Valley National and I are pleased to announce the addition of two new employees – Douglas Marcincin and Laura Morganelli as entry-level professionals. Both Doug and Laura have their roots in the Lehigh Valley having attended both high school and college in the Valley. Doug is a Lehigh grad and Laura is a DeSales grad-both in the Class of 2013. In addition to learning how to get things done at Valley National and studying for the myriad of exams required in the financial services industry, both Doug and Laura will be very busy helping to convert Valley National’s comprehensive data base program to a new, more powerful data base – a big project. I am especially pleased in announcing their employment as part of Valley National’s effort to attract the best and the brightest college grads so as to keep that talent in the Valley.
Monthly Archives: July 2013
The Markets This Week
It’s the middle of the armpit-soaking summer, a time when investors usually lather their portfolios with SPF 50 and let them relax until fall. But traders remained active last week, even as a strong jobs report made it more likely that the Federal Reserve will slow its asset purchases.
The second half of the year has begun, and so far it’s a lot like the first half.
For the week the Dow rose 226.24 points, or 1.52%, to 15,135.84. The Standard & Poor’s 500 added 25.61 points to close at 1631.89, and the Nasdaq Composite gained 76.13 points, or 2.24%, to close at 3479.38.
Bond yields and Treasury notes are still on the rise, with the 10-year yield climbing 0.23 percentage point on the week to 2.72%.
The Labor Department said Friday that the economy added 195,000 jobs in June, and it revised its May and April employment estimates upward by a total of 70,000 jobs. Nonfarm payrolls have now risen by an average of 202,000 jobs per month this year. The market initially hesitated on the news. Job growth appears to be consistent and relatively robust, which means the Fed has another excuse to slow down its asset-buying program. But after that initial hiccup, stocks rose in the afternoon, and the Dow ended the day 147 points higher.
Strategists and investors we talked to this week, however, remained uneasy. As the Fed takes the economy’s training wheels off, there may be considerable wobbles ahead.
“The economy is pretty clearly creating enough jobs for the Fed to begin to taper,” said John Canally, an investment strategist at a major financial services firm. “I’m not so clear that will lead to a stronger economy. The job market might just be playing catch-up. You might get a situation where the Fed is tapering, but GDP growth is still below their forecast” ( Source: Barrons Online).
Heads Up!
During
the last 6 weeks, stock prices, the bond market prices, and commodities prices all
declined. This simultaneous decline is
rare. It has occurred on only 3
occasions in the last 40 years for this length of time.
Their
decline was tied to one concern – the suspicion the FED will soon end its period of easy monetary policy.
We think the reaction
is overdone. See the commentary below under
“The FED and Its Policies” for more details.
We believe the stock market will rebound because the 3 factors that
generally support it are strong (see the “The Heat Map” for these three
factors). Over the next 3 to 5 weeks, we
suspect interest rates will drop, bond prices will increase. However, in the long term, we suspect
interest rates will trend higher and bond prices lower.
The “Heat Map”
Most
of the time, the U.S. stock market looks to 3 factors to support its upward
trend – let’s grade each of the factors:
CONSUMER SPENDING: I grade this factor a C (neutral).
THE FED AND ITS POLICIES: I continue to grade this factor an A+ (extremely favorable) because the
FED cannot do much more than it is doing to support the stock market and asset
prices. Concerns about the FED changing
its stance spooked the stock market last week (and the bond market the last 4
weeks); but, we believe there is only a
slim chance the FED will change its accommodative policy anytime soon. We believe the FED will take steps in the
weeks ahead to further calm the markets.
BUSINESS PROFITABILITY: I graded this factor an A (very favorable).
The Economy
Data released last week was mixed:
Housing and consumer confidence data released Tuesday was strong (good news),
but first quarter GDP released Wednesday was revised down to 1.8% from 2.4%
(bad news). The stock market ended higher on both days.
The Numbers
Last week, U.S. Stocks, Foreign
Stocks and Bonds increased. During the
last 12 months, STOCKS outperformed BONDS.
LAST WEEK -Here is a look the
cause of the volatility created this week by hedge funds, institutions, and
those we call “traders”.
|
Returns through 5-17-2013 |
1-week |
Y-T-D |
1-Year |
3-Years |
5-Years |
10-Years |
|
Bonds- BarCap Aggregate Index |
.3 |
-2.4 |
-.7 |
3.5 |
5.2 |
4.5 |
|
US Stocks-Standard & Poor’s 500 |
.9 |
13.8 |
20.6 |
18.4 |
7.0 |
7.3 |
|
Foreign Stocks- MS EAFE Developed Countries |
..8 |
2.2 |
15.1 |
6.7 |
-3.6 |
4.8 |
Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and c
annot be invested into directly. Three, five and ten year returns are annualized excluding dividends.
Motivational Quote of the Week
Our greatest
weakness lies in giving up. The most certain
way to succeed is always to try
just one more time.
– Thomas A. Edison
Personal Notes
I took notice the Pittsburgh Pirates have “brought up” their #1 draft
pick: Gerrit Cole who struck out the first batter he faced with a 99 mph fast
ball and followed up with a 2 RBI base hit with his first at bat against San
Fran’s Cy Young award winning pitcher.
Gerrit went on to record a win in his first 4 starts. The Pirates have a deep pitching staff. And, they have the will and motivation to win
thereby snapping Pittsburgh’s more than 2 decade drought of winning seasons,
the longest in the history of professional sports. Even if you are a Phillies or Yankees or Sox
fan, a small part of you has to cheer for the Pirates to finally have a winning
season. If you end up cheering for the
Pirates, you will not be alone – the Pirates have sold out their last 3 home
games.
The Markets This Week
Quit gnashing your teeth every time a
member of the Fed board speaks. It’s time to sit back, relax and reminisce.
The Dow is up 13.78% this year, the
index’s best first-half showing since 1999. The quarter that ended on Friday
wasn’t a blockbuster like the one that preceded it, but the 2.27% gain was
solid.
Of course, memories don’t pay
dividends. The gnashing of teeth will begin again in earnest on Monday.
Few
strategists expect the market to repeat its first-half feats in the second half
of the year. There’s simply too much uncertainty about the actions of central
banks, and the Federal Reserve in particular. And yet, most strategists still
prefer U.S. stocks to almost any alternative — bonds are plunging, gold is
tarnished, emerging markets are no longer emerging.
Despite
the recent rise in volatility and dip in stock prices, the bull market in U.S.
equities is far from over, says Henry Smith, the chief investment officer at
Haverford Trust.
“I think this week is kind of a
reconfirmation that the bull is in full force,” he said. “What we saw
in the preceding three weeks was just a temporary dislocation due to a shift in
Fed policy.”
For the week, the Dow rose 110.2
points, or 0.74%, to end the week at 14,909.60. The Standard & Poor’s 500
was up 13.85 points to 1,606.28. The Nasdaq Composite rose 46 points, or 1.37%,
to 3,403.25.
On Friday, the Dow fell 114.89 points
as volume rose, but the trading spike was probably caused by index funds
trading stocks as some indexes were reshuffled, notes Ryan Larson, who leads
equity trading at RBC Global Asset Management.
Going forward, stocks could be held
back by the uncertainty over the timing of the Fed’s exit from its asset-buying
program. Larson thinks the recent drop in U.S. stocks has stabilized, but he
expects the S&P 500 to bounce around for the summer in a range from 1500 to
1650 as investors await word from the Fed ( Source:
Barrons Online).