Next Move: Washington
Weekly Update – February 19, 2013
Markets ended a quiet week basically flat, though the S&P 500 managed to chalk up its
seventh week of gains. For the week, the S&P 500 gained 0.12%, while the Dow lost
0.08% and the Nasdaq trimmed 0.06%.i
There was quite a bit of economic data released last week - here are a few highlights:
U.S. manufacturing appeared to stumble in January as factory output fell 0.4%,
according to a Federal Reserve report. However, production was much higher in the
final months of 2012 than expected, indicating that this could be a temporary setback. ii
Europe is weighing on markets as a disappointing GDP report showed that the
economies of France, Germany, Greece, Italy, and Portugal all contracted in the fourth
quarter of 2012. As a result, the fourth quarter Eurozone GDP shrank 0.6% compared
with the third quarter.iii On the positive side, consumer confidence beat expectations
with a significant bump in January as Americans responded enthusiastically to the
resolution of the fiscal cliff. Households earning less than $75,000 were among the most
optimistic about the future, belying economists’ concerns about the weight of payroll
taxes among this group.iv On the whole, we think the general trend shows that the
economy is still plowing forward, despite concerns about budgets and federal spending.
The holiday-shortened week will see the release of housing data and minutes from the
January Fed FOMC meeting. Markets could stay in low gear as investors look for signs
of future Fed moves and examine reports on housing data.v
Looking farther ahead, we’re anticipating some market headwind in the form of the
March 1st sequestration deadline that is fast approaching. This automatic series of
federal spending cuts was temporarily extended in January during the fiscal cliff
wrangling to allow Congress and the President more time to negotiate. However, with
no resolution thus far, and Congress in recess this week, it appears as though the
deadline may pass with no action.vi Although markets have been ignoring the news thus
far, the effects of sequestration in massive federal budget cuts, lost jobs, furloughs, and
defense cutsvii would very likely have a negative effect on markets. While we never try
to make definite predictions, we’re keeping a close eye on what’s going on in
Washington and will keep you informed. As always, we focus on the long term while
taking advantage of opportunities as they present themselves.
ECONOMIC CALENDAR:
Monday: U.S. Markets Closed for Presidents’ Day Holiday
Tuesday: Housing Market Index
Wednesday: Housing Starts, Producer Price Index, FOMC Minutes
Thursday: Consumer Price Index, Jobless Claims, PMI Manufacturing Index Flash,
Existing Home Sales, Philadelphia Fed Survey, EIA Petroleum Status Report
Data as
of 2/15/2013
1-Week
Since 1/1/2013
1-Year
5-Year
10-Year
& Poor's 500
0.12%
6.56%
13.14%
2.52%
8.20%
DOW
-0.08%
6.70%
9.40%
2.65%
7.68%
NASDAQ
-0.06%
5.71%
9.47%
7.50%
14.36%
International
-0.17%
2.76%
12.91%
-1.03%
13.33%
of 2/15/2013
1 mo.
6 mo.
1 yr.
5 yr.
10 yr.
Treasury Yields
(CMT)
0.09%
0.13%
0.17%
0.87%
2.01%
Standard
Data as
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, Treasury.gov. International performance is represented by the iShares MSCI EAFE Index
Fund (ETF). Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into
directly.
HEADLINES:
G20 countries put off debt cutting. The 20 most economically powerful countries in
the world met at a summit in Moscow and expressed concern about the fragile state of
the global economy. Despite concerns about high levels of debt held by countries such
as Japan, the nations jointly agreed to focus efforts on economic stability.viii
Oil prices drop on weakened manufacturing data. Crude oil fell below $96 a barrel
after a report on U.S. factory output showed a decline. With global demand weak, 2013
may see lower oil and gasoline prices.ix
Unemployment drops to three-week low. Unemployment applications fell last week to
a seasonally adjusted 341,000. Applications have declined slowly and steadily over the
past few months, indicating that hiring could improve this year.x
China avoids hard landing. China’s economy averted a steep slowdown and appears
to be poised for moderate growth, according to a former central bank advisor, indicating
that the bank’s monetary intervention may have worked. China’s GDP grew by 7.9% in
the fourth quarter of 2012, reversing a seven-quarter deceleration.xi
QUOTE OF THE WEEK:
“Associate with men of good quality if you esteem your own reputation; for it is better to
be alone than in bad company.” – George Washington
HEALTH TIP OF THE WEEK:
Add Fish to Your Diet
Some varieties of fish are packed with disease-fighting nutrients and make an excellent
addition to your diet. These super-foods are loaded with omega-3 fatty acids, selenium,
B12, and calcium that boost your immune system. Fish in this category include:
•
Rainbow trout
•
Pollock
•
Sardines
•
Catfish
•
Mackerel
•
Baramundi
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Diversification does not guarantee profit nor is it guaranteed to protect assets
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock
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i
http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-february-11-2013.htm
ii
http://news.yahoo.com/industrial-production-falls-weak-manufacturing-141630817--business.html
iii
http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-february-11-2013.htm
iv
http://news.yahoo.com/instant-view-consumer-sentiment-improves-february-150501716--business.html
v
http://blogs.wsj.com/marketbeat/2013/02/15/next-weeks-tape-housing-inflation-and-fed-tea-leaves/
vi
http://bostonglobe.com/news/politics/2013/02/15/massachusetts-will-lose-jobs-congress-enacts-sequestration-reportsays/JlUZbE1RkHQKgs3VEDzZxI/story.html
vii
http://tpmdc.talkingpointsmemo.com/2013/02/white-house-paints-bleak-picture-of-sequestration-consequences.php
viii
http://news.yahoo.com/g20-defuses-talk-currency-war-no-accord-debt-075651623--finance.html
ix
http://news.yahoo.com/oil-under-96-barrel-us-industrial-data-190753002--finance.html
x
http://news.yahoo.com/us-unemployment-aid-applications-fall-341-000-133625064--finance.html
xi
http://www.businessweek.com/news/2013-02-16/china-misses-hard-landing-as-government-spends-li-daokui-says