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A Potential Growth Problem?


We are starting to pay more attention to the fact that after seeing 27 straight weeks of strengthening economic data, we have had three weeks of moderate/weakening data.  The weaker data includes recent unemployment claims, consumer confidence and payroll employment.

It’s prompting a lot of “here we go again” sentiment, but we think that given the global easing cycle, the improvement in housing, the apparent peak in gas prices, and all of the other data still coming in on the positive side, there is no need to panic or do anything other than watch for right now.

For the week, the Dow Jones Industrial Average (DJIA) gained 1.40% to 13029, the Standard & Poor’s (S&P) 500 gained 0.60% to 1379, but the Nasdaq Composite Index lost -0.36% to 3000.  The Russell 2000 Index, which tracks the performance of small capitalization stocks, gained 0.97% to finish at 804.

The big reasons why we could see a problem with future growth depend on how a few different things shake out. First of all, any spillover from the Eurozone problems could affect our growth. Second, is anticipation of the Fiscal Cliff.  The Fiscal Cliff is when all of the spending cuts, the end of extended unemployment benefits, tax hikes, and more are anticipated to kick in at the same time causing a fiscal drag on gross domestic product (GDP).  The Fiscal Cliff is now about 250 days away. A third reason for possible growth issues is China’s slowdown.

But, it’s not all bad because in addition to the global easing, housing, and gas prices mentioned earlier, we have seen a decent earnings season so far.  In fact, 1st quarter earnings are on track for 81% of the companies to beat estimates (123 have reported so far).  We think that this explains how the major indices were up in the face of bad economic news last week.

Finally, while we try to remain politically neutral, there are times when it’s important to realize that some political issues will drive some economic action and we want to note them to you.  If we see the economy faltering on the back of fear over the Fiscal Cliff, we will probably see the President’s election odds go down.  This could prompt some action to counter any weakening of his odds of reelection.

So, using a phrase that is popular with the kids these days…

“I’m just sayin’.”

IMPORTANT NOTE: Due to industry regulations, comments are not permitted on this blog. If you would like to contact the author, please email us at info@monumentwm.com.

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.

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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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