{"id":880,"date":"2012-06-19T06:18:13","date_gmt":"2012-06-19T12:18:13","guid":{"rendered":"http:\/\/www.sunlakesofarizona.com\/blog\/?p=880"},"modified":"2012-06-19T06:18:13","modified_gmt":"2012-06-19T12:18:13","slug":"economic-notes-for-the-week-of-june-18th","status":"publish","type":"post","link":"https:\/\/dev.sunlakesofarizona.com\/blog\/2012\/06\/economic-notes-for-the-week-of-june-18th\/","title":{"rendered":"Economic Notes for the Week of June 18th"},"content":{"rendered":"

The big number for the week, retail sales,<\/strong> fell in May, by -0.2%, which was along the lines of the median forecast.\u00a0 The non-auto component was weaker than expected, though, by almost 0.5%.\u00a0 Additionally, data from earlier recent months was revised downward.\u00a0 Weakness emerged from several areas, especially those on the \u2018fringe\u2019 of spending, such as sporting goods stores, health and personal care.\u00a0 However, areas like clothing, furniture and electronics were up\u2014which appears odd, but is in line with the inconsistent results from some of these metrics.\u00a0 We expect more of the same going forward.<\/p>\n

From a manufacturing standpoint, industrial production<\/strong> was down in May by -0.1%, just shy of consensus expectations.\u00a0 This was spurred by lower units for motor vehicles; however, utilities and mining were both up.\u00a0 Capacity utilization<\/strong> came in at 79.0%, which just below estimates.\u00a0 These figures are largely in line with a broader deceleration in economic activity during the past several months\u2014not shrinkage, mind you\u2014but a more tempered pace than before.\u00a0 Although they bear watching, mid-cycle slowdowns have occurred during previous cycles and are not necessarily a signal of outright contraction ahead.<\/p>\n

Inflation<\/strong> results were tempered, which was largely expected.\u00a0 Headline CPI was down -0.3% month-over-month in May (+1.7% year-over-year), while the Core CPI figure rose +0.2% (+2.3% year-over-year).\u00a0 The difference is the dramatic fall in energy prices\u2014particularly crude oil and gasoline\u2014during the month, which offset a small rise in shelter and goods\/services costs.\u00a0 The Producer Price Index (PPI) was down -1.0% month-over-month and Core PPI up +0.2% month-over-month, in line with the CPI trends but with more of an energy price impact.\u00a0 Inflation overall remains benign, largely due to slow economic activity.\u00a0 Import prices<\/strong> fell month-over-month by -1.0%, which was largely in line with expectations; year-over-year growth was -0.3%.\u00a0 As with CPI\/PPI, lower petroleum and natural gas prices were the primary driver for the decrease.<\/p>\n

On the employment side, initial jobless claims<\/strong> rose 6k to 386 for the week of June 9th, which pushed the four-week moving average up to 382k.\u00a0 Continuing claims fell 33k down to 3.278 million for the June 2nd week.<\/p>\n

The University of Michigan consumer confidence<\/strong> numbers were lower than expected, falling from 79.3 in May to 74.1 in June.\u00a0 The \u2018current conditions\u2019 and \u2018consumer expectations\u2019 elements were both lower; however inflation expectations were fairly tempered (have been in a range of 2.5-3.0% or so for several years, in line with both current year-over-year inflation and historical averages).<\/p>\n

On to Europe… it appears that the Greek conservatives have won.\u00a0 What does this mean?\u00a0 Fears of a Greek exit from the Eurozone have receded for the time being.\u00a0 Now, thoughts move to how quickly a new government can be formed and how decision-making will unfold.\u00a0 This will buy Greece more time, essentially.<\/p>\n

What should we make of the coming weeks?\u00a0 Primarily, we will need to ensure that European perceptions don\u2019t deteriorate further and\/or the political processes don\u2019t provide any unexpected shocks.\u00a0 Of course, we can\u2019t predict any of the political action, nor can we predict the market\u2019s reaction to it.\u00a0 Greece has to form a government and Spanish banking issues persist and will likely need recapitalization and\/or a bailout.\u00a0 Is this pushing the can further down the road?\u00a0 Yes, most likely.<\/p>\n

One caution to those who feel times like this are right to \u2018dial back\u2019 a bit on risk:\u00a0 clients feel better about it, but that doesn\u2019t make it necessarily effective.\u00a0 This is a contrary view (although not an uncommon one currently), in that foreign stocks in general (particularly European stocks) have priced in an extremely dire scenario… recession and potentially a Euro breakup.\u00a0 Valuations are the lowest they\u2019ve been in decades, and there is opportunity in the ashes here.\u00a0 Just as there was in the U.S. in 2008-2009.<\/p>\n

Market Notes <\/em><\/strong><\/p>\n\n\n\n\n\n\n\n\n\n
Period ending 6\/15\/2012<\/strong><\/td>\n\n

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

\n

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

DJIA<\/td>\n\n

1.76<\/p>\n<\/td>\n

\n

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

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

1.34<\/p>\n<\/td>\n

\n

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

Russell 2000<\/td>\n\n

0.33<\/p>\n<\/td>\n

\n

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

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

2.32<\/p>\n<\/td>\n

\n

-0.60<\/p>\n<\/td>\n<\/tr>\n

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

2.22<\/p>\n<\/td>\n

\n

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

BarCap U.S. Aggregate<\/td>\n\n

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

\n

2.38<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n\n\n\n\n\n
U.S. Treasury Yields<\/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\/2011<\/td>\n\n

0.02<\/p>\n<\/td>\n

\n

0.25<\/p>\n<\/td>\n

\n

0.83<\/p>\n<\/td>\n

\n

1.89<\/p>\n<\/td>\n

\n

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

6\/8\/2012<\/td>\n\n

0.09<\/p>\n<\/td>\n

\n

0.28<\/p>\n<\/td>\n

\n

0.71<\/p>\n<\/td>\n

\n

1.65<\/p>\n<\/td>\n

\n

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

6\/15\/2012<\/td>\n\n

0.09<\/p>\n<\/td>\n

\n

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

\n

0.68<\/p>\n<\/td>\n

\n

1.60<\/p>\n<\/td>\n

\n

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

Equities ended up on a positive note this week.\u00a0 Central banks appeared poised to act as necessary based on Greek election results, to keep banking institutions and financial markets liquid, as well as instill confidence into the system.\u00a0 This seemed to be good PR on their behalf, knowing reactions to recent crises in recent years have been largely born out of uncertainty and lack of conviction.\u00a0 And, due to this, short-term traders can often be the cause of needless volatility.\u00a0 On the week, our portfolios were generally helped by the exposure to foreign (emerging markets in particular) and core U.S. large cap; bonds were generally less helpful in absolute terms.<\/p>\n

U.S. large-cap equities outperformed smaller market caps, but underperformed foreign stocks and emerging markets, which came up with strong returns last week.\u00a0 Domestically, telecom, energy and financials led on the week, while materials, consumer discretionary and tech trailed\u2014all-in-all, no risk-on or risk-off trend for the week, which was a bit unusual compared to what we\u2019ve been used to.<\/p>\n

Bond markets were mixed to generally positive with lower rates.\u00a0 Foreign debt of all types and high yield credits generally outperformed government bonds.<\/p>\n

In the commodity markets, precious metals led the way, while agricultural contracts were down by the largest extent (by 5%).\u00a0 Other areas were far less dramatic.<\/p>\n

Have a good week.<\/p>\n

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

Investment Advisor Representative<\/p>\n

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

480-895-0611<\/p>\n

Sources:\u00a0 FocusPoint Solutions, Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, Goldman Sachs, JPMorgan Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Thomson Reuters, Schroder\u2019s, Standard & Poor\u2019s, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.\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":"

The big number for the week, retail sales, fell in May, by -0.2%, which was along the lines of the median forecast.\u00a0 The non-auto component was weaker than expected, though, by almost 0.5%.\u00a0 Additionally, data from earlier recent months was revised downward.\u00a0 Weakness emerged from several areas, especially those on the \u2018fringe\u2019 of spending, suchRead 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-880","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/880","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=880"}],"version-history":[{"count":1,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/880\/revisions"}],"predecessor-version":[{"id":881,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/880\/revisions\/881"}],"wp:attachment":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/media?parent=880"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/categories?post=880"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/tags?post=880"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}