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Where's the Holiday Inflation?

Happy Hanukkah and Merry Christmas! Whichever holiday you choose to celebrate, I hope that it is a wonderful time spent with family and friends. Enjoy the season!

Keeping with the holiday theme, I was reading PNC Financial Services Group's latest report on the Christmas Price Index. Did you know that there was such an index? In the spirit of the holidays and the "Twelve Days of Christmas" song, PNC Bank decided 31 years ago to figure out how much it would cost to buy each of the twelve gifts in that famous Christmas song. As your recall from the song, during the twelve days of Christmas, one's true love purchases a whole bunch of gifts, ranging from 12 Drummers Drumming, 5 Gold Rings, all the way down to a Partridge in a Pear Tree. But how much would buying all those gifts really cost today? According to the this year's update of PNC's index, the total cost of all the gifts would equate to $27,673.22. This is a 1.02% increase over last year's total cost. In terms of the price inflation, this is a much smaller increase than 2013, when the cost of the goods increased by almost 8% from 2012. At least it's not 2003. That year the cost of buying these twelve Christmas gifts rose a whopping 16%!

On the investment front, I wanted to alert you to change in the rankings of the asset classes that I evaluate on a daily basis. International Equities is no longer one of the top two asset classes. It has fallen to number three, while Fixed Income (ie bonds) has risen to number two. U.S. Equities remain in the number one position. The decline in the International Equity asset class ends a nearly two year reign of being in the top two ranked asset classes. International Equities have been a story of the "haves" and the "have nots". Those who "have" enough Crude Oil to export to the rest of the world, have been hit hard in the market, while those that "have not" a drop of oil to export have held up far better. China, India and the US are 3 of the top 4 importers of Crude Oil globally, and all have produced gains over the past 3 months. Countries such as Russia, have not faired so well.

With that being said, you will begin to notice a shift in your portfolios that I manage. International Equity allocations will be reduced while Fixed Income allocations will be increased. U.S Equities continue to look unstoppable, as they have a strong grip on the number one position. Rest assured that I will continue to monitor these asset classes so that your portfolios are positioned to take advantage of the current trends in the markets. This concept of positioning your investments toward current trends, rather than past or future presumptions, serves as the driving force behind the methodology that I employ to manage risk in your portfolios.