The Federal Reserve Chairman Ben Bernanke outlined two major risks facing the US economy: 1) the ongoing Eurozone fiscal and banking crisis and its potential effects on the US, and 2) the unsustainable path of the US fiscal situation including the looming "fiscal cliff". While the US has little control over Europe, the fiscal cliff is within Congress's power to address. If no action is taken, the automatic spending cuts and tax increases could throw the economy back into recession according to estimates. Bernanke stated the Fed is ready to take further action if needed to support the recovery.
Volatility returned to the markets as the S&P 500 fell 2% for the week due to concerns over the European debt crisis and slowing growth in China. Spain became the latest problem country in Europe, while China's economy expanded at its weakest pace in over three years. Additionally, weak earnings reports from several U.S. banks led to weakness in financial stocks. Conflicting economic data from the U.S. also contributed to uncertainty and market swings. The "quitters" indicator from the JOLTS report provided a positive signal about consumer confidence, despite a disappointing jobs report and decline in consumer sentiment surveys.
Margaret Thatcher accurately predicted problems with the euro 17 years before the 2010 crisis. She argued that Germany would prioritize low inflation while the euro would devastate poorer countries' inefficient economies. True to her prediction, the shared currency is causing imbalances between countries with different economic and political systems. Resolving the eurozone's structural problems is very difficult given it requires agreement among 17 countries and their various political parties.
- Stocks took a hit last week due to ongoing concerns about the European debt crisis, a potential economic slowdown in China, and JPMorgan's $2 billion trading loss.
- Investors are frustrated that after two years and 17 eurozone summits, the European debt issue is still not resolved and may be worse as options are running out.
- The US faces potential economic challenges including a presidential election and fiscal deadlines by the end of the year.
The stock market continued rising last week driven by optimism over a Greek bailout and better economic data. However, higher gas prices and tensions in the Middle East could impact consumer spending. In China, slowing housing prices following measures to boost lending have raised concerns. Surveys found Americans view $150,000 in annual income or $1 million in net worth as amounts needed to feel "rich", which has policy implications.
The document summarizes the reaction of markets to a recent agreement by European leaders to address the sovereign debt crisis. It notes that stock prices rose significantly as investors were relieved by the three-point deal involving Greek debt relief and boosting the bailout fund. However, details remain unclear and challenges loom with the U.S. debt panel deadline approaching. Overall investors were in a relief rally but surprises can still occur as with sudden market moves or unexpected weather, much like the forecasting abilities of analysts and meteorologists.
Republicans and Democrats in Congress are struggling to reach an agreement to raise the federal debt ceiling before an August 2 deadline, which could trigger a default on US debt obligations. Former Treasury Secretary Larry Summers warned that a US debt default would cause widespread financial panic and uncertainty, similar to or even worse than the 2008 global financial crisis. While politicians recognize the risks, most analysts believe a last-minute deal will be reached to raise the debt ceiling and avoid default, though it may only provide a temporary solution.
Silver prices have risen more than gold prices and stock prices over the past 10 years. Silver is seen as an alternative investment during times of economic uncertainty like the current issues with sovereign debt in Greece, Portugal, and Ireland. While rising precious metals prices and debt problems are interesting to financial professionals, they can also impact everyday investors which is why advisors are trying to profit from these situations and protect clients.
The document summarizes market volatility in 2011 and discusses the Chinese government's crackdown on freedom of speech through restrictions on social media. Specifically:
- The stock market has seen high volatility in 2011, with the VIX hitting a record high and large intraday swings in the Dow Jones Industrial Average.
- Investors have been frustrated by the lack of direction in uncertain markets affected by European debt problems and US budget issues.
- China limits freedom of speech to control social unrest, recently requiring real name registration and verification for users of the popular Weibo social media platform.
- The government fears social media could enable mass organization that leads to instability, as seen in the Arab Spring, given China's
Volatility returned to the markets as the S&P 500 fell 2% for the week due to concerns over the European debt crisis and slowing growth in China. Spain became the latest problem country in Europe, while China's economy expanded at its weakest pace in over three years. Additionally, weak earnings reports from several U.S. banks led to weakness in financial stocks. Conflicting economic data from the U.S. also contributed to uncertainty and market swings. The "quitters" indicator from the JOLTS report provided a positive signal about consumer confidence, despite a disappointing jobs report and decline in consumer sentiment surveys.
Margaret Thatcher accurately predicted problems with the euro 17 years before the 2010 crisis. She argued that Germany would prioritize low inflation while the euro would devastate poorer countries' inefficient economies. True to her prediction, the shared currency is causing imbalances between countries with different economic and political systems. Resolving the eurozone's structural problems is very difficult given it requires agreement among 17 countries and their various political parties.
- Stocks took a hit last week due to ongoing concerns about the European debt crisis, a potential economic slowdown in China, and JPMorgan's $2 billion trading loss.
- Investors are frustrated that after two years and 17 eurozone summits, the European debt issue is still not resolved and may be worse as options are running out.
- The US faces potential economic challenges including a presidential election and fiscal deadlines by the end of the year.
The stock market continued rising last week driven by optimism over a Greek bailout and better economic data. However, higher gas prices and tensions in the Middle East could impact consumer spending. In China, slowing housing prices following measures to boost lending have raised concerns. Surveys found Americans view $150,000 in annual income or $1 million in net worth as amounts needed to feel "rich", which has policy implications.
The document summarizes the reaction of markets to a recent agreement by European leaders to address the sovereign debt crisis. It notes that stock prices rose significantly as investors were relieved by the three-point deal involving Greek debt relief and boosting the bailout fund. However, details remain unclear and challenges loom with the U.S. debt panel deadline approaching. Overall investors were in a relief rally but surprises can still occur as with sudden market moves or unexpected weather, much like the forecasting abilities of analysts and meteorologists.
Republicans and Democrats in Congress are struggling to reach an agreement to raise the federal debt ceiling before an August 2 deadline, which could trigger a default on US debt obligations. Former Treasury Secretary Larry Summers warned that a US debt default would cause widespread financial panic and uncertainty, similar to or even worse than the 2008 global financial crisis. While politicians recognize the risks, most analysts believe a last-minute deal will be reached to raise the debt ceiling and avoid default, though it may only provide a temporary solution.
Silver prices have risen more than gold prices and stock prices over the past 10 years. Silver is seen as an alternative investment during times of economic uncertainty like the current issues with sovereign debt in Greece, Portugal, and Ireland. While rising precious metals prices and debt problems are interesting to financial professionals, they can also impact everyday investors which is why advisors are trying to profit from these situations and protect clients.
The document summarizes market volatility in 2011 and discusses the Chinese government's crackdown on freedom of speech through restrictions on social media. Specifically:
- The stock market has seen high volatility in 2011, with the VIX hitting a record high and large intraday swings in the Dow Jones Industrial Average.
- Investors have been frustrated by the lack of direction in uncertain markets affected by European debt problems and US budget issues.
- China limits freedom of speech to control social unrest, recently requiring real name registration and verification for users of the popular Weibo social media platform.
- The government fears social media could enable mass organization that leads to instability, as seen in the Arab Spring, given China's
The jobs recovery from the 2007 recession has been painfully slow compared to previous recessions. Over 4 years after employment peaked, only half the jobs lost have been recovered. Possible reasons for the slow recovery include financial crises typically resulting in slow recoveries, policy uncertainty in Washington, extended unemployment benefits, and eurozone crisis uncertainty dampening business demand. However, record corporate profits and cash levels could eventually provide a boost to hiring and the broader economy if companies begin spending more on new hires.
The document discusses recent market trends and political issues in the US. It notes that gold, silver, oil prices hit multi-year highs while the US dollar fell against other currencies. Inflation increased in China but remained stable in the US. Congress passed bills to reduce the federal budget deficit. The document then summarizes a survey of baby boomers that found most are concerned about retiring as planned due to financial uncertainties.
Spain requested a $125 billion bailout to rescue its failing banks as its economy struggles with high unemployment and recession. If Spain's financial troubles escalate, it could destabilize the entire eurozone economy. Meanwhile, Greece will hold a pivotal election that could lead to it leaving the eurozone, an unprecedented event that would plunge the region into uncharted territory. Federal Reserve Chairman Ben Bernanke stated the Fed stands ready to take action if European and global economic problems worsen.
The document summarizes the strong performance of the stock market in the first quarter of 2012, with the S&P 500 rising 12% which was its best start since 1998. Analysts attributed the gains to an easing of Europe's debt crisis, a strengthening global economy, rising US consumer sentiment, and supportive Federal Reserve policy. However, some warn that the market could falter later in the year as it has in recent years, due to potential risks like renewed European debt issues or a slowing US economy.
Warren Buffett and Bill Gross, two legendary investors, disagree on bonds. Buffett sees bonds as risky in times of inflation while Gross favors bonds in the short term due to low interest rates. Their views may differ based on timeframe, with Buffett looking 7-10 years out and Gross a couple years. Additionally, indexes may not fully reflect market performance due to decisions around their construction.
The markets had a strong week with the S&P 500 and Dow posting their largest gains since December. Unemployment claims matched a four-year low and the Federal Reserve signaled it will keep interest rates low to support the economy. Meanwhile, Mongolia has emerged as one of the fastest growing economies due to its natural resources, but faces challenges in converting this wealth into long-term educational gains like more developed countries.
The document summarizes a weekly commentary from Hyre Weekly dated April 23, 2012. It discusses how corporate earnings in the US have overtaken concerns about the European debt crisis as the focus of investors. While most US companies reported better than expected earnings, earnings growth was only 3.7% compared to a year ago. Interest rates increased again in troubled European countries like Spain and Italy, suggesting their debt problems remain. The commentary concludes by noting the interconnection of global markets and how European problems could eventually impact the US.
The document summarizes recent market contradictions and distortions that are contributing to investor risk aversion and confusion. Government interventions like stimulus programs, quantitative easing, and bailouts have generated unintended side effects in markets. Politicians debate the merits of intervention versus free markets. Falling stock prices may paradoxically reduce risk as valuations decline, setting up markets for better long-term returns according to some analysts. Overall, distortions and political debates are causing uncertainty, stagnation, and falling stock prices.
The document summarizes economic and market data from early February 2012. It reports that January job growth and unemployment data surprised to the upside, pushing stock prices higher. Services sector growth also accelerated. However, housing prices continued to decline sharply from their 2006 peak. Interest rates on mortgages fell to a new record low. Overall, the economy appeared to be gaining momentum after a slowdown in late 2011, though questions remained about sustainability versus stimulus-driven growth.
Central banks around the world have created over $2.5 trillion since 2008 through quantitative easing programs. This involves banks creating money to purchase government and mortgage debt, with the goal of increasing money supply and stimulating the economy. However, low interest rates have resulted in a "stealth tax" on savers as interest earned is below inflation. While helping debtors, quantitative easing may be keeping the economy dependent on unsustainable monetary policy.
Last week saw broad weakness in US equities and higher yields for global sovereign bonds. The dollar strengthened due to increased expectations of a December Fed rate hike, pressuring gold and bonds which had seen speculative long positions. Economic data was mixed with a stronger auto sales figure but weaker employment growth. Outside the US, emerging market stocks and bonds outperformed despite dollar strength. Going forward, analysts expect the sixth straight quarter of declining corporate profits in the US.
The document discusses uncertainty in the current economic situation and markets. It notes there is uncertainty in Washington over budget issues, the economy's recovery from recession, the value of the dollar, and the war on terrorism. As financial advisors, the author's firm tries to account for uncertainty by considering best and worst case scenarios and balancing investments. The document also notes that despite weak economic growth, corporate profits are at record levels, but middle-class spending remains stagnant, holding back stronger growth.
Standard & Poor's downgraded the credit ratings of 9 eurozone countries including France and Spain. Most eurozone countries now have negative outlooks, indicating a risk of further downgrades. This underscores the ongoing economic problems in Europe. However, the US downgrade had little impact so far, and US investors are more focused on signs of economic momentum in the US than on European issues for now. Nevertheless, if the problems in Europe worsen significantly, it could negatively impact the US economy as well.
The document discusses rising consumer prices, including the price of coffee. It provides three reasons for higher coffee prices: increasing costs of fertilizer and farm goods, rising affluence in developing countries leading to higher demand, and adverse weather affecting coffee production. While core inflation remains low, food and energy prices are rising. The yield curve is also discussed as a potential indicator of future recessions.
- The US added 227,000 new jobs in February and 1.2 million jobs over the past six months, the highest six-month total since 2006. However, unemployment remains elevated and long-term unemployment is near record levels.
- Since the stock market low on March 9, 2009, the S&P 500 has risen over 100% while corporate revenues have barely increased due to widespread cost cutting, including large job cuts. Continued job growth may lead companies to add more staff and support revenue growth.
- US household net worth reached $58.5 trillion at the end of 2011, still $8.3 trillion below its 2007 peak, as the real estate and stock markets impact wealth. Households are
The European Union summit helped fuel a stock market rally by delivering more fiscal integration steps than expected. While the second quarter saw stock market gains reduced due to concerns over Europe, the US economy, and the Federal Reserve, the S&P 500 is still up 8.3% for the year. Investors remain cautious watching the US presidential election and looming fiscal cliff at the end of 2012.
The stock market ended 2011 right where it started despite significant volatility. The S&P 500 opened and closed at 1,257.6 but saw daily swings totaling over 3,000 points. Key events in 2011 included the European debt crisis, falling interest rates, political upheaval in the Middle East, Apple's rise led by Steve Jobs, and natural disasters like the Japanese earthquake. Foreign markets declined more sharply than the flat U.S. market. Gold rose while commodities fell on the year.
- Investors were relieved after European leaders suggested providing additional support to prevent Greece from defaulting on its debt, though concerns remained about potential destabilizing effects.
- The IMF reduced its US growth forecast and commodity prices fell on worries about slower global economic growth reducing demand for raw materials.
- Most US stocks that performed well were defensive sectors as risk aversion remained among investors.
The newsletter discusses quarterly investment performance and market outlooks across various asset classes. It provides commentary from investment managers on the performance of equities, fixed income, and specific funds. It also discusses using target date ETFs and the Lyrical U.S. Value Equity Fund as part of a blended bond strategy and highlights their differentiated investment approach.
The document provides a weekly market commentary for February 27, 2012. It notes that the markets have been calm recently as fears have declined. The S&P 500 reached its highest level in over 3.5 years and volatility is low. However, it warns of potential risks on the horizon from rising oil prices and geopolitical tensions in oil producing regions that could cause a market correction. The commentary emphasizes that investors should focus on long term trends rather than short term fluctuations.
The S&P 500 has risen 12.6% since early October due to a lack of bad news. Three pieces of news that could be considered lacking in bad news are: 1) 75% of companies reporting earnings so far this quarter have beaten estimates. 2) Economic news has generally supported the idea that the economy is not collapsing. 3) European leaders may finally take action to address the sovereign debt crisis. Whether this lack of bad news continues remains uncertain.
The document summarizes recent negative news headlines about weak global financial markets and slowing economies. While the headlines seem dire, the advisor argues they are designed primarily to generate readership rather than provide an accurate portrayal of the long-term economic situation. The advisor believes their role is to look beneath headlines and discern the real issues to help clients stay on track with their goals despite short-term market volatility.
The jobs recovery from the 2007 recession has been painfully slow compared to previous recessions. Over 4 years after employment peaked, only half the jobs lost have been recovered. Possible reasons for the slow recovery include financial crises typically resulting in slow recoveries, policy uncertainty in Washington, extended unemployment benefits, and eurozone crisis uncertainty dampening business demand. However, record corporate profits and cash levels could eventually provide a boost to hiring and the broader economy if companies begin spending more on new hires.
The document discusses recent market trends and political issues in the US. It notes that gold, silver, oil prices hit multi-year highs while the US dollar fell against other currencies. Inflation increased in China but remained stable in the US. Congress passed bills to reduce the federal budget deficit. The document then summarizes a survey of baby boomers that found most are concerned about retiring as planned due to financial uncertainties.
Spain requested a $125 billion bailout to rescue its failing banks as its economy struggles with high unemployment and recession. If Spain's financial troubles escalate, it could destabilize the entire eurozone economy. Meanwhile, Greece will hold a pivotal election that could lead to it leaving the eurozone, an unprecedented event that would plunge the region into uncharted territory. Federal Reserve Chairman Ben Bernanke stated the Fed stands ready to take action if European and global economic problems worsen.
The document summarizes the strong performance of the stock market in the first quarter of 2012, with the S&P 500 rising 12% which was its best start since 1998. Analysts attributed the gains to an easing of Europe's debt crisis, a strengthening global economy, rising US consumer sentiment, and supportive Federal Reserve policy. However, some warn that the market could falter later in the year as it has in recent years, due to potential risks like renewed European debt issues or a slowing US economy.
Warren Buffett and Bill Gross, two legendary investors, disagree on bonds. Buffett sees bonds as risky in times of inflation while Gross favors bonds in the short term due to low interest rates. Their views may differ based on timeframe, with Buffett looking 7-10 years out and Gross a couple years. Additionally, indexes may not fully reflect market performance due to decisions around their construction.
The markets had a strong week with the S&P 500 and Dow posting their largest gains since December. Unemployment claims matched a four-year low and the Federal Reserve signaled it will keep interest rates low to support the economy. Meanwhile, Mongolia has emerged as one of the fastest growing economies due to its natural resources, but faces challenges in converting this wealth into long-term educational gains like more developed countries.
The document summarizes a weekly commentary from Hyre Weekly dated April 23, 2012. It discusses how corporate earnings in the US have overtaken concerns about the European debt crisis as the focus of investors. While most US companies reported better than expected earnings, earnings growth was only 3.7% compared to a year ago. Interest rates increased again in troubled European countries like Spain and Italy, suggesting their debt problems remain. The commentary concludes by noting the interconnection of global markets and how European problems could eventually impact the US.
The document summarizes recent market contradictions and distortions that are contributing to investor risk aversion and confusion. Government interventions like stimulus programs, quantitative easing, and bailouts have generated unintended side effects in markets. Politicians debate the merits of intervention versus free markets. Falling stock prices may paradoxically reduce risk as valuations decline, setting up markets for better long-term returns according to some analysts. Overall, distortions and political debates are causing uncertainty, stagnation, and falling stock prices.
The document summarizes economic and market data from early February 2012. It reports that January job growth and unemployment data surprised to the upside, pushing stock prices higher. Services sector growth also accelerated. However, housing prices continued to decline sharply from their 2006 peak. Interest rates on mortgages fell to a new record low. Overall, the economy appeared to be gaining momentum after a slowdown in late 2011, though questions remained about sustainability versus stimulus-driven growth.
Central banks around the world have created over $2.5 trillion since 2008 through quantitative easing programs. This involves banks creating money to purchase government and mortgage debt, with the goal of increasing money supply and stimulating the economy. However, low interest rates have resulted in a "stealth tax" on savers as interest earned is below inflation. While helping debtors, quantitative easing may be keeping the economy dependent on unsustainable monetary policy.
Last week saw broad weakness in US equities and higher yields for global sovereign bonds. The dollar strengthened due to increased expectations of a December Fed rate hike, pressuring gold and bonds which had seen speculative long positions. Economic data was mixed with a stronger auto sales figure but weaker employment growth. Outside the US, emerging market stocks and bonds outperformed despite dollar strength. Going forward, analysts expect the sixth straight quarter of declining corporate profits in the US.
The document discusses uncertainty in the current economic situation and markets. It notes there is uncertainty in Washington over budget issues, the economy's recovery from recession, the value of the dollar, and the war on terrorism. As financial advisors, the author's firm tries to account for uncertainty by considering best and worst case scenarios and balancing investments. The document also notes that despite weak economic growth, corporate profits are at record levels, but middle-class spending remains stagnant, holding back stronger growth.
Standard & Poor's downgraded the credit ratings of 9 eurozone countries including France and Spain. Most eurozone countries now have negative outlooks, indicating a risk of further downgrades. This underscores the ongoing economic problems in Europe. However, the US downgrade had little impact so far, and US investors are more focused on signs of economic momentum in the US than on European issues for now. Nevertheless, if the problems in Europe worsen significantly, it could negatively impact the US economy as well.
The document discusses rising consumer prices, including the price of coffee. It provides three reasons for higher coffee prices: increasing costs of fertilizer and farm goods, rising affluence in developing countries leading to higher demand, and adverse weather affecting coffee production. While core inflation remains low, food and energy prices are rising. The yield curve is also discussed as a potential indicator of future recessions.
- The US added 227,000 new jobs in February and 1.2 million jobs over the past six months, the highest six-month total since 2006. However, unemployment remains elevated and long-term unemployment is near record levels.
- Since the stock market low on March 9, 2009, the S&P 500 has risen over 100% while corporate revenues have barely increased due to widespread cost cutting, including large job cuts. Continued job growth may lead companies to add more staff and support revenue growth.
- US household net worth reached $58.5 trillion at the end of 2011, still $8.3 trillion below its 2007 peak, as the real estate and stock markets impact wealth. Households are
The European Union summit helped fuel a stock market rally by delivering more fiscal integration steps than expected. While the second quarter saw stock market gains reduced due to concerns over Europe, the US economy, and the Federal Reserve, the S&P 500 is still up 8.3% for the year. Investors remain cautious watching the US presidential election and looming fiscal cliff at the end of 2012.
The stock market ended 2011 right where it started despite significant volatility. The S&P 500 opened and closed at 1,257.6 but saw daily swings totaling over 3,000 points. Key events in 2011 included the European debt crisis, falling interest rates, political upheaval in the Middle East, Apple's rise led by Steve Jobs, and natural disasters like the Japanese earthquake. Foreign markets declined more sharply than the flat U.S. market. Gold rose while commodities fell on the year.
- Investors were relieved after European leaders suggested providing additional support to prevent Greece from defaulting on its debt, though concerns remained about potential destabilizing effects.
- The IMF reduced its US growth forecast and commodity prices fell on worries about slower global economic growth reducing demand for raw materials.
- Most US stocks that performed well were defensive sectors as risk aversion remained among investors.
The newsletter discusses quarterly investment performance and market outlooks across various asset classes. It provides commentary from investment managers on the performance of equities, fixed income, and specific funds. It also discusses using target date ETFs and the Lyrical U.S. Value Equity Fund as part of a blended bond strategy and highlights their differentiated investment approach.
The document provides a weekly market commentary for February 27, 2012. It notes that the markets have been calm recently as fears have declined. The S&P 500 reached its highest level in over 3.5 years and volatility is low. However, it warns of potential risks on the horizon from rising oil prices and geopolitical tensions in oil producing regions that could cause a market correction. The commentary emphasizes that investors should focus on long term trends rather than short term fluctuations.
The S&P 500 has risen 12.6% since early October due to a lack of bad news. Three pieces of news that could be considered lacking in bad news are: 1) 75% of companies reporting earnings so far this quarter have beaten estimates. 2) Economic news has generally supported the idea that the economy is not collapsing. 3) European leaders may finally take action to address the sovereign debt crisis. Whether this lack of bad news continues remains uncertain.
The document summarizes recent negative news headlines about weak global financial markets and slowing economies. While the headlines seem dire, the advisor argues they are designed primarily to generate readership rather than provide an accurate portrayal of the long-term economic situation. The advisor believes their role is to look beneath headlines and discern the real issues to help clients stay on track with their goals despite short-term market volatility.
The document summarizes recent economic developments and market performance. It notes that while stock prices doubled from early 2009 lows, the underlying economy has seen only modest growth with issues like high unemployment and government debt. It discusses PIMCO's view that advanced economies will see sluggish growth and high unemployment for the next 3-5 years, while emerging markets prosper, which is playing out. The latest economic data is keeping policymakers up at night as they try to stimulate the economy amid an end to QE2 and fiscal policy difficulties in Congress.
The weekly commentary discusses the recent performance of the stock market and economy. It notes that Apple's strong earnings helped the S&P 500 gain 1.8% despite disappointing economic data from the US, Spain, and UK. The housing market continues to struggle with home prices at their lowest point since 2002, but sales have increased recently due to declining inventory levels. Overall the economy is growing modestly but not enough to indicate a clear direction.
The jobs recovery from the 2007 recession has been painfully slow. Over 4 years after employment peaked, only half the jobs lost have been recovered, unlike previous recessions where recovery took 2-3 years. Reasons for the slow recovery include financial crisis-related slowdowns, policy uncertainty, extended unemployment benefits, and euro crisis uncertainty. However, record corporate profits and cash levels could eventually spark new hiring if companies begin spending on growth.
The document discusses stock performance in 2011 and analyzes high-dividend stocks from the past. It finds that in 2011, stocks with the highest dividend yields were the only ones to experience positive returns, with gains of 10.4%, 6.4%, and 8.7% respectively. The document also examines "Nifty Fifty" stocks from the 1970s that were seen as guaranteed growth companies but have had varying performance over 40 years, with some like Eastman Kodak struggling in their transition to digital. Key lessons are that some iconic stocks remain so, promoting "one decision" stocks is not a sound strategy, and all stocks can decline to zero.
- Greece and Italy recently replaced their political leaders in hopes that new leadership can help calm financial markets and drive structural reforms.
- The new leaders in Greece and Italy, Lucas Papademos and Mario Monti respectively, are expected to help lead their countries out of debt crises.
- If the new leaders take swift action and gain credibility, it could help boost the markets. However, it remains to be seen if political changes in Europe will be enough to significantly improve the markets.
The document summarizes recent economic data and stock market performance. It notes that less than three weeks ago, the economy appeared to be weakening and falling into a new recession, but recent data on auto sales, retail sales, and job growth has been better than expected, helping the stock market rise over 11% in two weeks. However, the author cautions it is too early to say the economy has fully turned around and still has improvements to make before a full recovery.
The Federal Reserve announced "Operation Twist" to lower longer-term interest rates by selling short-term Treasuries and buying long-term ones. While interest rates declined as intended, stocks fell over 6% due to fears of a Greek default, global financial crisis, slowing growth in China, and declining copper prices indicating weaker global growth. Dividends have provided over a third of the S&P 500's total return over 80 years and can enhance returns and provide stability, especially in a low interest rate environment.
Central banks around the world coordinated actions to provide liquidity support to the global financial system in response to deteriorating liquidity conditions. This caused stock markets to soar as investors saw it as a sign that central banks will do what is needed to prevent the world economy from stalling. However, the actions only address short-term issues and do not solve the long-term problems of too much debt and too little growth faced by some countries. A long-term solution will require agreement on fiscal discipline from European political leaders.
Central banks around the world coordinated actions to provide liquidity support to the global financial system in response to deteriorating liquidity conditions. This caused stock markets to soar as investors saw it as a sign that central banks will take aggressive actions to prevent the world economy from stalling. However, the actions only address short-term issues and do not solve the long-term problems of too much debt and too little growth faced by some countries. A long-term solution will require agreement on fiscal discipline policies from European political leaders.
Jamie Dimon, the CEO of JP Morgan who is known as one of the smartest bankers, revealed that the bank recently lost $2 billion on risky derivative bets. This loss shows that even experts can make mistakes, and provides three important lessons: keep strategies simple, closely monitor all investments, and remain humble, as even the smartest people can fail. The large loss damages JP Morgan's reputation of being well-managed during the financial crisis.
- The Federal Reserve announced it would sell short-term Treasury securities and buy longer-term securities to lower interest rates and stimulate the economy, which succeeded in lowering bond yields. However, the stock market declined 6.4% as fears grew of a Greek default and slowing global economic growth.
- While price appreciation gets more attention, dividends have accounted for about one-third of stock market returns over 80 years and allowed investors to benefit in both rising and falling markets. Receiving and reinvesting dividends added an average of 2.3% annually to S&P 500 returns over the past decade.
The stock market rose sharply in the first quarter of 2011, with the S&P 500 increasing 5.4%. Commodity prices also increased, driven in part by political instability in the Middle East, which caused oil prices to rise over 16% and settle above $100 per barrel. The US dollar continued to weaken against other major currencies during the quarter. Investor fear, as measured by the volatility index, ended the quarter flat despite events that caused spikes in concern during the period. Overall, strong economic growth and expected corporate earnings seemed to outweigh geopolitical and disaster related worries in the markets.
The document summarizes a weekly commentary from Hyre Weekly on January 18, 2012. It discusses Standard & Poor's downgrading the credit ratings of several eurozone countries, including France and Spain. This underscores the ongoing economic problems in Europe. It also provides market performance data and discusses new technologies showcased at the recent Consumer Electronics Show, including OLED TVs.
1. Hyre Weekly Commentary
July 23, 2012
The man with his finger on the pulse says the U.S. economy faces two main risks. We have no
control over one of those risks and the other, well, we do have some control, but whether our
politicians will appropriately exercise that control is a big question.
Federal Reserve Chairman Ben Bernanke faced Congress last week and he delivered a rather
subdued outlook in his semi-annual monetary policy report. He said our economy faces two
major headwinds:
1. The Euro-area fiscal and banking crisis and its potential spillover effects on our
economy.
2. The unsustainable path of the U.S. fiscal situation (e.g., the “fiscal cliff”).
Source: Federal Reserve
The U.S. has little control over the euro-area situation so we’re at the mercy of European leaders
to make bold and tough decisions to get their houses in order. The second item, though, is clearly
within our control.
The so-called fiscal cliff, in which a series of tax hikes and spending cuts will take effect in 2013
if Congress takes no further action, could throw the economy back into a recession. The
Congressional Budget Office estimates if no policy changes are made, then our 2013 federal
budget deficit will decline by about $600 billion. On the surface, that sounds great. However,
such a huge shock to our system in a short period of time could be problematic.
So, will Congress agree to adjust the legislation for the benefit of the economy? We’ll see.
For his part, Bernanke said the Federal Reserve “is prepared to take further action as appropriate
to promote a stronger economic recovery and sustained improvement in labor market conditions
in a context of price stability.” It’s good to know that the Fed is ready to help if needed.
1- 1- 3- 5- 10-
Data as of 7/20/12 Week Y-T-D Year Year Year Year
Standard & Poor's 500 (Domestic 0.4% 8.4% 2.8% 12.7% -2.3% 5.2%
Stocks)
2. DJ Global ex US (Foreign Stocks) 0.6 0.5 -16.9 3.3 -7.8 5.6
10-year Treasury Note (Yield Only) 1.5 N/A 2.9 3.6 5.0 4.6
Gold (per ounce) -1.2 0.1 -0.6 18.3 18.3 17.2
DJ-UBS Commodity Index 4.2 3.9 -11.1 6.3 -3.4 3.8
DJ Equity All REIT TR Index -1.1 16.0 9.5 31.4 2.7 12.1
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.
IT’S BEEN ALMOST A YEAR since August 5, 2011, the day the U.S. lost its coveted AAA
credit rating from Standard and Poor’s. So, how have the financial markets responded in the year
since? Quite well, actually.
It may not feel like it, but the broad U.S. stock market, as measured by the S&P 500 index, rose
13.6 percent between August 5, 2011 and last Friday, according to data from Yahoo! Finance.
Despite all the angst from the credit downgrade, the threat of a double-dip recession and the
turmoil in Europe, the stock market has hung in there.
The returns in the bond market are perhaps even more startling. The 10-year Treasury yielded
2.56 percent on August 5, 2011 and by last Friday, the yield had dropped to 1.46 percent,
according to Yahoo! Finance. Normally, you might expect interest rates to rise after a credit
downgrade since the ratings agency is essentially saying your bonds are riskier than previously
thought.
The U.S., though, is perhaps a “special” case. The day after the credit downgrade, none other
than Warren Buffett went on Bloomberg television and said he thought the U.S. should be a
“quadruple A” rating. And, to this day, the U.S. dollar remains the world’s leading reserve
currency as more than 60 percent of the world’s foreign currency reserves are held in U.S.
dollars, according to BusinessWeek.
We shouldn’t get overconfident, though. While the U.S. has tremendous assets, it might only
take a few bad decisions from our leaders to undo what took decades to build.
Weekly Focus – Think About It…
“There is nothing wrong with America that the faith, love of freedom, intelligence, and energy of
her citizens cannot cure.”
--Dwight D. Eisenhower, 34th president of the United States
Best regards,
3. Jim Hyre, CFP®
Registered Principal
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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
* Some newsletter content was prepared by PEAK for use by James Hyre, CFP®, Registered Principal
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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
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professional.
Jim Hyre, CFP®
Registered Principal
Raymond James Financial Services, Inc.
Member FINRA/SIPC
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