Archive for ND&S Updates

The Pause that Refreshes

November 30, 2015 

The stock market was mostly flat on lower volume during the Thanksgiving-shortened week. The S&P 500 was flat for the week while the Nasdaq advanced by 0.4%. The raft of economic data releases was mostly greeted with a shrug, although crude oil declines are no longer automatically dragging down energy stocks [the sector is already down 10% to 25% YTD]. Overseas, China’s Shanghai Composite dove 5.5% Friday as the stock brokerage probe widened [in addition to ongoing weakness in industrial profits].

This week contains a plethora of events which will set the stage for the rest of the year, and probably beyond. Yellen’s speeches on Wed and Thursday, the November jobs report on Friday all precede the 12/16 FOMC meeting. In addition, the ECB will hold its final meeting of the year [further accommodation is likely]. Finally, OPEC will be meeting at the end of the week [production is expected to remain unchanged].

The IMF yuan approval as a component in the IMF’s Special Drawing Rights [SDRs] {along with the Dollar, Euro, Yen and Pound Sterling} is a step closer to the yuan becoming the world’s next primary reserve currency [the Pound dominated the 19th century, the Dollar was preeminent during the 20th century, and if economic irresponsibility continues to fester in Washington’s beltway, yuan primacy may rule during the 21st]. The following highlights some of the milestones in China’s long and arduous path to international economic respectability:


“We are made wise not by the recollection of our past, but the responsibility for our future.”
George Bernard Shaw

Earnings Recession?

November 23, 2015 

Equity prices rebounded with the S&P 500 up 3.34%, MSCI EAFE advancing 2.52%, and the MSCI EM increasing 2.73% for the week. The DJIA was flat while growth stocks continued to outperform value (energy drag).

Despite the holiday shortened trading week, there will be reports on existing and new home sales as well as the 2nd revision to 3rd quarter GDP, which should show an increase to 2.1% from the initial report of 1.5%

With 93% of companies having reported earnings for the 3rd quarter, results are on track to show a decline of 1.8% from a year ago. For the year, S&P 500 earnings are expected to decline 0.3%, primarily due to the energy sector which is forecasted to see earnings decline 58% this year. Corporate profits are on pace for their worst year since the financial crisis. The good news is that next year earnings are expected to increase 8.2%.

Happy Thanksgiving!

“Gratitude can transform common days into Thanksgiving, turn routine jobs into joy, and change ordinary opportunities into blessings.” – William Arthur Ward

Weekly Roundup … Nous Sommes Paris

November 16, 2015 

Markets finished broadly lower last week, breaking a streak of six straight weekly advances. For the week, the Dow Jones Industrial Average finished at 17,245 to close down 3.71%. The broader-based S&P 500 closed at 2,023 for a loss of 3.63% for the week. The Nasdaq Composite closed the week at 4,928 as it shed 4.26%. International markets were broadly lower as well. The 10-year Treasury closed the week at a yield of 2.28% (down from a close of 2.33% the prior week) as bonds gained on equity market uncertainty.

We are skipping our usual review of economic and market conditions out of respect for the people of France who have suffered a massive loss. Our hearts and prayers go out to the people of France, and we stand in solidarity with them and the civilized world.

Truly, we say – Nous Sommes Paris.

Keeping Our Perspective

November 9, 2015 

Weekly economic numbers ebb and flow, but has anything really changed? The “blockbuster report” on Friday was the jobs increase (271,000 in October) and average hourly income (up 2.5% from a year earlier). The immediate Wall Street reaction – the Fed will raise the Fed Funds rate in December. Our reaction has been that this is not critical and should not limit the equity markets. However, the stock market was up 6-7% in October despite lackluster earnings, making the balance of the year somewhat less exciting.

The positive force in our economy is the improvement in jobs, with the unemployment rate dropping to a recent low of 5.0%. The U-6 rate, which measures underemployment more broadly, fell to 9.8%, a seven-year low. Yet thus far, with the exception of housing and autos, the consumer has been slow to increase overall spending.

Conclusion? Don’t be excited by weekly reports. The U.S. economy is growing slowly on the order of 1-2%. Do you feel confident about your asset allocation, your sector weightings and the individual holdings? The ebb and flow of weekly and monthly numbers should not overly influence your overall investment strategy. The solution as always is to focus on what you hold in a portfolio.

“Progress is man’s ability to complicate simplicity.”  –  Thor Heyerdahl

Weekly Review

November 2, 2015 

US equity markets finished a volatile trading week to finish slightly higher marking the 5th consecutive week the DJIA and S&P 500 has done so. For the week, the S&P 500 closed at 2079 for a gain of 0.22% while the DJIA closed at 17664 for a gain of 0.14%. International markets were negative for the week with the MSCI EAFE down -0.30% while the MSCI EM was off -2.38%. Treasury yields were higher across the board as the FOMC stood pat on rates for now. The Fed officials indicated they would still consider a possible rate increase at its December meeting.

Third-quarter earnings continued this week and were relatively strong. Some high-profile earnings reports were perhaps overshadowed by M&A talks. Major deals between Walgreens and Rite Aid, Allergan and Pfizer, and Starwood and Hyatt received most of the headline attention. Economic data was rather disappointing as US GDP growth slowed to 1.5% annual rate in the third quarter, US consumer confidence fell to 97.6 in October (from 102.6), and US durable goods orders fell a seasonally adjusted 1.2% in September.

This week, 19.6% of the S&P 500 companies will be reporting earnings. We expect volatility to continue as we are in the middle of earnings season and FOMC noise remains.

“Life is 10% what happens to you and 90% how you react to it.” – Charles Swindoll