A mixed week for the markets as the Dow closed higher while the S&P 500 and Nasdaq were lower. The week opened strong, with the Dow crossing 10,400 for the first time this year. Economic releases late in the week and a stronger dollar fueled a sell-off, sending markets sharply lower. Despite the drop, the Dow was up 0.46% for the week, with the S&P off 0.19% and the Nasdaq lower by 1.01%.
Some disappointing news was released this week. First, the third quarter GDP is being revised lower from the 3.5% rate to around 2.8%. Lower construction and exports are the main source of lower revisions. Disappointing housing starts also weighed on the markets for the week. This is understandable since the government tax credit was set to expire at the end of October, so activity was accelerated in that month. The government has since extended this credit, yet was unbeknownst to buyers in October.
The Consumer Price Index release came in higher than expected this week at 0.2%. This reaffirms our view that inflation will be picking up in the future. Policymakers believe that inflation will not be a factor while unemployment remains high and continue to pursue an easy money policy. Yet with Treasury rates so low, a slight increase in inflation can dramatically impact interest rates.
Also released this week was the Leading Economic Indicators report. Showing a 0.3% gain, these indicate the economy is growing, albeit at a slow rate. The troubling part of this release is that the rise can be attributed to government intervention. Interest rates are incredibly low and the money supply was increased. Other components of the leading indicators were up only slightly or down for the month.
Next week will be a quiet one with the Thanksgiving holiday. Of course, markets are closed on Thursday and volume will be light on Friday also. There a couple of news-worthy releases in the upcoming week, however. Monday we will see existing home sales. Tuesday we get the revised GDP number (which will be down from the 3.5% first release) and Consumer Confidence release. Wednesday we will see Personal Income, Durable Goods Orders, and New Homes Sales releases.
Where are we investing now?
We continue to buy equities on the market pullbacks, especially higher-quality stocks. We believe the cash on the sidelines will continue to push the market higher, despite the profit-taking seen this week. We are still bullish (positive) on commodities as the dollar trends lower. We are also putting some money in TIPs, expecting inflation to increase in the future. We are looking at putting more money internationally, as emerging markets (excluding China) are an area we favor.
HAPPY THANKSGIVING
Some disappointing news was released this week. First, the third quarter GDP is being revised lower from the 3.5% rate to around 2.8%. Lower construction and exports are the main source of lower revisions. Disappointing housing starts also weighed on the markets for the week. This is understandable since the government tax credit was set to expire at the end of October, so activity was accelerated in that month. The government has since extended this credit, yet was unbeknownst to buyers in October.
The Consumer Price Index release came in higher than expected this week at 0.2%. This reaffirms our view that inflation will be picking up in the future. Policymakers believe that inflation will not be a factor while unemployment remains high and continue to pursue an easy money policy. Yet with Treasury rates so low, a slight increase in inflation can dramatically impact interest rates.
Also released this week was the Leading Economic Indicators report. Showing a 0.3% gain, these indicate the economy is growing, albeit at a slow rate. The troubling part of this release is that the rise can be attributed to government intervention. Interest rates are incredibly low and the money supply was increased. Other components of the leading indicators were up only slightly or down for the month.
Next week will be a quiet one with the Thanksgiving holiday. Of course, markets are closed on Thursday and volume will be light on Friday also. There a couple of news-worthy releases in the upcoming week, however. Monday we will see existing home sales. Tuesday we get the revised GDP number (which will be down from the 3.5% first release) and Consumer Confidence release. Wednesday we will see Personal Income, Durable Goods Orders, and New Homes Sales releases.
Where are we investing now?
We continue to buy equities on the market pullbacks, especially higher-quality stocks. We believe the cash on the sidelines will continue to push the market higher, despite the profit-taking seen this week. We are still bullish (positive) on commodities as the dollar trends lower. We are also putting some money in TIPs, expecting inflation to increase in the future. We are looking at putting more money internationally, as emerging markets (excluding China) are an area we favor.
HAPPY THANKSGIVING
