Archives For Todd Burkhalter


Weekly Update – April 30, 2012

The trading week started off slowly as investors absorbed further troubling news
about the state of the global economy: Disappointing manufacturing reports from
China, France, and Germany, plus news that the Netherlands might be heading for
its own fiscal crisis.[i]

Things turned around later in the week though, as domestic equities closed higher on positive news surrounding U.S. corporate earnings. The Dow managed to recoup all its April losses, closing up 1.53% for the week, while the S&P rose 1.80%, and the Nasdaq gained 2.29%. For the moment, corporate earnings are providing a positive counterpoint to lackluster economic news.


The state of our nation’s economy was also in the spotlight last week. Gross
Domestic Product (GDP) grew by 2.2% in the first quarter, down from 3.0% in the
fourth quarter of 2011. The biggest factors in the slowdown were slower
inventory-building by private companies and less defense spending by the
federal government. Thankfully, consumer spending – the largest contributor to
GDP – is still strengthening, which should lead to ongoing improvement in our
overall economic picture.[ii]
In keeping with its upbeat tone, the Fed added 20 basis points to its 2012 GDP forecast, increasing predicted growth to between 2.4%-2.9% this year. The Fed also agreed to keep interest rates between 0.00%-0.25%, and expects inflation to remain below 2.0% for the next two years. During the follow-up press conference, Chairman Ben Bernanke stated that the Fed was still prepared to take an active role in the recovery.[iii]

Unemployment claims continue to remain near a three-month high, indicating that employers have stepped-up layoffs and are reluctant to increase hiring. However,
economists believe that the mild winter distorted first-quarter hiring, making it appear unusually strong. Overall, the economy has continued to add jobs and unemployment is falling well ahead of estimates.[iv]


Regardless of what happens with short-term market movements and news from abroad, we are
grateful to see that the U.S. economy is recovering from the financial crisis better than any other economy in the world right now. This is likely a major reason why we have seen domestic equities performing so well lately – when compared with the rest of the world, U.S. companies are the prettiest girl at the dance. While
there are sure to be bumps in the road ahead, corporate balance sheets are strong, the job market is slowly improving, consumers are still spending, and our economy is chugging along.






Personal Income and Outlays, Chicago PMI, Dallas Fed Mfg. Survey


Tuesday: Motor Vehicle Sales, ISM Mfg. Index, Construction Spending


Wednesday: ADP Employment Report, Factory Orders, EIA Petroleum Status Report


Thursday: Jobless Claims, Productivity and Costs, ISM Non-Mfg. Index

Friday: Employment Situation




Weekly Update – April 23, 2012

Strong corporate earnings caused stocks to rally last week for the first time this
month. The S&P closed up 0.6% for the week, while the Dow closed 1.4%
higher, and the Nasdaq trimmed 0.36%. With no domestic economic reports
released on Friday, traders turned their attention back to lingering concerns over
Europe and China, and markets lost some momentum in afternoon trading. Even so,
last week’s positive earnings reports are alleviating concerns about the
economy and making investors feel more confident about the rallies we’ve seen
this year. With 23% of S&P 500 companies having reported results so far,
more than four out of five have beaten expectations by an average of 8.8%.
Profit growth in this quarter has also been up 6.2%, according to Thomson
Reuters Proprietary Research.[i]

While some analysts are concerned that stocks are poised to repeat their 2010 and
2011 performance – when a mid-year retreat followed an April peak – there are
many differences between the economy of the past two years and today. The 2010
and 2011 pullbacks largely occurred because of recession fears and shocks
created by the Japanese Tsunami, but the U.S. economy is on more solid footing
than at any other time in the recovery. Current indicators point to slow and
steady economic growth, and we have already moved away from index highs. If we
continue to see positive earnings among the nearly 180 S&P 500 components
reporting next week, we may see markets sustain their upward trajectory.[ii]

Investors will also be closely watching Tuesday’s meeting of the Federal Reserve FOMC.
With an optimistic economic outlook and improving jobs situation, it is
unlikely that the Fed will conduct another round of bond purchases. Even so, we
will be monitoring the Fed’s statement on Wednesday, and will be certain to
fill you in on any outstanding developments. I hope you have a great week!




Weekly Update – April, 16 2012

It was a rough one for the stock market last week as major indices closed out their worst session of 2012 on the backof disappointing economic growth in China and renewed fears about debt-ridden
Europe. The S&P fell 2% for the week, while the Dow lost 1.61%, and the Nasdaq closed down 2.25%.

China, the world’s second-largest economy, reported first-quarter growth figures of 8.1%, the weakest rate in nearly three years, and below expectations of 8.3%. Stocks fell sharply on the news, stoking
fears that a weakened Chinese economy could have global implications.[i] Concerns surrounding
Spain’s debt offering next week renewed fears about the European debt crisis, battering bank stocks and dragging down the euro against the dollar.[ii]

On the other hand, domestic indicators continue to provide a positive contrast to global worries. The most recent Beige Book report released by the Federal Reserve shows that the U.S. economy is
improving at a “modest to moderate” pace as solid auto sales, warm weather, and growth in high-tech manufacturing outweighed the effect of high gasoline prices.[iii]

Sales by U.S. wholesalers rose 1.2% in February, and they restocked their inventories at a faster rate in February than January, suggesting they expect a strong spring. Consumer confidence likewise grew in February by the most in seven months. This is especially good news since consumer spending drives nearly 70% of domestic economic activity; if consumers keep spending, the economy will continue to improve.[iv]


Domestically, the U.S. economy really seems to be chugging along, and indicators continue to support a broad recovery. Nevertheless, concerns about the fragile global economy will likely lead to continued
volatility in equity markets. The declines experienced over the last two weeks are not difficult to comprehend in light of the outstanding first quarter performance we experienced. In the weeks ahead, analysts will be examining quarterly earnings reports to determine whether the pullback has been exhausted, or if we should expect continued profit taking.

As always, when short-term declines test your resolve, it is critically important to remain focused on your long term objectives and trust that the portfolio strategy you have in place can weather a few squalls.