A solid start to the year for the markets as the Dow closed the week up 1.82%, the S&P was up 2.12%, and the Nasdaq topped them both at 2.68% while volatility hit the lowest levels of the past 12 months. This week we got some disappointing news in terms of employment, but retail sales and manufacturing activity showed signs of strength.
Unemployment numbers came in worse than expected for December with nonfarm payrolls dropping by 85,000. However, November numbers were revised from a loss of 11,000 to a gain of 4,000. The December unemployment rate remains unchanged at 10.0%, but the holiday season tends to make these measurements a little unreliable. Nonetheless, it is still a reminder of how weak the actual economy is. Some good news coming from these reports is that staffing companies have been hiring and we are looking at investment opportunities in this area.
Preliminary reports show holiday sales at retailers came in nearly 3% higher than the previous year. Part of this increase is due to fewer discounts, not necessarily an increase in traffic at these stores. This week we get the Retail Sales and Beige Book releases which will shed more light on these retail numbers. These reports are not believed to be overly optimistic and is something we will be watching very closely.
In addition to the Beige Book release Wednesday and Retail Sales on Thursday, this week will have plenty of news to digest. Corporate earnings releases begin coming in this week with the most notable name, Alcoa, being released on Monday. Thursday we will see business inventories and import prices. On Friday, we get the CPI, industrial production, and capacity utilization. These reports are expected to come in higher than their prior ones, but as we saw with unemployment, the U.S. economy remains weak so some disappointments are likely.
Where are we investing now?
We remain bullish for the short term and are looking to put some money to work on the market dips. For equities, we are focusing on higher-quality and multi-national stocks. We are still bullish on commodities and believe the dollar will continue its trend lower. TIPs continue to be a favorite, as we expect inflation to increase in the future. Consequently, U.S. treasuries are an area we are very bearish on. Finally, we are optimistic about international stocks, as emerging markets (excluding China) are an area we favor.
Unemployment numbers came in worse than expected for December with nonfarm payrolls dropping by 85,000. However, November numbers were revised from a loss of 11,000 to a gain of 4,000. The December unemployment rate remains unchanged at 10.0%, but the holiday season tends to make these measurements a little unreliable. Nonetheless, it is still a reminder of how weak the actual economy is. Some good news coming from these reports is that staffing companies have been hiring and we are looking at investment opportunities in this area.
Preliminary reports show holiday sales at retailers came in nearly 3% higher than the previous year. Part of this increase is due to fewer discounts, not necessarily an increase in traffic at these stores. This week we get the Retail Sales and Beige Book releases which will shed more light on these retail numbers. These reports are not believed to be overly optimistic and is something we will be watching very closely.
In addition to the Beige Book release Wednesday and Retail Sales on Thursday, this week will have plenty of news to digest. Corporate earnings releases begin coming in this week with the most notable name, Alcoa, being released on Monday. Thursday we will see business inventories and import prices. On Friday, we get the CPI, industrial production, and capacity utilization. These reports are expected to come in higher than their prior ones, but as we saw with unemployment, the U.S. economy remains weak so some disappointments are likely.
Where are we investing now?
We remain bullish for the short term and are looking to put some money to work on the market dips. For equities, we are focusing on higher-quality and multi-national stocks. We are still bullish on commodities and believe the dollar will continue its trend lower. TIPs continue to be a favorite, as we expect inflation to increase in the future. Consequently, U.S. treasuries are an area we are very bearish on. Finally, we are optimistic about international stocks, as emerging markets (excluding China) are an area we favor.
