{"id":682,"date":"2011-11-22T16:26:52","date_gmt":"2011-11-22T22:26:52","guid":{"rendered":"http:\/\/www.sunlakesofarizona.com\/blog\/?p=682"},"modified":"2011-11-22T16:26:52","modified_gmt":"2011-11-22T22:26:52","slug":"economic-notes-for-the-week-of-november-21st","status":"publish","type":"post","link":"https:\/\/dev.sunlakesofarizona.com\/blog\/2011\/11\/economic-notes-for-the-week-of-november-21st\/","title":{"rendered":"Economic Notes for the Week of November 21st"},"content":{"rendered":"

Economic Notes <\/em><\/strong><\/p>\n

European concerns continued to dominate other issues.\u00a0 This is unfortunate, considering that U.S. news has been looking better as of late and is perhaps underappreciated.\u00a0 Japan, which has also been largely ignored, grew for the first time in four quarters.<\/p>\n

The European Central Bank purchased \u20ac10 Billion to purchase Italian and Spanish Bonds in order to bring yields in both of those nations back below 7.0%\u2014the often-referred-to \u201cbreaking point.\u201d\u00a0 In response to criticism he could be doing more, ECB President Mario Draghi maintained that \u2018price stability\u2019 should remain the institution\u2019s primary objective and doing otherwise might threaten its credibility (note that many central banks, including the ECB, are subject to only a single mandate, as opposed to the Federal Reserve\u2019s dual mandate of stable prices and maximum employment).\u00a0 Of course, with such a broad mandate, a wide variety of actions could be justifiable.<\/p>\n

At the same time, Angela Merkel publicly stated that she would like to see the underlying EMU treaty revisited and revamped while Spanish elections resulted in a victory by the opposition party supporting an austerity platform.\u00a0 These events and public comments often seem contradictory, so it is difficult to take anything at face value due to the extreme political nature of the process.\u00a0 A positive side of this turmoil is that the aftermath may well lead to a more fiscally and economically strong union.<\/p>\n

Back to the U.S….<\/p>\n

Retail sales<\/strong> increased at a rate of 0.5% in November\u2014more than expected.\u00a0 Interestingly, strong performances in \u201cnon-store\u201d sales (aka online) in electronics have pointed to the new iPhone release as a key reason.\u00a0 As much as we hope for good economic results, it is difficult to imagine this particular product-specific effect lasting indefinitely.<\/p>\n

The Consumer Price Index<\/strong> number came in at -0.1%, in contrast to a +0.3% increase the month before, while the core CPI number was up just +0.1%.\u00a0 The difference in the two readings was a 2% decline in energy prices during the month, which offset slightly higher food prices (although the food price trend is moderating).\u00a0 It is interesting to note that the owner\u2019s equivalent rent component of CPI was sharply higher, and tends to be a more persistent part of CPI.\u00a0 October producer prices<\/strong> declined more than expected at -0.3%, while the core number remained unchanged.<\/p>\n

Industrial production<\/strong> rose +0.7%, which was about twice as strong as expected\u2014helped by vehicle assemblies (highest level since mid-2008).\u00a0 The capacity utilization rate also rose 0.5% to 77.8%.\u00a0 Capacity utilization is a more obscure and difficult-to-measure estimated figure, but improvement here is also positive and, if this continues, add to additional job growth down the line.<\/p>\n

Several housing numbers came out this week.\u00a0 The homebuilder survey<\/strong> demonstrated a pickup in sentiment, although the absolute level remains extremely low relative to historical averages.\u00a0 Housing starts<\/strong> were down -0.3% for October, which was much better than the consensus view that we would see a sharp correction following September\u2019s strong 7% increase.\u00a0 Starts came in at 628,000 units, which, as we have discussed before is an extremely low number considering broader demographic growth and replacement housing needs.\u00a0 Building permits<\/strong> were also up +10.3%\u2014while a volatile number, this was also better than expected and points to some sporadic, albeit choppy, signs of life in the sector.<\/p>\n

The U.S. index of leading indicators<\/strong> climbed more than forecast for October, at +0.9%, which is the largest rise since February.\u00a0 The gains looked to be broad, in terms of better numbers from consumer spending, manufacturing and homebuilding, as well as fewer overall job losses.<\/p>\n

While economic conditions are still touchy, especially with the uncertainty in Europe, we are seeing better numbers, which has lowered the double-dip-recession risk and raised hopes for the early part of 2012.\u00a0 Economic research we review continues to be optimistic, albeit careful due to European political sentiment, which, of course, cannot be readily \u2018modeled.\u2019\u00a0 That said, there appears to be a general understanding that European leaders (and citizens) understand the seriousness of their predicament and realize that difficult choices need to be made.\u00a0 The alternative, of course, is a set of even worse outcomes.\u00a0 That may be the best leverage remaining in the system.<\/p>\n

This week, we will have the report from the Debt Super Committee, charged with agreeing on $1.2 Trillion in deficit reductions.\u00a0 Failure in achieving agreement is expected, although it remains to be seen how markets respond to the results.<\/p>\n

 <\/p>\n

Market Notes <\/em><\/strong><\/p>\n

 <\/p>\n\n\n\n\n\n\n\n\n\n
Period ending 11\/18\/2011<\/strong><\/td>\n\n

1 Week (%)<\/strong><\/p>\n<\/td>\n

\n

YTD (%)<\/strong><\/p>\n<\/td>\n<\/tr>\n

DJIA<\/td>\n\n

-2.85<\/p>\n<\/td>\n

\n

4.31<\/p>\n<\/td>\n<\/tr>\n

S&P 500<\/td>\n\n

-3.75<\/p>\n<\/td>\n

\n

-1.55<\/p>\n<\/td>\n<\/tr>\n

Russell 2000<\/td>\n\n

-3.36<\/p>\n<\/td>\n

\n

-7.17<\/p>\n<\/td>\n<\/tr>\n

MSCI-EAFE<\/td>\n\n

-4.06<\/p>\n<\/td>\n

\n

-13.02<\/p>\n<\/td>\n<\/tr>\n

MSCI-EM<\/td>\n\n

-3.82<\/p>\n<\/td>\n

\n

-18.87<\/p>\n<\/td>\n<\/tr>\n

BarCap Aggregate<\/td>\n\n

0.01<\/p>\n<\/td>\n

\n

6.91<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n\n\n\n
U.S. Treasury Rates<\/strong><\/td>\n\n

3 Mo.<\/strong><\/p>\n<\/td>\n

\n

2 Yr.<\/strong><\/p>\n<\/td>\n

\n

5 Yr.<\/strong><\/p>\n<\/td>\n

\n

10 Yr.<\/strong><\/p>\n<\/td>\n

\n

30 Yr.<\/strong><\/p>\n<\/td>\n<\/tr>\n

12\/31\/2010<\/td>\n\n

0.12<\/p>\n<\/td>\n

\n

0.61<\/p>\n<\/td>\n

\n

2.01<\/p>\n<\/td>\n

\n

3.30<\/p>\n<\/td>\n

\n

4.34<\/p>\n<\/td>\n<\/tr>\n

11\/11\/2011<\/td>\n\n

0.01<\/p>\n<\/td>\n

\n

0.24<\/p>\n<\/td>\n

\n

0.90<\/p>\n<\/td>\n

\n

2.04<\/p>\n<\/td>\n

\n

3.12<\/p>\n<\/td>\n<\/tr>\n

11\/18\/2011<\/td>\n\n

0.01<\/p>\n<\/td>\n

\n

0.29<\/p>\n<\/td>\n

\n

0.94<\/p>\n<\/td>\n

\n

2.01<\/p>\n<\/td>\n

\n

2.99<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

 <\/p>\n

This proved to be another choppy but largely negative week for risk assets as markets alternated between European fears and recovery rallies based on better U.S. economic fundamentals.\u00a0 This has been the same story for months, so we won\u2019t rehash it again here.\u00a0 Domestic stocks outperformed foreign stocks; the more defensive consumer staples and utilities sectors unsurprisingly outperformed as more cyclical energy and financials lagged by the greatest amounts.<\/p>\n

Investment grade fixed income overall, as represented by the BarCap Agg, was flat; treasuries gained on the risk-off week, while foreign bonds lost ground in the positive week for the U.S. dollar.<\/p>\n

In keeping with a move away from riskier assets, commodities lost ground despite WTI crude oil getting back up to $98\/barrel (it started the month at $92).\u00a0 Oil, as with several commodities, is tied up in a battle of uncertain global demand and a stronger dollar.<\/p>\n

Happy Thanksgiving to all of you.<\/p>\n

Karl Schroeder, RFC, CSA, CEP<\/p>\n

Investment Advisor Representative<\/p>\n

Schroeder Financial Services, Inc.<\/p>\n

480-895-0611<\/p>\n","protected":false},"excerpt":{"rendered":"

Economic Notes European concerns continued to dominate other issues.\u00a0 This is unfortunate, considering that U.S. news has been looking better as of late and is perhaps underappreciated.\u00a0 Japan, which has also been largely ignored, grew for the first time in four quarters. The European Central Bank purchased \u20ac10 Billion to purchase Italian and Spanish BondsRead more<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-682","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/682","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/comments?post=682"}],"version-history":[{"count":1,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/682\/revisions"}],"predecessor-version":[{"id":683,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/682\/revisions\/683"}],"wp:attachment":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/media?parent=682"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/categories?post=682"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/tags?post=682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}