Only One “Up Day” Last Week
The Federal Open Market Committee (FOMC), the policy-making arm of the Federal Reserve, will conclude its two-day meeting on Wednesday, which will be followed up by a press conference from Fed Chairman Ben Bernanke. There has been a lot of talk of the Fed “tapering” their stimulus back but there are several reasons why we don’t believe there will be any changes this year. Right now, labor markets are still not strong enough, the financial markets have reacted poorly to Bernanke’s tapering suggestion from a few weeks back, (especially the emerging markets), and inflation is still below the Fed’s desired level and slowing.
The market only had one good day last week, Thursday, while the other four were losers. As such, gold, oil and silver were all up. But, hey, let’s keep in mind that the Standard & Poor’s 500 index (S&P 500) is still up over 14% for the year.
Here’s a recap of how the market did last week.
The U.S. dollar has been falling and that has had some implications that are worth paying attention to. While the U.S. dollar was rallying up through the end of May, companies that derive greater than 50% of their revenue from overseas have not done as well as the companies that derive greater than 50% of their revenue in the U.S. However, since the end of May, the U.S. dollar has been weak and exposure to those companies with heavy international sales have held up better than the companies with heavy U.S. sales.
The issues that are causing the recent consternation in the market revolve around some recent concerns about U.S. growth. Really? Concerns about the U.S. economy growing have just sprung up from nowhere, huh? Wow…I guess I should get out more.
That’s funny because on the economic front, we had some pretty good reports last week on Retail Sales and Jobless Claims which both came in better than expected. Jobless claims came in at 334k vs. the 346k that economists predicted (less people filing for unemployment benefits is a good sign). The 4 week moving average has moved lower as well, which is another positive sign.
If you don’t like the news about U.S. growth this week, wait until next week – it will probably come in better. Meanwhile, investors that have held their course since these growth scares started popping up in the summer of 2010 have been rewarded for ignoring the scares.
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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.
(1) West Texas Intermediate crude spot price is as of end of week.
(2) London Bullion Market Association; gold fixing pricing at 3 p.m. London time.
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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