Financial Market Update
StrategicPoint of View®
March 1, 2010
Welcome to the StrategicPoint of View -- a market and economic overview of what occurred last week, what's up for this week, and our commentary on the economy and current market activity in general for “Making Money” listeners.
LAST WEEK
4th Quarter GDP was revised up from 5.7% to 5.9% - not a meaningful positive movement but certainly better than a pullback in growth. New and existing home sales fell – most likely resulting from the flip side of the Homebuyers’ Credit and a bit of bad weather. Consumer sentiment and confidence were weaker than expected; the consumer is losing patience with this economy which doesn’t appear to be brightening fast enough, the Senate passed a jobs bill providing tax breaks for businesses that hire the unemployed, perhaps offsetting some of the disappointment from higher new jobless claims
S&P 500: 1104 (down 0.45% for the week and down 1% on the year)
Dow: 10,325 (down 0.74% for the week and down 1% on the year)
NASDAQ: 2238 (down 0.27%% for the week and down 1.4% on the year)
10-year: 3.63% (from 3.68% last week)
Crude Oil (March): $79.45 (from $79.81 last week)
Gold (April): $1097 (from $1,109 last week)
USD/Euro: $1.3625 (from $1.3614 last week)
THIS WEEK
The consumer is the focus of this week’s data. On Monday, personal income and spending will be reported. On Friday, it is the all important non-farm payroll number. Mid-week, our attention is drawn to the ISM figures on manufacturing and services.
COMMENTARY
One step backwards this week. Fortunately, it’s not a big step. If you separate the economy from the markets, weekly data takes on the proper perspective.
Think of the tortoise and the bouncing bunny (Hare). The Tortoise is the economy; the trail he leaves behind as he proceeds is the recovery. The race began at the end of recession last summer. Since then, the Tortoise has slowly moved forward, sometimes pausing, occasionally stepping back, but overall moving ahead. He is slow, but we all know that. Our problem is that it is hard to focus on the Tortoise – most people think he’s kind of boring.
But then there is the bouncing bunny, or “Hare,” as he calls himself. He is all over the place and our eyes immediately gravitate to him. He, of course, represents the markets. The Hare maintains our attention by leaping and falling with grand strides. We try to attribute reason to his movements, but that is not always easy. We are not sure that the Hare even knows where he is going- it is all about the race for him.
At StrategicPoint we concentrate on the Tortoise. As we look ahead, the terrain is a bit foggy – the finish line could be in a number of directions. Sticking with the Tortoise means we don’t get ahead of ourselves or veer off in the wrong direction. Our path may be less volatile if we focus on the unfolding economic data, go slow enough to keep a vigilant eye on the surroundings, and take measured steps with our investments.
As an example of how the economic data fuels our opinions, we have had a change of view on our outlook for inflation for 2010. We now believe that inflation is very likely to remain tame all year. A sluggish economy with excess capacity may offer little opportunity for the cost–push type of inflation that leads to an increase in wages, the largest component of most inflationary spirals.
The other type of inflation - monetary inflation – is also much less likely. It can arise when the dollar falls rapidly. In light of recent and ongoing sovereign debt troubles in Europe, which have resulted in the plunge in the value of the Euro and corresponding rise in the dollar, we don’t see monetary inflation returning this year. Add to the mix a Federal Reserve which is determined to keep the economy very liquid and a banking system hoarding money, near term inflation is an unlikely event.
Tactical asset allocation, our investment strategy, is based on our view of the economy. Ours is a top-down approach. Before we know how much to allocate to each asset class and which funds to use, we must first understand how consumers, businesses and governments are performing and what elements of the economy are impacting them. That’s why watching the Hare is much less productive than keeping an eye on the Tortoise.
This past week we bid adieu to StrategicPoint’s Making Money Show. After almost eleven wonderful years, we are opting to focus our market insight and commentary on daily market updates on News Talk 630 WPRO and 99.7 FM, beginning Monday March 1st at 8:10am and 5:32pm. By making this move, we hope to reach more listeners and trust you will migrate with us to our new radio home. Once there, as always, we will seek to take the mystery out of your financial life. For more information, visit our website www.StrategicPoint.com.
Tune in to News Talk 630 WPRO and 99.7 FM daily for our "Making Money Updates". Get the latest market news and our take on the day's events with our market commentary at 8:10am and 5:32pm. For more information, visit www.StrategicPoint.com.
*Past performance is not indicative of future results. Indices are unmanaged and you cannot directly invest in them. The Nasdaq Composite Index measures all NASDAQ U.S. and non-U.S. based common stocks listed on the Nasdaq Stock Market. The S&P 500 index is based on the average performance of 500 industrial stocks monitored by Standard and Poor’s. The data referred to above was taken from sources believed to be reliable. StrategicPoint Investment Advisors has not verified such data and no representation or warranty, expressed or implied, is made by StrategicPoint Investment Advisors.
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