Mr. Blutarsky…Zero Point Zero

The Down Jones Industrial Average logged what was essentially a 0.0 return (when rounded down to one decimal point) on the week.

Looking forward, investors will be bracing for the onslaught of earnings reports that will be rolling in over the next few weeks. Additionally, Europe is still on the radar and the sluggish economy remains front and center.

Last week’s market seemed to focus mostly on concerns about the economy and the potential impact that weak economic growth will have on Q2 earnings and beyond.  The minutes from the Fed’s late June meeting did not reveal any concrete signs that a third round of asset buys (referred to as QE3) might be on the docket.  Investors and traders expressed their disappointment with multiple losing sessions up until Friday.

Here’s how the market ended up for the week.

We believe that the broad U.S. economic data continues to be indicative of a modest expansion at best.

Remember – modest expansion does not mean a recession.

Fed Chief Ben Bernanke will present his testimony before Congress starting on Tuesday and continuing into Wednesday.  The minutes from the recent Fed meeting suggested growth is not weak enough for any new stimulus, however, the economy isn’t moving along fast enough either. It seems like we are in sort of a “no-man’s land”.

Analysts have been reducing their Q2 profit forecasts due to the slowing U.S. growth, the recession in Europe, slowing demand in the Far East, and falling commodity prices.  In addition to that, Thomson Reuters recently reported that negative earnings preannouncements have outweighed positive preannouncements by the largest ratio since Q3 2001.

However, let’s recognize that there is a possible silver lining – with the bar already set so low, any upside surprises have the potential to fuel equity gains. We saw this happen in April when Q1 earnings were announced and most companies managed to clear a low hurdle.

Here’s a quick snapshot of how I see the economy going into the fall:

Signs the U.S. economy may worsen in the fall

1. Eurozone crisis gets worse

2. China continues weakening

3. The U.S. Fiscal Cliff remains unaddressed

Signs the U.S. economy may improve in the fall

1. Global easing cycle continues

2. Gasoline prices are much lower this summer than expected

3. There is actually a housing recovering underway

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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.  The 2, 10 and 30 year Treasury is simply the yield at the close of the day.