It was the week of the month dominated by housing numbers.<\/p>\n
The NAHB homebuilder sentiment index<\/strong> rose from 37 in August to 40 in September, which beat consensus estimates of a 38 figure, and was led by all three index components:\u00a0 current sales, expected future sales and prospective buyer traffic.\u00a0 The other good news is that that the index is now at its highest level since mid-2006.<\/p>\n Housing starts<\/strong> rose less than expected in August, at +2.3% month-over-month versus a forecast +2.8%.\u00a0 This translated to an annualized level of 750k units, which is better than the 500k and under figures we became used to during the depths of the financial crisis, but remains below the long-term average level of a million homes a year we need to keep up with population growth.\u00a0 So, better, but still room to go.\u00a0 The good news in this report is that the increase consisted of a +5.5% rise in single-family starts, which offset a nearly -5% drop in starts from multi-family (a surge in multi-family building has been the recent trend).\u00a0 Housing permits<\/strong> fell -1.0% in August, month-over-month, which was better than the expected drop of -1.9%.<\/p>\n Existing home sales<\/strong> rose strongly in August, up +7.8% to an annualized level of 4.82 million units, versus a forecast +2.0% gain.\u00a0 The gain in sales occurred in both single-family homes and condos, although the single-family homes figure was a bit better.\u00a0 This represented more good news for housing, as were existing home prices<\/strong>, which came in at a +9.5% gain on the trailing year.\u00a0 The months\u2019 supply<\/strong> of homes fell to 6.1 months.<\/p>\n We\u2019ve been seeing this trend over the past several months, and housing appears to be bottoming (and even showing signs of growth in some regions).\u00a0 Recent studies done in this area show that a slow start into recovery isn\u2019t unusual and is perhaps more in line with more extreme previous real estate cycles (think the Texas and Oklahoma oil-oriented peak in 1983, California peak in 1986 and New England multi-state peak the same year), where a general price decline lasted for 3-4 years, with subsequent recovery periods taking 5-10 years.\u00a0 The national scope of the recent housing bust was unprecedented, but, thus far, the same pattern of decline and recovery in both housing prices and construction activity has held with these regional precedents.\u00a0 Conclusion:\u00a0 we\u2019re still in this recovery and may be for several more years.\u00a0 Also, as if clients haven\u2019t already discovered this, quick profits in housing may harder to come by compared to the pre-2005-2008 world.\u00a0 Long-term studies by Robert Shiller and others remind us that the long-term annual after-inflation\/real rate of return on residential housing is just a shade above zero.<\/p>\n The regional manufacturing surveys have certainly been in the news more than average\u2014much of it due to weakness in recent numbers.\u00a0 The Empire state index<\/strong> from the New York Fed declined further, from -5.85 to -10.41 in September, which was much worse than expected.\u00a0 New orders, shipments and employment were all down and inventories crept up\u2014so universally weaker.\u00a0 Conversely, the Philadelphia Fed Index<\/strong> improved slightly, from -7.1 to -1.9, which was better than expected and again reminded us of the fickleness of these indexes.\u00a0 While shipments were down, new orders here were better and expectations about future business activity were much more positive (in fact, the best reading in 20 years).\u00a0 Also, the Morgan Stanley Business Conditions Index<\/strong> jumped 18 points to 55% for September, which was a bit of a surprise.<\/p>\n On the jobs front, initial claims<\/strong> for the Sept. 15 week were a lower 382k, but still higher than the expected 375k.\u00a0 Some of this carryover may be related to Tropical Storm Isaac, but this effect, if any, seems to be fading away.\u00a0 Continuing claims<\/strong> for the Sept. 8 week, however, fell again and were lower than expected at 3,272k versus the forecast 3,300k.\u00a0 The continuing claims trend is a positive one in recent weeks.<\/p>\n Minneapolis Fed President Kocherlakota made comments this last week regarding the possible longevity of the Fed\u2019s easing plan\u2014alluding to continued low rates until the unemployment rate reaches 5.5% or so (considered to be \u2018full\u2019 employment in some economic models).\u00a0 So, assuming current population growth trends and consistent labor force participation, the U.S. will need to generate nearly 145,000-160,000 jobs a month for the next 6 years to hit this goal.\u00a0 Considering the Fed\u2019s dual mandate, one of which is maximizing employment, expect the foot on the gas for some time.<\/p>\n Market Notes <\/em><\/strong><\/p>\n Period ending 9\/21\/2012<\/strong><\/td>\n 1 Week (%)<\/strong><\/p>\n<\/td>\n YTD (%)<\/strong><\/p>\n<\/td>\n<\/tr>\n -0.08<\/p>\n<\/td>\n 13.38<\/p>\n<\/td>\n<\/tr>\n -0.36<\/p>\n<\/td>\n 17.97<\/p>\n<\/td>\n<\/tr>\n -1.03<\/p>\n<\/td>\n 16.63<\/p>\n<\/td>\n<\/tr>\n -0.87<\/p>\n<\/td>\n 13.11<\/p>\n<\/td>\n<\/tr>\n -0.74<\/p>\n<\/td>\n 9.84<\/p>\n<\/td>\n<\/tr>\n 0.45<\/p>\n<\/td>\n 3.63<\/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 0.11<\/p>\n<\/td>\n 0.27<\/p>\n<\/td>\n 0.72<\/p>\n<\/td>\n 1.88<\/p>\n<\/td>\n 3.09<\/p>\n<\/td>\n<\/tr>\n 0.11<\/p>\n<\/td>\n 0.27<\/p>\n<\/td>\n 0.68<\/p>\n<\/td>\n 1.77<\/p>\n<\/td>\n 2.95<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Stocks were a touch lower on the week, with U.S. large cap equities ending with minimal losses, and outperforming smaller-cap stocks and foreign issues.\u00a0 From a sector perspective, telecom and healthcare outperformed, while cyclical materials, financials and energy lagged.\u00a0 Domestic stocks generally beat foreign issues.\u00a0 In the EAFE, the European nations generally underperformed Japan and Australia.\u00a0 Emerging market India led the way with a strongly positive week from a country standpoint, while nations like Brazil, France and Italy were off by the greatest amounts.<\/p>\n From an earnings note, bellwether FedEx disappointed investors.\u00a0 Despite better than expected earnings, they lowered forward-looking expectations, which, considering their unique role in the global economy, is interesting, but didn\u2019t appear to rattle investors too much this week.\u00a0 Managements appear again to be in a race to lower guidance, which should certainly affect investor perceptions of 3rd quarter earnings which will start tricking in during October.<\/p>\n With interest rates lower, long bonds outperformed, led by 20+ year Treasuries, while other investment grade issues were solidly positive.\u00a0 Domestic high yield and foreign debt generally came in negative.<\/p>\n Commodities were generally down on the week, with the exception of precious metals, which gained a bit again on QE easing.\u00a0 The biggest drops were in energy (oil down -5%) and agriculture, the latter due to uncertainty about global economic growth, including a report by the American Petroleum Institute that U.S. oil consumption in August hit its lowest level in 15 years.\u00a0 Interestingly, is still about $6 cheaper per barrel that it was last December, while gasoline is about $0.60 higher a gallon.<\/p>\n We made note of some straightforward comments made by investment icon and Vanguard founder Jack Bogle recently in a publication.\u00a0 Interesting to consider are his long-tested models for forward-looking equity and fixed income returns… stocks should generally return a sum of their current dividend yield plus earnings growth (so, call it 2% + 5% = 7%, on the conservative side).\u00a0 The best estimate for total return for bonds is their current yield (just under 2.5% for the BarCap Aggregate at the moment).\u00a0 Perhaps a simple but effective rule for clients to keep in mind.<\/p>\n Have a good week.<\/p>\n Karl Schroeder, RFC<\/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":" It was the week of the month dominated by housing numbers. The NAHB homebuilder sentiment index rose from 37 in August to 40 in September, which beat consensus estimates of a 38 figure, and was led by all three index components:\u00a0 current sales, expected future sales and prospective buyer traffic.\u00a0 The other good news isRead 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-916","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/916","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=916"}],"version-history":[{"count":1,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/916\/revisions"}],"predecessor-version":[{"id":917,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/916\/revisions\/917"}],"wp:attachment":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/media?parent=916"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/categories?post=916"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/tags?post=916"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n\n
\n \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\/31\/2011<\/td>\n \n \n \n \n \n \n 9\/14\/2012<\/td>\n \n \n \n \n \n \n 9\/21\/2012<\/td>\n \n \n \n \n \n