Archives For Todd Burkhalter

Thankful For Progress

November 19, 2012 — Leave a comment

Thankful For Progress
Weekly Update – November 19, 2012

As you gather with your family and friends this week, we urge you not to let anxiety over the fiscal cliff or sovereign debt problems in Europe distract you from what matters most. Turn off CNBC and close the Wall Street Journal for a few days. Use the opportunity to recharge your batteries. There’ll be plenty of time to watch the news later. To help you with this, we thought it would be nice to share a few positive things worth being thankful for.

Progress towards a fiscal compromise: The latest word is that the White House and Congress have committed to short negotiations, with the goal of achieving a fiscal cliff resolution before the New Year. This is welcome news and we hope we’ll begin to see business leaders opening their wallets and making big investments in hiring and growth soon.[i] Markets slid during the early part of last week, but rallied Friday on this news. [ii]

Resilient markets: Despite what we’ve been through in the past few years, U.S. markets are still performing well – the Dow is still up 3% for the year and 3.5% since last year, when economists worried that we might be facing a double-dip recession. With consumer sentiment running high and investors feeling renewed confidence in Congress, we may still see additional upside this year.[iii]

A recovering economy: Our economy has suffered some serious pain in the last few years, but is still chugging along. Currently, we have a housing market that is bouncing back vigorously, a decreasing unemployment rate, and recovering industrial output. Our economy still has a long way to go before it can be considered fully recovered, but trends are pointing to continued improvement next year if we can get past the fiscal cliff.[iv]

Looking ahead, despite the holiday-shortened trading week, markets could still see some action. Housing data will be released Monday, and Ben Bernanke is scheduled to speak Tuesday (analysts expect his remarks to address the economic recovery and tight consumer credit markets). The day after Thanksgiving, Black Friday will mark the start of the holiday shopping season and traders may have time to react to any early revenue announcements.[v] European analysts expect the next round of Eurozone aid to Greece to be announced this week, so we may see some movement in currency and European markets too.[vi]


Weekly Update – November 12, 2012

The big question last week was: What next? Markets slid as investors reacted to fears about post-election economic policy and renewed turbulence in Europe. Stocks logged their worst week since June, with the S&P losing 2.64%, the Dow sliding 2.12% and the Nasdaq falling 3.16%.[i]

The world tuned in on Tuesday to watch the end of a hotly contested U.S. national election. For those who missed it, President Obama won a second term in office. In Congress, Democrats won a majority in the Senate while Republicans maintained control of the House. Markets started the selloff first-thing on Wednesday as traders responded to concerns about the global economy, driving the S&P 500 down by 2.4%.[ii]  Bonds experienced a dramatic swing as well, as worried investors were driven towards the perceived safety of government securities.

Now that the election is over, analysts and media pundits are turning their attention to the issue that’s been hanging over us for months: the fiscal cliff. The fiscal cliff will likely dominate headlines until an agreement is reached, meaning that we can expect markets to remain volatile. A split Congress will make it difficult for Democrats and Republicans to reach a compromise. Deep divisions between the parties remain, and the debate may continue through the New Year; though we really hope it doesn’t.

President Obama jumped right into the debate last Friday and staked out the Democratic negotiating position by announcing that any agreement must include tax increases on the wealthy. Since this is a major sticking point for Republicans, it is unlikely that a compromise will be reached soon.[iii] If Republicans do not give ground on the issue, Democrats may allow the Bush Tax Cuts to expire in order to gain bargaining power for their own ‘middle-income tax relief’ plan in the New Year.

A more desirable scenario would bring Republicans to the negotiating table for a bi-partisan plan to gradually phase in austerity measures instead of going over the cliff – similar to the 2010 Simpson-Bowles plan. This would set the stage for meaningful tax and budget reform over the next few years and reassure deficit-watchers that the U.S. is managing its debt. The crux of the matter is that while the U.S. needs to get its deficit spending under control (lest we end up like Europe), our still-fragile economy cannot withstand large-scale tax increases and government spending cutbacks.

In short, now that election season is over, lawmakers are faced with major challenges, and we fear that they are more interested in partisan bickering than hammering out a compromise. On the bright side, we see the potential for markets to respond positively when an agreement is finally made. If economic reports remain upbeat, we could see further upside in the near future. As always, we encourage you to remain patient and focused on your long-term financial strategy.

ECONOMIC CALENDAR:

Monday: Veterans Day, Stock Markets Open, Bond Markets & Banks Closed

Tuesday: Treasury Budget

Wednesday: Producer Price Index, Retail Sales, Business Inventories, FOMC Minutes

Thursday: Consumer Price Index, Jobless Claims, Empire State Mfg. Survey, Philadelphia Fed Survey, EIA Petroleum Status Report

Friday: Treasury International Capital, Industrial Production

 



[ii] http://www.briefing.com/investor/markets/after-hours-report/prmw–and-139-slxp–and-86-qcom–and-82-panl-297-mnst-133-following-earningsguidance.htm

[iii] http://www.cnbc.com/id/49759402

 

It Was A Busy Week

November 5, 2012 — Leave a comment

It Was a Busy Week
Weekly Update – November 5, 2012

It was a busy week as Hurricane Sandy pounded the East Coast; securities exchanges were forced to close on Monday and Tuesday; and a slew of economic reports were released. Stocks ended the shortened week with a selloff Friday, erasing gains made earlier, and finishing basically flat. For the week, the S&P gained 0.16% and the Dow climbed 0.12%, while the Nasdaq trimmed 0.19%.[i]

Although the economic impact of Hurricane Sandy won’t be known for weeks or months, the true cost of a disaster like this is always the human suffering. It is painful to see beautiful homes and townships devastated by natural forces, and our thoughts go out to all those impacted. If you or someone you love has been affected in any way, and if there is anything we can do, please don’t hesitate to let us know.

On the bright side – without making light of this disaster – it should be noted that major storms rarely have a lasting impact on the U.S. economy. Generally, even large disasters like this one aren’t costly enough to damage the enormous economic machine that is the U.S. economy. Insurance companies may be stuck footing a large bill, and the government may have to pay for relief efforts, but economic snags of this type are usually temporary. The major exception to this general rule was Katrina, which devastated New Orleans and caused over $100 billion in estimated damages. One of the major reasons Katrina was so expensive was because of the area’s economic importance as a major shipping port and oil and gas hub. Although the effects of Sandy are widespread, the storm would have had to shut down major cities for weeks to achieve similar effects.[ii] Fortunately, it passed somewhat quickly, and major recovery efforts are underway.

One note of positive news could be found in last week’s Labor Department report showing that employers added 171,000 new jobs last month. Although the unemployment rate ticked slightly upwards to 7.9%, the increase was attributed to discouraged workers restarting job searches, which is a positive sign for the economy.[iii] This good news combined with recent consumer confidence highs indicate that we may be able to expect consumer spending to increase during the holiday season, which would be excellent for retailers.

As earnings season continued last week, markets responded positively to some solid results. Consumer discretionary stocks edged higher as several well known travel companies and luxury retailers beat estimates.[iv] Overall, the corporate earnings picture has improved as more companies have reported; according to November 2nd data, of the 378 S&P 500 companies that have reported so far, 61.9% have beat expectations, which is in line with the 62% average since 1994. While we may see additional volatility in the weeks ahead, solid earnings and upbeat economic reports mean that investors have a lot to be pleased about right now.[v]

ECONOMIC CALENDAR:

Monday: ISM Non-Mfg. Index

Wednesday: EIA Petroleum Status Report

Thursday: International Trade, Jobless Claims

Friday: Import and Export Prices, Consumer Sentiment



[i] http://www.briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-october-22-2012.htm

[ii] http://www.marketwatch.com/story/big-storms-rarely-dent-economy-for-long-2012-10-29

[iii] http://news.yahoo.com/index-futures-tread-water-ahead-jobs-report-110825182–finance.html

[iv] http://www.briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-october-29-2012.htm

[v] http://news.yahoo.com/index-futures-tread-water-ahead-jobs-report-110825182–finance.html