Archive for ND&S Updates

Climbing The Wall of Worry

April 28, 2015 

With the equity markets touching new highs last week (NASDAQ surpassing its March 2000 Tech Bubble peak and S&P 500 with a new closing high), and the uncertainty caused by international tensions, it would seem natural for investors to feel jumpy. Recent economic data certainly adds to the queasiness, as last week, March’s Durable Goods Orders were misleadingly positive. The 4% m/m move was lifted by temporary factors – including a 31% jump in civilian airline purchases and 42% boost in defense. Yet we see a number of factors which are more sanguine. Oil is down 43% from one year ago, which is good for global growth. Foreign governments are aggressively easing monetary policies … pushing down yields there to extraordinarily low numbers. As a result, the “low” yields here in the U.S. are actually higher than abroad, easing any pressure to sell bonds. This has strengthened the Dollar against foreign currencies, as money flows into our markets from abroad.

In terms of action in the daily issues affecting our local economy, we are thrilled to learn that the R.I. unemployment rate has dropped below that in Connecticut for the second consecutive month (RI is now 10th highest nationally). We give tentative applause to Governor Raimondo whose proposed jobs package should continue to emphasize job growth and economic development.

The calendar flips over to May on Friday, and undoubtedly you will soon hear or read the phrase “sell in May and go away”. Despite the noise, we are more sanguine that the six year bull market in equities should continue. We again reiterate the need for good research and a disciplined approach. Know your investments and remember the three basic rules of investing – patience, patience and patience. Avoid the quick buck mentality and think long term.

“A good leader takes a little more than his share of the blame, a little less than his share of the credit.”  – Arnold H. Glasow

Greece is the Word

April 20, 2015 

Markets were off to a good start last week only to be derailed on Friday (DJIA down 279 points) by Greek default fears. Greece’s creditors are losing patience in Greece’s ability to make good on upcoming bond interest payments. A possible Greek default will, no doubt, raise concerns of a Greek exit from the Eurozone. It is likely that Greece will establish an emergency financing agreement, but how long can this Greek drama continue before seriously hurting European banks and impacting confidence in global growth?

U.S. economic data released last week were fairly disappointing: tepid retail sales, disappointing producer prices, weaker-than-expected Empire manufacturing numbers, poor housing starts, and jobless claims that missed consensus. Earnings releases during the week were mostly positive although a few bellwether companies reported lackluster results.

For the week, the Dow Jones Industrial Average finished at 17,826 to close down 1.26%. The broader-based S&P 500 closed at 2,081 for a loss of 0.98% for the week. The Nasdaq Composite closed the week at 4,931 for a drop of 1.28%. International markets fared better as the Dow Jones Global (ex US) Index inched ahead 0.18% for the week. The 10-year Treasury closed the week at a yield of 1.87% (down from 1.95% the prior week) as bond prices rose due to strong demand from Asian investors as well as poor economic reports.

The week ahead will see quarterly results from 144 S&P 500 companies along with economic releases for March Existing and New Home Sales and March Durable Goods Orders. Buckle-up …

As always, we urge investors not to get caught up in the day-to-day noise of the markets. Instead, focus on long-term goals, and enjoy the gift of each day.

“There is nothing permanent except change.”Heraclitus

Weekly Commentary – 4/13/15

April 13, 2015 

Last week, U.S. equities continued their advance with the DJIA and the S&P 500 both up 1.7% for the week.  International stocks continued their YTD outperformance as developed markets measured by MSCI EAFE were up 1.7% while emerging markets measured by the MSCI EM increased 4.24%.  On the negative side, bonds slipped slightly as the yield on the 10 year U.S. Treasury note rose to 1.96% from 1.92%.

In the news last week, we started to see some signs of life in the housing sector.  Weekly mortgage applications increased 7% for purchases after being mostly flat earlier in the year.  Strength in the labor force and in household formations should boost housing this year, as well as better weather.

This week, look for stronger retail sales numbers on Tuesday, also helped by better weather.  Analysts are estimating March retails sales to increase by 1.1%.  Earnings season begins in earnest this week with major banks reporting as well as General Electric, Intel, and Johnson & Johnson.  Overall, quarterly earnings may be disappointing as analysts are estimating that S&P 500 earnings will decline 2.9% and revenues to also decline 2.9%.  The stronger dollar and lower oil prices continue to play out.

“Most people have never learned that one of the main aims in life is to enjoy it.” – Samuel Butler

Bad News Equals Good News?

April 6, 2015 

The markets shrugged off what was mostly disappointing economic news to finish slightly higher for the week. Headlining the negative news were weak employment and manufacturing numbers while geopolitical tensions continue to persist despite a tentative agreement with Iran on their nuclear program. Details from last week’s Labor Department report showed nonfarm payroll jobs grew only 126,000 in March (far fewer than expected which marked the smallest gain since Dec. 2013), a continued dip in workforce participation, and unemployment steady at 5.5%. ISM Manufacturing and factory orders were also reported last week showing a slowing pace of growth in the manufacturing sector … consistent with other indicators from the past few weeks (Durable Goods Orders). All of this seemingly negative news will likely push out the next Fed rate hike (good news for equity investors).

For the week, the S&P500 finished up 0.58% closing at 2,067 while the DJIA was up 0.53% finishing at 17,763. Smaller US companies measured by the Russell 2000 finished up 1.99% which continues to be aided by a stronger US Dollar. International markets also had a positive week, with the MSCI EAFE finishing up slightly at 0.01% and MSCI EM up 3.20%. The yield on the 10yr Treasury finished lower this week at a yield of 1.92%.

This past Tuesday marked the end of the 1st quarter which means two things: 1) Our Investment Committee at ND&S is putting the finishing touches on our 2015 1st Qtr Newsletter.  2) The Azaleas will be in full bloom at Augusta National Golf Club as The Master’s begins this Thursday.

Happy Spring!

“You swing your best when you have the fewest things to think about.”Bobby Jones