Weekly Economic Update

Posted on March 9, 2015 by LSAConnect

Economic Update 3-09-2015

 

  • Economic data last week was mixed, as ISM manufacturing and non-manufacturing reports showed expansion, albeit at a lessened rate than expected. Employment data was strong on Friday, in both payrolls and a lower unemployment rate, despite lower participation as a contributing element.
  • Equity markets took a turn for the negative later in the week, as that same stronger employment data heightened fears of sooner Fed rate hike action. Interest rates responded by rising as well, which hurt bond prices.  Commodity prices fell upon a stronger dollar and larger crude oil inventories.

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Chart of the Week: Chasing the S&P 500

Posted on March 5, 2015 by LSAConnect

Chart of the Week: Chasing the S&P 500

LSE_WHATS_NEXT_FOR_EQUITY_MRKTSSource

This week’s chart is a visualization of the risk that comes with investing in the S&P 500. Due to its rapid increase since the bottom of the 2008 recession, the popular use of the S&P 500 as a benchmark to track portfolio performance has led to misguided investor expectations of returns for a properly diversified portfolio. With the S&P 500 hitting all-time highs, it has never been more important nor more challenging for investors to understand the significance of downside protection and staying within their own level of risk. Forbes, Market Watch, Investment News, and many others have come out with articles that may be beneficial to share with clients to help them make sense of the current market conditions in relation to a diversified portfolio.

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Weekly Economic Update

Posted on March 2, 2015 by LSAConnect

Economic Update 3-02-2015

  • Economic data was mixed on the week, with housing figures relatively flat on net, inflation coming in weaker on a headline level due to the impact of lower energy prices, and tempered results in other areas. Adjusted GDP results for Q4 of 2014 notched downward a bit, which reflects this slower patch.
  • Equities gained on the week, with foreign stocks outperforming domestic. Bonds generally experienced a positive week upon a retraction in longer-term interest rates.  Although oil prices were mixed to lower, commodity indexes gained upon the heels of higher gasoline prices.

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Chart of the Week: Is this the Biggest Threat to the US Economy?

Posted on February 26, 2015 by LSAConnect

Dollar

The surge of the US dollar is beginning to be crowned by some as the biggest threat to the economic recovery.  Although the rise is significant, this chart shows that the US Dollar Index is essentially in line with the 20 year average. There is a fear that the worst is yet to come and that when monetary policy begins to tighten, the surge can reach unprecedented levels. However, it is possible that since the rate hike is so highly anticipated to occur sometime this year, it is already priced in to the dollar. For now, the stronger dollar should be seen as a vote of confidence in the US economy, but if it does not slow its current trend it can be harmful to an already sluggish recovery.

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Weekly Economic Update

Posted on February 23, 2015 by LSAConnect

Economic Update 2-23-2015

  • Economic data on the week was mixed to lower, with several key surveys and housing reports coming in weaker than expected. Perhaps more severe winter weather in recent weeks played a bit of a role, and/or we’re seeing some flattening in growth acceleration.
  • U.S. stocks experienced a less volatile week, with prices ending up slightly above where they started after news of a potential deal between Greece and Europe at the end of the week. Interest rates rose, which was a negative for government bonds across the curve, but credit fared better.  Commodities lost ground again with choppiness in the oil patch.

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Weekly Economic Update

Posted on February 16, 2015 by LSAConnect

Economic Update 2-16-2015

  • In a moderately quiet week for economic releases, retail sales disappointed last month on a headline level due to lower gasoline prices. However, price recovery in recent weeks may have weighed on fickle consumer sentiment.
  • Global equity markets gained ground on a variety of geopolitical events (Ukraine, Europe/Greece) resulting in better sentiment. Bonds lost ground on higher interest rates, notably on the longer-end of the curve.  Commodities experienced another positive week with continued stabilization in energy prices.

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Chart of the Week: Crunch Time for Greece

Posted on February 11, 2015 by LSAConnect

Chart of the Week: Crunch Time for Greece

Greek Bank Stocks

Source: http://ow.ly/ITA9T

 This past Friday, Eurogroup Chief Jeroen Dijsselbloem shot down Prime Minister Alexis Tsipras’s proposal for a “bridge loan” program that would avoid Greece being shut off from funding at the end of the month, which would have given Greece and Eurogroup officials more time to renegotiate the terms of the bailout program. Under the current bailout agreement, Greece can still receive up to 7 billion euros of aid, but it must comply with further austerity measures of which the new government refuses to implement. The next showdown between the officials is an emergency meeting called this afternoon. Fears of deposit flight are accelerating, as Greek bank stocks have sunk more than 10% this week at the beginning of this week.

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Weekly Economic Update

Posted on February 9, 2015 by LSAConnect

Economic Update 2-09-2015

  • It was a relatively busy week for several economic reports, including a lackluster but positive ISM number and an employment report that came in better than expected.
  • U.S. equity markets rebounded strongly higher on the week with an easing in geopolitical concerns between the EU and Greece, stabilization in oil prices and end to a less-than-apocalyptic earnings season. Bonds suffered one of their worst weeks in some time with interest rates shooting higher.  Commodities also gained sharply on the back of oil’s gains.

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Chart of the Week: Volatility and the Stock Market

Posted on February 6, 2015 by LSAConnect

Chart of the Week: Volatility and Stock Returns

Vix to SP returns

This chart shows S&P 500 annual average returns relative tovolatility measured by the VIX Index. Currently, the VIX is hovering around a comfortable reading of 18, just shy of its average reading of 20. The VIX has not shown a monthly average over the 20 mark in over two years (June 2012), no doubt contributing to the attractive returns passive investing boasted during this time period. However, this long stretch of relatively calm activity appears to be coming to end as the VIX has been trending upward the past year. With the uncertainties of oil prices, currencies, geopolitical concerns, and Fed policy flooding the market, it is unlikely this trend will break anytime soon, shaping up 2015 to be a year to emphasize a diversified investing approach.

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Weekly Economic Update

Posted on February 2, 2015 by LSAConnect

Economic Update 2-02-2015

  • Economic data was highlighted by the conclusion of the FOMC meeting (status quo), GDP for Q4 was slightly weaker than expected, and housing numbers were mixed. Consumer confidence, however, on the heels of cheap gasoline, reached new highs.
  • Equity markets lost ground last week, upon a variety of geopolitical concerns, optimistic Fed sentiment and mixed corporate earnings results. Bonds again shined, as yields fell to lows not seen since mid-2012.  Commodities actually rebounded a bit, as oil markets continued to search for a bottom to prices.

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Chart of the Week: A Tale of Two Economies

Posted on January 29, 2015 by LSAConnect

Chart of the Week: A Tale of Two Economies

P1-BS611A_TWOTI_16U_20150128171805

This week’s chart comes straight from the Wall Street Journal that featured the research findings of Barry Cynamon of the St. Louis Fed and Steven Fazzari of Washington University in St. Louis. In their studies, Cynamon and Fazzari found that, since 2009, “average per household spending among the top 5% of U.S. income earners—adjusting for inflation—climbed 12% through 2012, the most recent data available. Over the same period, spending by all others fell 1% per household.” In their conclusion, they argue that inequality and the associated demand drag helps explain the slow recovery.

Read the full research paper here: http://ow.ly/I9UFe

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Fed Note

Posted on January 28, 2015 by LSAConnect

Fed Note:

The January FOMC meeting ended without incident, and without major change in strategy or language, as expected.  There are four new FOMC voting members this year, but this didn’t change the overall tone (no dissenters this time).  In the formal release, they upgraded language for economic activity as expanding from a ‘moderate’ to now ‘solid’ pace, and job gains from ‘solid’ to ‘strong.’  The decline in energy prices was noted as a positive for household purchasing power.  The ‘considerable time’ language for a low rate regime was removed, while the ‘patient’ approach was retained.  Continue reading →

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