Archives For Todd Burkhalter

What Goes Up….

February 13, 2012 — Leave a comment

 

 

Weekly Update – February 13, 2012 

 

 

As the old expression goes; what goes up must come down. During the final minutes of trading, the Dow Jones Industrial Average trimmed its gains, falling 89.23 points, or 0.7%, locking in a weekly loss of 0.5%. For the day, only one of the Dow’s 30 components rose. The broad-based S&P 500 fared similarly, retreating 9.31 points, or 0.7%, for a loss of 0.2% for the week, while the tech heavy Nasdaq declined 23.35 points, or 0.8%, ending the week down 0.1%.[i] 

 

In an action reminiscent of 2011, worries about stalling efforts to keep Greece from defaulting sparked this pre-weekend decline. As stocks fell, the Chicago Board Options Exchange (CBOE) Volatility Index (VIX) jumped above 20 for the first time in nearly two weeks, rising more than 11%.[ii] While we don’t view this as a major cause for alarm, it is a reminder that all is not yet well with our European counterparts. After a week dominated by both hopes and fears about a nation at the center of Europe’s debt crisis, stocks finally snapped their five-week winning streak as negotiations faltered.

 

Equity markets have been red-hot this year, and frankly, last week’s pullback should come as little surprise. If stocks continued their ascent at the same fiery pace we’ve seen so far in 2012, the S&P would end the year up over 60%! Such remarkable gains are completely unrealistic to expect, and would be totally unsustainable. Healthy markets move up and down on a daily basis. While it is generally accepted that the stock market will grow in value over time, short-term movements can happen for a variety of reasons too numerous to list. It’s just the nature of the stock market.

 

It may be easier said than done, but we encourage you not to let unpredictable short-term moves in the market overly influence your investment decisions. In the long run, we believe Europe is going to muddle through this, though there are bound to be bumps along the way.

 

What drives your decision making progress? Would you like to discuss our process?

 

 

 

ECONOMIC CALENDAR:
Tuesday –

NFIB Small Business Optimism Index, Retail Sales, Import and Export Prices, Business Inventories

 
Wednesday – Empire State Manufacturing Survey, Treasury International Capital, Industrial Production, Housing Market Index, EIA Petroleum Status Report, FOMC Minutes

 
Thursday – Housing Starts, Jobless Claims, Producer Price Index, Ben Bernanke Speaks at 9:00 AM ET, Philadelphia Fed Survey

 
Friday – Consumer Price Index, Leading Indicators

 

 

 

 

 

 

Weekly Update – January 30, 2012

With only a couple trading days left in January, stocks are positioned to lock in four straight months of gains and finish with their best performance since 1997.[i] Unfortunately, some momentum was lost last week after the government said the U.S. economy expanded at a slower-than-expected pace in the fourth quarter. For the week, the Dow Jones Industrial Average fell 0.5%, while the S&P 500 and Nasdaq notched modest gains.[ii] 

Because the figures reported by the Commerce Department were lower than expected and stocks pulled back, should that lead us to conclude that economic growth was poor? Not at all. Gross domestic product, the broadest measure of the nation’s economic health, grew at a 2.8% annual rate during the last three months of the year, which is a major improvement from the 1.8% we saw during the third quarter, and is the fastest growth we’ve experienced since the second quarter of 2010.[iii] 

On the other hand, when you look closely at the numbers, there are some important points to note. One is that the majority of the growth came from one area – business inventories. Private businesses increased inventories $56.0 billion in the fourth quarter, following a decrease of $2.0 billion in the third. Of course that sounds wonderful, but it can also be a double-edged sword. While it shows that businesses are optimistic about the health of the economy and feel confident they can sell their goods, if sales fall short of expectations, it can create a financial burden for them in the future. Only time will tell how this works out.

Another important point is that “real final sales of domestic product” – GDP less the change in private inventories – only increased 0.8% in the fourth quarter, compared with an increase of 3.2% in the third. So while GDPas a wholepicked up in the fourth quarter, real salesslowed down. This is likely one of the reasons why the Federal Reserve lowered its outlook for the economy in 2012, announcing that they expect it to grow between 2.2% and 2.7% this year.[iv] 

What’s next? The week ahead is a heavy one for economic data that includes personal income, consumer confidence, auto sales, manufacturing, construction, and the key nonfarm payrolls figure at the end of the week. In addition to the economic news, nearly 100 companies in the S&P 500 will report quarterly earnings.

Why are all these numbers important? For months, U.S. economic indicators have taken a back seat to headlines out of Europe, but as confidence grows that the Eurozone will survive, focus should gradually shift back to the health of the U.S. economy. We’ll be watching this data and sharing our thoughts with you along the way.

ECONOMIC CALENDAR:
 

Monday –
Tuesday – Employment Cost Index, Redbook, S&P Case-Shiller HPI, Chicago PMI, Consumer Confidence
Wednesday – Motor Vehicle Sales, ADP Employment Report, ISM Manufacturing Index, Construction Spending, EIA Petroleum Status Report
Thursday – Jobless Claims, Productivity and Costs
Friday – Monster Employment Index, Employment Situation, Factory Orders, ISM Non-Manufacturing Index

Personal Income and Outlays

The January Effect

January 23, 2012 — Leave a comment

 

 

Weekly Update – January 23, 2012

 

There’s an old adage you may have heard recently which says: “As goes January, so goes the year.” What is this January barometer all about? According to the Stock Traders Almanac, the month of January tends to predict the direction of the market with an 88.5% accuracy ratio, with only seven major errors record since 1950.[i] Those aren’t bad numbers.

 

What causes the “January effect”? Most sources attribute it to a calendar-related anomaly in the financial markets where security prices increase in the month of January because investors sell losing positions in December and reposition themselves after the first of the year, or vice-versa.[ii] While this is certainly not exact science, and it is far too early to know if January will accurately predict the rest of the year, it is interesting to note.

 

So far, the Bulls are really showing off. With seven trading days left to go in January, the benchmark indexes are all up between 4% and 7%. The S&P 500’s 4.5% YTD gain marks its best start since 1987![iii] So does this bull have legs? Skeptics will tell you it doesn’t and idealists will tell you it does. We’d like to tell you that we don’t know. We’re not clairvoyant. (Sorry, we know you wish we were.) What we do know is that markets don’t move up or down in a straight line, and we won’t be surprised if we experience a pullback in the weeks ahead. This is not something we fear; it’s just the nature of the stock market.

 

There are both positive and negative factors at work right now, and we are monitoring many of them. Europe is still on the map, and our economy is growing at a slower-than-average rate that leaves it somewhat vulnerable to external shocks. At the same time, we see the strengthening in various sectors such as financials, basic materials, durable goods, and technology[iv] as reasons to sustain our optimism that both the stock market and the economy will fare well in 2012.

 

ECONOMIC CALENDAR:

 
Tuesday – Redbook
Wednesday – Pending Home Sales Index, EIA Petroleum Status Report, FOMC Meeting Announcement 

 
Thursday – Durable Goods Orders, Jobless Claims, New Home Sales, Leading Indicators

 
Friday – GDP, Consumer Sentiment

 

Would you like to discuss your portfolio of investments and what is impacting it?