The
U.S. economy continues to grow, at a slow pace; but still it grows. We saw confirming evidence in this last
week’s economic reports. FOMC Chair
nominee Janet Yellen gave traders what they want in her testimony: more
accommodative Fed policy to come. Gasoline
prices are down more than 10% since the start of September.
One
negative – Empire state manufacturing index collapses to -2.2 versus
expectations of 5, lowest level in 6 months.
Last week, U.S. Stocks, Foreign Stocks and Bonds all increased. During the last 12 months, STOCKS outperformed BONDS.
|
Returns through 11-15-2013 |
1-week |
Y-T-D |
1-Year |
3-Years |
5-Years |
10-Years |
|
Bonds- BarCap Aggregate Index |
.4 |
-1.5 |
-1.6 |
3.2 |
5.6 |
4.7 |
|
US Stocks-Standard & Poor’s 500 |
1.6 |
28.5 |
35.8 |
17.0 |
18.1 |
7.7 |
|
Foreign Stocks- MS EAFE Developed Countries |
1.6 |
16.9 |
26.7 |
4.8 |
10.0 |
4.6 |
Source:
Morningstar Workstation. Past performance is no guarantee of future
results. Indices are unmanaged and cannot be invested into directly.
Three, five and ten year returns are annualized excluding dividends.
“Your
Financial Choices” The
show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by
Valley National’s Laurie Siebert CPA, CFP®, AEP®. This week Laurie will discuss: “Giving thanks this
Thanksgiving.”
Laurie will take your phone inquiries regarding this
topic or any other. This show will be
broadcast at the regular time. WDIY is broadcast on FM 88.1 for reception in
most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton and Phillipsburg
area; and, it is broadcast on FM 93.7 in the Fogelsville and Macungie area – or
listen to it online from anywhere on the internet. For more information,
including how to listen to the show online, check the show’s website www.yourfinancialchoices.com
and visit www.wdiy.org.
Last week, five other Valley National advisors and I
attended Charles Schwab’s “IMPACT” investment conference in Washington,
DC.
IMPACT is an important conference in the investment
industry. Over 7,000 independent
Investment Advisors attend IMPACT. Those
advisors manage over $1 trillion dollars of client investments. So, the IMPACT conference receives attention
and attracts top flight, expert speakers who give us their thoughts on the
current economic conditions and prospects for the future.
I was surprised to hear that each and every speaker
was bullish on the market. Each had his
or her own set of reasons for optimism.
But, I felt uncomfortable that ALL the speakers were optimistic. I do recall the saying, “the candle that
burns the brightest is the quickest extinguished.”
Things on Wall Street look pretty good. On Main
Street, not so much.
The stock market jumped another 1.6% last week,
hitting an all-time high for the 36th time this year. Equity markets the world
over rose about 1%.
These
synchronized gains followed Thursday’s appearance in the U.S. Senate of Federal
Reserve Vice Chairwoman Janet Yellen, who has been selected by President Obama
to replace the central bank’s departing chairman, Ben Bernanke. Yellen
indicated there would be no change any time soon in the Fed’s policy of monthly
bond buying, a quantitative-easing strategy that has fueled much of the
market’s gain this year. In other words, tapering remains on hold. What little
concern remained about a policy shift effectively disappeared with her
comments.
On the week, the
Dow Jones Industrial Average gained 200 points, or 1.3% to 15,961.70, and the
Standard & Poor’s 500 index rose 28 to 1798.13. Both were new highs. The
Nasdaq Composite index added 1.7%, or 67, to 3985.97, and briefly crossed the
4000 mark for the first time since September of 2000. The MSCI World Index rose
1% on the week.
The Fed’s clampdown on interest rates has fueled a
headlong rush into risk assets such as stocks. The resultant wealth effect
appears to have spilled into the disparate New York City worlds of fine art and
taxi medallions.
An Andy Warhol painting sold for $105 million last
week, the highest price ever for the artist. A Francis Bacon work, “Three
Studies of Lucian Freud,” sold for $142.4 million, a record for a single
piece. At the first auction in five years of yellow cab medallions, a pair went
for $2.5 million, almost double the price at the previous auction. The city
restricts the number of permits to about 13,000 (Source: Barrons Online).
The number of days from 3-23-2010
(ObamaCare signed into Law) to 10-1-2013 (website due date) = 1,289 Days
VERSUS
The number of days from 12-7-1941 (Pearl
Harbor) to 5-8-1945 (VE day) = 1,249 Days
What this means is that in
the time we were attacked at Pearl Harbor to the day Germany surrendered our
government mobilized millions of
Americans, building tens of thousands of tanks, planes, jeeps, subs,
cruisers, destroyers, torpedoes, millions upon millions of guns, bombs, ammo,
etc. Thus, turning the tide in North
Africa, Invading Italy, D-Day, Battle of the Bulge, Race to Berlin
– all while we were also fighting the Japanese in the Pacific!!
And in that amount of time –
our government can’t write regulations, educate consumers, and build a working
webpage.
(Source: a good friend who voted for Barack Obama)
Most
of the time the U.S. stock market looks to 3 factors (call them the “pillars”
that support the stock market) to support its upward trend – let’s grade each
of the pillars.
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. And, the FED announced on
9/18/2013 it intends to continue the highly accommodative policy to stimulate
the economy.
BUSINESS PROFITABILITY: I continue to grade this factor an A (very favorable).
NOTE: the above grades are unchanged from last
week.
The
U.S. economy continues grow, at a slow pace, but still it grows. We saw confirming evidence in this last
week’s economic reports. Jobs data was
surprisingly strong, the growth of the economy was higher than expected, the
European Central Bank cut interest rates, and the stock market hit another all-time
high.
One
negative – applications for new home mortgages dropped.
Last week, U.S. Stocks increased. Foreign Stocks and Bonds declined. During the last 12 months, STOCKS outperformed BONDS.
|
Returns through 11-8-2013 |
1-week |
Y-T-D |
1-Year |
3-Years |
5-Years |
10-Years |
|
Bonds- BarCap Aggregate Index |
-.5 |
-1.9 |
-2.1 |
2.7 |
5.6 |
4.8 |
|
US Stocks-Standard & Poor’s 500 |
.6 |
26.4 |
31.4 |
15.6 |
16.3 |
7.5 |
|
Foreign Stocks- MS EAFE Developed Countries |
-.8 |
15.0 |
22.7 |
3.5 |
8.2 |
4.6 |
Source:
Morningstar Workstation. Past performance is no guarantee of future
results. Indices are unmanaged and cannot be invested into directly.
Three, five and ten year returns are annualized excluding dividends.