“Made in China” has become cheaper. Today’s surprise move by China to make its currency (the yuan) weaker will make Chinese manufactured products 2% less expensive. This will help American consumers who buy or use products sourced in China. And, it DECREASES the probability the FED will raise rates in September. I now rate the probability of rate increase in September at less than 50%.
Daily Archives: August 12, 2015
The “Heat Map”
Most of the time the U.S. stock market looks to 3 factors (call them the “pillars” which support the stock market) to support its upward trend – let’s grade each of the pillars.
CONSUMER SPENDING: This grade is a B (favorable). This is an upgrade from B-. Gasoline prices have tumbled. Products from China have become cheaper as described in “Heads Up!” above. Both trends put more money in the pockets of Americans to spend on discretionary purchases.
THE FED AND ITS POLICIES: We 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.
BUSINESS PROFITABILITY: This factor’s grade is a C (average).
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 5. These risks deserve our ongoing attention.
The Numbers
Last week, Bonds increased while U.S. Stocks and Foreign Stocks declined. During the last 12 months, STOCKS outperformed BONDS
|
Returns through 8-7-2015 |
1-week |
Y-T-D |
1-Year |
3-Years |
5-Years |
10-Years |
|
Bonds- BarCap Aggregate Index |
.1 |
.6 |
2.4 |
1.7 |
3.2 |
4.7 |
|
US Stocks-Standard & Poor’s 500 |
-1.2 |
2.1 |
11.0 |
16.5 |
15.5 |
7.7 |
|
Foreign Stocks- MS EAFE Developed Countries |
-.5 |
7.1 |
1.7 |
11.1 |
7.2 |
5.1 |
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.
The Economy
Last week was a light week for economic reports during which positive reports outweighed negative reports.
The positive reports were:
- Car sales are on fire, GM sales rose 6.4% and Ford sales rose 4.9%, vs expectations of a 0.6% and 1.8% increase, respectively.
- Unemployment came in at 5.3%, unchanged from last month and in line with expectations.
- Weekly jobless claims came in at 270k, in line with expectations.
- Personal income rose 0.4%, better than the 0.3% expected.
- Average hourly earnings rose 0.2%, in line with expectations.
And the negative reports were:
- Consumer spending rose 0.2%, below the 0.3% expected rise.
- The Institute of Supply Management Index fell to 52.7, down from 53.5 in June.
- Construction spending rose 0.1%, well below the 0.8% expected rise.
Factory orders rose 1.8%, below the 2% expected rise.
“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®. Due to Musikfest, this week Laurie will provide a pre-recorded show.
No calls-ins are possible this week. This show will be broadcast at the regular time. Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie. 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.
Motivational Quote of the Week
“Whatever the mind of man can conceive and believe, it can achieve.”
– Napolean\ Hill
The Markets This Week
A further slump in oil prices, a growing sense the Fed will soon raise interest rates, and a host of disappointing earnings reports made stocks fade like a slow summer sunset last week. The Dow notched its longest losing streak in four years, falling for the seventh straight day on Friday. Investors who weren’t on their sailboats didn’t seem particularly alarmed. The indexes are still much closer to their record highs than they are to bear market territory. And it’s August after all.
“On a Friday in August, it’s hard to draw conclusions about markets,” says Scott Clemons, chief investment strategist at Brown Brothers Harriman. “I don’t tend to read a whole lot into August trading patterns for the obvious reasons of thin markets and light participation.”
Trading on Friday was influenced by the government’s July jobs report, which came in roughly in line with expectations and solidified consensus expectations that the Fed will increase rates in September. The economy added 215,000 jobs and the unemployment rate stayed at 5.3%.
The Dow Jones Industrial Average fell 316 points, or 1.8%, on the week, to 17,373.38. The Standard & Poor’s 500 index dropped 26 points to 2077.57. The S&P has now fallen for five of the past seven weeks, and sits 2.5% below the highs it hit in May. The Nasdaq Composite fell 85 points, or 1.7%, to 5043.54.
Disney (ticker: DIS) led the Dow lower, falling 8.9% on the week after CEO Robert Iger said its sports unit, ESPN, had lost subscribers. The news hurt shares of several media companies, including Time Warner (TWX). Energy companies also slid along with the price of West Texas oil, which was down 6.9% to $43.87. Chevron (CVX) hit a new 52-week low, dropping 5.3% on the week.
(Source: Barrons Online)