“Hey Ma, can we get some Meatloaf?!?”

By David B. Armstrong, CFA | Sep 13, 2010 | Weekly Market Commentary

In a hilarious scene from Wedding Crashers, Will Farrell screams several memorable quotes asking his mom to bring him and Owen Wilson some meatloaf.  He wants, but he does not get – several times.  Many investors have been feeling the same way over the course of this year, but last week went a long way towards easing some market jitters.  Given the positive response I got from readers last week to my Breakfast Club quote, I thought I’d follow it up this week with another movie reference title for today’s Monument Wealth Management blog & email update.

The equity market indices finished with mixed performances last week with the main indices slightly up and the small cap index down over a full percentage point.  The Dow Jones Industrial Average (DJIA) gained 0.14% to finish the week at 10,463, the S&P 500 Index gained 0.46% to finish at 1,110 and the Nasdaq Composite Index gained 0.39% to finish at 2,242.  The Russell 2000, which measures smaller capitalization stocks, lost 1.07% to finish at 636.

Last Friday’s positive close marked the third straight day in a row the market closed up and was also the seventh positive day out of the past eight.  As of this morning (Monday), the market was still trading higher.  We saw a serious day of selling on Monday as European bank fears once again emerged, but by the end of the week and over the weekend, those fears were addressed and put to rest.  Additionally, weekly unemployment claims fell to 451,000 in the week ending September 4^th – this is good (actually, let’s call it ‘better’) news. This is the lowest weekly reading since July 10^th and the readings have declined each week for the past three weeks.  The four-week average is at 477,750. We think that when the number reaches the 400,000-425,000 range, the market and investors will become convinced that the private sector is actually creating meaningful jobs.

Also reported last week was our (the U.S.) trade gap with China.  For 2010, it has widened to $145 billion (through July).  For reference, it was at $123 billion at this same time last year.  We have read that this could prompt Congress to introduce legislation that would be interpreted as “protectionist.”  Although it probably would not pass, we are concerned that it would be viewed negatively by the market and increase the odds of a double-dip recession.  That’s probably the biggest reason it would not pass, but we’ll watch it.  As I stated last week, this pace of private sector job growth is probably not going to decrease the unemployment rate, but in our opinion it does not suggest that the economy is heading to in danger of a double-dip recession either.

In other news, it looks like the consumer is pulling off the unlikely combination of being able to spend, save and pay down outstanding consumer debt.  This is good news across the board.  Consumer debt has declined for six straight months and looking even farther back, it has decreased for 17 of the last 18 months as well.  This spend, save, pay down behavior is why people are saying the consumer is not spending as much as in other recoveries, but this subdued spending is not all bad.

Finally, JP Morgan put out a quick study today that I liked.  They examined what level of GDP growth had historically resulted in positive net job creation in the economy.  Their research suggests that GDP growth of 1.5% would be sufficient to support employment gains; however, it would take GDP growth of 2.9% for the unemployment rate to actually fall.   While most economists we like to follow feel that this growth rate is eventually attainable, current GDP growth is wallowing in the middle of these two numbers.

We acknowledge that the economy is weak, but there is some good news out there. In an environment where there is laser focus on the bad news, it’s constructive to look at how the market reacts when there is good news.

We have seen a few good market days now and it looks like Ma may actually be bringing us some of that meatloaf – I like it…MA, MEATLOAF!

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**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.