{"id":883,"date":"2012-06-26T08:54:40","date_gmt":"2012-06-26T14:54:40","guid":{"rendered":"http:\/\/www.sunlakesofarizona.com\/blog\/?p=883"},"modified":"2012-06-26T08:54:40","modified_gmt":"2012-06-26T14:54:40","slug":"economic-notes-for-the-week-of-june-25th","status":"publish","type":"post","link":"https:\/\/dev.sunlakesofarizona.com\/blog\/2012\/06\/economic-notes-for-the-week-of-june-25th\/","title":{"rendered":"Economic Notes for the Week of June 25th"},"content":{"rendered":"

The Federal Reserve Open Market Committee<\/strong> ended their meeting last week with little new news.\u00a0 Target rates, at zero to roughly a quarter of a percent, can\u2019t be forced any lower, and, therefore, aren\u2019t as effective at further economic stimulation as they once were.\u00a0 What the Fed can do (and is doing) is extending \u2018Operation Twist,\u2019 which sounds convoluted, but consists of buying long Treasuries back with proceeds gained from selling shorter Treasuries (about $270 billion worth).\u00a0 The point is to lower interest rates at specific areas on the yield curve where they\u2019ll end up doing the most good\u2014home mortgages, auto loans and capital loans for business equipment tend to fall in the intermediate range, so lower rates here are most stimulative to the economy.<\/p>\n

Will this do much?\u00a0 Most economists and former Fed officials don\u2019t think so, but it is something.\u00a0 If conditions continue to decelerate as we\u2019ve seen indications of in the last few months, expect a third round of Quantitative Easing.\u00a0 Markets seemed to think more QE would be in the cards this go-around, but it was not to be and disappointment set in almost right away.\u00a0 The only explanation is that Fed officials haven\u2019t quite seen enough negative evidence yet for more action.\u00a0 Another issue that we mention occasionally:\u00a0 the Fed\u2019s dual mandate of stable prices and maximum employment.\u00a0 Labor markets have been disappointing in this current recovery, so Fed action may be driven as much by the urge to increase prospects for employment as for economic growth.<\/p>\n

 <\/p>\n

In other news, the Conference Board\u2019s index of leading economic indicators<\/strong> rose +0.3% for May, which was better than many analysts predicted.\u00a0 Seven of the ten indicators that make up the index were up.\u00a0 Many of these items are things we report on week to week, but the leading indicator\u2019s importance is these taken together.\u00a0 The \u2018coincident indicator\u2019 index was up +0.2% for the second straight month.<\/p>\n

Not always seen as a critical report due to its sometimes sporadic results, the Philadelphia Fed Index<\/strong> was in the news again due to increased scrutiny of regional Fed surveys\u2014those looking for kernels of data, good or bad, about the economic outlook.\u00a0 The index fell -16.6 in June, which bucked consensus of a flat reading, and agrees with other data pointing to manufacturing slowing.\u00a0 While the overall number was negative, the employment component was higher, as were firms\u2019 expectations about business activity looking ahead six months.<\/p>\n

On the real estate front, housing starts<\/strong> were weaker than anticipated, down -4.8%, as multi-family starts fell off a bit.\u00a0 At the same time, April starts were revised up, which tempered things a bit.\u00a0 Housing permits<\/strong> rose +7.9% in May, which was a surprise.\u00a0 Existing home sales<\/strong> were down -1.5%, which was largely in line with forecast, and was largely made up of falling figures for single family homes and condos.\u00a0 The months\u2019 supply of homes increased a tiny bit from 6.5 to 6.6.\u00a0 The median sales price of existing homes was up +5.1% on the month.<\/p>\n

 <\/p>\n

Choppy housing conditions continue, but the positive story is that we\u2019re not seeing further widespread deterioration.\u00a0 Seasonality may be contributing to some of the gains, but we\u2019ll take positive news when we can get it.<\/p>\n

On the employment front, initial jobless claims<\/strong> rose to 387k, which was about 4k higher than expected.\u00a0 The four-week moving average, which is the most-watched piece has also moved up to 386k, the highest point since the end of 2011.\u00a0 Standard 26-week continuing claims<\/strong> were unchanged but higher than anticipated at 3,299k; the emergency program recipients declined by 40k.\u00a0 It was echoed in Ben Bernanke\u2019s comments at the FOMC press conference, but employment growth has been subpar for this point in the recovery and has frustrated policymakers.\u00a0 The lack of job growth may well play an important role in upcoming election rhetoric.\u00a0 An improving economy and employment picture play well for President Obama and other incumbents; continued weakness, or even sub-par expectations, favor challengers.<\/p>\n

On a positive note, a recent study from the Fed Survey of Consumer Finances showed that median family net worth, despite falling almost 40% during the Great Recession, is now back up almost 15% from the low in 2009.\u00a0 Slightly improving home prices are a component, no doubt, as are improved financial returns from those lower levels.\u00a0 This \u2018wealth effect\u2019 does matter, in terms of household confidence and perceived ability to spend.<\/p>\n

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

 <\/p>\n\n\n\n\n\n\n\n\n\n
Period ending 6\/22\/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

-0.98<\/p>\n<\/td>\n

\n

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

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

-0.56<\/p>\n<\/td>\n

\n

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

Russell 2000<\/td>\n\n

0.53<\/p>\n<\/td>\n

\n

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

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

0.36<\/p>\n<\/td>\n

\n

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

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

-0.87<\/p>\n<\/td>\n

\n

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

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

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

\n

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

 <\/p>\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\/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

6\/22\/2012<\/td>\n\n

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

\n

0.31<\/p>\n<\/td>\n

\n

0.76<\/p>\n<\/td>\n

\n

1.69<\/p>\n<\/td>\n

\n

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

On the week, U.S. stocks were down\u2014in large part by investor disappointment of global central bank (primarily U.S. Fed and ECB) lack of response in providing further economic stimulus.\u00a0 We may still need it, but data hasn\u2019t deteriorated to the point yet where they\u2019ve found it necessary (see above).\u00a0 On the U.S. side, growth stocks in health care and technology outperformed while energy and utilities underperformed.\u00a0 European concerns continue to dominate sentiment on a seemingly day-to-day basis.<\/p>\n

 <\/p>\n

Bonds were mixed.\u00a0 Government issues were largely lower with higher yields, while \u2018credit,\u2019 such as high yield and foreign bonds performed positively.<\/p>\n

Commodities were led by a spike in agricultural contracts, while energy continued to lose ground, as did precious and industrial metals.\u00a0 The fall in oil\/gasoline prices has hurt the performance of oil stocks, but, as we\u2019ve mentioned before, this has come at a good time for consumers and the economy\u2014where lower energy costs are a significant aid to growth.<\/p>\n

 <\/p>\n

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

 <\/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

 <\/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

 <\/p>\n","protected":false},"excerpt":{"rendered":"

The Federal Reserve Open Market Committee ended their meeting last week with little new news.\u00a0 Target rates, at zero to roughly a quarter of a percent, can\u2019t be forced any lower, and, therefore, aren\u2019t as effective at further economic stimulation as they once were.\u00a0 What the Fed can do (and is doing) is extending \u2018OperationRead 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-883","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/883","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=883"}],"version-history":[{"count":1,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/883\/revisions"}],"predecessor-version":[{"id":884,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/883\/revisions\/884"}],"wp:attachment":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/media?parent=883"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/categories?post=883"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/tags?post=883"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}