dividend and interest payments from the securities in your account can be mailed to you or directly deposited to your bank account. Year-end tax reporting is provided by the brokerage firm and will consolidate your reporting requirements. The report will include a breakdown of the income which is subject to federal and state tax as well as the tax-free income. It is important to keep track of your cost basis in securities for income tax reporting; many brokerage firms have software that tracks this important information.

It can be difficult to transfer individual stock certificates, especially if you own several different companies. Upon the death of the owner, each transfer agent requires certified paperwork, which can differ from agent to agent. Estate transfers of securities held in a brokerage firm is easy and for most firms inexpensive. When stocks are held in an account only one set of paperwork is needed to transfer all assets in the account. Disposition of assets may begin immediately without the delay of transferring the securities. A transfer on death (TOD) provision can allow securities to be distributed to designated beneficiaries upon the death of the owner(s). 

Regardless of whether you hold the individual stock or bond certificate it is important to know why you own a particular company and to be sure the quality of the company has not changed. I believe that you should build a stock and/or bond portfolio with a purpose and then manage it with discipline. 


Nancy Hadley is an Investment Representative with D.A. Davidson in downtown Sandpoint. 

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Nancy Hadley

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stock market, money, investing

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