Archives for November 2015

Stocks Close Mixed on Low Holiday Volume Weekly Update – November 30, 2015

Stuart Miles

Image courtesy of FreeDigitalPhotos.net/Stuart Miles

Stocks closed out the short week mixed on very low volume as investors stayed home for the holidays. For the week, the S&P 500 grew 0.04%, the Dow lost 0.14%, and the NASDAQ gained 0.44%.[i]

The data we got last week suggests that the economy is still chugging along. Investors got their second look at third-quarter Gross Domestic Product and were cheered to learn that the economy grew 2.1% last quarter instead of the 1.5% originally estimated. The revised data shows that businesses spent more than expected.[ii]

The holiday shopping season kicked off with Black Friday, and the news so far suggests that retailers may have seen less business than last year. However, a sluggish start to the retail season isn’t all bad news. National shopping trends suggest that the Black Friday weekend is becoming less important to retailers, especially as more consumers move to online shopping; industry projections indicate that retailers may see a 2.4% increase in holiday sales this year.[iii]

However, despite the improving labor market and economy, Americans may be less eager to open their wallets this year. Overall consumer spending data suggests that Americans are curbing their spending and padding their savings accounts. While we certainly won’t argue that prudent financial behavior is a bad thing, flat consumer spending may be a headwind for economic growth.[iv]

The week ahead is packed with important economic events, including the November jobs report, which is the last major employment data the Federal Reserve will review before they meet in mid-December to make a decision about interest rates. If the jobs report shows evidence of continued momentum in the labor market, it could sway the Fed toward raising interest rates for the first time in nine years.[v] Fed chairwoman Janet Yellen will also give several speeches, though it’s unlikely that she’ll give us too many hints ahead of the December meeting.

ECONOMIC CALENDAR:

Monday: Chicago PMI, Pending Home Sales Index, Dallas Fed Mfg. Survey

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

Wednesday: ADP Employment Report, Productivity and Costs, EIA Petroleum Status Report, Janet Yellen Speaks 12:25 PM ET, Beige Book

Thursday: Jobless Claims, Janet Yellen Speaks 10:00 AM ET, Factory Orders, ISM Non-Mfg. Index

Friday: Employment Situation, International Trade

11-27-15


HEADLINES:

Durable goods jump in October. Orders for long-lasting manufactured goods like autos, airplanes, and appliances, soared 3.0% in October. The increase suggests that demand may be increasing in the last months of the year.[vi]

Consumer confidence declines in November. A measure of American sentiment about the economy unexpectedly fell in November as Americans became concerned about their job prospects.[vii]

New home sales soar. Sales of newly constructed homes skyrocketed by 10.7% in October, and inventories rose to the highest level in 2010. The increased activity could blunt concerns about a slowing housing market.[viii]

Mortgage applications fall as rates increase. A rise in mortgage rates over the last month caused application volume to drop 3.2% last week. However, applications are still up 4.0% over the same period last year.[ix]

[i] http://finance.yahoo.com/q/hp?s=%5EGSPC&a=10&b=23&c=2015&d=10&e=27&f=2015&g=d

http://finance.yahoo.com/q/hp?a=10&b=23&c=2015&d=10&e=27&f=2015&g=d&s=%5EDJI%2C+&ql=1

http://finance.yahoo.com/q/hp?a=10&b=23&c=2015&d=10&e=27&f=2015&g=d&s=%5EIXIC%2C+&ql=1

[ii] http://www.cnbc.com/2015/11/24/us-preliminary-q3-2015-gdp.html

[iii] http://www.cnbc.com/2015/11/28/black-friday-sales-slip-from-year-prior-shoppertrak.html

[iv] http://www.cnbc.com/2015/11/25/personal-income-.html

[v] http://www.foxbusiness.com/economy-policy/2015/11/27/week-ahead-november-jobs-report-fed-speeches/

[vi] http://www.foxbusiness.com/economy-policy/2015/11/25/durable-goods-order-rosefell-xx-in-october/

[vii] http://www.foxbusiness.com/economy-policy/2015/11/24/consumer-confidence-unexpectedly-declines-in-november/

[viii] http://www.foxbusiness.com/economy-policy/2015/11/25/new-home-sales-rise-xx-in-october/

[ix] http://www.cnbc.com/2015/11/25/mortgage-applications.html

Investors Keep Cool Despite Recent Events Weekly Update – November 23, 2015

Image courtesy of FreeDigitalPhotos.net/ nongpimmy

Image courtesy of FreeDigitalPhotos.net/ nongpimmy

The major averages ended last week on a high note despite ongoing concerns about terrorism. Investors kept their cool and gave the S&P 500 its best week of the year.[i] For the week, the S&P 500 gained 3.27%, the Dow rose 3.35%, and the NASDAQ grew 3.59%.[ii]

Terrorism reared its ugly head again with an attack in Mali last week that left 20 dead.[iii] Brussels, the seat of EU governance, went into lockdown on Saturday after authorities found evidence of a planned Paris-style attack on the city.[iv] So far, investors seem to be shrugging off the concerns about terrorism. While cool-headed behavior is good news for investors tired of volatility, it’s a grim sign of the times: People are getting used to tragedies.

In other news, anticipation around the next Federal Reserve Open Market Committee meeting in December is heating up and Fed spokespeople are out in force. St. Louis Fed President James Bullard stated that a rate hike is coming “soon.” [v] Dennis Lockhart, President of the Atlanta Fed, cited improving labor markets as evidence supporting a rate raise.[vi]

On top of the speechmaking, FOMC minutes released on Wednesday showed that the Fed is fully prepared to raise rates in December.[vii] The takeaway: Rate hikes may be imminent. However, we also know that the Fed is very responsive to data. Before making a decision in December, Fed officials will be taking hard looks at the November jobs report as well as taking a look at the global economic situation.

During this holiday-shortened week, investors will be paying close attention to a revised third-quarter economic growth report. The first report showed that the economy grew at a tepid 1.5% in the third quarter. Unofficial estimates are projecting a slight rise in the revised estimate to 1.6% for Q3 and a spike to 2.7% in the fourth quarter.[viii] Will these projections hold? Let’s hope so. Analysts will also be closely watching early reports from retailers for clues about what the crucial holiday shopping season has in store.

 

ECONOMIC CALENDAR:

Monday: PMI Manufacturing Index Flash, Existing Home Sales

Tuesday: GDP, International Trade in Goods, S&P Case-Shiller HPI, Consumer Confidence

Wednesday: Durable Goods Orders, Jobless Claims, Personal Income and Outlays New Home Sales, Consumer Sentiment, EIA Petroleum Status Report

Thursday: U.S. Markets Closed for Thanksgiving Day Holiday

11-23


HEADLINES:

Weekly jobless claims hold steady. New claims for unemployment benefits remained at 276,000, the 36th straight week below the key 300,000 level. The sustained strength in the labor market could encourage the Fed to raise rates at next month’s meeting.[ix]

Housing starts drop to seven-month low. Groundbreaking on new homes dropped in October to multi-month lows. However, a sharp rise in building permits suggests that the housing market still has momentum.[x]

Wages may be growing faster than we think. A measure of wage growth published by the Atlanta Fed shows that wages grew 3.0% in September, a number much higher than the 2.2% shown by official Labor Department statistics.[xi]

Q3 earnings fall 1.5% from one year ago. With most earning reports in from the third quarter, analysts project that earnings fell last quarter (year-over-year) for the first time since 2009. However, excluding the ailing Energy sector, earnings per share would be up 3.9%.[xii]

[i] http://www.cnbc.com/2015/11/20/us-markets.html

[ii] http://finance.yahoo.com/q/hp?s=%5EGSPC&a=10&b=16&c=2015&d=10&e=20&f=2015&g=d

http://finance.yahoo.com/q/hp?a=10&b=16&c=2015&d=10&e=20&f=2015&g=d&s=%5EDJI%2C+&ql=1

http://finance.yahoo.com/q/hp?a=10&b=16&c=2015&d=10&e=20&f=2015&g=d&s=%5EIXIC%2C+&ql=1

[iii] http://www.cnn.com/2015/11/21/africa/mali-hotel-attack/

[iv] http://www.theguardian.com/world/2015/nov/22/brussels-lockdown-terror-threat-paris-attacks

[v] http://www.foxbusiness.com/economy-policy/2015/11/20/fed-bullard-signals-imminent-rate-hike/?intcmp=marketfeatures

[vi] http://www.cnbc.com/2015/11/19/feds-lockhart-comfortable-with-hiking-soon.html

[vii] http://www.foxbusiness.com/markets/2015/11/20/investors-keep-calm-and-carry-on-despite-paris-terror-surge/?intcmp=bigtopmarketfeaturesside

[viii] http://projects.wsj.com/econforecast/#ind=gdp&r=20

[ix] http://www.cnbc.com/2015/11/12/us-weekly-jobless-claims-nov-7-2015.html

[x] http://www.foxbusiness.com/economy-policy/2015/11/18/housing-starts-drop-to-seven-month-low-permits-rise/

[xi] http://www.cnbc.com/2015/11/20/worker-wages-may-be-growing-faster-than-you-think.html

[xii] http://www.cnbc.com/2015/11/20/q3-earnings-look-the-most-dismal-since-financial-crisis.html

How Will the Paris Attacks Affect Markets? Weekly Update – November 16, 2015

Image courtesy of freedigitalphotos.net/Vichaya Kiatying-Angsulee

Image courtesy of freedigitalphotos.net/Vichaya Kiatying-Angsulee

Markets gave up gains last week and closed lower, ending the worst week since mid-August. Nerves about a possible December rate hike and faltering commodity prices contributed to selling pressure.[i]  For the week, the S&P 500 lost 3.63%, the Dow fell 3.71%, and the NASDAQ dropped 4.26%.

A series of coordinated terrorist attacks shook Paris on Friday, leading to at least 129 dead and hundreds wounded.[ii] Our thoughts are with the victims and their families in this terrible time. Coming on top of suicide bomber attacks in Beirut on Thursday and the possible bomb-related downing of a Russian charter flight in October, the attacks have highlighted the global threat posed by ongoing violence in Syria, Iraq, and Afghanistan.[iii]

American officials were quick to announce that no “credible threat” exists against U.S. targets, for which we are thankful.[iv]  As attention turns to analyzing the attacks, experts around the world are already thinking about the financial, economic, and security implications of these new threats.

How will markets react to the attacks?

As always, there is no way to know for sure how single events will affect markets. However, we can take some educated guesses:[v]

  • Volatility in financial markets around the world is likely as investors react to geopolitical uncertainty and the expectation that western nations may take a more active role in overseas conflicts.
  • Oil may experience a rally as investors hedge their bets against further instability in the Middle East.
  • Treasuries and other so-called “safe haven” investments may see interest as investors seek shelter from uncertainty.
  • The Euro may drop against the U.S. dollar and other currencies because of increased headwinds.

Though the deplorable attacks are terrible in their human cost, they likely won’t change the overall market calculus for U.S. investors. We will wait and see what happens this week in European markets and will advise you of any concerns as needed.

Looking ahead, investors will be concerned with economic reports and the upcoming December Federal Reserve Open Market Committee (FOMC) meeting. Minutes from the last FOMC meeting will be released on Wednesday, and analysts will be searching for clues about a potential December interest rate hike.[vi]

ECONOMIC CALENDAR:

Monday: Empire State Mfg. Survey

Tuesday: Consumer Price Index, Industrial Production, Housing Market Index, Treasury International Capital

Wednesday: Housing Starts, EIA Petroleum Status Report, FOMC Minutes

Thursday: Jobless Claims, Philadelphia Fed Business Outlook Survey

11-16

HEADLINES:

Retail sales edge upward. October retail sales rose less than expected, growing just 0.1% vs. the 0.3% forecast. A surprise decline in auto sales contributed, tamping down on growth expectations for the fourth quarter.[vii]

Weekly jobless claims unchanged. New claims for jobless benefits remained steady last week, bolstering opinions that the labor market continues to strengthen.[viii]

Business inventories rises. Inventories rose unexpectedly in September, suggesting that third-quarter economic growth data may be revised upward.[ix]

Consumer sentiment rebounds. After losing confidence in September, U.S. consumers regained their optimism in November for the second straight month, mainly on hopes about a strong domestic economy.[x]

[i] http://www.cnbc.com/2015/11/13/us-markets.html

[ii] http://www.cnn.com/2015/11/14/world/paris-attacks/

[iii] http://www.bbc.com/news/world-middle-east-34805466

http://www.cnn.com/2015/11/09/middleeast/russian-plane-crash-egypt-sinai/

[iv] http://abcnews.go.com/US/wireStory/officials-credible-threats-target-us-paris-attacks-35213823

[v] http://www.cnbc.com/2015/11/15/paris-terror-the-potential-aftermath-for-markets.html

[vi] http://www.foxbusiness.com/economy-policy/2015/11/13/week-ahead-fomc-october-minutes-inflation-data/

[vii] http://www.foxbusiness.com/economy-policy/2015/11/13/october-retail-sales-risefall-0x/

[viii] http://www.foxbusiness.com/economy-policy/2015/11/12/weekly-jobless-claims-rosefell-by-x000/

[ix] http://www.cnbc.com/2015/11/13/september-business-inventories-rise.html

[x] http://www.foxbusiness.com/economy-policy/2015/11/13/consumer-sentiment-rebounds-after-october-tumble/

Stocks Finish Strong on Surprising Jobs Report Weekly Update – November 9, 2015

Image courtesy of FreeDigitalPhotos.net/jscreationzs

Image courtesy of
FreeDigitalPhotos.net/jscreationzs

Markets ended last week on a high note, marking the sixth straight week of gains and the longest winning streak for the major averages since late 2014.[i] For the week, the S&P 500 grew 0.95%, the Dow gained 1.40%, and the NASDAQ grew 1.85%.[ii]

Since August’s pullback, the S&P 500 has regained 12.40%.[iii] While headwinds still exist, and we don’t think that stock investors should breathe a sigh of relief yet, we’re happy to see that markets have regained some lost ground.

Underpinning the renewed investor optimism are some strong domestic fundamentals. After a lousy September report, a surprisingly strong October employment report showed that the economy gained 271,000 jobs. The number came in well above expectations of 180,000 and shows that the labor market continues to improve. Even better, wages grew 2.5% from a year ago – the highest year-over-year increase since 2009.[iv] The strong jobs report gave immediate rise to speculations about interest rate hikes.

In a speech before the House, Federal Reserve Chair Janet Yellen said that a December rate hike is still on the table. Will pulling the trigger roil markets? Maybe. Though the past can’t predict the future, we can look back and see that investors have often reacted nervously to any move (or expectation of a move) by the Fed. While a rate increase is a vote of confidence in the economy, it’s also a source of worry for some economists. China’s slowing growth and fragility among other emerging market economies mean that raising borrowing costs could have ripple effects across the global economy.

In her testimony, Yellen emphasized that the U.S. economy is growing well, though she indicated that soft global trade and exports are potential headwinds. Overall, it looks like the Fed isn’t committing to a date for a rate hike yet and will wait to see what the data shows in the coming weeks.[v]

ECONOMIC CALENDAR:

Tuesday: Import and Export Prices

Thursday: Jobless Claims, JOLTS, EIA Petroleum Status Report, Treasury Budget

Friday: PPI-FD, Retail Sales, Business Inventories, Consumer Sentiment

11-9

HEADLINES:

Productivity grows slowly in Q3. Third-quarter output per worker grew 1.6%, possibly indicating why wage growth remains stubbornly weak. Labor productivity grew 3.5% in the second quarter.[vi]

Sluggish demand drags on China. New data highlights China’s decelerating economy as imports fall 16% and exports fall 3.6% in October. Trade dropped 9% overall, marking the eighth straight month of decline.[vii]

Manufacturing brakes in October. A measure of factory activity showed that the sector slowed last month to the lowest level since 2013. However, a rise in new orders offers hope for the fourth quarter.[viii]

Construction spending rises in September. Spending on new construction skyrocketed, growing faster than expected. September activity reached the highest level since 2008, suggesting that third-quarter economic growth might be higher than originally estimated.[ix]

[i] http://www.cnbc.com/2015/11/06/us-markets.html

[ii] http://finance.yahoo.com/q/hp?s=%5EGSPC&a=10&b=2&c=2015&d=10&e=6&f=2015&g=d

http://finance.yahoo.com/q/hp?a=10&b=2&c=2015&d=10&e=6&f=2015&g=d&s=%5EDJI%2C+&ql=1

http://finance.yahoo.com/q/hp?a=10&b=2&c=2015&d=10&e=6&f=2015&g=d&s=%5EIXIC%2C+&ql=1

[iii] Source: Yahoo Finance. S&P 500 price return between August 25, 2015 and November 6, 2015

http://finance.yahoo.com/q/hp?s=%5EGSPC&a=07&b=25&c=2015&d=10&e=8&f=2015&g=d

[iv] http://www.foxbusiness.com/economy-policy/2015/11/06/us-adds-271000-jobs-in-october-strong-upside-surprise/

[v] http://www.theguardian.com/business/2015/nov/04/janet-yellen-december-rate-hike-still-on-table

[vi] http://www.reuters.com/article/2015/11/05/usa-economy-idUSL1N1301N520151105

[vii] http://www.foxnews.com/world/2015/11/08/as-prices-drop-and-demands-slump-china-october-import-and-export-fall/

[viii] http://www.foxbusiness.com/economy-policy/2015/11/02/us-manufacturing-sector-growsslows-more-than-expected-in-october/

[ix] http://www.foxbusiness.com/economy-policy/2015/11/02/us-manufacturing-sector-growsslows-more-than-expected-in-october/

Hixon Zuercher November 2015 Monthly Video Update

Special Update: New Budget Deal Affects Social Security Strategies Weekly Update – November 2, 2015

Image courtesy of freedigitalphotos.net/Stuart Miles

Image courtesy of freedigitalphotos.net/Stuart Miles

Facing down another government shutdown, the House and Senate passed a new budget deal last week that suspends the debt limit until 2017 and increases funding levels for a number of federal programs. President Obama is expected to sign the deal into law early this week.[i]

Unfortunately, though the deal averts a debt default and reduces the risk of a December government shutdown, it includes provisions that may cut into Social Security benefits for millions of Americans. By negotiating the deal in secret, lawmakers have prevented affected retirees from having their say. To say that we’re disappointed is an understatement.

The new regulations will prevent retirees from using two advanced Social Security claiming strategies: file-and-suspend and applying for a restricted claim for spousal benefits. Both of these strategies are designed to increase lifetime income for retirees and are being counted on by many Americans.

Here’s what we know so far:[ii]

  • As of May 1, 2016, spousal or child benefits will no longer be payable unless the primary earner is also collecting Social Security benefits. Spouses will also no longer be able to file restricted claims for spousal benefits at their full retirement age.
  • Workers and spouses who are currently using these strategies (e.g. have already filed and suspended claims) are grandfathered in under the deal and will not be affected.[iii]
  • Retirees who will be age 62 or older by December 31, 2015 may still be able to file a restricted application for spousal benefits.
  • Retirees who will be age 66 or older before May 1, 2016 may still have time to file and suspend and trigger benefits for their spouse or dependents.

If you are eligible to file and suspend before May 1, 2016, please contact us to discuss your situation.

As always, we will update you as we know more in the coming weeks.

ECONOMIC CALENDAR:

Monday: PMI Manufacturing Index, ISM Mfg. Index, Construction Spending

Tuesday: Factory Orders

Wednesday: ADP Employment Report, International Trade, Janet Yellen Speaks 10:00AM, ISM Non-Mfg. Index, EIA Petroleum Status Report

Thursday: Jobless Claims, Productivity and Costs

Friday: Employment Situation

 

HEADLINES:Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the DJCBP. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Q3 GDP shows slow growth. Our first look at third-quarter economic growth showed that Gross Domestic Product grew a paltry 1.5%. This is just a preliminary report, and economists will revise the data several more times; however, we can see that weak business spending affected growth last quarter. [iv]

Consumer spending misses in September. Personal spending data showed that Americans increased their spending at the slowest rate since January, indicating they may be cautious about economic turmoil.[v]

Consumer confidence rebounds in October. After a weak September reading, consumer confidence jumped in October as lower-income households grew more optimistic. Wealthier households were less confident due to concerns about financial markets.[vi]

Pending home sales drop in September. The number of contracts on previously owned homes fell unexpectedly in September in a potential warning sign about the

[i] http://www.cnn.com/2015/10/30/politics/senate-budget-agreement-rand-paul/index.html?iid=EL

[ii] http://www.investmentnews.com/article/20151030/FREE/151039996/advisers-rethink-retirement-plans-amid-social-security-changes

[iii] http://www.bloomberg.com/news/articles/2015-10-28/are-you-about-to-lose-50-000-in-future-social-security-benefits-

[iv] http://www.cnbc.com/2015/10/29/us-q3-gross-domestic-product-oct-29.html

[v] http://www.foxbusiness.com/economy-policy/2015/10/30/personal-spending-income-miss-expectations/

[vi] http://www.foxbusiness.com/economy-policy/2015/10/30/consumer-sentiment-unexpectedly-declines-in-october/