It was a busy week as far as economic releases were concerned.\u00a0 Expect many of the individual numbers to be affected at least to some degree by Hurricane Sandy and its aftermath.<\/p>\n
Retail sales<\/strong> fell -0.3% for the week, which ended up being a shade weaker than the consensus drop of -0.2%.\u00a0 Much of the expected decline was a direct result of the Sandy aftermath, which is a drag for obvious reasons, as well as some payback from strong weeks previous that were spurred by iPhone 5 sales.\u00a0 There were some data reporting disruptions as well, which is also expected and may take time to sort out due to continued difficulty in getting infrastructure back up and running back East.<\/p>\n Industrial production<\/strong> fell -0.4% in October as well, relative to a forecasted gain of +0.2%\u2014again, the storm was at the heart of the decline.\u00a0 Manufacturing production also fell -0.9%.\u00a0 While the exact impact is hard to estimate, the FEMA and Fed estimates point to Sandy holding back production by roughly a percentage point\u2014enough to take us from growth to decline in literal terms (especially in utilities and transportation equipment).\u00a0<\/p>\n Capacity utilization<\/strong> was also down, to 77.8%, versus an expected 78.3% level.\u00a0 We expect this may continue for the remainder of the year, as facilities slowly come back online, and better numbers perhaps in the first quarter of 2013.\u00a0 So, for now, the numbers are a bit noisy and we would have to assume not generally reflective of the national economic trend.\u00a0 Business inventories<\/strong> rose +0.7% in September, which was just a shade above expected and in line with recent months\u2019 numbers.<\/p>\n The October Producer Price Index (PPI)<\/strong> dropped by -0.2%, month-over-month, which ran counter to an expected +0.2% gain (the core PPI fell by about the same amount as the headline number).\u00a0 The year-over-year number also fell from 2.3% to 2.1%.\u00a0 Commodity prices fell, which represented the bulk of this change, as did a decline in auto prices (similar to what happened with the CPI last month).<\/p>\n The headline consumer price index (CPI)<\/strong> rose +0.1% month over month in October, which was on target with the expected change.\u00a0 The core<\/strong> component of the index (sans food and energy) gained a bit more, at +0.2%, which was a tenth of a percentage point higher than anticipated.\u00a0 The bulk of the increase was due to rents up +0.4%, \u2018owners\u2019 equivalent rent\u2019 up +0.2% and transportation services up +0.7% (due to higher airfares).\u00a0 However, prices for used cars\/trucks fell -0.9%, which provided some relief.\u00a0 Year-over-year, the headline inflation number was up +2.2% with core up +2.0%.\u00a0 The story on both is that, despite periodic fluctuations in commodity prices (namely gasoline), there remains a fair amount of slack in the economy and inflation remains subdued for now.<\/p>\n The Philadelphia Fed survey<\/strong> fell to -10.7 versus a forecasted gain reading of +2.0.\u00a0 This was seen as a bit of a surprise, but considering overall storm damage, it probably shouldn\u2019t be.\u00a0 The official comments referenced Hurricane Sandy by name, with mention that firms responding to the survey lost about 2 days of activity on average\u2014this may seem like a small number, but can affect surveys in a large way from a percentage standpoint when you consider there are only 31 days in a month (and about . \u00a0New orders and shipments were both down, while employment stayed relatively flat to slightly higher.\u00a0 The Empire State manufacturing survey<\/strong> from the New York Fed was essentially flat for November, at -5.2 versus -6.2 last month.\u00a0 The report was a big stronger than expected due to better new orders and shipments, despite reports of Sandy\u2019s storm effects on respondents.\u00a0 Inventories fell, as did employment.<\/p>\n The NFIB Small Business Optimism survey<\/strong> didn\u2019t change much from September to October, up +0.3 points to 93.1, and was right on target with forecast as well as general readings during 2012.\u00a0 Anecdotally, survey respondents (owners of small businesses) have continued to place regulation and higher taxes as critical fears in their assessment of business issues (this is no different than from the past several years, really).\u00a0 However, at this point the number of owners who are uncertain about whether conditions will improve or deteriorate in the next six months is at an all-time high.<\/p>\n The minutes from the late October FOMC meeting<\/strong> came out this week, but the output wasn\u2019t much of a surprise to anyone.\u00a0 Mainly, it appeared that additional asset purchases may be forthcoming in the December meeting and beyond\u2014largely to replace and take up the slack when Operation Twist ends.\u00a0 Additionally, the committee may be moving from a calendar-based timeline (mid-2015 currently) to an outcome-based approach\u2014which would likely consist of targets for both unemployment and inflation.\u00a0 This might not happen this year, but it\u2019s been hinted at for \u201913.<\/p>\n How would this work?\u00a0 The FOMC would apply easing conditions as long as conditions warranted it and would measure their progress\/results by the unemployment level.\u00a0 If it falls to a certain point (arguably somewhere between 5.5% and 7.0%), they\u2019re done.\u00a0 Also, if CPI rises to a certain threshold point (probably an upper bound of 2.5-3.0%), they\u2019d also take the foot off the gas as to prevent unnecessary inflation.\u00a0 More details to come on such a plan, but this seems to be a possible path.<\/p>\n Initial jobless claims<\/strong> for the week ended Nov. 10 rose a dramatic +439k, compared to expectations of a +375k increase.\u00a0 Continuing claims<\/strong> for the Nov. 3 week rose +171k to 3,334k.\u00a0 The DOL acknowledged the storm\u2019s impact on both results, which, again, discounts some of their value from a broader economic standpoint.<\/p>\n Market Notes <\/em><\/strong><\/p>\n Period ending 11\/16\/2012<\/strong><\/td>\n 1 Week (%)<\/strong><\/p>\n<\/td>\n YTD (%)<\/strong><\/p>\n<\/td>\n<\/tr>\n -1.65<\/p>\n<\/td>\n 5.54<\/p>\n<\/td>\n<\/tr>\n -1.36<\/p>\n<\/td>\n 10.29<\/p>\n<\/td>\n<\/tr>\n -2.31<\/p>\n<\/td>\n 6.05<\/p>\n<\/td>\n<\/tr>\n -2.02<\/p>\n<\/td>\n 7.16<\/p>\n<\/td>\n<\/tr>\n -2.13<\/p>\n<\/td>\n 5.83<\/p>\n<\/td>\n<\/tr>\n 0.01<\/p>\n<\/td>\n 4.39<\/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 0.09<\/p>\n<\/td>\n 0.27<\/p>\n<\/td>\n 0.65<\/p>\n<\/td>\n 1.61<\/p>\n<\/td>\n 2.75<\/p>\n<\/td>\n<\/tr>\n 0.06<\/p>\n<\/td>\n 0.24<\/p>\n<\/td>\n 0.62<\/p>\n<\/td>\n 1.58<\/p>\n<\/td>\n 2.73<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Stocks continued their slide this week as \u2018fiscal cliff\u2019 concerns and possible resolutions dominated the news.\u00a0 This may likely be the case throughout the remainder of the month and through December, absent any other geopolitical or economic headlines during the Holidays, as attention will again shift to corporate earnings for Q4 in January.<\/p>\n In the U.S., all domestic sectors lost ground, but consumer discretionary and staples performed best on the week.\u00a0 Telecom, information technology and industrials fared worst.<\/p>\n From a country standpoint, Japan recovered with the best return on the week, followed by Spain.\u00a0 Japan\u2019s new prime minister dissolved parliament last week and established elections for December, which may have given investors some hope in that troubled market.\u00a0 A declining but perhaps still expensive Yen may help their competitiveness yet.\u00a0 In the emerging market arena, Mexican stocks earned about a percent while everything else lost ground.\u00a0 Greek stocks fell the most as the nation raised just enough money through a treasury auction to avoid defaulting on a debt payment last week.\u00a0 The prime minister and other lawmakers passed continued limited austerity measures in their 2013 budget and pushed for additional Euro funds, frozen since June.<\/p>\n Bonds were flat to slightly higher with rates slightly lower (by a few basis points, which can matter more on the long end than the short end, as we\u2019ve discussed).\u00a0 As expected, long treasuries and corporates gained the most ground.\u00a0 Foreign debt, in both developed and emerging markets, fared the worst on the week.<\/p>\n All real estate categories were down on the week, but Asian REITs were the best performing, followed by U.S. residential and European names.\u00a0 Domestic industrials and retail lost the most ground, in keeping with broader equities.<\/p>\n Commodities were mixed on the week.\u00a0 Livestock, a tiny piece of most indexes, was the best performer, followed by industrial metals and energy.\u00a0 Precious metals fell back a bit and agricultural commodities lost several percent to bring up the rear for the week.\u00a0 Perhaps the most interesting news was the IEA\u2019s 2012 World Energy Outlook which was published this week and projected that the United States will surpass Saudi Arabia as the world\u2019s largest oil producer by \u2018around 2020.\u2019\u00a0 Obviously, if this proves to be even remotely accurate, the impact on global geopolitical affairs and energy policy in coming years could be quite dramatic.<\/p>\n One last comment regarding investor sentiment.\u00a0 In recent months, consumer sentiment had begun to slowly improve as seen through a variety of different surveys, including the Univ. of Michigan, Conference Board as well as Gallup polls.\u00a0 On the other hand, many retail investor surveys, like the AAII and CNN Money \u2018Fear & Greed Index\u2019, continue to show choppy results, based on both market performance and the political environment.\u00a0 However, in all cases we\u2019re still well below highs reached in 2006-2007.<\/p>\n What affects these surveys?\u00a0 You\u2019d think it would be common sense, since we\u2019re not only consumers ourselves, but we\u2019re also colored as \u2018insiders,\u2019 so to speak.\u00a0 Goldman Sachs recently took a look at sentiment variables and determined that there were four critical components that correlated closely with sentiment:\u00a0 (1) gasoline prices, (2) the stock market, (3) employment levels and (4) economic policy uncertainty.\u00a0 Seems simple enough, and fairly intuitive.\u00a0 Three of those are easy to measure, while the policy uncertainty factor is a little more difficult (some academics attempt to do this through indexes they\u2019ve created and serve as the best surrogate for this piece).\u00a0 Interestingly, the first two variables of gas and stock prices explain over two-thirds of the sentiment results\u2014again, not unsurprising perhaps since those are the most obvious in our daily lives and experience the highest degrees of fluctuation.\u00a0 Employment is certainly a factor, but tends to be bimodal\u2014you\u2019re either working or you\u2019re not.<\/p>\n Where do we stand now?\u00a0 Not quite down in the dumps, but generally in poor moods\u2014however, these moods are improving.\u00a0 When these moods improve even further, history has shown that risk asset performance may continue to improve as well.<\/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 a busy week as far as economic releases were concerned.\u00a0 Expect many of the individual numbers to be affected at least to some degree by Hurricane Sandy and its aftermath. Retail sales fell -0.3% for the week, which ended up being a shade weaker than the consensus drop of -0.2%.\u00a0 Much of theRead 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-928","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/928","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=928"}],"version-history":[{"count":1,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/928\/revisions"}],"predecessor-version":[{"id":929,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/posts\/928\/revisions\/929"}],"wp:attachment":[{"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/media?parent=928"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/categories?post=928"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dev.sunlakesofarizona.com\/blog\/wp-json\/wp\/v2\/tags?post=928"}],"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 11\/9\/2012<\/td>\n \n \n \n \n \n \n 11\/16\/2012<\/td>\n \n \n \n \n \n