It was a busy week on the economic front.\u00a0 We don\u2019t often like to bombard you with this much detail, but many of these particular numbers are important.<\/p>\n
The advance report for the 4th Quarter 2011 real Gross Domestic Product<\/strong> came in at an annualized +2.8%.\u00a0 (By \u2018advance\u2019 of course, we\u2019re referring to the first of several, increasingly more detailed, less estimated and presumably more accurate releases over the next several months.)\u00a0 This was a bit lower than expected, as the consensus had been hovering around the +3.0% range; but was better than the 3rd Quarter\u2019s +1.8% reading.\u00a0 For the full year, real GDP was up +1.7% after a +3.0% year in 2010.\u00a0 So the economy is slow, but \u2018trudging\u2019 along.<\/p>\n Several items contributed.\u00a0 Mainly, growth in final sales was weaker than expected\u2014based on lighter consumer spending, business fixed investment and a substantial (-12.5%) decrease in federal government defense spending (however many defensive-related spending items tend to be more volatile).\u00a0 The much maligned auto sector contributed to 0.3% of growth, or about 11% of the total growth for the quarter.\u00a0 As the President mentioned during the State of the Union, American carmakers are indeed experiencing a recovery.<\/p>\n The slowed momentum in spending is an important component, and whether this continues to moderate or recovers will be a critical component to performance in the 1st Quarter of this year.\u00a0 We would not be surprised to see a bit of pullback in early 2012\u2014to a rate of 2% or somewhere in that range\u2014but preliminary estimates for the second half of 2012 and 2013 look better than that.<\/p>\n As mentioned earlier this week in our special note, the Federal Reserve Open Market Committee<\/strong> decided to leave the fed funds rate unchanged at their 0.00-0.25%.\u00a0 Additionally, their language pointed to continued low rates through at least late 2014.\u00a0 Considering how far out that estimate is, it\u2019s a very curious policy from several levels\u2014it appears to be part public relations, and a continued commitment to sustain a slow-growing economy at the expense of possible inflationary pressures down the road.\u00a0 This was perhaps confirmed by Ben Bernanke\u2019s press conference comments confirming the Fed\u2019s willingness to consider further stimulus action if necessary, especially considering their assessment of possible downside risks in the global economy\u2014related to the situation in Europe.\u00a0 At the same time, however, this may be \u2018too much information\u2019 and limit the Fed\u2019s flexibility over time.\u00a0 This could also delay a catalyst for further improvement:\u00a0 consumers or businesses may not feel any urgency to borrow at current low rates (since these will be around for a few years), which could drag out and delay economic growth.<\/p>\n Initial jobless claims<\/strong> were up a bit from last week, to 377,000, although the more closely watched (and less \u2018noisy\u2019) four-week moving average dropped to 378,000.<\/p>\n Durable goods orders<\/strong> rose +3.0% for December, which was more than the expected +2.0%.\u00a0 Several components of the underlying report showed decent growth, including \u2018core\u2019 capital goods (non-defense, non-aircraft), which reversed some weakness from prior months.\u00a0 Shipments were also up.\u00a0 All-in-all, despite the Fed\u2019s comments yesterday regarding some slowing in business spending, these reports have been showing the economy growing at a moderate, albeit not explosive pace.<\/p>\n Pending home sales<\/strong> fell by -3.5% (month-over-month) in December, which was slightly more than the -1.0% expected number and reversed stronger gains of the prior few months.\u00a0 This index tracks \u2018signed sales contracts,\u2019 and usually front-runs the existing home sales number by a few months\u2014so perhaps some weaker numbers on that front are forthcoming.\u00a0 The FHFA home price index<\/strong>, which tracks house transactions using agency-conforming loans, was up +1.0% for December, however.\u00a0 This index has shown some better momentum than a few other home price indexes.\u00a0 Overall, a continued choppy housing market, but the volatility in monthly numbers points to possible bottoming, as opposed to continued free-fall downward.<\/p>\n New home sales<\/strong> numbers were down -2.2% for December, at a 307,000 seasonally-adjusted annualized rate, which was in contrast to consensus expectations for a 2% increase.\u00a0 In fact, 2011 became the worst year on record for new home sales, and the number of homes being built remains extremely low.\u00a0 While negative news continues for sure, the overall number of homes being built is ridiculously low\u2014so low, in fact, that we are barely keeping up with the number of homes being \u2018scrapped\u2019 each year, let alone new homes needed to keep pace with demographic demand. \u00a0In other words, in a few years we may need more.<\/p>\n Lastly, the Michigan Consumer Sentiment Survey<\/strong> increased to 75.0 in January, a point or so higher than consensus.\u00a0 Both current conditions and expectations were higher, which resulted in the best reading since last February.<\/p>\n <\/p>\n Market Notes <\/em><\/strong><\/p>\n <\/p>\n 1 Week (%)<\/strong><\/p>\n<\/td>\n YTD (%)<\/strong><\/p>\n<\/td>\n<\/tr>\n -0.47<\/p>\n<\/td>\n 3.78<\/p>\n<\/td>\n<\/tr>\n 0.09<\/p>\n<\/td>\n 4.79<\/p>\n<\/td>\n<\/tr>\n 1.83<\/p>\n<\/td>\n 7.87<\/p>\n<\/td>\n<\/tr>\n 1.63<\/p>\n<\/td>\n 5.96<\/p>\n<\/td>\n<\/tr>\n 2.16<\/p>\n<\/td>\n 10.94<\/p>\n<\/td>\n<\/tr>\n 0.61<\/p>\n<\/td>\n 0.51<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n 3 Mo.<\/strong><\/p>\n<\/td>\n 2 Yr.<\/strong><\/p>\n<\/td>\n 5 Yr.<\/strong><\/p>\n<\/td>\n 10 Yr.<\/strong><\/p>\n<\/td>\n 30 Yr.<\/strong><\/p>\n<\/td>\n<\/tr>\n 0.02<\/p>\n<\/td>\n 0.25<\/p>\n<\/td>\n 0.83<\/p>\n<\/td>\n 1.89<\/p>\n<\/td>\n 2.89<\/p>\n<\/td>\n<\/tr>\n 0.05<\/p>\n<\/td>\n 0.26<\/p>\n<\/td>\n 0.91<\/p>\n<\/td>\n 2.05<\/p>\n<\/td>\n 3.10<\/p>\n<\/td>\n<\/tr>\n 0.06<\/p>\n<\/td>\n 0.22<\/p>\n<\/td>\n 0.75<\/p>\n<\/td>\n 1.93<\/p>\n<\/td>\n 3.07<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n <\/p>\n U.S. stocks were up a bit on the week, at a more tempered pace than previous ones so far this month.\u00a0 Utilities and technology led the way, while telecom services and health care lagged the market by the greatest degree.\u00a0 Overall, growth outperformed value and small-caps beat out large caps on the week.\u00a0 Thus far, from an earnings standpoint, 169 companies in the S&P 500 have reported and about 2\/3 of these have beaten analyst estimates.\u00a0 More to come this week from several high profile companies.<\/p>\n Additionally, foreign markets (emerging market in particular) have continued their streak of outperformance in 2012.\u00a0 Both U.S. and global REITs also fared well, both up over 2% on the week with decent earnings numbers reported.\u00a0 Commodities also gained over 2%, led by strong weeks in silver and rebounding natural gas.\u00a0 Gold also did well with the Fed\u2019s actions implying a weakening effect on the U.S. dollar.\u00a0 So far this year, industrial metals have been the best performing commodity group with global GDP prospects looking brighter, especially with fewer worries about carryover to emerging markets.<\/p>\n U.S. bonds were up a bit with lower rates across the board\u2014especially in the most liquid 5-10 year area dabbled in most in by the Fed.\u00a0 However, \u2018credit\u2019 including high yield debt and foreign bonds (especially emerging markets) were the best performing.\u00a0 Positioning here has been a positive to our portfolios this year.<\/p>\n Bond auctions in Europe have continued to go \u2018well,\u2019 meaning that yields demanded by market participants\/bond buyers haven\u2019t been prohibitively high.\u00a0 In times of crisis, such as with Italy and Spain in prior months from time to time, investor demand for higher and higher yields on debt is a byproduct of distrust in that particular government\u2019s debt.\u00a0 By accepting more reasonable (lower) yields, investors are signaling higher levels of confidence… a good thing.\u00a0 Signs of strength from Euro leaders have tended to result in better auctions and lower rates.<\/p>\n In particular, Italy has a large amount of debt coming due in February and March, with other countries following in lesser amounts in the spring and summer months\u2014so interest rates on these refinancings will be of particular interest to investors and politicians.<\/p>\n Enjoy the week.<\/p>\n <\/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 <\/p>\n Sources:\u00a0 FocusPoint Solutions, Barclays Capital, Bloomberg, Deutsche Bank, Goldman Sachs, JPMorgan Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Reuters, Standard & Poor\u2019s, U.S. Federal Reserve, Wells Capital Management, Yahoo!.\u00a0 Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return\/excluding dividends.\u00a0 Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.<\/p>\n The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.\u00a0 All information and opinions expressed are subject to change without notice.\u00a0 Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.\u00a0 Schroeder Financial Services, Inc. is a registered investment advisor.<\/p>\n","protected":false},"excerpt":{"rendered":" It was a busy week on the economic front.\u00a0 We don\u2019t often like to bombard you with this much detail, but many of these particular numbers are important. The advance report for the 4th Quarter 2011 real Gross Domestic Product came in at an annualized +2.8%.\u00a0 (By \u2018advance\u2019 of course, we\u2019re referring to the firstRead 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-716","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/716","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=716"}],"version-history":[{"count":1,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/716\/revisions"}],"predecessor-version":[{"id":717,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/716\/revisions\/717"}],"wp:attachment":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/media?parent=716"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/categories?post=716"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/tags?post=716"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n\n
\n Period ending 1\/27\/2012<\/strong><\/td>\n \n \n \n DJIA<\/td>\n \n \n \n S&P 500<\/td>\n \n \n \n Russell 2000<\/td>\n \n \n \n MSCI-EAFE<\/td>\n \n \n \n MSCI-EM<\/td>\n \n \n \n BarCap U.S. Aggregate<\/td>\n \n \n \n\n
\n U.S. Treasury Yields<\/strong><\/td>\n \n \n \n \n \n \n 12\/30\/2011<\/td>\n \n \n \n \n \n \n 1\/20\/2012<\/td>\n \n \n \n \n \n \n 1\/27\/2012<\/td>\n \n \n \n \n \n