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Hyre Weekly Commentary
- 1. Hyre Weekly Commentary April 23, 2012 The Markets Move over European debt headlines, corporate earnings have something to say. Even though troubles are brewing again across the pond in Europe, corporate earnings season in the U.S. is stealing the spotlight. Why? According to CNBC, more than 100 companies in the S&P 500 have reported earnings and 8 out of 10 have delivered better than expected results – and that’s grabbed investors’ attention. Each quarter, publicly traded companies update investors on how their businesses fared over the previous three months. And, according to the updates we’re seeing, business is still looking okay. The news helped push the S&P 500 higher by 0.6 percent on the week. Now, like all statistics, there’s more than one way to interpret the earnings numbers. While 8 out of 10 companies have beaten expectations, the “expectation” was pretty low. In fact, earnings increased only 3.7 percent from the year ago quarter, according to Zacks. For the remaining S&P 500 companies that are set to report, Zacks expects those companies to report slightly negative earnings growth compared to the year ago quarter. Over in Europe, Spain and Italy saw the borrowing rate increase on their government debt, which suggests their debt problem is far from over. And, the International Monetary Fund released a report that stated the obvious – if the European debt crisis can’t be contained, it would negatively impact global economic growth in a severe way. At the moment, the U.S. markets seem fixated on corporate earnings and have put the European problem on the back burner. But, in this interconnected world, problems overseas may eventually find their way to our shores. Data as of 4/20/12 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year Standard & Poor's 500 (Domestic Stocks) 0.6% 9.6% 3.1% 18.3% -1.5% 2.2% DJ Global ex US (Foreign Stocks) 0.9 8.4 -13.6 13.2 -5.2 4.9 10-year Treasury Note (Yield Only) 2.0 N/A 3.4 2.8 4.7 5.2 Gold (per ounce) -1.5 4.3 9.4 23.2 18.9 18.4
- 2. DJ-UBS Commodity Index -0.9 -1.8 -20.0 8.0 -4.3 3.4 DJ Equity All REIT TR Index 2.8 11.1 10.3 36.0 -0.3 10.4 Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable. WHEN $1 TRILLION ISN’T ENOUGH… Earlier this year the European Central Bank (ECB), Europe’s equivalent of our U.S. Federal Reserve, responded to the fear surrounding the European debt crisis by offering unlimited three-year loans with a 1.0 percent interest rate to European banks. According to The Wall Street Journal, at least 800 banks across Europe responded to this offer by borrowing over $1.3 trillion. As planned, the banks then took a good portion of that money and bought government securities that paid a higher interest rate. It sounds like a great deal to the banks – borrow money at a 1.0 percent rate then turn around and buy government securities that pay a much higher rate and pocket the difference. The primary objective of this emergency lending was to indirectly allocate money to European governments who are heavily indebted. The ECB thought that making cheap money available would help lower interest rates in these troubled countries and “buy” them more time to work out their economic problems. How’s it working? Initially, interest rates in troubled countries dropped dramatically as banks bought the high- yielding government securities and fears of a collapse eased. Unfortunately, The Wall Street Journal says many of the banks who borrowed money from ECB may have already exhausted most of those funds – leaving little money left to keep pushing interest rates down. As a result of this fear, interest rates are rising again, particularly in Spain and Italy, and, like a leak in a dike, it’s hard to stop a rise once it gets going. Will the ECB step in again and help European banks and governments avoid a Greek-style default? It’s too early to tell, but either way, we’ll be closely watching this tug-o-war between positive corporate earnings in the U.S. and negative headlines out of Europe. Stay tuned… Weekly Focus – Think About It “There are no shortcuts to any place worth going.” --Beverly Sills Best regards, Jim Hyre, CFP®
- 3. Registered Principal P.S. Pleasefeel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added. Securities offered through Raymond James Financial Services, Inc., Member FINRA/SIPC. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. * The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. * The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. * Gold represents the London afternoon gold price fix as reported by www.usagold.com. * The DJ/AIG Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Consult your financial professional before making any investment decision. * You cannot invest directly in an index. * Past performance does not guarantee future results. mc101507 * This newsletter was prepared by PEAK for use by James Hyre, CFP®, registered principal * If you would prefer not to receive this Weekly Newsletter, please contact our office via e-mail or mail your request to 2074 Arlington Ave, Upper Arlington, OH 43221. * The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the forgoing material is accurate or complete. Any opinions are those of Jim Hyre and not necessary those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security to herein. Tax or legal matters should be discussed with the appropriate professional. Jim Hyre, CFP® Registered Principal Raymond James Financial Services, Inc. Member FINRA/SIPC 2074 Arlington Ave. Upper Arlington, OH 43221 614.225.9400 614.225.9400 Fax 877.228.9515 Toll Free www.hyreandassociates.com Find Us Here: Raymond James Financial Services does not accept orders and/or instructions regarding your account by email, voice mail, fax or any alternate method. Transactional details do not supersede normal trade confirmations or statements. Email sent through the Internet is not secure or confidential. Raymond James Financial Services reserves the right to monitor all email. Any information provided in this email has been prepared from sources believed to be reliable, but is not guaranteed by Raymond James Financial Services and is not a complete summary or statement of all available data necessary for making an investment decision. Any information provided is for informational purposes only and does not constitute a recommendation. Raymond James Financial
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