Archives For Todd Burkhalter

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.


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





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]


Monday: ISM Non-Mfg. Index

Wednesday: EIA Petroleum Status Report

Thursday: International Trade, Jobless Claims

Friday: Import and Export Prices, Consumer Sentiment






A NOTE ABOUT HURRICANE SANDY: Sunday night, as Hurricane Sandy took aim at the heart of America’s financial district, both the New York Stock Exchange and Nasdaq stock market said they would not open for trading Monday due to the storm. Depending on how much damage is inflicted on the Eastern seaboard, there is a possibility that trading might also be halted on Tuesday.[i] With Hurricane Sandy approaching, and likely bringing high winds and flooding, its potential economic impact is a point of concern. The historic storm is thought to be the largest to hit the U.S. and could cause major damage to cities in the northeast and mid-Atlantic. Please be assured that we will keep you informed about any developments with the potential to affect your investments.[ii]


Markets Lower but Economy Growing
Weekly Update October 29, 2012


Markets got off to a slow start last week as disappointing earnings and a downgrade of Spanish debt combined to fuel bearish sentiment. Major indices closed near their seven-week low with the S&P trimming 1.48%, the Dow sliding 1.77%, and the Nasdaq losing 0.59%.[iii]

Last week’s earnings reports mostly continued the downbeat trend we’ve seen this year of top-line revenue misses and a weak earnings outlook. With earnings reports in from nearly half of S&P 500 companies, just 36.9% have reported revenue that beat forecasts, far below the 62% historical average, according to Thomson Reuters data. Earnings are faring slightly better, with 62.5% above expectations.[iv]

Moody’s downgraded the debt of five Spanish regions last week, citing limited cash reserves and upcoming interest payments. This move will make it more likely that these regions will reach out to the national government for a lifeline, worsening Spain’s already-precarious debt situation.[v] This move is an unfortunate reminder that the European debt situation is far from resolved.

On the bright side, Friday’s GDP reading showed that the U.S. economy grew at an accelerated rate in the third quarter. The Commerce Department’s initial GDP estimate clocked in at 2% growth, beating economists’ estimate of 1.9% and showing a substantial improvement over the second quarter’s 1.4% increase. The uptick in growth was a result of a last-minute surge in consumer spending and an increase in government spending. Despite the tough economy, consumers went on a shopping spree, buying up automobiles and iPhone 5s, driving up consumer spending by 2% in Q3.[vi]


Monday: Personal Income and Outlays, Dallas Fed Mfg. Survey

Tuesday: S&P Case-Shiller HPI, Consumer Confidence

Wednesday: ADP Employment Report, Employment Cost Index

Thursday: Motor Vehicle Sales, Jobless Claims, Productivity and Costs, ISM Mfg. Index, Construction Spending

Friday: Employment Situation, Factory Orders