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Market Commetary - Week of 2/11/13

The Markets

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.

Market Commetary - Week of 2/04/13

The Markets

“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 Timbuk3. A high degree of investor optimism has helped push markets higher.1 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.2 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.3

Market Commetary - Week of 1/28/13

The Markets

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 2012 the best year for home sales since 2007.

Market Commetary - Week of 1/22/13

The Markets

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.

Commerce Department data showed housing starts climbed by 12.1 percent in December, on an annualized basis, exceeding economists’ expectations. Home construction is expected to continue to rebound, as long as mortgage rates remain low, and experts anticipate sales of new and existing homes will show improvement this week. This continued improvement in the housing market may have contributed to a more positive investor outlook.

Market Commentary - Week of 1/14/13

The Markets

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

Market Commentary - Week of 1/7/13

The Markets

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.

While markets embraced ATRA with unabashed enthusiasm, pundits were less keen on the new law. They greeted the changes with the excitement – or lack thereof – many readers reserve for books with cliffhanger endings. That’s because ATRA failed to resolve key issues related to the fiscal cliff, including automatic spending cuts and the debt ceiling limit. As a result, Americans can soon expect new additions to the fiscal cliff series. The next, which may be called the Debt Ceiling Debacle, will undoubtedly be accompanied by considerable melodrama and bipartisan bickering.

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Market Commentary - Week of 1/7/13

The Markets

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.

While markets embraced ATRA with unabashed enthusiasm, pundits were less keen on the new law. They greeted the changes with the excitement – or lack thereof – many readers reserve for books with cliffhanger endings. That’s because ATRA failed to resolve key issues related to the fiscal cliff, including automatic spending cuts and the debt ceiling limit. As a result, Americans can soon expect new additions to the fiscal cliff series. The next, which may be called the Debt Ceiling Debacle, will undoubtedly be accompanied by considerable melodrama and bipartisan bickering.

Market Commentary - Week of 12/31/12

The Markets

“This too shall pass.”

--Ancient proverb

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.”

As Reuters reported, “One way or another, Washington will come to an agreement to offset some effects of the cliff. The result will not be entirely satisfying, but it will be enough to satisfy investors.”  Unfortunately, we have to go through a totally avoidable wailing and gnashing of teeth before we get the Democrats and Republicans to do what ordinary Americans do when faced with opposing issues—compromise.

Market Commentary - Week of 12/24/12

The Markets

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.

  • Orders for long-lasting goods jumped in November. The data suggested a surprisingly strong and broad increase in corporate spending.
  • Sales of existing homes climbed in November to the highest rate in three years.
  • Consumer spending climbed in November “as Americans pushed aside the threat of higher taxes next year, buying gifts for the holidays and making up for shopping lost to superstorm Sandy,” according to Bloomberg.
  • Car and light truck sales rose in November to the highest annual rate since 2008.
  • Economic growth, as measured by gross domestic product, was revised up to 3.1 percent in the third quarter from the originally reported 2.7 percent, according to Reuters. That’s more than double the growth rate from the second quarter.
  • Corporate profits hit a record high in the third quarter and, “Clearly, corporate America is on a roll,” according to Forbes.

Sources: MarketWatch, Bloomberg, Reuters, Forbes

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