“Off The Wall” Blog
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A Market Sell-Off, a New Hire, and a Promotion – All in One Week
By David B. Armstrong, CFA | Apr 09, 2012 | Weekly Market Commentary
We’d like to announce the newest member of the Monument Wealth Management Team, Dr. Ann Schnorrenberg. Ann holds a Doctorate from Columbia University in Economics and is a Financial Planning Associate on the Monument Wealth Management team. We are excited to have her aboard and look forward to everyone meeting her.
Additionally, this was a celebratory weekend for me as well, as I was promoted to the rank of Lieutenant Colonel in the United States Marine Corps Reserve.
Now back to the news. Friday’s March jobs report seems to have disappointed the market, but in reality, it is not a huge game changer. The employment report was a disappointment relative to both what was expected to be reported, as well as some labor market data from recent months. Today, the markets are reacting.
For the week, the Dow Jones Industrial Average (DJIA) lost -1.15% to 13,060, the Standard & Poor’s (S&P) 500 lost -0.74% to 1,398, and the Nasdaq Composite Index lost -0.36% to 3,080. The Russell 2000 Index, which tracks the performance of small capitalization stocks, lost -1.46% to finish at 818.
While the employment report was a disappointment, it created some hope that another round of quantitative easing (QE) could be quite possible. The March employment report showed the economy adding 121,000 private sector jobs in the month of March. This fell way short of the 215,000 that were expected, and was well below the 250,000 jobs created on average in the three months ending in February 2012.
Now on the surface that seems bad, BUT the labor market is indeed healing and is in way better shape than last summer. The problem is that the economy is probably only growing fast enough to create about 200,000 jobs a month. With that, we think that this increases the probability that the Fed will step in and bring on a third round of Quantitative Easing, also known as QE3. Look for that announcement to come probably sometime in April.
The BIG question that everyone will be asking is, “is this the start of the same thing we saw before the summer of 2010 and 2011?” Here’s what I think – just because it has happened twice in a row DOES NOT mean it is more likely to happen a third.
Why? There are a few reasons. FIRST – The clearest and one of the most significant positives this year versus 2010/2011 is that housing has turned the corner. Higher rents are pushing buyers to act, and investment buyers, both domestic and foreign, are helping. Also, property taxes are declining in the wake of lower assessed property prices. SECOND – global short term interest rates (referred to as Global Short Rates) rose in 2010 and 2011. This year, they are declining. THIRD – Even though we had a poor reading on the employment report on Friday, which measures the number of jobs added, the unemployment claims last week were 362k versus 406k a year ago and 468k two years ago.
Oh – and in the hopper for next week – Earnings Season! So while macroeconomic data and events will probably drive the market this week, microeconomics will also have the attention of the market next week as companies begin to release their first quarter of 2012 earnings reports.
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Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC
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 is an unmanaged index generally comprised of companies with lower price-to-book ratios and lower forecasted growth values.
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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