{"id":905,"date":"2012-09-04T14:51:43","date_gmt":"2012-09-04T20:51:43","guid":{"rendered":"http:\/\/www.sunlakesofarizona.com\/blog\/?p=905"},"modified":"2012-09-05T04:11:51","modified_gmt":"2012-09-05T10:11:51","slug":"economic-notes-for-the-week-of-september-4th","status":"publish","type":"post","link":"https:\/\/dev.sunlakesofarizona.com\/blog\/2012\/09\/economic-notes-for-the-week-of-september-4th\/","title":{"rendered":"Economic Notes for the Week of September 4th"},"content":{"rendered":"

Consumer confidence<\/strong> fell in August unexpectedly down to 60.6, versus the consensus estimate of 65.9.\u00a0 A deterioration in the \u2018expectations\u2019 component was the biggest reason for the drop, while the \u2018present\u2019 conditions and \u2018employment\u2019 measures were relatively flat.\u00a0 As we know, sentiment measures can be quite fickle.<\/p>\n

Conversely, <\/strong>University of Michigan consumer sentiment<\/strong> rose to a three-month high in August, from 72.3 to 74.3, and beating an expected figure of 73.6.\u00a0 Current conditions scored highest and were sharply upward, while expectations for the more immediate future (6 months from now) fell a few points.<\/p>\n

Consumer spending<\/strong> gained +0.4%, which was slightly below consensus by a tenth-of a percent or so and was the first gain in real spending for several months.\u00a0 Personal income<\/strong> was up +0.3% for July, which was right on target with forecast.<\/p>\n

Factory orders<\/strong> rose +2.8% for July, which represented the largest move in a year and reflected strength in motor vehicle and airplane sales; however, in another mixed report, core orders dropped.<\/p>\n

The Case-Shiller House Price Index<\/strong> gained +0.9% for June, which was about twice the forecast amount.\u00a0 This brought the year-over-year index to a half-percent positive number, which is the first since 2010.\u00a0 Prices for the month were higher in 18 of the 20 cities surveyed, with the biggest moves in Detroit, Atlanta and San Francisco.<\/p>\n

Pending home sales<\/strong> were a little better than anticipated for July at +2.4% versus a +1.0% expected gain.\u00a0 This index tracks signed but not finalized sales, so these figures end up translating into existing home sales a few months after they appear on this list.\u00a0 From a regional standpoint, sales increased in all areas (mostly the South and Midwest) except for the West, which saw a drop of a percent and a half.<\/p>\n

The second estimate of Q2 GDP<\/strong> was revised upward, as many expected, from +1.5% to +1.7%.\u00a0 This revision higher generally stemmed from stronger net exports than in the advance estimate.\u00a0 Elsewhere, inventory accumulation was revised lower and personal consumption growth was revised up; however, capital spending and residential investment ratcheted down a bit.<\/p>\n

GDP growth in the U.S. is expected to be 2.0-2.5% range for the third quarter, which represents an improvement to Q1\u2019s number.\u00a0 This makes the Fed\u2019s situation especially difficult, in that it may be too strong for additional easing but not strong enough to make significant progress from the standpoint of job growth.\u00a0 However, it is above \u2018stall speed\u2019 needed for economic acceleration to occur.<\/p>\n

The Fed\u2019s Beige Book<\/strong>, a summary piece continuing narratives from all regional Fed Reserve district banks, was also released and told a similar story to what we\u2019ve been seeing through other economic data:\u00a0 manufacturing is mixed (roughly half-and-half, in terms of positive vs. negative news from various districts), while consumer spending has continued to grow slowly.\u00a0 Additionally, housing market activity is improving in almost all areas in terms of home sales, prices and construction projects.\u00a0 The downside, as noted in the Bernanke Jackson Hole comments, is the weak labor market.<\/p>\n

The Chicago PMI<\/strong> came out a bit lower than expected, at 53.0 versus an expected 53.2, so a minor disappointment.\u00a0 That said, some of the underlying figures in the index weren\u2019t too bad\u2014as new orders, production and employment were all higher; on the negative, inventory and deliveries were down, while prices paid were up.<\/p>\n

Lastly, initial jobless claims<\/strong> for the Aug. 25 week were 374k, higher than a forecast 370k, while continuing claims were also slightly higher at 3,316k for the Aug. 18 week.\u00a0 The four-week moving average of initial claims remains well below earlier summer\u2019s higher levels.<\/p>\n

The big news of the week was Ben Bernanke\u2019s comments at the annual Fed retreat at Jackson Hole<\/strong>, although it largely was a non-event from the standpoint of dramatic pronouncements or surprise strategies.\u00a0 The speech went through a historical analysis of decisions made during the financial crisis and made the case for unconventional monetary easing, such as balance sheet \u2018tweaking\u2019 and communication efforts, and made special note of the poor state of the U.S. labor market (which also took center stage at this week\u2019s Republican National Convention).\u00a0 He acknowledged research showing that Fed actions over the last few years may have raised output by 3% and added 2 million jobs to private payrolls, based on internal economic models.<\/p>\n

The most pessimistic comments alluded to long-term challenges generated in an economy where long-term unemployment remains high, which turns into structural high unemployment due to loss of skills and other factors.\u00a0 Therefore, along with other similar comments, there is a good chance the Fed will remain on the gas pedal for some time.<\/p>\n

Market Notes <\/em><\/strong><\/p>\n\n\n\n\n\n\n\n\n\n
Period ending 8\/31\/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

-0.45<\/p>\n<\/td>\n

\n

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

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

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

\n

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

Russell 2000<\/td>\n\n

0.40<\/p>\n<\/td>\n

\n

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

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

-0.78<\/p>\n<\/td>\n

\n

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

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

-1.88<\/p>\n<\/td>\n

\n

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

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

0.50<\/p>\n<\/td>\n

\n

3.85<\/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

8\/24\/2012<\/td>\n\n

0.10<\/p>\n<\/td>\n

\n

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

\n

0.72<\/p>\n<\/td>\n

\n

1.68<\/p>\n<\/td>\n

\n

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

8\/31\/2012<\/td>\n\n

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

\n

0.22<\/p>\n<\/td>\n

\n

0.59<\/p>\n<\/td>\n

\n

1.57<\/p>\n<\/td>\n

\n

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

 <\/p>\n

 <\/p>\n

Markets this week were down slightly, as expectations for a dramatic Bernanke speech at Jackson Hole didn\u2019t play out as expected\u2014with few surprises or other \u2018twists.\u2019\u00a0 Small-caps outperformed large-caps, which has been somewhat unusual as of late.\u00a0 From a sector standpoint, consumer discretionary and health care stocks outperformed on the week, while industrials and utilities lagged\u2014another week with no clear-cut \u2018risk-on\u2019 or \u2018risk-off\u2019 connection.<\/p>\n

 <\/p>\n

From a year-to-date standpoint, technology and financials have led the way (although tech has been somewhat of a \u2018quiet\u2019 winner), while utilities and energy have brought up the rear.\u00a0 Cyclicals have not really paid off this year, while defensive stocks like staples and health care have ended up roughly in the middle of the pack.<\/p>\n

 <\/p>\n

Spain and Italy both led foreign markets, while emerging market stocks\u2014notably all four BRICs\u2014were the bigger losers on the week.\u00a0 Concerns about China in particular have been ongoing for months.\u00a0 Even though growth remains much higher than in developed nations on an absolute level, export activity has slowed (along with corresponding buying activity by larger developed market trading partners), and the government races in attempts to engineer a soft landing.\u00a0 China\u2019s level of success in doing so, as well as demand conditions in the rest of the world, appear to be the main questions that global economic growth is hinged to for the second half of 2012.<\/p>\n

Bonds gained on a drop in interest rates.\u00a0\u00a0 Long treasuries performed best, due to the duration effect, but most intermediate-term credit and foreign debt also gained ground on the week.<\/p>\n

U.S. REITs, primarily retail and industrial, led on the week, while developed Asia lagged by the greatest amount.<\/p>\n

In the commodity world, precious metals led returns on the week, up +1%, likely on expectations for future quantitative easing.\u00a0 Energy was also up on the week, as were agricultural commodities, while industrial metals ended up as the only loser.<\/p>\n

As summer comes to an end, we begin looking towards year-end and traditional seasonal volatility.\u00a0 Sometimes fall (and September in particular) gets a bad rap, with a reputation for volatility and inconsistent returns.\u00a0 In reviewing monthly returns since 1926, September does have the lowest \u2018batting average\u2019 (winning months relative to losing months), but even that ratio is 50%.\u00a0 (October is a bit better at 60%, and all months combined are 62%.)\u00a0 So, while we\u2019ve seen a few wild rides in the fall season, we are in no means destined for poor outcomes.\u00a0 Likely, macro factors will weigh heavily.<\/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":"

Consumer confidence fell in August unexpectedly down to 60.6, versus the consensus estimate of 65.9.\u00a0 A deterioration in the \u2018expectations\u2019 component was the biggest reason for the drop, while the \u2018present\u2019 conditions and \u2018employment\u2019 measures were relatively flat.\u00a0 As we know, sentiment measures can be quite fickle. Conversely, University of Michigan consumer sentiment rose toRead 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-905","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/905","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=905"}],"version-history":[{"count":2,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/905\/revisions"}],"predecessor-version":[{"id":907,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/905\/revisions\/907"}],"wp:attachment":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/media?parent=905"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/categories?post=905"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/tags?post=905"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}