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.
BUSINESS
PROFITABILITY: I graded this factor an A (very favorable).
NOTE:
the above grades are unchanged from last week.
Fed
officials want to start scaling back their $85 billion-per-month bond-buying
program this year and could take a small step in that direction at their policy
meeting Sept. 17-18. But the economic data in recent months have been ambiguous
and new threats to the economy and markets loom, which could prompt officials
to wait longer before acting.
Last week, U.S. Stocks increased, Foreign Stocks
decreased, and Bonds were unchanged. 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 9-6-2013
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
-.9
-3.6
-2.5
2.5
4.6
4.6
US Stocks-Standard & Poor’s 500
1.4
17.8
18.2
16.9
8.3
7.1
Foreign Stocks- MS EAFE Developed Countries
2.7
8.7
17.5
5.2
.8
4.7
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
and guest Bernie Story, President and CEO of the Lehigh Valley Community
Foundation, will discuss: “A way to
give.”
Laurie and
Bernie will take your calls on this topic and other inquiries this week. 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.
Twelve years is not
long enough to get my arms around the events of 9/11. I realized
this when watching some of yesterday’s CNN coverage of all the tragic events of
that day.
Equities took the high road and finished in positive
territory last week. Stock prices advanced on economic data that, for the most
part, suggested the domestic economy continues to expand, if modestly.
Russia-U.S. saber rattling over Syria sent shares
sharply downward Friday morning, but didn’t derail the rally. Economic figures
released during the week were mild enough to convince investors that the
Federal Reserve’s expected tapering of its monthly bond buying will be modest.
The
Dow Jones Industrial Average picked up 0.8%, or 112 points, to finish at
14,922.50, snapping a four-week losing streak. The S&P 500 gained 22
points, to 1655.17. The tech-heavy Nasdaq Composite rose 2%, or 70, to 3660.
The Labor Department said Friday that August nonfarm
payrolls had increased by a lower-than-expected 169,000. The unemployment rate
inched down to 7.3% from 7.4%, but that came on a drop in the participation
rate. It’s not particularly indicative of a robust labor market, and it’s
likely the last piece of important data that will be considered at the Fed’s
Sept. 17-18 Open Market Committee meeting.
Some expect a tapering to be announced, but the
weaker jobs report could mean that any tapering will be modest. The soft jobs
market could convince the Fed to delay or minimize cuts in its bond-buying
splurge, which has kept interest rates low and aided the equity bull market.
Friday morning, the market “went like someone
going from New York City to Newark by way of Miami,” says John Wilson, a
principal at a market commentary Website. Investors initially welcomed the jobs
news, but stocks quickly plunged on headlines saying that Russia was sending
warships to the eastern Mediterranean near Syria. But before noon, stocks had
recovered all the lost ground. Wilson says he’s heartened by the market’s
behavior, and he notes that breadth is still strong, with the percentage of
NYSE stocks above their 200-day moving average never dropping below 65% during
the recent retreat from the August highs.
While Friday’s jobs news wasn’t particularly
exciting, on balance last week’s figures were consistent with an expanding
economy. Particularly encouraging: the latest numbers on jobless benefits,
private payrolls, and car sales.
Even though bond yields have risen to around 3%,
fixed-income securities still aren’t an attractive alternative to stocks,
Wilson adds, particularly when many expect yields to go higher still, which
would push down bond prices. Chris Zook,
chief investment officer of CAZ Investments, concurs on bonds. The question, he
adds, is whether the economy is strong enough to withstand a less accommodative
stance from the Fed (Source: Barrons Online).
Arguments on how to make the American health
care system more efficient and cost effective will continue for
generations. One reason is the dramatic
differences in health care expenditures by different Americans. According to Kaiser Family Foundation
study: 5% of the U.S. population
accounts for about 50% of all health care expenditures; but, 50% of the U.S.
population accounts for just 2.7% of all health care expenditures.
On the surface, the above statistics seem ripe
for the use of insurance to spread the risk.
But the “devil is in the details.” For more information, listen to Laurie Siebert CPA, CFP, AEP on this
week’s “Your Financial Choices” radio show: http://www.yourfinancialchoices.com.
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.
BUSINESS
PROFITABILITY: I graded this factor an A (very favorable).
NOTE:
the above grades are unchanged from last week.
Recent
downturn in activity in the home sales has caught my attention – I suspect it
is linked to the uptick in mortgage rates.
The report on home sales is only one month’s data so we would be wise to
avoid putting too much importance on it.
However, we must continue to watch this data carefully because the U.S.
real estate recovery is the keystone to the U.S. economy rebound.
