Now What: A Guide to Retirement During Volatile Times

What impact will corporate earnings have on the markets?

by ken | 08:23 in |


What impact will corporate earnings have on the markets?
 

Markets turned out another solid performance last week as all three major indices reached new highs. With minimal economic data for investors to chew on, earnings drove most of the market action last week. On Tuesday, the S&P 500 set a new high while the Dow notched its first close above the 15,000 mark. Industrials, technology, and consumer discretionary stocks led the gains while utilities and consumer staples dropped. For the week, the S&P 500 added 1.19%, the Dow gained 0.97%, and the Nasdaq increased 1.72%.[1]

 

As we near the end of earnings season, 90% of S&P 500 companies have reported in, with 67% beating earnings expectations. If all remaining companies post numbers in line with estimates, earnings will be up 5.3% over the first quarter of 2012. However, most companies are still missing their revenue estimates, with only 46% beating their own revenue projections. Next week, a handful of major retailers are due to report, which, along with Monday’s retail sales report, will give sector analysts a lot to think about.[2]

 

After markets closed for the weekend, Federal Reserve officials announced their strategy for unwinding QE3, their unprecedented $85 billion per month bond-buying program. While they didn’t confirm the timing of intended moves, officials said they plan to reduce bond purchases in careful, measured steps as they monitor the job market and inflation. Because it doesn’t look like the Fed intended this announcement to mark the end of quantitative easing, it appears they meant to signal their flexibility in managing the programs in the months ahead.[3]

 

Looking ahead, the bulls could keep running next week as long as economic reports on labor, retail sales, industrial production, and manufacturing don’t disappoint. However, with equities reaching new highs, there are plenty of opportunities for weakness to end the run. If investors think that markets are overbought, some consolidation might occur. The market activity thus far suggests that investors are betting on increasing economic growth, and the Fed’s announcement seems to indicate that officials aren’t too worried about the U.S. economy at this time. As always, we’ll keep an eye on the action and will keep you informed.

 

ECONOMIC CALENDAR:

Tuesday: Import and Export Prices

Wednesday: Producer Price Index, Empire State Mfg. Survey, Treasury International Capital, Industrial Production, Housing Market Index, EIA Petroleum Status Report

Thursday: Consumer Price Index, Housing Starts, Jobless Claims, Philadelphia Fed Survey

Friday: Consumer Sentiment

HEADLINES:

Late mortgage repayments drop in Q1. A strengthening housing sector, rising home prices, and steady gains in the jobs market are helping U.S. homeowners stay current with their mortgage payments. The percentage of homeowners behind in payments fell by 21% in the first quarter as compared to the same period in 2012.[4]

U.S. income inequality may be reaching turning point. Economists believe that rising college enrollment rates and wider adoption of technology may begin erasing the income gap between the haves and the have-nots. Increasing numbers of Americans earning college degrees and falling prices for computers may allow more people to earn higher wages in the years to come.[5]

April U.S. budget surplus largest in five years. Increased tax revenues and an improving economy allowed the federal government to post a monthly surplus of $113 billion. In comparison, the surplus in April 2012 was $59 billion.[6] There is usually a surplus in April because the government receives an inflow of tax payments. But tax receipts this April are 28% higher than last year, and the surplus is nearly twice as high.[7]

High U.S. oil exports mean higher gasoline prices. Summer gas prices may be lower than they were last year, but increased exporting of domestic crude oil overseas means that they probably won’t get much lower. Analysts estimate that the average gasoline price this summer will be $3.53 per gallon, 16 cents lower than last summer and much lower than the peak of $3.78 reached in February.[8]


QUOTE OF THE WEEK:

“Try not to become a man of success but a man of value.” – Albert Einstein

 

 

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Securities offered through Aurora Capital, Member FINRA/SIPC.



Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Google Finance is the source for any reference to the performance of an index between two specific periods.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

 

By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.

 

 

Does the U.S economy support record stock prices?

by ken | 07:57 in |


Does the U.S economy support record stock prices?
 

U.S. markets closed out last week with a bang, after a better-than-expected jobs report eased concerns about a stalled economic recovery. The S&P 500 and Dow both surged to new highs on the news, with the S&P 500 closing out the week above 1,600 and the Dow briefly topping 15,000. For the week, the S&P 500 gained 2.03%, the Dow gained 1.78%, and the Nasdaq gained 3.03%.[i]

 

Friday’s Employment Situation report showed that the economy added a solid 165,000 jobs in April, dropping the headline unemployment rate to 7.5%. Even better, the report showed revised numbers for February and March, indicating that economic activity was stronger than originally estimated.[ii] On the downside, when we dig deeper into the jobs report, we see threats to consumer spending as the average weekly hours worked dropped to 34.4 while wages increased just 0.2%. Furthermore, what economists believe to be the widest measure of unemployment, the U-6, rose slightly to 13.9%, its lowest point since December 2008.[iii] The U-6 includes frustrated workers who have given up looking for a job, plus people who are working part-time because they can’t find full-time work. All factors considered, the jobs picture looks lukewarm.

 

We realize this information could raise some questions, so briefly, let’s take stock of how the recovery is progressing:

                                       

Hiring and unemployment are both growing at a measured pace. On the employment front, the economy has been adding an average of 196,000 jobs per month in 2013; this is far better than the 179,000 monthly average in 2011 and 2012, but still not as good as we would like. At the current rate of growth, the U.S. won’t reach pre-recession hiring levels for at least another year. The unemployment rate has improved drastically from its 10% peak in 2009; however, at 7.5%, the current rate is still recession level, and the Fed doesn’t expect to hit 6% until 2015 at the soonest. [iv]

 

The economy is improving slowly. The economic recovery from the recession is the slowest since WWII. The economy grew 2.12% in 2012 and 2.5% in Q1 2013; in a normal economic cycle, these growth numbers would be perfectly respectable, but we need higher growth during recovery periods to generate enough jobs to bring down unemployment. Economists had hoped to see stronger growth this year (even as high as 3-4%), but the combined effect of the new payroll tax and across-the-board sequestration cuts is dragging down economic performance.[v]

 

Economic fundamentals and stock market performance are looking better. Despite worries about higher payroll taxes, consumers spent at the strongest pace in two years during Q1 2013. This is good news since consumer spending accounts for 70% of economic growth. The housing market is booming, fueled by record-low mortgage rates and higher housing prices. New-home sales were up 18.5% in March (from the prior year), and homebuilders were working on more than 1 million new homes in March for the first time in five years. Markets are also performing well above expectations: For the year, the Dow has gained over 14% and the S&P 500 has increased by more than 13%, showing that investors are ready to pile onto any good news.[vi]

 

All told, the U.S. economy is doing pretty well. We could wish for a faster recovery, but we have to work with the hand we’re dealt. While we may see a slower second quarter, economists still expect healthy economic growth in 2013.

 

ECONOMIC CALENDAR:

Wednesday: EIA Petroleum Status Report

Thursday: Jobless Claims

Friday: Ben Bernanke Speaks 9:30 AM ET, Treasury Budget

 


HEADLINES:

States miss tax targets. Nearly half of U.S. states missed their monthly tax withholding targets in April as investors and companies sold off investments or made other moves to avoid steep tax bills. While this could cause a short-term cash crunch, state revenues are already above pre-recession levels.[vii]

European markets reach five-year highs. European investors jumped onto the U.S. jobs bandwagon and sent European shares skyrocketing, erasing losses from earlier in the week. With the EU’s prognosis still unknown, investors are looking for good news wherever they can find it.[viii]

Gold ends rally, closes mostly flat. Although gold has recovered from its recent decline, the jobs report mostly erased its gains for the week. Bullion had been supported by recent rallies in copper and other commodities, but the economic good news dented its rally. Often treated as a haven investment during turbulent times, gold can be a volatile commodity.[ix]

Factory orders drop. New orders of factory goods dropped by 4% in March, the largest drop in seven months. A Commerce Department report showed that highly volatile aircraft sales were largely responsible for the decline. However, non-aircraft orders increased during the same period, indicating that businesses may be investing again.[x]


QUOTE OF THE WEEK:

“Success does not consist in never making blunders but in never making the same one a second time.” - Josh Billings




TAX TIP OF THE WEEK:

Don’t Forget About RMDs

Most retirement plans are subject to required minimum distributions. Beginning on April 1 of the year after you reach age 70 1/2, you must withdraw a minimum amount from your retirement plan or the IRS can assess a penalty against you. To avoid this penalty, use the RMD calculator on the IRS website to determine when you should start taking RMDs and the amount you must withdraw.

 

Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!

 

 

If you would like to opt-out of future emails, please reply to this email with UNSUBSCRIBE in the subject line.

Securities offered through Aurora Capital Member FINRA/SIPC.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark

[i] http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-april-29-2013.htm
[ii] http://news.yahoo.com/us-job-market-showing-gains-healing-slow-153324938.html
[iv] http://news.yahoo.com/us-job-market-showing-gains-healing-slow-153324938.html
[v] http://news.yahoo.com/us-job-market-showing-gains-healing-slow-153324938.html
[vi] http://news.yahoo.com/us-job-market-showing-gains-healing-slow-153324938.html
[vii] http://news.yahoo.com/many-states-miss-targets-withheld-taxes-april-162521902.html
[viii] http://www.cnbc.com/id/100703374
[ix] http://www.cnbc.com/id/100703062
[x] http://www.reuters.com/article/2013/05/03/us-factory-orders-idUSBRE9420M720130503

Slower Growth ahead?

by ken | 09:16 in |


Ken’s Market comment’s on CNBC

http://video.cnbc.com/gallery/?play=1&video=3000163102

 

Slower Growth Ahead?


Markets ended positive last week despite a disappointing GDP report, erasing losses endured the previous week. As of Friday’s close, the S&P 500 gained 1.74%, the Dow climbed 1.13%, and the Nasdaq increased 2.28%.[1]

 

Earnings data and a handful of economic reports drove most of the market action last week. According to our first peek at preliminary first quarter GDP data, the economy grew at an annualized rate of 2.5%, which is up significantly from the 0.4% gain in the fourth quarter of 2012, but still below consensus expectations of around 3.0%.[2] While the data is preliminary, a deeper look suggests we may face slower growth in the second quarter. Let’s break down the numbers to see why:

Nearly all the gains in Q1 came from consumer spending and inventories. Consumer spending is expected to drop in the spring as Americans continue to feel the effects of the 2% payroll tax increase. Inventory growth, driven by farmers stocking up their silos after last year’s drought, made a strong contribution to last quarter’s growth; however, the activity was unusual, and unlikely to continue into Q2. Furthermore, government spending, which accounts for a significant part of economic activity, is declining rapidly – dropping 4.1% in Q1 alone. Most analysts expect government spending to continue to slide as the effects of sequestration become more pronounced.[3]

On the earnings front, more than 30% of the S&P 500 has reported and, while results are uneven, the news is mostly good. Blended earnings are up 2.4% in the first quarter, which is great since most analysts had low expectations. Two standout sectors thus far are technology, which benefited from strong consumer electronics sales, and building materials, which is getting a boost from the housing sector. [4]

 

On the downside, there are a lot of revenue misses happening; so far, only 39% of companies have beat revenue expectations, which is far below the historic average of 61%. This indicates that demand is still soft and companies are achieving their results by cutting costs. Anemic revenue growth seems to be tied to slow global demand, which is a particular problem for large multinational corporations that do a lot of business abroad. Demand in Europe is essentially flat, and sales volume is down across the board, making it difficult for companies to improve their margins.[5]

 

Next week will see the release of a slew of economic data, along with the steady march of more earnings reports. Analysts will be closely watching consumer spending and consumer confidence data, as well as the jobs report to see whether more market upside is possible. As always, we’ll continue to monitor earnings reports and economic data and keep you updated.

 

 

HEADLINES:

Durable goods orders dropped in March. Orders for long lasting manufactured goods recorded their largest drop in seven months, falling by 5.7% in March, following a 4.3% increase in February. The drop was nearly double what economists had expected, and indicates factory activity may be cooling off.[6]

Unemployment claims drop. The number of Americans filing jobless claims fell by a surprising 16,000, showing a possible improvement in the job market. The four-week moving average, a less volatile gauge, also fell, easing concerns of deterioration in labor market conditions.[7]

Oil, gasoline prices fall. The price of crude oil slipped last week as first quarter GDP growth came in under expectations. Coupled with disappointing economic growth in China, this report left analysts wondering if global demand for oil will soften in 2013. At the pump, the average price of gasoline dropped to $3.51, down 32 cents from a year ago.[8]

Spain delays deficit targets. In an admission that its severe austerity measures had failed to control its finances, Spain slashed its economic forecast and extended its deficit targets by two years. Economists warned that Spain’s economy would contract by 1.3% in 2013, but might grow by nearly half a percent in 2014. As anti-EU sentiment grows in core nations like Germany, these delays may make it politically difficult to continue to bail out countries like Spain.[9]

QUOTE OF THE WEEK:

“In virtually every area of your life, the more you give away, the more you get back.” – Dr. Wayne Dyer




Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!

 

 

 

If you would like to opt-out of future emails, please reply to this email with UNSUBSCRIBE in the subject line.

. Securities offered through Aurora Capital Member FINRA/SIPC.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Google Finance is the source for any reference to the performance of an index between two specific periods.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

 

By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.

 

 


[1] http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-april-22-2013.htm
[2] http://www.reuters.com/article/2013/04/27/us-usa-economy-idUSBRE93P04P20130427
[3] http://www.reuters.com/article/2013/04/27/us-usa-economy-idUSBRE93P04P20130427
[4] http://www.cnbc.com/id/100668291
[5] http://www.cnbc.com/id/100673553
[6] http://www.reuters.com/article/2013/04/24/us-usa-economy-goods-idUSBRE93N0NH20130424
[7] http://www.reuters.com/article/2013/04/25/us-usa-economy-jobless-idUSBRE93O0KC20130425
[8] http://news.yahoo.com/oil-slips-us-growth-lags-expectations-161728254.html
[9] http://news.yahoo.com/spain-slashes-forecasts-delays-deficit-targets-165237261.html

A Difficult Week

by ken | 08:09 in |


A Difficult Week


Even as we share this update with you, the events that unfolded last week in Massachusetts and Texas are still fresh in our minds. Our hearts will remain with the victims and their families, as well as the residents of Boston and West Texas, as they rebuild their lives from these tragedies. In times like these, we are reminded of the things that are truly important in life. If there is anything we can do for you or someone you know who was affected by any of last week’s events, please don’t hesitate to ask for our help.

 

It was also a difficult week for equity markets, as major indices experienced their biggest drop so far this year, pummeled by earnings reports and global concerns. For the week, the S&P 500 lost 2.11%, the Dow fell 2.14%, and the Nasdaq trimmed 2.70%.[1]

 

Earnings drove much of the selloff last week. Although the earnings reported thus far have largely beat estimates, disappointing reports from a handful of companies had an oversized effect on markets.[2] While 70% of the reports have beaten earnings estimates, only 44% have beat revenue expectations. This indicates that earnings results have largely been achieved by cost-cutting measures rather than organic growth. One factor that appears to be driving the weakness in revenue growth is soft demand overseas.[3]

 

Markets reacted poorly to China’s unexpectedly poor first-quarter GDP report, which showed a weak 7.7% growth instead of the 8%+ growth analysts had been expecting.[4] This indicates that China’s recovery may still be fragile. Coupled with concerns about Europe, it’s clear that global economies still have a long way to go.

 

On the positive side, investors responded well to Tuesday’s upbeat economic data, which shows that the news isn’t all bad. On the housing front, the Commerce Department reported that March housing starts increased by 7.0% from February’s estimate, while building permits declined slightly (though they are still 12% above March 2012 numbers).[5] A key measure of inflation also declined, supporting Fed chairman Ben Bernanke’s position that inflation is not an issue for now. Manufacturing also appears to be on the upswing; the Fed’s report shows that industrial production increased by 0.4% in March, beating expectations.[6]

 

In recent weeks, disappointing jobs numbers, slumping consumer confidence, and other weak data has indicated that the economy could be slowing down. However, the Fed’s most recent Beige Book survey shows no sign of such a slowdown. The report shows that despite prevailing concerns, the economy continued to grow at a moderate pace, bolstered by a vibrant housing sector and auto sales.[7] With so much conflicting data to review, many people struggle to make sound investment decisions. If you have any questions about how certain factors could affect you or your portfolio, please don’t hesitate to reach out to us. We pride ourselves on helping our clients cut through the clutter to develop strategies that are suitable for them and their goals.

 

As mentioned earlier, our thoughts are with the victims of Monday’s Boston bombing and those affected by the Texas plant explosion. It can be hard to think positively during such times, but we are proud of the swift work of first responders and investigators, and the way Americans have reached out in support of those in need.

 

HEADLINES:

Initial unemployment claims rise slightly. Unemployment claims jumped last week to 352,000, higher than the estimate of 347,000; the jump brings the 4-week moving average (a less-volatile measure) back in line with February numbers. Despite appearing to be stuck in neutral, unemployment claims are still significantly lower than the same time last year.[8]

Earthquake rocks Sichuan Province China. A magnitude-7 earthquake struck the southwestern province early Saturday morning, killing over 150 and injuring thousands. The earthquake triggered power outages and landslides in the same region that experienced a 2008 earthquake that left nearly 70,000 confirmed dead.[9]

Italy’s current president re-elected for a second term. Amid squabbling between party leaders, Giorgio Napolitano became the first Italian president to be asked to serve a second term. While European leaders reacted with relief, many view the election result as a sign of political stagnation.[10]

Gold retreats further in massive selloff. The precious metal’s biggest drop in 30 years came as investors rushed for the exits, and worries of margin calls have spooked goldbug investors. While gold is traditionally seen as a “safe haven” investment, it is also a historically volatile investment, falling an average of 31.6% in bear markets.[11]

QUOTE OF THE WEEK:

“You miss 100% of the shots you don't take.” – Wayne Gretzky

 

Share the Wealth of Knowledge!
Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!

 

If you would like to opt-out of future emails, please reply to this email with UNSUBSCRIBE in the subject line.

Securities offered through Aurora Capital Member FINRA/SIPC.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

Diversification does not guarantee profit nor is it guaranteed to protect assets

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Google Finance is the source for any reference to the performance of an index between two specific periods.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

 Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

 

By clicking on these links, you will leave our server as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.

 

 


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