The Markets - March 31, 2014
Whether it's good news or bad news, it is often surprising how investors and markets react. Last week, Russia annexed Crimea and the Standard & Poor's 500 Index gained about 1.4 percent.
This week, U.S. investors had the chance to bask in the glow of some good news: jobs growth was healthy, consumer spending improved modestly, consumer confidence numbers were better than expected, and fourth quarter's U.S. gross domestic product (GDP) growth number was revised upward. How did U.S. markets respond? Only the Dow Jones Industrial Average finished the week in positive territory.
The Markets - March 24, 2014
After a series of moves that proved far more effective, but were almost as complicated as the Acme Corporation strategies Wile E. Coyote employed in pursuit of the roadrunner, Russia dropped an anvil on Ukraine and annexed Crimea. In response, Ukraine's acting Prime Minister Arseniy Yatsenyuk signed a political association agreement with the European Union (EU), and the United States slapped sanctions on some of Russia's President Vladimir Putin's wealthy allies and Bank Rossiya.
The Markets - March 17, 2014
Russian President Vladimir Putin sure has stirred up a hornets' nest. Why is annexing the Crimean peninsula and, possibly, Ukraine such a priority for the Russian leader? When asked, Putin has indicated Russia's military influence is necessary to protect Russian-speaking populations in Ukraine. However, The Economist has a different take on Putin's actions:
The Markets - March 10, 2014
Okay, so Russia sending troops into Ukraine's Crimean Peninsula did unsettle world markets. At least it did on Monday.
The Markets - March 3, 2014
If you think Russia could have found a colder place to hold the winter Olympics than Sochi, where the average January 2014 temperature was 51° Fahrenheit, you're right. In some Siberian towns, negative double-digit temperatures are considered the norm during winter months. If you thought Russia sending troops into Ukraine's Crimean Peninsula would unsettle world markets, you would have been wrong.
The Markets - February 24, 2014
Behind the dark clouds of volatile markets there appears to be a silver lining. That may be hard to believe when so many are focused on whether economic weakness is due to bad weather or, well, economic weakness, but here are a few of the signs that things may take a turn for the better:
The Markets - February 18, 2014
With the enthusiasm of new love, American stock markets pushed higher during Valentine's week.
Were investors enamored of the Federal Reserve's new Chairwoman, Janet Yellen, who spoke on behalf of the Fed for the first time last week? Some suggested investors appreciated her dedication - she spent almost six hours answering questions from members of the Financial Services Committee - and were soothed by her commitment to continuing the policies of her predecessor. The New York Times said stock markets rose as a result of Ms. Yellen's testimony and were further buoyed when the House voted to raise the government's borrowing limit until March 2015 without any conditions.
The Markets - February 10, 2014
American stocks bounced last week like a skier pounding moguls on an Olympic freestyle course. Some found it difficult to understand why stocks had their best week since December of 2013. Barron's said:
"We just can't figure out why the markets were strong. It's not like the news this week was terribly good. The Institute for Supply Management's manufacturing survey fell to 51.3, well below forecasts for 56.5. The U.S. added just 117,000 jobs, well below forecasts for 170,000. You would think investors would be worried that the economy was running out of steam."
The Markets - February 3, 2014
If investors were fishermen, they'd probably toss January 2014 right back into the stream. At the end of the month, U.S. stocks (S&P 500) had lost 3.6 percent of their value, according to Barron's. Other asset classes hadn't fared well either. Bond yields fell and emerging markets were all roiled up.
The Markets - January 13, 2014
The People's Republic of China (PRC) appears to have taken the words of American industrialist Henry Ford to heart. Ford said, "There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible."
The Markets - January 6, 2014
Like a half-full bottle of champagne that was left uncorked overnight, stock markets were anything but effervescent during the first few days of 2014.
The Markets - December 30, 2013
Like the mother of a bride reviewing flower arrangements and fretting that a brilliantly sunny day could be marred by dark clouds hidden just beyond the horizon, pundits have been parsing the exceptional year-to-date performance of U.S. stock markets and fussing over the future.
The Markets - December 23, 2013
To borrow a word from the legendary Gomer Pyle: G-o-l-l-y!
In 1955, just five years before The Andy Griffith Show became a big hit, William McChesney Martin, Jr., then Chairman of the Board of Governors of the Federal Reserve System, made an often-quoted speech in which he said, "The Federal Reserve, as one writer put it, after the recent increase in the discount rate, is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up."
The Markets - December 16, 2013
You really need to take predictions with a grain of salt. Consider these esteemed opinions:
"I think there is a world market for maybe five computers." Thomas Watson, Chairman, IBM, 1943
"Who wants to hear actors talk?" H. M. Warner, Founder, Warner Brothers, 1927
"Everything that can be invented has been invented." Charles Duell, Commissioner, U.S. Office of Patents, 1899
The Markets - December 9, 2013
If every piece of positive news was a petal, then you might say the American economy was in bloom last week. Moving into the holiday season, consumer confidence was at a five-month high.
The Markets - December 2, 2013
In 2006, Time Magazine's Person of the Year was 'You.' The magazine declared that 2006 was about:
"...Community and collaboration on a scale never seen before... It's about the many wresting power from the few and helping one another for nothing and how that will not only change the world, but also change the way the world changes."
The Markets - November 25, 2012
Okay. Okay. If you've been trekking through Siberia or Patagonia for about a year, then maybe it surprised you to hear the minutes from the Federal Reserve Open Market Committee meeting showed it expects to begin tapering Quantitative Easing (QE) in the coming months.
The Markets - November 18, 2013
If you found holiday songs or Beatles tunes humming through your head last week, it may have been your subconscious processing world and market events.
Over the river and through the woods/To Grandmother's house we go... Janet Yellen, current Vice Chairman and nominee to be the next Chairman of the Federal Reserve System, testified at her confirmation hearing before the U.S. Senate's Committee on Banking, Housing, and Urban Affairs on Thursday. Her comments were widely interpreted as indicating that current stimulus measures will remain in place. This made investors happy and helped push global stock markets higher.
The Markets - November 12, 2013
After last week's surprisingly strong employment report, it's almost possible to picture Ben Bernanke slapping trail dust from his leg, ducking his head, and saying, "Just doin' my job."
After all, running the economy is as laden with complications and unexpected events as a cattle drive. Richard Graboyes, an economist who was once the Director of Education for the Federal Reserve Bank of Richmond, wrote that driving cattle seems "arduous, but simple - walk some cattle from point A to point B. But, the endeavor is fraught with natural and human risks for both rancher and driver."
The Markets - November 5, 2013
Exceptional... exceeds expectations... meets expectations... needs improvement... unsatisfactory. It's a rating system familiar to anyone who has ever received a performance review. Right now, the performance of inflation is not meeting expectations - and that may be a good thing.
Critics of loose monetary policy and rock bottom interest rates have had high expectations for inflation. That is, they have predicted inflation will rise. In March 2012, Martin Feldstein, a professor of economics at Harvard and President of the National Bureau for Economic Research, explained the massive liquidity created in the United States by the Federal Reserve's easy money policies created a risk of rising inflation. A rapid increase in bank credit would boost the money supply and the rate of inflation unless the Fed raised interest rates in a timely way and on an adequate scale.
The Markets - October 28, 2013
Contrarians probably are waiting for the other shoe - or, in this case, U.S. stock markets - to drop.
If you're not familiar with contrarian investing, the theory goes something like this: Consensus opinion is often wrong. When the majority of investors have a bullish outlook and believe stocks are going to move higher, the chances are stock values will drop. Likewise, when the majority has a bearish outlook and believes stocks are going to move lower, the chances are stock values will rise.
The Markets - October 21, 2013
Curse of Chucky, Scream 2, Final Destination 5, Freddy vs. Jason... You know Halloween is nearly upon us when you can't surf channels without exposing yourself to or relishing in a multitude of horror flick sequels.
The Markets - October 14, 2013
Do world stock markets believe Congress is just offering up some Halloween excitement?
Last week, they responded to the government shutdown in the United States and the possibility the U.S. might default on its debt for the first time ever with the bravado of teenagers standing in line for a haunted house. Markets around the globe finished the week higher with some notable exceptions that included Chinese and Mexican markets and America's NASDAQ.
The Markets - October 7, 2013
For Sturm und Drang enthusiasts, the third quarter of 2013 held plenty of mayhem and emotion. It began with an overthrow of Egypt's democratically-elected government and ended with the United States government at risk of defaulting on Treasury and government obligations.
The Markets - September 29, 2013
"It's déjà vu all over again," Yogi Berra reportedly said as he watched Yankee teammates Mickey Mantle and Roger Maris smack back-to-back home runs for the umpteenth time.
The Markets - September 23, 2013
We're going to do it...We're going to do it...We're not going to do it...Yet.
Last week, the U.S. Federal Open Market Committee gave stock markets a gift that, on a scale of thrills, might have been on par with Marilyn Monroe singing happy birthday to JFK. On Wednesday, the FOMC announced (without a trace of breathiness):
The Markets - September 10, 2013
Confluences are the building blocks of the world's waterways. When two or more rivers meet, changes in velocity and turbulence tend to result in geologic scouring; erosive activity that may alter the shape of the river and its bed. The action may produce a 'scour hole' downstream from the confluence. For a river runner, a hole creates "potential for trouble and the need for deft maneuvers." America may be heading toward a scour hole that is being shaped by a confluence of factors and events, domestic and global, economic and demographic.
The Markets - September 3, 2013
Last week was crunch time in the National Football League (NFL). With the 2013 regular season approaching rapidly, NFL teams cut about 700 players from their rosters over the Labor Day weekend. That was a big cut-about a 40 percent drop in player employment-as rosters were pared from 90 to 53 players. However, it's not likely to have a significant effect on U.S. unemployment data-and that's really what the week ahead is all about.
The Markets - August 27
"So much depends / upon / a red wheel / barrow / glazed with rain / water / beside the white /
The Markets - August 19, 2013
Robert Burns, father of fourteen and writer of Auld Lang Syne, once said, "There is no such uncertainty as a sure thing." Was he ever right!
The Markets - August 12, 2013
Like the kid who sings loudly and enthusiastically at a grade school concert while wary peers dodge his O Sole Mio arm sweeps, the Federal Reserve has been getting a lot of attention lately. That didn't change last week.
The Markets - August 5, 2013
You say to-may-to. I say to-mah-to.
You have to be a careful reader to keep up with the Federal Reserve these days. Last week, the Fed re-characterized the pace of economic growth in the United States from 'moderate' to 'modest.' According to Wall Street Journal blog, Real Time Economics, "economic data show that 'modest' is a touch weaker than 'moderate.'" No matter how you parse the difference, it was enough to prevent the Fed from beginning to normalize monetary policy by cutting back on bond buying.
The Markets - July 30, 2013
If it's not stocks, it's bonds!
In a turnaround worthy of Bruce Willis in a 'Die Hard' movie, expectations for second quarter's corporate earnings growth soared from below expectations, on average, in the previous week to beating expectations last week. Earnings growth estimates shot up to 4.1 percent which was a significant change from last week's 2.8 percent. Of the companies that have reported so far, more than one-half have performed better than expected - an improvement on the last four quarters' performance.
The Markets - July 22, 2013
Singing the earnings song...
Each year, in January, April, July, and October, most publicly-traded companies announce their corporate earnings results. These announcements can have a dramatic effect on companies' share prices - and markets - especially when companies don't meet analysts' expectations.
The Markets - July 15, 2013
One of these things is not like the other... If you find yourself humming that old Sesame Street standard when you think about financial markets and world economies, you're probably not alone.
To the consternation of many, the Dow Jones Industrials Average and the Standard & Poor's 500 Index rocketed to new highs last week just as the International Monetary Fund (IMF) cut its global economic growth forecast for 2013 and 2014.
The Markets July 2, 2013
Soothing words from Federal Reserve Bank officials helped settle investors' fears last week, and U.S. stock markets moved higher. The Dow Jones Industrials Average was up 0.7 percent, the Standard & Poor's 500 gained 0.9 percent, and the NASDAQ rose by 1.4 percent.
The Markets - June 24, 2013
It was like watching a game of telephone where one child speaks into another child's ear and that child speaks into another child's ear and, by the time the last child repeats the original statement, it has transformed into something completely different.
The Markets - June 17, 2013
Like a host at a dinner party, the International Monetary Fund (IMF) put the performance of the U.S. economy on the table last week to be gnawed over by world markets. When the IMF presented its annual review of the world's largest economy, it stated that:
"Despite some improvements in economic indicators, particularly in the housing market, the very rapid pace of deficit reduction... is slowing growth significantly... U.S. growth is expected to slow to 1.9 percent in 2013, from 2.2 percent in 2012. This projection reflects the impact of the sequester ($85 billion of automatic U.S. government spending cuts), and the expiration of the payroll tax cut and the increase in tax rates for high-income taxpayers...Growth could pick up to 2.7 percent next year with a more moderate fiscal adjustment and a further strengthening of the housing market."
The Markets - June 11, 2013
Like a funhouse mirror, investors' concerns about whether and when the Federal Reserve will begin to end its quantitative easing program contorted market responses to economic news last week. Unexceptional economic reports were treated as good news and pushed stock markets higher; strong economic reports were treated as bad news and pushed stock markets lower.
The Markets - May 28, 2013
Like guests feeling the first rain drops at a Memorial Day barbeque, markets responded uncertainly to Federal Reserve Board Chairman Ben Bernanke's congressional testimony and the newly released Federal Open Market Committee (FOMC) minutes last week.
The Markets - May 20, 2013
Much like elementary school children trying to capture the attention of someone they have a crush on, the American economy sent lots of mixed signals last week.
Conflicting reports emerged about consumer sentiment during the week. The Conference Board, a non-profit research organization, reported consumers remained somewhat pessimistic about the direction of the economy. In contrast, the University of Michigan's consumer sentiment survey rose to a six-year high, according to ABC News. The Index moved from 76.4 in April to 83.7 in May indicating consumers are feeling more confident about the economy.
The Markets - May 13, 2013
'Sell in May and Go Away' is a trading maxim which, according to Investopedia, encourages an investor to "sells his or her stock holdings in May and get back into the equity market in November..." Traders who adhere to that adage may be pondering averages and exceptions right now. During the first two weeks of the month, the Dow Jones Industrials Average, the Standard & Poor's 500, and the Russell 2000 Indices all reached new highs. The Dow passed 15,000, the S&P reached 1,600, and the Russell 2000 hit 968.
The Markets - May 6, 2013
Like athletes testing their limits, the Standard & Poor's 500 and the Dow Jones Industrials Indices both hit new highs last week. The S&P closed the week above the 1,600 level for the first time, while the Dow climbed above the 15,000 mark on Friday before closing lower. Strong corporate earnings, gains in the housing market, and good news from Europe helped support last week's strong performance.
The Markets - April 29, 2013
If anyone doubted the power of Twitter, their skepticism was laid to rest this week. Early Tuesday afternoon, a tweet from the Associated Press reported President Obama had been injured by explosions in the White House. Stock, bond, and commodity markets fell sharply on the news and then rebounded when the Associated Press communicated that its Twitter account had been hacked. This wasn't the first time such a thing had happened on Twitter or the first time false and market moving information had been posted. In February, the stocks of Burger King and Jeep moved after a post on each company's Twitter account indicated the company had been sold to a rival firm. The lesson to take from these events? Everyone may want to be wary about buying or selling investments based on news reported through Twitter or any other social media feeds.
The Markets - April 22, 2013
It was a wild, wild week.
Last Monday, bombs exploded near the finish of the Boston Marathon. Not long after, media outlets let the public know letters to President Obama and a senator from Mississippi contained the poison ricin. On Wednesday, the town of West, Texas was flattened by an explosion at a fertilizer plant. By the end of the week, a man had been arrested for sending the ricin letters, the city of Boston had been locked down, the bombing suspects had been captured, and folks were returning to their homes in West, Texas.
The Markets - April 15, 2013
Last week, the term 'Easy Money' conjured both comedian Rodney Dangerfield and the U.S. Federal Reserve, and no one was certain how much respect either one should get.
The Fed accidentally e-mailed its market-moving Federal Open Market Committee (FOMC) meeting minutes to congressional staffers and trade lobbyists on Tuesday at 2 p.m. The minutes weren't supposed to be released to anyone until Wednesday at two. Once the mistake was realized, the Fed released the minutes early on Wednesday morning.
The Markets - April 8, 2013
U.S. investors puzzled over disparate pieces of economic and world news last week. By the end of the week, major U.S. markets had tumbled indicating investors didn't like what they'd seen.
Under new leadership, the Bank of Japan (BOJ) announced an aggressive stimulus program that will inject $1.4 trillion into its economy over the next two years. The effort is intended to end decades of stagflation. Stagflation is a period of economic stagnation characterized by rising inflation, higher unemployment, lackluster consumer demand, and lack of growth in business activity. Shares in the Japanese market, which closed before U.S. jobs numbers were announced, rose to almost a five-year high.
The Markets - April 1, 2013
U.S. stock markets finished the week - and the quarter - on a positive note.
The Federal Reserve's accommodative monetary policy and strong profit growth helped provide the lift needed to propel the S&P 500 Index to a record high. The Dow Jones Industrials Index also finished the week above its previous record close. For the quarter, the S&P 500 was up about 10 percent, the Dow was up about 11.3 percent, and the NASDAQ finished up about 8.2 percent.
The Markets - March 25, 2012
Like a not-quite-dead villain in a horror film, the Eurozone crisis raised its ugly head again last week, scaring investors and causing many stock markets to close flat or slightly down for the week, according to Barron's. Investors' worries strengthened demand for Treasuries, pushing the yield on the benchmark 10-year bond lower.
The Markets - March 20, 2013
Like winded runners, stock markets slowed at the end of last week.
Since the start of the year, the Dow Jones Industrials Index has risen by almost 11 percent, hurdling past new highs several times. The S&P 500 Index gained 9.4 percent over the same period. The index moved higher in 10 of the past 11 weeks and finished last week just shy of its all-time high. However, the Dow and the S& P's momentum - and that of some other U.S. stock markets - slowed on Friday as stronger economic data was offset by an unexpected slump in consumer sentiment.
The Markets - March 11, 2013
The Markets - March 4, 2013
It was a bumpy week for stock markets. Early on, markets in many countries were negatively affected by the outcome of Italian elections. Italy's anti-establishment Five-Star Movement, led by comedian Beppe Grillo, won about one-fourth of the votes in both the country's upper and lower houses. Markets lost value as investors anticipated political gridlock could delay Italian economic reforms. Since Italy is the third largest economy in Eurozone and its public debt is significantly higher than its Gross Domestic Product, political stalemate in Italy could negatively affect the Eurozone.
The Markets - February 25, 2013
Like Canadian geese migrating in anticipation of winter, stock markets moved south last week in anticipation of monetary tightening. Minutes from the January Federal Reserve Open Market Committee meeting were released mid-week. After reviewing them, many analysts decided that quantitative easing may begin to taper off before the end of the year. Not everyone agreed with this interpretation; however, it caused major U.S. stock markets, as well as some Asian and European stock markets, to dip lower. Many markets recovered ground before Friday, but in the U.S., only the Dow Jones Industrial Index finished the week with a gain.
The Markets - February 19, 2013
Stocks delivered mixed performance last week. The Dow Jones Industrials and NASDAQ Indices moved lower while the Standard & Poor's 500 and Russell 2000 Indices moved higher for the week. Stocks were helped by positive economic news in the United States, including modestly positive retail sales for January, improved consumer sentiment, and a decline in initial jobless claims. However, these positives were offset to some extent by concerns about weakness overseas. Germany reported that its economy contracted during the fourth quarter of 2012. It's the country's worst economic performance since 2009.
The Markets - February 11
Like a climber determined to reach a peak, stock markets continued to move higher last week.
Signs of strength in U.S. and international trade data improved the outlook for economic growth at home and abroad. The U.S. trade deficit narrowed in December, a sign that the economy did better than expected during the fourth quarter of last year. In China, robust domestic demand pushed imports significantly higher while exports grew more than anticipated. In Europe, Germany's 2012 surplus was its second highest in more than 60 years which is a sign of underlying strength in one of the Eurozone's biggest economies.
The Markets - February 11
Like a climber determined to reach a peak, stock markets continued to move higher last week.
Signs of strength in U.S. and international trade data improved the outlook for economic growth at home and abroad. The U.S. trade deficit narrowed in December, a sign that the economy did better than expected during the fourth quarter of last year. In China, robust domestic demand pushed imports significantly higher while exports grew more than anticipated. In Europe, Germany's 2012 surplus was its second highest in more than 60 years which is a sign of underlying strength in one of the Eurozone's biggest economies.
The Markets - February 5, 2013
The future's so bright, I gotta wear shades."
For the last several weeks investors have appeared to agree with the sentiment expressed in the 1980s song by Timbuk 3. A high degree of investor optimism has helped push markets higher. The trend continued last week as the National Association of Active Investment Managers' weekly survey found that professional investors are as bullish as they have been since the survey began six years ago. That may be part of the reason that the Dow Jones Industrial Index moved to within one percent of its all-time high during Friday's rally.
The Markets - January 28, 2013
They say that optimism is catching. The performance of markets across the globe last week certainly supported the idea.
During the second week of January, there was reason for optimism about the housing market as data showed that housing starts exceeded economists' expectations and home construction appeared to be on the rebound. Last week, the National Association of Realtors disclosed that very low mortgage rates, falling unemployment, and one of the most affordable housing markets on record helped make 2011 the best year for home sales since 2007.
The Markets - January 22, 2013
Investors appeared to be as optimistic as a newly-engaged couple last week. Strong housing data, a positive labor report, temporary easing of debt ceiling pressures, and some stronger-than-expected earnings results helped the Standard & Poor's 500 and the Dow Jones Industrials indices close at five-year highs.
The Markets - January 14, 2013
Why were investors turning to stocks? Was it the generally strong performance of stock market indices during 2012 or something else? Theories were abundant. Some speculated that the surge signaled:
• Renewed confidence in the American economy
• Relief that capital gains and dividend taxes remained constant for middle income Americans
• Faith in the ability of the American government to get things done
• Lack of attractive investment alternatives as the average yield on high-yield bonds fell below 6% for the first time ever
The Markets - January 8, 2013
Global markets celebrated the New Year on Wednesday with a rally in appreciation of the U.S. fiscal cliff agreement, now known as The American Taxpayer Relief Act of 2012 (ATRA). Many European, Asian, and American markets closed the day sharply higher. The FTSE 100 was up 2.2 percent, Hong Kong's Hang Seng was up 2.9 percent, Brazil's Bovespa was up 2.6 percent, and the Dow Jones Industrials Index was up 2.4 percent for the day.
The Markets - December 31, 2012
"This too shall pass."
Like getting emotionally involved with your favorite sports team, it's easy to get caught up in the drama surrounding the fiscal cliff. Combining politics, money, power, gamesmanship, and national impact makes for a compelling story line. But you know what? "This too shall pass."
The Markets - December 24, 2012
The situation is fluid.
As politicians scramble and we inch closer to the fiscal cliff day of reckoning, it's important to keep one thing in mind-the big picture. While the cliff situation dominates the headlines, the underlying economy is quietly marching ahead. Consider this recent data.
The Markets - December 17, 2012
Special Note: The horrible tragedy at Sandy Hook Elementary School tugs at the heart of all of us. In the midst of a joyous season, we have another example of the fragility of life. We pray for the innocent victims and their families and hope they may find some measure of comfort and healing in their time of great pain.
The Markets - December 10, 2012
Another week is history and we're another week closer to the "fiscal cliff."
You can't turn on the TV or surf the internet without some reference to the fiscal cliff. But, consider this. Remember all the fuss about Y2K back in 1999? Everybody was worried about planes dropping from the sky at midnight, ATMs freezing up, and the power grid shutting down on January 1. Well, the clock struck midnight and, poof, like Cinderella's glass slippers, nothing changed.
The Markets - December 3, 2012
After all the huffing and puffing of the election, the fiscal cliff, and the Dancing With the Stars season finale, the U.S. stock market ended the month of November within 0.3 percent of where it started, according to The Wall Street Journal.
The Markets - November 26, 2012
What fiscal cliff?
Stock prices rose last week to their best weekly gain in five months as investors cheered the start of the holiday shopping season, encouraging economic data from Germany and China, improved housing data, and confidence from President Obama and Congressional leaders that the fiscal cliff will be avoided.
The Markets - November 19, 2012
The announcement last week that Hostess Brands, the maker of iconic treats such as Twinkies and Ding Dongs, was going out of business highlights the need for investors to have a solid risk management strategy.
As you contemplate making an investment, here are three things important to know:
The rationale for the investment and the research behind it.
What constitutes "fair value" for the investment.
What would trigger you to sell the investment.
The Markets - November 12, 2012
Special Post-Election Analysis
With the election behind us, what's next for the economy and the financial markets? In this special analysis, we'll take a look at what the election means, how the markets are reacting, and where we go from here.
The Markets - November 5, 2012
As the week wore on, the devastation from Hurricane Sandy became ever more apparent. And, while we talk about the financial markets in this commentary, we know that what happens on Wall Street pales in comparison to the tragedy and hardship facing many people in the northeast. Our thoughts and prayers go out to them.
The Markets - October 29, 2012
Who's right, consumers or businesses?
As it relates to the U.S. economy, consumers seem to feel optimistic about it while businesses are hunkering down.
The Markets - October 15, 2012
Two widely watched indicators just hit five-year extreme levels - and that's a positive for the economy.
Consumer sentiment hit a five-year high in the preliminary October reading, as measured by the University of Michigan-Thomson Reuters sentiment gauge. This gauge "covers how consumers view their personal finances as well as business and buying conditions," according to MarketWatch. Higher levels of sentiment could translate into higher consumer spending and help propel the economy.
The Markets - October 8, 2012
Encouraging, but still lackluster.
That's how one analyst described the September jobs report released last Friday by the Labor Department. On the encouraging side, the unemployment rate dropped to its lowest level since January 2009 and the previous two month's reports were revised upward to show 86,000 more jobs were created than originally reported. On the lackluster side, "At the recent pace of job growth, it would take about 28 months to recoup all the jobs lost during the last recession," and "The U.S. is still short about 4.1 million jobs compared to its pre-recession peak," according to MarketWatch.
The Markets - October 1, 2012
Despite all the concern about the fiscal cliff, the sovereign debt crisis, and saber-rattling in the Middle East, the U.S. stock market has posted a strong year-to-date gain.
With just three months left in the year, the Standard and Poor's 500 index is up 14.6 percent, while the NASDAQ composite index, which measures more than 3,000 stocks on the NASDAQ exchange, is up 19.6 percent.
The Markets - September 24, 2012
Corporations are putting more cash in investors' pockets.
In the past week, more than half a dozen Blue Chip companies announced increases in their dividend payouts. In fact, Standard and Poor's Corporation said S&P 500 companies paid a record $34 billion in cash payments to investors in August. That's a pretty nice stimulus!
The Markets - September 17, 2012
I am the Federal Reserve, hear me roar.
Printing dollars in numbers too big to ignore.
With an apology to Helen Reddy for paraphrasing her early 1970's anthem, the Federal Reserve dropped a bombshell on the markets last week, and the reverberation may endure for years to come.
The Markets - September 10, 2012
It's about time.
Believe it or not, the U.S. stock market as measured by the S&P 500 index hit an all-time record high last week when you include reinvested dividends, according to Bloomberg. Now, you may not have seen that headline in the news last week because the index itself is still 9.3 percent below its all-time high reached on October 9, 2007.
The Markets - September 4, 2012
Now that the traditional end to summer has arrived, things might heat up on Wall Street as traders return to their stations and face a host of pressing risks.
The omnipresent Mohamed El-Erian of PIMCO took to the airwaves on Bloomberg last week and laid out his list of the four major risks facing the global economy:
The Markets - August 27, 2012
Close, but not quite.
Last week, the U.S stock market hit an intra-day four-year high, but it couldn't hold the gain and closed slightly lower for the week, according to MarketWatch. As usual, news flow from Europe and the Federal Reserve helped move prices.
The Markets - August 20, 2012
Like the tortoise beating the hare, the U.S. stock market has been slowly and steadily inching its way up over the past few weeks.
Since touching an intraday low on June 4, the Dow Jones Industrial Average, the NASDAQ, and the S&P 500 index have all rallied more than 10 percent, according to CNBC. In fact, the Dow and S&P 500 have now risen for six consecutive weeks. It feels a bit like a "stealth" rally as volume has been very low and volatility, as measured by the CBOE volatility index, is at its lowest level in five years.
The Markets - August 13, 2012
Is the "cult of equity" dying?
Since 1912, stocks have returned on average 6.6 percent per year after inflation, according to Bill Gross, the legendary bond manager from PIMCO. Recently, Gross ruffled some feathers when he wrote that the historic 6.6 percent return "is an historical freak, a mutation likely never to be seen again as far as we mortals are concerned." Histrionics aside, Gross makes a point that deserves elaboration.
The Markets - August 6, 2012
Despite disappointment that central banks in the U.S. and Europe offered no new stimulus programs last week, the U.S. stock market rose for the fourth straight week - thanks to one piece of government news, according to Bloomberg.
The Markets - July 30, 2012
"Within our mandate, the ECB is willing to do whatever it takes to preserve the euro and, believe me, it will be enough."
--Mario Draghi, European Central Bank (ECB) President
The Markets - July 23, 2012
The man with his finger on the pulse says the U.S. economy faces two main risks. We have no control over one of those risks and the other, well, we do have some control, but whether our politicians will appropriately exercise that control is a big question.
The Markets - July 16, 2012
Should the Federal Reserve raise interest rates to fire up the economy?
For the past few years, the Fed has been on a mission to lower rates as much as possible. The thinking is lower rates will spur economic growth by making it less costly for businesses and consumers to borrow money.
The Markets - July 9, 2012
Where is the recovery in jobs?
In the 10 recessions between World War II and 2001, the jobs lost during the recession were fully recovered within 4 years of the previous peak in employment, according to the blog, Calculated Risk. In fact, with the exception of the 2001 recession, the previous 9 recessions had recovered all their lost jobs within a relatively short 2½ years.
The Markets - July 2, 2012
A dose of good news from a European summit last Friday helped fuel a strong rally in world financial markets and took some of the sting out of a weak second quarter.
With the expectation bar set very low, the 19th European Union (EU) summit since 2008 "delivered more steps toward fiscal integration than pessimistic investors had expected," according to The Wall Street Journal.
The Markets - June 25, 2012
While nobody knows what the future holds, one powerful person came pretty close to accurately predicting the problems Europe is having with the euro - a full 17 years before the current crisis began in 2010.
The Markets - June 18, 2012
When central bankers talk, investors listen.
World stock markets rallied last week on a Reuters report which said major central banks were prepared to take coordinated action if the results of the Greek elections led to market turmoil.
The Markets - June 11, 2012
Add another country to the European bailout list.
Over the weekend, Spain requested up to $125 billion in bailout money to shore up its ailing banks, according to Bloomberg. Spain's banks and the country's economy are reeling from the bursting of a massive property bubble. Things are so bad in Spain that the country is back in recession and nearly 25 percent of the country's workers are unemployed, according to The Wall Street Journal.
The Markets - June 4, 2012
It was a weak week in the world's financial markets and these headlines from The Wall Street Journal, Saturday, June 2, and Sunday, June 3 editions, leave no doubt of that.
Grim Job Report Sinks Markets
Euro-Zone Reports Deepen Gloom
Asia Weakness Heightens Fears of Contagion
Brazil Loses Steam as World Slows
Dow Tumbles Into Red for the Year
Raw Materials in a Free Fall
Government-Bond Yields Sink to Record Lows
The Markets - May 29, 2012
Judging by what's happening in the bond market, it appears that some investors are more concerned about the return of their money than the return on their money.
The Markets - May 22, 2012
There wasn't much to 'Like' in the financial markets last week as stocks took a hit on another round of global worries. High on the list of concerns were:
Continuing anxiety over Greece's ability to avoid default and remain in the euro.
Rising borrowing costs for Italy and Spain.
Ongoing fears of an economic slowdown in China.
Loss of faith in the banking system due to JPMorgan's $2 billion (and growing) bad bet.
A very tepid response to the highly anticipated stock market debut of Facebook.
The Markets - May 14, 2012
Even the smartest guy in the room sometimes makes mistakes.
Jamie Dimon, CEO of the huge U.S. bank JP Morgan, has been called the smartest guy in the room for his ability to effectively steer the bank through the economic crisis. And, while most of the other big U.S. banks have tarnished reputations, Dimon's firm was the one that stood out from the crowd.
Unfortunately, that all changed last week.
The Markets - May 7, 2012
The most important news last week may have actually happened this past weekend.
On Sunday, voters went to the polls in France, Greece, and Germany and the results could have a major impact on world markets. French voters sent incumbent president Nicholas Sarkozy packing and, instead, elected Socialist Party candidate Francois Hollande. Hollande "has pledged to shift the burden of economic hardship onto the rich and to resolve the protracted euro sovereign-debt crisis by softening the current prescription of austerity," according to The Wall Street Journal. While his strategy is debatable, it will likely cause a rift with Germany and add uncertainty to recent eurozone agreements.
The Markets - May 1, 2012
What is the costliest fruit?
How about an apple, as in Apple, Inc.? With more than $500 billion in market capitalization, Apple is the world's most valuable company, according to Reuters. Last week, the company reported quarterly earnings that easily trumped analyst forecasts and this helped propel the S&P 500 to a 1.8 percent weekly gain. But it's not just Apple that's doing well. According to FactSet, a robust 78 percent of the S&P 500 companies that have reported earnings so far this quarter have beaten analysts' forecasts.
The Markets - April 23, 2012
Move over European debt headlines, corporate earnings have something to say.
Even though troubles are brewing again across the pond in Europe, corporate earnings season in the U.S. is stealing the spotlight. Why? According to CNBC, more than 100 companies in the S&P 500 have reported earnings and 8 out of 10 have delivered better than expected results – and that’s grabbed investors’ attention.
The Markets - April 16, 2012
It’s back. Volatility, that is.
Like a yo-yo, the market bounced around and the S&P 500 index ultimately ended down 2.0 percent for the week and 3.4 percent from this year’s closing high, according to Reuters. Despite the drop, the market is still showing a solid 9.0 percent gain for the year.
The Markets - April 10, 2012
When in doubt, blame it on the weather.
It’s human nature to want to ascribe a reason to everything that happens in the world. Rather than feeling like it’s all random, we always want to know why the market went up or why bats hang upside down or why white is the most popular car color.
The Markets - April 2, 2012
Last week marked the end of a very strong first quarter for the stock market.
For the quarter, the S&P 500 index rose 12.0 percent, its strongest start to a year since 1998. In fact, the index ended the quarter 3.4 percent above the average year-end projection of strategists surveyed by Bloomberg. In other words, the market gained more in the first quarter than analysts thought it would gain for the whole year.
The Markets - March 26, 2012
A trillion here, a trillion there and, pretty soon, you have a nice market rally.
Through a program called quantitative easing, central banks around the world have flooded the world economy with the equivalent of trillions of U.S. dollars. Quantitative easing involves central banks making large-scale purchases of debt – usually government or mortgage debt – and paying for that debt by creating money out of thin air, according to The New York Times. The hope (and remember, hope is not an investment strategy) is that with more money sloshing around the global economy, interest rates will drop and that will stimulate demand and increase economic growth.
If all goes according to plan, the economy will recover and then the central banks will sell the bonds they purchased and “destroy” the money they received for selling the bonds. When the whole cycle is completed, the net effect is no new money is created, according to the BBC. Optimists say this is an appropriate activity for central banks when the economy faces major hurdles. Pessimists say the central banks are unlikely to turn off the spigot and we could end up with runaway inflation.
The Markets - March 19, 2012
It was a busy week on Wall Street with numerous big moves and key milestones hit. Here are a few of the highlights:
· The S&P 500 index and the Dow Jones Industrial Average had their biggest weekly gains since last December.
· The S&P 500 closed at its highest level in nearly four years and the NASDAQ index closed at its highest level in more than 10 years.
· Yields on U.S. government bonds rose substantially on the back of “steady albeit moderate economic expansion,” according to Barron’s.
· Gasoline prices continued to rise and are now up 18 percent since December and pump prices topped $4 a gallon in many parts of the country.
· Employment is looking better as initial claims for U.S. unemployment benefits matched a four-year low.
Sources: Barron’s, The Wall Street Journal, MarketWatch
The Markets - March 12, 2012
An important key to support the stock market is starting to fall into place.
You may have guessed that key is JOBS. Last week, the Labor Department reported an increase of 227,000 new jobs in February. Over the past six months, 1.2 million new jobs have been created – the highest six-month total since 2006. More jobs could lead to more spending which could boost corporate sales, earnings, and, possibly, stock prices.
The Markets - March 5, 2012
It may not feel like it, but the U.S. stock market is off to its best start to the year since 1991, according to CNBC.
With a rise of 8.9 percent for the year, the S&P 500 index has now risen eight of the last nine weeks. Some analysts cite improving economic data, solid corporate earnings, and a stronger job picture for the bubbling stock market, according to Reuters.
But, before we get too carried away, the S&P 500 index would still need to rise about 15 percent to match its all-time record high of 1,565 hit back on October 9, 2007, according to The Wall Street Journal. The gap is not as wide if you reinvested dividends since October 2007. On that score, the S&P would be just 3.5 percent below its all-time high.
The Markets - February 27, 2012
It’s been rather calm in the stock market lately.
For the past couple years, the euro zone debt problems and the “will we or won’t we relapse into a recession” worry have been on center stage. Now, Europe’s immediate liquidity issue has been patched and the U.S. economy seems to be on firmer footing. Accordingly, the stock market has responded to these developments and, last week, the S&P 500 index closed at its highest level in more than 3½ years, according to The New York Times.
The Markets - February 22, 2012
Valentine’s Day is over, but there’s still a “whole lotta love” swirling around the stock market these days.
The Dow Jones Industrial Average closed last week at its highest level since May 2008 while the S&P 500 is knocking on the door of its highest close in almost four years, according to The Wall Street Journal. The gains were driven by optimism that Greece will get another bailout and better-than-estimated data on jobless claims, manufacturing, and housing, according to Bloomberg.
The Markets - February 13, 2012
Who should you believe, Warren Buffett or Bill Gross?
Buffett and Gross are generally recognized as two of the world’s greatest investors. Buffett made his name in equities while Gross made his name in bonds as the head of Pimco, a trillion-dollar money management company. Both have outstanding multi-decade track records and both are billionaires.
Yet, today, they disagree on the merits of investing in “currency-based investments” such as money-market funds, bonds, mortgages, bank deposits, and other instruments.
The Markets - February 6, 2012
How do you spell market rally? How about “Jobs.”
A much higher than expected 243,000 jobs were added to our economy in January and that helped push the Dow Jones Industrial Average to its highest close since May 2008, according to Bloomberg. On top of that, the unemployment rate dropped to 8.3 percent – the lowest since February 2009.
More good economic news came from the services sector as the pace of growth in January accelerated to its highest level in nearly a year, according to the widely followed index from The Institute of Supply Management and reported by CNBC.
The Markets - January 30, 2012
At its most basic level, a trade takes place when a buyer is willing to buy at a certain price and a seller is willing to sell at that price. Both parties could be smart, experienced, and looking at the same data, yet somehow one party thinks it’s a good price to buy and the other thinks it’s a good price to sell.
Last week, several news items represented good examples of how investors could look at the same data and draw different conclusions. Consider these:
The Markets - January 23, 2012
We’re only three weeks into the New Year and already some very interesting trends have developed in the markets. Consider these four:
- The worst performing stocks in 2011 have been the best performing in 2012. Bespoke Investment Group did an analysis and discovered that the 50 worst performing stocks in the S&P 500 in 2011 were up a whopping 11.2 percent YTD 2012 as of last Wednesday. By contrast, the 50 best performing stocks in 2011 were up only 2.1 percent so far in 2012. What a difference a “turn of the calendar” makes!
- U.S. Treasury securities are off to their worst start in nine years. With improvements in the employment situation, housing sales hitting an 11-month high and a reprieve in the European debt problem, investors have less need for conservative treasuries and a bigger appetite for riskier stocks, according to Bloomberg and CNBC. At the moment, investors seem to be saying, “risk on.”
- U.S. stocks rose for the third consecutive week and are near a six-month high. Despite a decidedly mixed start to the 4th quarter earnings season, stocks have roared out of the gate this year and are now up 20 percent from the October 2011 low, according to Reuters. Of course, too much euphoria could lead to disappointment later.
- The CBOE Volatility Index (VIX) declined nearly 22 percent in the first three weeks of this year. The big decline in the VIX suggests investors are less fearful about near-term market volatility, according to CNBC. In fact, the VIX is down to a seven-month low, according to Reuters. While the markets may be calm now, we’re not complacent.
The Markets - January 17, 2012
The U.S. became a member last August and, now, so has most of the eurozone. Unfortunately, it’s not a club you want to join.
Late last week, Standard and Poor’s (S&P) announced it was downgrading the credit rating of nine of the eurozone’s 16 members including behemoths France and Spain. In addition, 14 of the 16 members have “negative outlooks” which means S&P believes, “that there is at least a one-in-three chance that the rating will be lowered in 2012 or 2013.” The only two countries with stable credit outlooks are Germany (no surprise) and Slovakia, a former Communist country that became an independent state in 1993 after the dissolution of Czechoslovakia.
The Markets - January 10, 2012
Which stock characteristic most impacted the S&P 500’s performance in 2011?
To answer that question, Bespoke Investment Group performed a decile analysis and concluded that having a high dividend yield was the most important factor affecting stock prices in 2011.
In their analysis, they discovered that the three deciles with the highest dividend yield were the only ones to experience a positive return for the year. In fact, while the S&P 500 index was unchanged for the year, the top three highest-yielding deciles rose 10.4 percent, 6.4 percent, and 8.7 percent, respectively. The remaining seven deciles all experienced a loss for the year.
The Markets - January 3, 2012
The Year in Review
“Much Ado About Nothing” is one of Shakespeare’s famous comedies and, surprisingly, the title succinctly summarizes the U.S. stock market in 2011.
There was “much ado” during 2011 as we experienced one of the most volatile years on record. For example, regarding the S&P 500 index stocks, Bloomberg said, “Individual stocks were more volatile than in 2009 and 2010, with 55 losing more than 30 percent this year compared with a total of 13 in the prior two.”
The Markets - December 19, 2011
If it feels like the stock market has been volatile this year, you’re right. Here are a few examples:
- Three-month historic volatility for the “fear” gauge known as the VIX hit a record on October 31, surpassing the prior peak from December 2008.
- Intraday swings in the Dow Jones Industrial Average have averaged 261 points since August 1, an exceptionally large number.
- On four consecutive days back in August, the Dow Jones Industrial Average alternated between gains and losses of more than 400 points, the longest streak ever.
The Markets - December 12, 2011
What’s more important to the U.S. stock market, economic growth or the value of the U.S. dollar?
On the surface, economic growth would seem to be the logical answer since as the economy grows, earnings should grow, too. But, digging a little deeper, the answer is not so clear cut.
What muddles the answer is that large U.S. multinational companies generate about 47 percent of their revenue from outside the U.S., according to Standard and Poor’s. When that revenue is translated back into U.S. dollars, the revenue could vary significantly depending on whether the dollar is strong, weak, or neutral.
The Markets - December 5, 2011
Politicians may struggle to work together, but at least the world’s central bankers can.
At 8:00 a.m. EST on November 30, the Federal Reserve released a statement that sent worldwide financial markets skyrocketing. Here’s the first paragraph of the statement:
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.
The Markets - November 28, 2011
"It's a small world after all."
Living in an age of jet travel, the internet and mobile communication have its advantages. It makes our world of 7 billion people seem a bit smaller since we're just one plane ride or "one boot of the computer" away from connecting with anyone in the world.
The Markets - November 21, 2011
"Printing money is really just a softer method of default, because it effectively converts the meaning of default from 'getting less than 100% of the currency you were owed' to 'getting all the currency you were owed, but ending up with less than 100 percent of the purchasing power you expected.'"
The Markets - November 14, 2011
Greece and Italy just dumped their political leaders and are hoping that new leadership will calm the financial markets and drive important structural reform.
One of the insightful bits of investing wisdom is that you don't have to recoup a loss using the same investment that caused the loss. In other words, it's okay to sell a loser and redeploy the money in another investment that may have a better chance of going up in value. That seems to be what Greece and Italy are doing with their leadership change.
The Markets - November 8, 2011
This Europe problem just won't go away and it's keeping the financial markets on edge.
Despite an October 27 agreement that strengthened the bailout of Greece, the "Greek Tragedy" continues as the country's government is a mess, Prime Minister George Papandreou is reportedly stepping down and the populace is protesting. And, with each day of delay, Greece is running out of money and European leaders are running out of patience.
The Markets - October 31, 2011
After 14 summits in 21 months, have European leaders finally solved their sovereign debt problem? Judging by the stock market's reaction, you might think the answer is yes.
In marathon sessions last week, European leaders agreed on a new, three-point deal to stave off a deeper debt crisis. The deal includes:
1) A commitment by banks and other private bondholders to accept a voluntary 50% writedown on Greek government debt.
2) A boost in the lending power of the euro-zone bailout fund.
3) A 106 billion euro ($148 billion) recapitalization of European banks.
The Markets - October 18, 2011
What happened to the economy?
Less than three weeks ago, it seemed like the economy was falling off a cliff. Firms like the Economic Cycle Research Institute were saying a new recession was on its way and there's nothing the government could do to stop it, according to MarketWatch. The stock market was sensing economic weakness, too, as it slumped to its lowest level in a year on October 3.
But, now, just two weeks later, the S&P 500 stock index is up a whopping 11 percent since October 3 and trading at the top end of a range that it's been stuck in for more than two months, according to Bloomberg.
The Markets - October 11, 2011
Sometimes a little spark is all you need.
At one point last Tuesday, October 4, the S&P 500 index dropped below 1,091, which represented a 20 percent decline from the April 29 closing high, according to MarketWatch. That's a key number because many investors consider a 20 percent decline to signify a bear market. But, lo and behold, just when it looked like the market might go from bad to worse, the Financial Times (FT) published a story that hit the internet that afternoon and the U.S. stock market staged a massive positive reversal.
The Markets - October 4, 2011
The word "volatile" has been so overused in the media, but it's hard to find a better way to describe recent movements in the financial markets. On any given day, the markets can rise or fall based on the latest thinking about euro-zone sovereign debt problems, a possible U.S. or Chinese recession, weak banks, inflation, deflation, or poor job numbers.
In the just completed third quarter, uncertainty (there's another overused word!) was in full bloom as the three major U.S. stock market indices posted double-digit declines, according to Barron's. Was the market sniffing out a new recession? Possibly. Last week, the respected Economic Cycle Research Institute was quoted in MarketWatch as saying, "The U.S. economy is headed for another recession that government intervention cannot prevent."
Along those same lines, Goldman Sachs said we may be moving from the 2007-2009 "Great Recession" to an upcoming "Great Stagnation." As quoted by Bloomberg, Goldman Sachs said a "Great Stagnation" would be characterized by "'high and sticky' unemployment, an average 0.5 percent growth rate in per capita gross domestic product, and stock markets that underperform historical averages."
The Markets - September 26, 2011
The Federal Reserve did "The Twist," but the financial markets ended up in "A Knot."
In a much anticipated action dubbed "Operation Twist," the Federal Reserve announced last week it would reshuffle its balance sheet by selling $400 billion of shorter-term Treasury securities and use the proceeds to buy longer-term securities. The Fed said it hopes the action will lower longer-term interest rates and, "contribute to a broad easing in financial market conditions that will provide additional stimulus to support the economic recovery."
The Markets - September 12, 2011
Are we heading toward a "currency war?"
When there's turmoil in the stock market or in the geopolitical environment, investors sometimes flee toward perceived "safe havens" in the hope of protecting a portion of their assets. While there's no guarantee that any investment will be free from risk, the following assets have sometimes been on the receiving end when times get tough:
- U.S. dollar
- Swiss franc
- Japanese yen
- U.S. Treasury securities
Sources: Goldline.com, U.S. Census Bureau
The Markets - September 6, 2011
Two four-letter words -- "debt" and "jobs" -- are hanging over the economy like a noose that keeps tightening.
This is not news; we've known for several years that debt is too high and jobs too scarce. Unfortunately, they've become intractable problems with no solution in sight.
Last week, the government reported the U.S. economy had a net gain of zero new jobs in August. On top of that, the unemployment rate remained stuck at a disappointingly high 9.1 percent and the number of unemployed people rose to 14 million -- including more than 6 million workers who have been out of work for 27 weeks or longer, according to MarketWatch.
The Markets - August 29, 2011
Like wanderers in the desert, investors breathed a sigh of relief when an oasis appeared last week. After Federal Reserve Chairman Ben Bernanke's speech, the Dow Jones Industrial Index posted its first weekly gain in more than a month, finishing at 11,284, an increase of more than 4 percent for the week. The Standard & Poor's Index and Dow Jones Global ex US Indices also were up for the week. In addition, the Chicago Board of Exchange Volatility Index (VIX), which is known as the 'fear index' because it reflects the amount of volatility investors anticipate in the next 30 days, fell by more than 10 percent. According to The Wall Street Journal, the head of U.S. equities index trading at Barclays Capital said that after Mr. Bernanke's speech, some investors set up options positions that are designed to profit from improving stock market stability in the future.
The Markets - August 22, 2011
The financial markets are currently filled with contradictions and that's contributing to head-scratching and risk-aversion on the part of investors.
Consider these head-scratchers:
- Mortgage rates are at a 50-year low, yet the housing market is still severely depressed.
- Ten-year Treasury yields hit a record low last week even though the government just experienced a downgrade in its credit rating and it is running trillion-dollar annual deficits.
- Gold prices hit a record high last week even though gold pays no interest and the core inflation rate is running below 2 percent.
- The value of the dollar fell to a record low against the Japanese yen last week even though Japan has been mired in a slump for 20 years and "Japanese government debt is more than double the Euro Area average and more than double the US," according to Jim O'Neill at Goldman Sachs.
Sources: Bloomberg, MarketWatch
The Markets - August 15, 2011
If there was ever a week for investors to be on vacation and "off the grid," last week was it. By being unplugged, you would have missed the following wild ride:
- Monday: The S&P 500 index plunges 6.7 percent partially in reaction to the U.S. losing its triple-A credit rating. By the end of the day, about 99 stocks out of every 100 close lower -- the biggest rout since May 13, 1940 when Germany was beginning its invasion of France, according to CNBC.
- Tuesday: The index soars 4.7 percent as the Federal Reserve announces it will leave its benchmark interest rate at a record low for at least two more years.
- Wednesday: The index tumbles 4.4 percent as concern about the health of the European banking sector and France's triple-A credit rating sends investors to the exits.
- Thursday: The index skyrockets 4.6 percent as calmer heads prevail and investors swoop in to buy perceived bargains.
- Friday: The index closes higher in a relatively uneventful day.
- For the week, the Dow Jones Industrial Average rose or fell at least 400 points on four consecutive days -- the first time that's ever happened.
Sources: The Wall Street Journal, Bloomberg, CNBC
The Markets - August 1, 2011
"Uncertainty" is an overused, but appropriate word to describe the situation our country finds itself in.
- We have uncertainty in Washington about how our budget issue will get resolved.
- We have uncertainty about the economy as it hasn't fully recovered from the Great Recession.
- We have uncertainty about the value of the dollar as gold prices hit record highs and the dollar remains depressed.
- We have uncertainty about how the war on terrorism will progress.
- We have uncertainty about when the housing market will recover.
The Markets - July 18, 2011
Will they or won't they?
Republicans and Democrats are squabbling over raising the federal debt ceiling and jeopardizing a projected August 2 "drop-dead" date for avoiding a default on part of our outstanding debt obligations. Both parties agree that default has to be avoided, but, so far, they've been unable to meet in the middle on an agreement. Meanwhile, the economy suffers.
The Markets - July 6, 2011
επεκταθείτε και προσποιηθείτε
If that looks like Greek to you, that's because, well, it is. It's Greek for "extend and pretend" and that's what happened last week to Greece's debt problem.
Deeply in debt, Greece's parliament passed legislation filled with tax increases, spending cuts, and privatization plans "aimed at meeting European Union aid requirements and staving off default," according to the Sydney Morning Heraldand Bloomberg. By passing the austerity plan, Greece is now in line to receive as much as $124 billion in new financing to keep the country afloat.
The Markets - June 27, 2011
There was good news and there was bad news but, by the end of the week, a wave of pessimism had swept gains away, causing markets to finish lower.
In the good news department, Greece adopted an austerity program that made it eligible to receive financial support from the European Union and International Monetary Fund, according to The New York Times. Relief that a Greek default had been avoided was soon offset by concern about the health of Italian banks. On Friday, extreme share price volatility caused trading in shares of specific banks to be suspended, according to The Wall Street Journal. Although the reason for the volatility was unclear, it raised new concerns about Europe's financial condition.
The Markets - June 16, 2011
To rework one of the Beatles most famous songs, our economy is traveling "The Long, Winding and Bumpy Road."
After doubling in value by the end of April from the March 2009 low, the Standard & Poor's 500 index has now declined for six straight weeks, according to Minyanville and The Wall Street Journal. While the doubling in stock prices is quite impressive, the economy hasn't kept up. Currently, we're experiencing "bumps" along the economic road including a double-dip in housing prices, weak first quarter economic growth, a high unemployment rate, and ballooning government debt, according to The Wall Street Journal.
The Markets - June 6, 2011
Well, it wasn't exactly the best week for the U.S. economy and financial markets. Here are a few "bumps on the road to recovery" we learned last week:
· Nationwide housing prices declined again in March and are now at the lowest level since mid-2002, according to the S&P/Case-Shiller Home Price Indices.
· The Institute for Supply Management's manufacturing gauge posted its third straight monthly decline in May and its biggest one-month drop since 1984, which suggests the manufacturing sector is slowing, according to MarketWatch.
· The Conference Board's index of consumer confidence fell to 60.8 in May from 66.0 in April, which was well below the consensus of economists and suggests consumers are turning gloomier, according to The Wall Street Journal.
· The jobs picture turned sour in May as the unemployment rate rose to 9.1% and only 54,000 new jobs were created -- both figures were worse than expected, according to MarketWatch.
The Markets - May 31, 2011
Starting in July, it may cost you more to wake up in the morning.
Starbucks announced last week that it was raising the price of bagged coffee sold in its cafes by an average of 17%. Interestingly, the rising price of coffee represents the confluence of several macro factors affecting the world today, according to Bloomberg.
First, farm goods are becoming more expensive as the cost of fertilizer is rising and being passed onto consumers.
Second, the developing world from Brazil to Asia is becoming more affluent and one outcome of that is they are more willing to pay up for high-quality goods -- including coffee.
The Markets - May 23, 2011
"It's déjà vu all over again." --Yogi Berra
Let's look back for a moment on a few flameouts from the late 1990s tech stock craze:
· The Internet community site theglobe.com set a record in November 1998 with an initial public offering (IPO) that soared 606% on its first day of trading. Despite that strong debut, it was delisted from the NASDAQ in April 2001 and today is a shell company with no significant assets or revenue.
· Pets.com (remember the "Sock Puppet?") appeared in a Super Bowl commercial in 2000 and received $300 million in funding. It went public in February 2000 and was bankrupt just nine months later.
· The online toy seller eToys went public in 1999 and rose 280% on its first day. At its peak, the company was valued at more than $8 billion. It went bankrupt in March 2001.
Source: Investor's Business Daily
The Markets - May 16, 2011
What are two things people tend to buy less of when the price goes down?
Normally, people like a bargain. When we go shopping, we feel much better buying things when they're 20% off or "Buy one, get the second at half price." But, there are two things that tend to buck this trend of buying when the price goes down. If fact, with these two things, people tend to buy more of them after their price has run up. Do you have your guess on what they are?
The Markets - May 2, 2011
When Fed Chairman Ben Bernanke speaks, people listen.
The normally secretive Federal Reserve held its first-ever news conference last week and what Bernanke said turned out to be music to the market's ears. Here are some of his key comments:
· The Fed will end its current $600 billion bond-buying program (QE2) in June (no surprise).
· It will continue to reinvest the proceeds of maturing securities (a sign of continuing the easy money policy).
· It will maintain its exceptionally low target for federal funds for an extended period (another sign of continuing the easy money policy).
The Markets - April 25, 2011
If 50 is the new 30, then silver is the new gold.
Gold gets most of the headlines, but silver is the precious metal that has really been on a tear. Just last week, silver prices rose 9%, according to Bloomberg. Over the past 10 years ending April 21, 2011, silver prices rose 937% compared to a rise of "just" 469% for gold and 7.5% for the S&P 500 index, according to Bespoke Investment Group. Of course, past performance is not guarantee of future results. The fast price swings of commodities will result in significant volatility in an investor's holdings.
The Markets - April 18, 2011
There was a little excitement in the financial and political world last week...
· Gold prices hit an all-time record high.
· Silver prices hit a 31-year high.
· Oil prices traded near 32-month highs.
· The value of the dollar fell to its lowest level since late 2009 against a basket of currencies.
· China's inflation rate jumped to a 31-month high of 5.4% for the year ending in March while U.S. inflation remained in check at 2.7% for the same period.
· The president signed a bill that cut about $38 billion from the current federal budget while the House of Representatives passed a bill to cut spending by nearly $6 trillion over a decade.
The Markets - April 11, 2011
The dollar is becoming a pariah and weakening against nearly all global currencies because our relatively slow economic recovery means the Federal Reserve is unlikely to raise interest rates in coming months, according to The Wall Street Journal. Low interest rates tend to make a country's currency less attractive and that causes investors to move capital to other countries that offer higher interest rates on deposited money.
Backing up the idea that the U.S. is slow in raising rates, The Wall Street Journal quoted a RBC Capital Markets report which said, "So far this year, central banks in at least 18 developing economies have raised interest rates." Our Federal Reserve is not one of them.
The Markets - April 4, 2011
STOCK MARKET RISES SHARPLY
It may not have felt like it, but the stock market, as measured by the S&P 500, rose 5.4% during the quarter. Despite some trying moments, the market rose "amid growing optimism that the recovery from the financial crisis had become self-sustaining, according toThe Wall Street Journal. The stock market seems to have taken to heart the U.S. Postal Service commercial that said, "...neither snow, nor rain, nor heat, nor gloom of night, nor the winds of change, nor a nation challenged, will stay us from the swift completion of our appointed rounds." In this case, the "appointed rounds" was a stock market that went up.
Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
The Markets - March 28, 2011
After last week's rally, the U.S. stock market is now higher than it was before the triple tragedy in Japan, according to Bloomberg.
It's really quite remarkable how quickly the stock market shrugged off the problems in Japan, the unrest in the Middle East and North Africa, the rising price of oil and other commodities, and the continuing sovereign debt problems in Europe. What's helping the market stay firm? Once again, it looks like strength in corporate earnings.
The Markets - March 21, 2011
Update on World Events
The enormity of the unfolding tragedy in Japan has saddened the world. We have never seen a triple tragedy like this with an earthquake, a tsunami, and a nuclear disaster all hitting one country at the same time. Like many others, we are hoping and praying for the Japanese people that their situation will improve soon.
As your advisor, we wanted to share with you a few thoughts about the current state of the world and how recent events in Japan, Libya, and elsewhere are affecting our thinking.
The Markets - March 14, 2011
"It takes a licking and keeps on ticking" was a memorable jingle for Timex watches and it seems like an apt description of the U.S. financial markets, too.
Despite absorbing numerous "licks" over the past couple years, the financial markets have been remarkably resilient.
The Markets - March 7, 2011
It's a heavyweight battle between high oil prices in one corner and strong economic numbers in the other. Which one will win?
Oil still lubricates a significant part of the world economic machine and, at more than $100 a barrel, it could cause the machine to seize up and inflation to rise. Unrest in the Middle East, speculative fervor, and the economic recovery are contributing to oil's recent strength, according to MarketWatch.
The Markets - March 1, 2011
Guns and oil are never a good combination.
As unrest in the Middle East continued last week, oil prices headed north and stock prices headed south. The decline in stocks last week was rather modest, but it still shows how oil is an important component of our economy. Specifically, if oil prices rise too much too soon (and nobody knows exactly what "too much too soon" is), then that could tank economic growth and stock prices.
Let's look at some facts related to oil so we can put the Middle East turmoil in perspective -- at least as it relates to the turmoil's impact on the economy.
February 23, 2010
The Middle East isn't the only place experiencing a protest by the people.
In Madison, Wisconsin, thousands of protesters flooded the state capital for several days last week to protest the newly-elected Republican governor's attempt to roll back state employee benefits and overhaul union rules, according to CNN. The battle is being closely watched on the national scene because if the governor succeeds, it may embolden other states to attempt similar moves.
What's playing out in Wisconsin may be a precursor to sweeping changes in our country over the next few years. Specifically, most people agree that our country is facing massive budget issues that cannot be "kicked down the road" indefinitely. With the Republicans scoring major victories in last year's election, they are now-right or wrong-trying to follow through on campaign promises to address these issues.
The Markets - February 14, 2011
Despite unrest in the Middle East, the stock market closed last week at its highest level in 32 months, according to Bloomberg.
Analysts point to better-than-forecast economic data, solid corporate earnings, continued Treasury purchases by the Federal Reserve, a jump in corporate takeovers, and improving employment data as catalysts for the market's positive tone. Corporate earnings, in particular, are coming in strong this quarter. According to Bloomberg, "More than 73 percent of the 348 companies in the S&P 500 that reported results since Jan. 10 have topped analysts' per-share profit predictions."
The Markets - January 24, 2011
It may not feel like it, but 2009 and 2010 completed the best two-year advance in the S&P 500 index since 1998 and 1999, according to Bloomberg. The bad news is the booming late 1990s was followed by the bust of the 2000s and as of last week, the S&P 500 was down about 13% from its December 31, 1999 closing price. That excludes reinvested dividends and is based on data from Yahoo! Finance. This 13% decline over the past 11 years was driven by two nasty bear markets -- the second from which we are still recovering.
The Markets - January 10, 2011
2010 is now history and it caps a wild three-year ride in the financial markets.
We ended 2007 near all-time record highs in the U.S. stock market, but then the wheels fell off. In 2008, markets fell dramatically and the world economy nearly imploded. In 2009, we realized that the world was not going to end and markets began to recover. In 2010, things started to stabilize and return to some level of "normalcy." As the chart below indicates, 2010 was a solid year in the equity markets and a strong year for gold, commodities, and real estate.
The Markets - December 13, 2010
Let's make a deal.
That's what President Obama did last week with the Republicans and the financial ramifications of the broad tax package are already starting to ripple through the financial markets. Last week, stock prices hit a two-year high, interest rates rose significantly, the dollar strengthened against a basket of other currencies and gold hit a new high then fell back, according to Associated Press, Bloomberg and The Financial Times.
The Markets - December 6, 2010
How risky are the financial markets right now?
Without a crystal ball, we won't know the answer until after the fact, but that doesn't stop Wall Street from finding creative ways to measure and profit from investors' desire to predict and avoid risk. Playing on this desire, we now have numerous indexes that try to predict future volatility.
The Markets - November 23, 2010
Among the many economic differences between China and the United States, one of the most glaring is that China is trying to slow down its inflation rate, while the United States is trying to ignite it.
The Markets - November 16, 2010
The Markets - November 9, 2010
The potential economic ramifications of last week's news are, to put it mildly -- huge.
Three big things happened that could have long-term effects on your portfolio and your financial well-being. First, on Tuesday, the Republicans scored a major victory in the mid-term elections and now have the upper hand in shaping the legislative agenda over the next two years. Should they succeed in cutting taxes and reducing spending, it could usher in a new era of fiscal conservatism that might cause short-term pain, but could lead to long-term gain. On the other hand, we could just end up with gridlock, finger-pointing, or compromises that please no one.
The Markets - October 25, 2010
Would you like to buy a 10-year U.S. Treasury note that yields 14% and matures in 30 years? Believe it or not, that's what the government was offering you back in November 1981, according to Morningstar.
It didn't last, though, because that marked the end of a 40-year bear market in bonds that started in 1941. The ending of that bear ushered in a bull market in bonds that some say exists to this day -- some 29 years later.
The Markets - October 18, 2010
When is a dollar not worth a dollar?
A McDonald's Big Mac costs an average of $3.71 in the United States, according to an October 14 article from The Economist. Just across the border in Canada, that same burger costs $4.18 based on the October 13 exchange rate. In the Euro area, you'd have to shell out $4.79 to quench your Mac attack. But, if you're really hungry, you should forget going to Switzerland because a Big Mac there will set you back a whopping $6.78 at the going exchange rate.
The Markets - October 11, 2010
Investors seem to be putting a lot of faith in the Federal Reserve right now.
Since the financial crisis began in 2008, the Federal Reserve and other branches of government have engaged in creative and somewhat unorthodox ways to try and shock the economy back to good health. While reasonable people disagree on the effectiveness of the government's intervention, it's fair to say that, so far, we avoided a repeat of the Great Depression. Whether that avoidance was due to, or in spite of, the government's intervention will be debated by academics for years.
The Third Quarter In Review
STOCK MARKET RISES SHARPLY
Thanks to a super strong September (the best in 71 years, according to CNBC), stocks rallied sharply for the quarter. It didn't start off that well as Fed Chairman Ben Bernanke described the economic outlook as "unusually uncertain" in July. The stock market basically treaded water in July and August as it digested the second quarter's big drop and the uncertain economic environment. By the time September rolled around, investors decided that the weak economy might actually be good news for the stock market. How? In the (il)logical way that the market sometimes works, investors began to believe that the economy was weak enough that the Fed would step in at some point with another round of quantitative easing. If that happened, interest rates might drop, the economy might get a lift, and stock prices might follow. That's the theory, anyway, and investors followed it by bidding up stock prices.
The Markets - September 27, 2010
Is inflation good or bad for our economy? After last week, we now know the Federal Reserve's answer to that question and it may have a major effect on the financial markets going forward.
The Markets - September 13, 2010
If you had an extra $1,000, would you use it to reduce debt or would you spend it on something discretionary?
How Americans answer that question may significantly impact economic growth over the next few years, according to an August 20 report from Federated Investors. If Americans decide to focus on debt reduction that could keep a lid on economic growth in the near term, but would likely be good for the economy over the long term. Conversely, if Americans start spending freely, it may boost short-term growth, but it might delay our day of reckoning and make it worse down the road.
The Markets - September 7, 2010
Where does 2 + 2 = billions of dollars? In the stock market, of course!
Back in the "good ol' days," investment professionals would spend their waking hours poring over financial statements, developing financial models, and analyzing reports to try and find undervalued stocks. The thought was you could find stocks that were selling below their "intrinsic value," and, if you held them long enough, you would likely earn a nice return. Warren Buffett exemplifies this style of investing, and he's done pretty well with that strategy over the past 40 years.
The Markets - August 30, 2010
Has corporate America lost its gumption?
Three of the things that have made the United States so great are the determination, fearlessness, and entrepreneurial spirit of our people. Unfortunately, that seems to be a bit lacking right now with the leaders of some of our country's largest companies.
The Markets - August 23, 2010
"We don't think the world has ended."
With so much doom and gloom being published these days, it's refreshing to hear a respected leader of a global, blue-chip company make a positive statement. Doug Oberhelman, the chief executive officer of Caterpillar, met with analysts last week and painted a rather bright picture of the world economy, including the quote above.
The Markets - August 16, 2010
One week, the glass is half full, the next week, it is half empty.
Investor’s lack of conviction was on full display last week as a scandal at Hewlett Packard, a change of heart from the Fed, a revenue miss from tech bellwether Cisco Systems, and an unexpected rise in weekly jobless claims led to a decline in global stock markets, according to Bloomberg.