A look back at 2012, a look ahead of 2013
With 2012 behinds us, it’s time to take a look at the events that shaped the year and consider what lies ahead. 2012 was a year defined by tremendous hope as well as ongoing fears about the future. Despite a painfully slow recovery, GDP growth looks like it may end up exactly where economists said it would: between 2.2 and 2.7% for the year. Markets also made major strides, helped along by a last-minute rally as a fiscal cliff compromise approached. Let’s take a look at some of the major highlights of 2012:
The Fiscal Cliff
Going into 2013, the story on everyone’s mind was the fiscal cliff. Fiscal cliff debates provided budget watchers with a real nail biter as Senate discussions continued early into the morning on January 1. While the Senate and White House were able to hammer out a last-minute 2 AM compromise, the deal met resistance in the House on Tuesday, and discussions went late into the evening. The House eventually voted to approve the plan, but negotiations are by no means over. Congress must approve an increase in the $16.4 trillion debt ceiling in mid-February before current federal funding runs out, and another government shutdown threat looms. Whatever happens, we are committed to keeping you informed about this issue.
According to Congressional sources, here are a few of the major provisions of the deal:
- Postpones for two months the start of $1.2 trillion in automatic spending cuts known as sequestration.
- Raises $600 billion in revenue over 10 years through tax increases on wealthy Americans.
- Permanently extends the Bush Tax Cuts for income below $400,000 per individual, or $450,000 per family. Income above that level would be taxed at the highest rate of 39.6%. For earners in the top bracket, capital gains and dividend tax rates would return to 20% from 15%.
- Permanently patches the AMT.
- Extends unemployment benefits for one year for the long-term unemployed.
So although technically, we went over the fiscal cliff, it makes no difference to the economy whether the compromise was reached on December 31, or January 2, since legislation can be backdated to January 1.
Markets
Turbulence largely defined markets in 2012. Investors were battered this year by elections, concerns about a global slowdown, and fears around the fiscal cliff. However, despite some serious headwinds, equities put up respectable results, with the S&P gaining 13.41%, the Dow gaining 7.26%, and the Nasdaq gaining just under 16%. Between June 4 and October 5, the Dow increased 12.31% during a summer market surge that surprised analysts who dubbed it a ‘sugar high,’ not supported by fundamentals, but by expectations of additional quantitative easing by the Federal Reserve.
The gains in U.S. equities this year were lead by homebuilders and financials, who outperformed markets as a whole. Housing remained a bright spot in the broader economy as housing starts, new home sales, and tight housing supplies contributed to sector gains. Financial stocks were able to produce significant returns despite debt worries largely because of gains in the housing sector.
The 2012 Presidential race roiled markets as candidates outlined their plans to boost the economy. The Eurozone crisis provided another headwind for markets concerned that Europe’s slowdown would affect U.S. companies. Despite Europe’s struggles, Euro region equities returned more than 15% in 2012.
The Economy
To say that the economic recovery stalled in 2012 is somewhat accurate but doesn’t tell the whole story. While the economy sprinted out of the gate during the first quarter, the momentum faded in the Spring, leading many to worry that we were seeing 2011 all over again. However, as Summer led to Fall, we saw that the economy was indeed growing, but at a slow pace. Surprising many, the economy picked up during the third quarter, posting growth of 3.1%. A bright spot in an otherwise drowsy recovery has been manufacturing, which managed to hold its own between January and October, spurred by lower energy prices.
Earnings were generally disappointing in 2012 as U.S. businesses struggled with challenging market conditions. On the positive side, while revenue was down, profits were up, indicating that companies got better at doing more with less and are poised to grow once demand increases.
Unemployment started looking much better in 2012, dropping from 8.5% in January to 7.7% in November. As always, the larger unemployment number obscures a lot of detail, in that some of this decline can be attributed to discouraged jobseekers dropping their job search. However, overall, the trend is in the right direction, leaving us hopeful for 2013.
Although it’s too soon to know what final fourth quarter numbers will be, retail sales, a major driver of annual revenue for many companies, look soft. Holiday sales got off to a great start in November, but appear to have closed with a whimper. According to analytics firm Retail Metrics, December same-store sales may have grown just 1.9% over last year, well below their 2.5% estimates. These results may push down fourth quarter earnings for retailers.
The Federal Reserve
An activist Fed proved to prop up markets in 2012 by announcing multiple waves of ‘quantitative easing.’ These bond-buying programs were designed to lower interest rates and encourage lending by purchasing first Treasury bills and then mortgage-backed bonds. However, we’re not certain that Bernanke’s mojo will hold through 2013. Taking a look at past QE operations, the first QE program saw the S&P gain nearly 70%, while QE III in September 2012 has presided over a net S&P loss of nearly 4% as fiscal cliff concerns weighed on investors. The most controversial move took place on December 12, when the Fed announced QE IV, in which it promises to buy bonds until unemployment is less than 6.5%.
In Summary
Whatever challenges we face in the year ahead, rest assured that opportunities will exist for those who look in the right places. As a firm, we will continue mining for those opportunities and will work hard to match our clients with investments designed to reach their financial goals. And, as always, we will continue to educate you and keep you informed about anything with the potential to impact your financial future. We consider it a great privilege to support you in this capacity, and we will continue fighting to protect the lifestyle you’ve worked so hard to earn – in 2013, and beyond!
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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.
The Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI.
The Pending Home Sales Index, a leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos and co-ops. The PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years. The results are weighted to produce the index.
The Chicago Board Options Exchange Market Volatility Index (VIX) is a weighted measure of the implied S&P 500 volatility. VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized.
The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index.
The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index.
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.
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.
Is a compromise in the works for the Fiscal Cliff?
Markets appeared to be in a holding pattern last week as traders await a fiscal cliff deal. Equities finished the week slightly in the red, pushed down by fresh concerns that lawmakers may not reach a deal this year. For the week, the S&P slid 0.32%, the Nasdaq trimmed 0.23%, and the Dow slipped 0.15%.
Despite ongoing talks, no fiscal cliff resolution is imminent. While Congress had expected to recess last Friday, lawmakers are delaying their holiday break to see the process through and may stay until Christmas, if necessary. In a new twist, sources close to the talks say that House Speaker John Boehner has offered up tax increases on incomes above $1 million as part of a deficit reduction deal to move negotiations forward. In exchange, Republicans want tax cuts extended for all incomes under that amount, as well as spending cuts to entitlement programs. While we don’t know if a deal is around the corner, this shift toward compromise on both sides is an important breakthrough.
Last week, the Fed made a huge, game-changing step towards adopting a more aggressive, expectations based monetary policy. On Wednesday, the FOMC announced QE4, promising to buy $45 billion in longer-term Treasuries on top of its monthly purchase of $40 billion in mortgage-backed securities. In an unprecedented move, the Fed also announced that it will keep interest rates low until unemployment falls to at least 6.5%, as long as inflation remains below 2.5%.
Tying monetary policy to specific guideposts is a fundamental shift in the way the Fed does business and moves it much closer to fiscal policy. We have hopes that this bold move will entice business leaders to move some of their cash stockpiles off of the sidelines and into the markets, giving the economy a much-needed boost. At the same time though, we’re concerned about how the Fed will ever be able to disengage (by selling off bonds) from this massive purchasing program without sending markets into a decline. Only time will tell the whole story. Next week analysts will be watching the release of GDP and unemployment numbers and waiting hopefully for more news from Washington.
On a final note, we feel compelled to acknowledge the tragic loss faced by the families of Newtown, Connecticut. Our hearts go out to the community who unjustly lost 26 precious lives. Though words cannot express the pain they are facing, may we at least be reminded how important it is to cherish our friends and family members with every moment we have.
NOTE: This will be our final commentary of 2012. Our next edition will be an annual recap sent on Tuesday, January 3rd. We urge you to take a break from the hustle and bustle of financial and political news to enjoy some undistracted time with your family and friends during the final weeks of this year, as we will also be doing.
ECONOMIC CALENDAR:
Monday: Empire State Mfg. Survey, Treasury International Capital
Tuesday: Housing Market Index
Wednesday: Housing Starts, EIA Petroleum Status Report
Thursday: GDP, Jobless Claims, Existing Home Sales, Philadelphia Fed Survey
Friday: Durable Goods Orders, Personal Income and Outlays, Consumer Sentiment
means not available.
HEADLINES:
China promises to maintain prudent monetary policy in 2013. China’s new Communist Party leaders reiterated their intention to closely monitor the country’s still-fragile economy in case more policy easing is required. Although China’s economy is recovering, weaker-than-expected November data indicates it’s not out of the woods yet.
U.S. factory output jumps in November. Manufacturing rebounded from Superstorm Sandy by posting its largest monthly increase – 1.1% - in a year. Strong auto production largely drove the gain, reigniting hope for the domestic economic recovery.
Holiday retail shopping takes off. Despite worries about the effects of Superstorm Sandy and the fiscal cliff, retail sales rose 0.3% between October and November, driven by lower gas prices and a steady job market. However, with a decline in consumer confidence, retailers are still concerned that fiscal cliff worries may dampen December sales.
Survey of economists/analysts says fiscal cliff is at top of worries. Over 35% of respondents to the CNBC survey say that the fiscal cliff is the biggest threat to the economic recovery. Although 41% believe that lawmakers will fail to reach a compromise in 2012, over 40% of respondents believe the issue will be resolved within the first weeks of 2013.
QUOTE OF THE WEEK:
‘We grieve for the families of those we lost. And we keep in our prayers the parents of those who survived’ President Obama
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.
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.
The Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI.
The Pending Home Sales Index, a leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos and co-ops. The PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years. The results are weighted to produce the index.
The Chicago Board Options Exchange Market Volatility Index (VIX) is a weighted measure of the implied S&P 500 volatility. VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized.
The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index.
The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index.
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.
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.
Will Lawmakers push investor’s over a cliff?
The combination of unease in Europe and political bickering in Congress set equity markets on edge last week. In spite of the turbulence, key indices still managed to close positive for the week, with the S&P 500 gaining 0.5%, the Dow gaining 0.12%, and the Nasdaq gaining 1.5%.
Markets slid Friday after comments by House Speaker John Boehner indicate that fiscal cliff talks have stalled. While the Democrats are seeking $1.6 trillion in tax increases (aimed largely at wealthy taxpayers), as well as $50 billion in additional stimulus spending, Republicans are focused on reducing the deficit through closing tax loopholes and reducing entitlement programs. Since these are essentially the same issues that have been argued over the last year, it seems as though lawmakers are more interested in theatrics than in resolving the issue before the end of the year.
A Greek aid deal was finally reached Tuesday as European ministers convinced a skeptical International Monetary Fund (IMF) that their formula for getting Greece back on track had good odds of success. The deal will cut Greek interest rates and give the ailing nation additional time to pay back rescue loans while giving it a 34.4 billion-euro loan installment in December. As part of the agreement, Greece’s debt-to-GDP ratio is expected to decline from 190% in 2014 to 124% in 2020. We hope – rather than expect – that Greece will be able to meet the terms of its new deal. Markets appeared to share our skepticism and did not show much reaction to the news.
Next week will see the release of some key economic data, including November jobless claims, which we expect to come in lower as the effects of Superstorm Sandy continue to fade. Although Sandy hit in the latter days of October, the Labor department conducts its payroll survey on the 12th of each month, meaning that November data will capture the effects of the storm. We’ll also be able to take a peek at the preliminary consumer sentiment report, which analysts will pore over to get a sense of what holiday retail numbers might look like. We’ll keep you posted. Have a great week!
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HEADLINES:
Chinese manufacturing expands in November. In a further sign that China may have turned the corner, the country’s official manufacturing index rose to the highest level in seven months. Economists believe that the country may experience additional growth in December due to Christmas.
European rescue funds downgraded. Moody’s Investors Service downgraded the Eurozone funds responsible for bailing out periphery nations to Aa1 from Aaa. The move was prompted by concerns about the high correlation in credit risk between the rescue funds and the countries funding them.
Investors flock to Treasuries. Despite the risks posed by the fiscal cliff, investors can’t get enough U.S. Treasuries. Reversing a 6-month trend, Treasury purchases topped corporate bonds as investors piled on, seeking asset protection rather than investment growth.
Corporations rush to issue debt in 2012. Record-low rates and potential tax law changes are driving a gusher of new corporate debt. The amount of investment-grade and high yield bonds issued this year is already at a record $1.2 trillion and is likely to increase before the new year when applicable tax laws may change.
QUOTE OF THE WEEK:
" You're happiest while you're making the greatest contribution.” - Robert F. Kennedy
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.
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.
The Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI.
The Pending Home Sales Index, a leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos and co-ops. The PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years. The results are weighted to produce the index.
The Chicago Board Options Exchange Market Volatility Index (VIX) is a weighted measure of the implied S&P 500 volatility. VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized.
The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index.
The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index.
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.
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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.
How will ‘Black Friday’ results impact the economy?
Equities ended the abbreviated week on a bullish note – with the S&P 500 having its second best week of the year – boosted by positive retail sales estimates and upbeat economic reports out of Europe. For the week, the S&P 500 gained 3.62%, the Dow gained 3.73%, and the Nasdaq gained 3.99%, erasing some of the losses we saw in previous weeks.
Although the holiday shopping season is just beginning, early information suggests retailers can expect a good showing this year. A recent consumer survey by Deloitte suggested that shoppers would spend an average of $286 over the holiday weekend, which is a 28% increase over a similar survey last year. Additionally, the National Retail Federation forecasts holiday sales to grow 4.1% over last year. This is good news for retailers, who expect to make between 40-50% of their profits during the holiday shopping season.
Hoping to goose the start of the shopping season, some retailers began offering Black Friday deals on Thanksgiving Day. Interestingly, the promotional push may have stolen sales from Black Friday itself. However, if Thursday’s numbers are added to Black Friday, stores still saw a total increase in sales of almost 1% over 2011, and store visits increased 3.5%, indicating that consumers are feeling confident and want to spend money.
The fiscal cliff is still very much on everyone’s minds, and despite reassuring jawboning by lawmakers, we don’t know how likely it is that we will see a resolution by Christmas. Federal Reserve Chairman Ben Bernanke fanned the flames during a speech last week by commenting that if a resolution is not reached, the U.S. economy will slide into recession. If that were allowed to happen, he does not believe that the Fed has the tools needed to help and that the economy would be on its own. While this isn’t a happy thought, it’s clear that Bernanke is using his bully pulpit to push lawmakers into action. His message is clear: “Make it happen, or you’re on your own.”
Monday of this week is widely known as “Cyber Monday,” the largest online shopping day of the year. As workers return to their desks after the long holiday weekend, many are still in shopping mode, and retailers offer online specials to lure them away from brick and mortar stores. It will be interesting to see if Cyber Monday numbers are as encouraging as Black Friday’s. Also this week, analysts will be turning their attention to the state of economic reports being released, including GDP, employment data, and consumer confidence.
ECONOMIC CALENDAR:
Monday: Dallas Fed Mfg Survey
Tuesday: Durable Goods Orders, Ben Bernanke Speaks at 8:30 AM ET, S&P Case-Shiller HPI, Consumer Confidence
Wednesday: New Home Sales, EIA Petroleum Status Report, Beige Book
Thursday: GDP, Jobless Claims, Pending Home Sales Index
Friday: Personal Income and Outlays, Chicago PMI
HEADLINES:
iPad and iPhone dominate Black Friday online shopping. IBM found that 24% of online shoppers used mobile devices, compared to 14.3% in 2011. The iPad was used by 88.3% of tablet shoppers.
Greece closer to aid deal. After several days of bargaining and politicking, Europe’s leaders are moving closer to a new bailout deal for Greece. The IMF has agreed to relax its debt-cutting targets for Greece, meaning the country may not be forced to adopt additional austerity measures.
Chinese manufacturing numbers are up. After seven consecutive months of slowing, an important manufacturing index is up as factory orders pick up. Since manufacturing forms a large part of the Chinese economy, this could indicate that the world’s second-largest economy might be recovering from its slump.
Oil prices surge on Israel tensions. Oil prices rose above $88 a barrel, on increased tensions in the Middle East. A brewing fight between Israeli forces and Gaza separatists is causing supply worries, pushing up the price.
QUOTE OF THE WEEK:
“ Abundance is about looking at life and knowing that you have everything you need for complete happiness, and then being able to celebrate each and every moment on Earth." – Dr. Wayne Dyer
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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.
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.
The Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI.
The Pending Home Sales Index, a leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos and co-ops. The PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years. The results are weighted to produce the index.
The Chicago Board Options Exchange Market Volatility Index (VIX) is a weighted measure of the implied S&P 500 volatility. VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized.
The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index.
The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index.
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.
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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.
Investor’s can be thankful
Click on the link below to view Ken’s comments on the Fiscal Cliff, which appeared in the national newspaper, Investors Business Daily
http://news.investors.com/investing-etfs/111612-633764-fiscal-cliff-too-late-to-sell-stocks.htm
As you gather with your family and friends this week, we urge you not to let anxiety over the fiscal cliff or sovereign debt problems in Europe distract you from what matters most. Turn off CNBC and close the Wall Street Journal for a few days. Use the opportunity to recharge your batteries. There’ll be plenty of time to watch the news later. To help you with this, we thought it would be nice to share a few positive things worth being thankful for.
Progress towards a fiscal compromise: The latest word is that the White House and Congress have committed to short negotiations, with the goal of achieving a fiscal cliff resolution before the New Year. This is welcome news and we hope we’ll begin to see business leaders opening their wallets and making big investments in hiring and growth soon. Markets slid during the early part of last week, but rallied Friday on this news.
Resilient markets: Despite what we’ve been through in the past few years, U.S. markets are still performing well – the Dow is still up 3% for the year and 3.5% since last year, when economists worried that we might be facing a double-dip recession. With consumer sentiment running high and investors feeling renewed confidence in Congress, we may still see additional upside this year.
A recovering economy: Our economy has suffered some serious pain in the last few years, but is still chugging along. Currently, we have a housing market that is bouncing back vigorously, a decreasing unemployment rate, and recovering industrial output. Our economy still has a long way to go before it can be considered fully recovered, but trends are pointing to continued improvement next year if we can get past the fiscal cliff.
Looking ahead, despite the holiday-shortened trading week, markets could still see some action. Housing data will be released Monday, and Ben Bernanke is scheduled to speak Tuesday (analysts expect his remarks to address the economic recovery and tight consumer credit markets). The day after Thanksgiving, Black Friday will mark the start of the holiday shopping season and traders may have time to react to any early revenue announcements. European analysts expect the next round of Eurozone aid to Greece to be announced this week, so we may see some movement in currency and European markets too.
HEADLINES:
Superstorm Sandy depresses industrial output. U.S. industrial manufacturing output fell in October as Sandy disrupted production and transportation across the Northeast. The storm is estimated to have reduced output by 1%; however, the underlying tone of production remains consistent with estimates.
Next round of Greek aid expected this week. According to remarks by Italian officials, Eurozone leaders will reach a compromise with Greece within days. Greece has already been granted an additional two years to reach austerity goals and European leaders will meet to discuss funding requirements for the next tranche of aid money.
Business inventories rise in September due to high stocks of automobiles. Excluding the automobile stocks, inventories were flat for a second month, meaning that economists may have to lower third-quarter GDP estimates. Business inventories form a key part of GDP estimates.
China’s biggest future threat is inflation. According to a Chinese central bank governor, the biggest risk to China’s transition from a planned economy to a market-based one is inflation. Without careful management by central bankers and deep financial reforms, overspending by local and regional governments could overheat the economy.
QUOTE OF THE WEEK:
As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them”
John Fitzgerald Kennedy
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.
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.
The Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI.
The Pending Home Sales Index, a leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos and co-ops. The PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years. The results are weighted to produce the index.
The Chicago Board Options Exchange Market Volatility Index (VIX) is a weighted measure of the implied S&P 500 volatility. VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized.
The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index.
The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index.
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.
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.
Will the markets go over a ‘Fiscal Cliff’?
The big question last week was: What next? Markets slid as investors reacted to fears about post-election economic policy and renewed turbulence in Europe. Stocks logged their worst week since June, with the S&P losing 2.64%, the Dow sliding 2.12% and the Nasdaq falling 3.16%.
The world tuned in on Tuesday to watch the end of a hotly contested U.S. national election. For those who missed it, President Obama won a second term in office. In Congress, Democrats won a majority in the Senate while Republicans maintained control of the House. Markets started the selloff first-thing on Wednesday as traders responded to concerns about the global economy, driving the S&P 500 down by 2.4%. Bonds experienced a dramatic swing as well, as worried investors were driven towards the perceived safety of government securities.
Now that the election is over, analysts and media pundits are turning their attention to the issue that’s been hanging over us for months: the fiscal cliff. The fiscal cliff will likely dominate headlines until an agreement is reached, meaning that we can expect markets to remain volatile. A split Congress will make it difficult for Democrats and Republicans to reach a compromise. Deep divisions between the parties remain, and the debate may continue through the New Year; though we really hope it doesn’t.
President Obama jumped right into the debate last Friday and staked out the Democratic negotiating position by announcing that any agreement must include tax increases on the wealthy. Since this is a major sticking point for Republicans, it is unlikely that a compromise will be reached soon. If Republicans do not give ground on the issue, Democrats may allow the Bush Tax Cuts to expire in order to gain bargaining power for their own ‘middle-income tax relief’ plan in the New Year.
A more desirable scenario would bring Republicans to the negotiating table for a bi-partisan plan to gradually phase in austerity measures instead of going over the cliff – similar to the 2010 Simpson-Bowles plan. This would set the stage for meaningful tax and budget reform over the next few years and reassure deficit-watchers that the U.S. is managing its debt. The crux of the matter is that while the U.S. needs to get its deficit spending under control (lest we end up like Europe), our still-fragile economy cannot withstand large-scale tax increases and government spending cutbacks.
In short, now that election season is over, lawmakers are faced with major challenges, and we fear that they are more interested in partisan bickering than hammering out a compromise. On the bright side, we see the potential for markets to respond positively when an agreement is finally made. If economic reports remain upbeat, we could see further upside in the near future. As always, we encourage you to remain patient and focused on your long-term financial strategy.
ECONOMIC CALENDAR:
Monday: Veterans Day, Stock Markets Open, Bond Markets & Banks Closed
Tuesday: Treasury Budget
Wednesday: Producer Price Index, Retail Sales, Business Inventories, FOMC Minutes
Thursday: Consumer Price Index, Jobless Claims, Empire State Mfg. Survey, Philadelphia Fed Survey, EIA Petroleum Status Report
Friday: Treasury International Capital, Industrial Production
HEADLINES:
China’s economy may be turning the corner. The head of China’s central economic planning agency claimed that China would meet its 7.5% GDP growth target in 2013. Data on Saturday showed that China’s exports jumped significantly, surpassing expectations and lending credence to the claim.
U.S. Q3 growth higher than previously thought. According to analysts, U.S. third-quarter growth estimates may be revised upwards due to economic data that was not originally included. Recent reports of higher wholesale business inventories and an increase in U.S. exports may indicate that the economy is doing better than expected.
Oil rises above $86 per barrel. Higher projected U.S. economic growth led to a spike in oil prices as producers prepare for higher demand for petroleum products. Gasoline futures also rose on fears of distribution problems and tight supplies in Hurricane Sandy-affected areas.
Greece is running out of cash. Greek’s downward spiral continues as its cash reserves are depleted and its coalition government struggles for survival. Although Greece has missed every key austerity milestone, it will likely receive further bailout funds since it is in the interest of other Eurozone nations to keep the country running (for now).
QUOTE OF THE WEEK:
“If you cannot do great things, do small things in a great way.” — Napoleon Hill
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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.
The Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI.
The Pending Home Sales Index, a leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos and co-ops. The PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years. The results are weighted to produce the index.
The Chicago Board Options Exchange Market Volatility Index (VIX) is a weighted measure of the implied S&P 500 volatility. VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized.
The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index.
The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index.
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.
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.
Hurricane Sandy’s impact on our economy
It was a busy week as Hurricane Sandy pounded the East Coast; securities exchanges were forced to close on Monday and Tuesday; and a slew of economic reports were released. Stocks ended the shortened week with a selloff Friday, erasing gains made earlier, and finishing basically flat. For the week, the S&P gained 0.16% and the Dow climbed 0.12%, while the Nasdaq trimmed 0.19%.
Although the economic impact of Hurricane Sandy won’t be known for weeks or months, the true cost of a disaster like this is always the human suffering. It is painful to see beautiful homes and townships devastated by natural forces, and our thoughts go out to all those impacted. If you or someone you love has been affected in any way, and if there is anything we can do, please don’t hesitate to let us know.
On the bright side – without making light of this disaster – it should be noted that major storms rarely have a lasting impact on the U.S. economy. Generally, even large disasters like this one aren’t costly enough to damage the enormous economic machine that is the U.S. economy. Insurance companies may be stuck footing a large bill, and the government may have to pay for relief efforts, but economic snags of this type are usually temporary. The major exception to this general rule was Katrina, which devastated New Orleans and caused over $100 billion in estimated damages. One of the major reasons Katrina was so expensive was because of the area’s economic importance as a major shipping port and oil and gas hub. Although the effects of Sandy are widespread, the storm would have had to shut down major cities for weeks to achieve similar effects. Fortunately, it passed somewhat quickly, and major recovery efforts are underway.
One note of positive news could be found in last week’s Labor Department report showing that employers added 171,000 new jobs last month. Although the unemployment rate ticked slightly upwards to 7.9%, the increase was attributed to discouraged workers restarting job searches, which is a positive sign for the economy. This good news combined with recent consumer confidence highs indicate that we may be able to expect consumer spending to increase during the holiday season, which would be excellent for retailers.
As earnings season continued last week, markets responded positively to some solid results. Consumer discretionary stocks edged higher as several well known travel companies and luxury retailers beat estimates. Overall, the corporate earnings picture has improved as more companies have reported; according to November 2nd data, of the 378 S&P 500 companies that have reported so far, 61.9% have beat expectations, which is in line with the 62% average since 1994. While we may see additional volatility in the weeks ahead, solid earnings and upbeat economic reports mean that investors have a lot to be pleased about right now.
ECONOMIC CALENDAR:
Monday: ISM Non-Mfg. Index
Wednesday: EIA Petroleum Status Report
Thursday: International Trade, Jobless Claims
Friday: Import and Export Prices, Consumer Sentiment.
HEADLINES:
Euro crisis strikes Greek hospitals. German drug maker Merck KGaA has stopped delivering a critical cancer drug to Greek hospitals due to unpaid bills. Although Greeks can still buy the popular prescription drug in pharmacies, until public hospitals are able to pay down their debts, the drug will not be available to hospital patients.
Consumer confidence rises to four-year high. The Conference Board Consumer Confidence index rose in October to the highest level since February 2008. Despite tough economic conditions, Americans were more confident about their finances and expected the job market to improve in the next six months.
Planned layoffs jump to five-month high. The number of planned employee layoffs by U.S. firms jumped 41.1% to the highest level since May. While the last three months of the year historically see the largest number of layoffs, analysts believe that the deteriorating situation in Europe and worries about the fiscal cliff are leading companies to cut back on staffing.
Long-term shifts in retail may hinder employment growth. The retail sector is a key provider of employment. As consumer confidence grows, and mortgage refinances put money back in consumers’ pockets, retailers are beginning to increase hiring. However, structural shifts towards self-checkout and online sales may limit the pace of hiring increases.
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.
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.
The Housing Market Index (HMI) is a weighted average of separate diffusion indices based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. Each resulting index is then seasonally adjusted and weighted to produce the HMI.
The Pending Home Sales Index, a leading indicator of housing activity, measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos and co-ops. The PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years. The results are weighted to produce the index.
The Chicago Board Options Exchange Market Volatility Index (VIX) is a weighted measure of the implied S&P 500 volatility. VIX is quoted in percentage points and translates, roughly, to the expected movement in the S&P 500 index over the upcoming 30-day period, which is then annualized.
The BLS Consumer Price Indexes (CPI) produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services. Survey responses are seasonally adjusted and weighted to produce a composite index.
The Conference Board Leading Economic Index (LEI) is a composite economic index formed by averages of several individual leading economic indicators, which are weighted to produce the complete index.
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.
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.