Quote
of the month.
“It is a rough road that leads to the heights of greatness.” – Seneca
“It is a rough road that leads to the heights of greatness.” – Seneca
Idea
of the Month.
“Protect yourself against the costs of potential adversity before you plan for future success. Adversity – especially in terms of “life events” – can come upon you faster, can last longer, and often can’t be fixed after the fact”. Jim Hecker
“Protect yourself against the costs of potential adversity before you plan for future success. Adversity – especially in terms of “life events” – can come upon you faster, can last longer, and often can’t be fixed after the fact”. Jim Hecker
The
month in brief.
Many things went north last month: stocks, retail sales figures, mortgage interest rates, the U.S. Dollar Index, and the prices of many commodities. Some things went south – most notably the jobless rate and gold and silver prices. The positive mood on Wall Street sustained itself through the holidays, with the S&P 500 ending the year up 23.45% and improving 64.83% from its March 9 close.1
Many things went north last month: stocks, retail sales figures, mortgage interest rates, the U.S. Dollar Index, and the prices of many commodities. Some things went south – most notably the jobless rate and gold and silver prices. The positive mood on Wall Street sustained itself through the holidays, with the S&P 500 ending the year up 23.45% and improving 64.83% from its March 9 close.1
Domestic
economic health.
How fast was the economy improving? Slowly but surely, the evidence suggested. Consumer spending had increased by0.6% in November, with personal incomes enjoying their biggest gain in six months.2 The Commerce Department said retail sales rose by 1.3% in November, a gain twice as large as economists had predicted.3 Consumer confidence was up, too: the Conference Board’s December survey featured a rise from 50.6 to 52.9, and the month’s final Reuters/University of Michigan survey showed improvement from November’s 67.4 to 72.5.4,5 We also learned that unemployment fell slightly to 10.0% in November.6
How fast was the economy improving? Slowly but surely, the evidence suggested. Consumer spending had increased by0.6% in November, with personal incomes enjoying their biggest gain in six months.2 The Commerce Department said retail sales rose by 1.3% in November, a gain twice as large as economists had predicted.3 Consumer confidence was up, too: the Conference Board’s December survey featured a rise from 50.6 to 52.9, and the month’s final Reuters/University of Michigan survey showed improvement from November’s 67.4 to 72.5.4,5 We also learned that unemployment fell slightly to 10.0% in November.6
On
the business side, the latest data on the manufacturing and service
sectors was mixed. The November Institute for Supply Management
manufacturing survey showed growth, but also a slip from October’s
55.7 to 53.6. ISM’s service sector index showed contraction in
November, moving from 50.6 to 48.7.7
And
inflation? Well, the Consumer Price Index was up 0.4% for November,
with core CPI flat after 10 straight monthly advances. Analysts noted
a 1.8% year-over-year gain in CPI, the first positive 12-month change
since February. Wholesale inflation (PPI) rose by 1.8% in November,
with core PPI up 0.5%.8
Groundbreaking
health care reform legislation passed in both houses of Congress.
January will see both the Senate and House try to reconcile their
separate bills. What didn’t happen in the 1990s seems ready to
happen now.
Global
economic health.
The manufacturing outlook seemed to be improving in important economies. China’s key purchasing managers’ index rose again, and a report had manufacturing expanding in December at the fastest rate in 20 months. PMIs also rose in December in India, Taiwan and South Korea. A survey of Eurozone purchasing managers showed a third straight month of growth in European manufacturing. Also, an index of U.K. manufacturing hit its highest mark in December since November 2007.9,10
The manufacturing outlook seemed to be improving in important economies. China’s key purchasing managers’ index rose again, and a report had manufacturing expanding in December at the fastest rate in 20 months. PMIs also rose in December in India, Taiwan and South Korea. A survey of Eurozone purchasing managers showed a third straight month of growth in European manufacturing. Also, an index of U.K. manufacturing hit its highest mark in December since November 2007.9,10
Looking
ahead, the International Monetary Fund's World Economic Outlook sees
global output growing by 3.1% in 2010 after a 1.1% dip in world GDP
for 2009. This follows the Organization
for Economic Cooperation and Development estimating 2010 growth for
its 30 member countries (the U.S., Japan, Germany and England among
them) to 1.9%, up from 0.7% in June.11
World
financial markets.
Many foreign indices outpaced ours during a very robust month for stocks. The Nikkei 225 climbed 12.85% in December to put it up 19.04% for the year. The Hang Seng and Shanghai Composite respectively gained +0.23% and 2.56% in December, capping off terrific years – the Hang Seng rose 52.02% and the Shanghai Composite rose 79.98% across 2009. South Korea’s KOSPI advanced 8.4% last month. Germany’s DAX rose 5.9% and the DJ Stoxx 600 climbed 5.85%; those indices respectively gained 23.85% and 28.57% for 2009. France’s CAC 40 rose 4.2% on the month, and ended the year at +22.32%. Canada's TSX Composite advanced 0.3% for December for a 28.02% annual gain. As for the MSCI World Index and MSCI Emerging Markets Index, they too posted gains: the World went north by 3.59% last month, and the EM rose 4.04%. For 2009, the World rose +22.82% while the EM soared +58.65%.12,13,14,15
Many foreign indices outpaced ours during a very robust month for stocks. The Nikkei 225 climbed 12.85% in December to put it up 19.04% for the year. The Hang Seng and Shanghai Composite respectively gained +0.23% and 2.56% in December, capping off terrific years – the Hang Seng rose 52.02% and the Shanghai Composite rose 79.98% across 2009. South Korea’s KOSPI advanced 8.4% last month. Germany’s DAX rose 5.9% and the DJ Stoxx 600 climbed 5.85%; those indices respectively gained 23.85% and 28.57% for 2009. France’s CAC 40 rose 4.2% on the month, and ended the year at +22.32%. Canada's TSX Composite advanced 0.3% for December for a 28.02% annual gain. As for the MSCI World Index and MSCI Emerging Markets Index, they too posted gains: the World went north by 3.59% last month, and the EM rose 4.04%. For 2009, the World rose +22.82% while the EM soared +58.65%.12,13,14,15
Commodities
markets.
It was not the greatest month for gold; however, it was a strong month for most hard assets. Gold and silver prices respectively fell 7.19% and 8.92% across December, but market conditions were better for copper (+6.29%), platinum (+0.74%) and especially palladium (+12.46%). Energy futures? Well, crude oil rose 2.69% on the month, and heating oil prices went north by 3.46%; natural gas prices naturally took off in December, rising 14.93%. Sugar topped all commodities during the month with a 19.04% gain. The hottest three commodities of 2009 were copper (+137.34%), sugar (+128.20%) and palladium (+116.67%). Lastly, the dollar rebounded – the U.S. Dollar Index rose 4.1%.16
It was not the greatest month for gold; however, it was a strong month for most hard assets. Gold and silver prices respectively fell 7.19% and 8.92% across December, but market conditions were better for copper (+6.29%), platinum (+0.74%) and especially palladium (+12.46%). Energy futures? Well, crude oil rose 2.69% on the month, and heating oil prices went north by 3.46%; natural gas prices naturally took off in December, rising 14.93%. Sugar topped all commodities during the month with a 19.04% gain. The hottest three commodities of 2009 were copper (+137.34%), sugar (+128.20%) and palladium (+116.67%). Lastly, the dollar rebounded – the U.S. Dollar Index rose 4.1%.16
Housing
& interest rates.
The latest home sales numbers were warped by the presumption of expiring federal tax breaks: new home sales were down 11.3% for November, while residential resales rose by 7.4% for the month.17 Housing starts, which had dropped more than 10% in October, rebounded nicely by rising 8.9% for November.18
The latest home sales numbers were warped by the presumption of expiring federal tax breaks: new home sales were down 11.3% for November, while residential resales rose by 7.4% for the month.17 Housing starts, which had dropped more than 10% in October, rebounded nicely by rising 8.9% for November.18
Mortgage
rates were definitely rising, and one of Freddie Mac’s economists
went on record with the opinion that rates on 30-year FRMs would get
to 6% a year from now. The last Freddie Mac survey of 2009 had rates
on 30-year FRMs at 5.14%, rates on 15-year FRMs at 4.54%, rates on
5-year hybrid ARMs averaging 4.44%, and rates on 1-year ARMs
averaging 4.33%.19,20
Major
indexes.
When the final bell sounded on New Year’s Eve, the DJIA, S&P 500 and NASDAQ had notched another month of gains.
When the final bell sounded on New Year’s Eve, the DJIA, S&P 500 and NASDAQ had notched another month of gains.
%
Change
|
1-Month
|
2009
|
DJIA
|
+0.80
|
+18.82
|
NASDAQ
|
+5.81
|
+43.89
|
S&P
500
|
+1.78
|
+23.45
|
10YrTIPS
Real Yield
|
+30.97
|
-30.84
|
(Source: CNBC.com, ustreas.gov, 12/31/09)1,21,22
Indices
are unmanaged, do not incur fees or expenses, and cannot be invested
into directly. These returns do not include dividends.
January
outlook.
Many analysts think January will be a very positive month for equities, setting the tone for a nice year. The Dow opened with a triple-digit rally on the first market day of 2009, buoyed by the December reading on the ISM manufacturing index: 55.9, the highest reading since April 2006.23 Key questions in the minds of investors: Can the recovery continue as the federal stimulus is withdrawn? When will the Fed tighten? How much inflation will we see, and how long will the dollar remain weak? As we wait for clues, there is much evidence that a global economic recovery is taking hold – and that is certainly good news for a stock market investor.
Many analysts think January will be a very positive month for equities, setting the tone for a nice year. The Dow opened with a triple-digit rally on the first market day of 2009, buoyed by the December reading on the ISM manufacturing index: 55.9, the highest reading since April 2006.23 Key questions in the minds of investors: Can the recovery continue as the federal stimulus is withdrawn? When will the Fed tighten? How much inflation will we see, and how long will the dollar remain weak? As we wait for clues, there is much evidence that a global economic recovery is taking hold – and that is certainly good news for a stock market investor.
The
key economic releases for the rest of January: November factory
orders and pending home sales (1/5), the December ISM service sector
index (1/6), December unemployment and wholesale inventories (1/8),
December retail sales and November business inventories (1/14), the
University of Michigan’s January consumer sentiment poll, December
CPI and December industrial production (1/15), December PPI, housing
starts and building permits (1/20), the Conference Board’s leading
indicators (1/21), December existing home sales (1/25), January
consumer confidence as measured by the Conference Board (1/26),
December new home sales and durable goods orders (1/27), and advance
4Q GDP (1/29). We will learn about December consumer spending on
February 1.
Riddle
of the month.
If an electric train is going south and the wind is blowing north, what direction is the smoke going?
If an electric train is going south and the wind is blowing north, what direction is the smoke going?
Contact
my office or see next month’s Update for the answer.
Last
month’s riddle.
What do the following six words have in common: fast, away, water, through, down, neck?
What do the following six words have in common: fast, away, water, through, down, neck?
Last
month’s riddle answer:
You can put the word “break” in front of all of them and form new English-language words.
You can put the word “break” in front of all of them and form new English-language words.
*Registered
Representative and Financial Advisor of Park Avenue Securities LLC
PAS.
Securities
products/services and advisory services offered through PAS a
registered Broker-dealer and investment advisor.
Field
Representative, The Guardian Life Insurance Company of America
(Guardian) New York, NY.
PAS
is an indirect wholly owned subsidiary of Guardian.
Wealth
Design Group is not an affiliate or subsidiary of PAS or Guardian.
PAS
is a member FINRA, SIPC.
These
views are those of Peter Montoya Inc., and not the presenting
Representative or the Representative’s Broker/Dealer, and should
not be construed as investment advice. The Dow Jones Industrial
Average is a price-weighted index of 30 actively traded blue-chip
stocks. The NASDAQ Composite Index is an unmanaged, market-weighted
index of all over-the-counter common stocks traded on the National
Association of Securities Dealers Automated Quotation System. The
Standard & Poor's 500 (S&P 500) is an unmanaged group of
securities considered to be representative of the stock market in
general. It is not possible to invest directly in an index. NYSE
Group, Inc. (NYSE:NYX) operates two securities exchanges: the New
York Stock Exchange (the "NYSE") and NYSE Arca (formerly
known as the Archipelago Exchange, or ArcaEx®,
and the Pacific Exchange). NYSE Group is a leading provider of
securities listing, trading and market data products and services.
The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest
physical commodity futures exchange and the preeminent trading forum
for energy and precious metals, with trading conducted through two
divisions – the NYMEX Division, home to the energy, platinum, and
palladium markets, and the COMEX Division, on which all other metals
trade. Nikkei 225 (Ticker: ^N225) is a stock market index for the
Tokyo Stock Exchange (TSE). The Nikkei average is the most watched
index of Asian stocks. The Hang Seng Index is a free-float
capitalization-weighted index of selection of companies from the
Stock Exchange of Hong Kong. The Shanghai Stock Exchange Composite
Index is a capitalization-weighted index that tracks the daily price
performance of all A-shares and B-shares listed on the Shanghai Stock
Exchange. The Korea Composite Stock Price Index or KOSPI is the index
of all common stocks traded on the Stock Market Division of the Korea
Exchange. The DAX 30 is a Blue Chip stock market index consisting of
the 30 major German companies trading on the Frankfurt Stock
Exchange. The Dow Jones STOXX (Price) Index is a broad based
capitalization-weighted index of European stocks. The FTSE 100 Index
is a share index of the 100 most highly capitalized companies listed
on the London Stock Exchange. The CAC-40 Index is a narrow-based,
modified capitalization-weighted index of 40 companies listed on the
Paris Bourse. The Toronto Stock Exchange (TSX), a subsidiary of the
TMX Group Inc., is the largest stock exchange in Canada. The MSCI
World Index is a free-float weighted equity index that includes
developed world markets, and does not include emerging markets. The
MSCI Emerging Markets Index is a float-adjusted market capitalization
index consisting of indices in more than 25 emerging economies.
Neither the named Representative nor Broker/Dealer gives tax or legal
advice. All information is believed to be from reliable sources;
however we make no representation as to its completeness or accuracy.
All economic and performance data is historical and not indicative of
future results. The market indices discussed are unmanaged. Investors
cannot invest in unmanaged indices. The publisher is not engaged in
rendering legal, accounting or other professional services. If other
expert assistance is needed, the reader is advised to engage the
services of a competent professional. Please consult your Financial
Advisor for further information. Additional risks are associated with
international investing, such as currency fluctuations, political and
economic instability and differences in accounting standards.
Citations.
1
cnbc.com/id/34645043 [12/31/09]
2
abcnews.go.com/Business/wireStory?id=9408799 [12/23/09]
3
marketwatch.com/story/retail-sales-sparkle-in-november-2009-12-11
[12/11/09]
4
conference-board.org/economics/consumerConfidence.cfm [12/29/09]
5
reuters.com/article/idUSTRE5BM2AT20091223
[12/23/09]
6
news.briefing.com/GeneralContent/Investor/Active/ArticlePopup/ArticlePopup.aspx?ArticleId=NS20091204092343HeadlineHits
[12/4/09]
7
biz.yahoo.com/c/e.html [12/4/09]
8
marketwatch.com/story/us-consumer-prices-rise-04-in-november-2009-12-16-83900
[12/16/09]
9
businessweek.com/news/2010-01-04/european-shares-gain-on-economy-bhp-billion-nestle-advance.html
[1/4/10]
10
ft.com/cms/s/0/7530f484-f8da-11de-beb8-00144feab49a.html/ [1/4/10]
11
etaiwannews.com/etn/news_content.php?id=1132755&lang=eng_news&cate_img=35.jpg&cate_rss=news_Business#
[12/14/09]
12
blogs.wsj.com/marketbeat/2009/12/31/data-points-asia-europe-182/
[12/31/09]
13
emerginvest.com/WorldStockMarkets/Countries.html [12/31/09]
14
cnbc.com/id/34643111 [12/31/09]
15
mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html
[12/31/09]
16
cnbc.com/id/34645043/page/2/ [12/31/09]
17
marketwatch.com/story/new-home-sales-crater-as-subsidy-ends-2009-12-23
[12/23/09]
18
bloomberg.com/apps/news?pid=20601068&sid=a4U0dmaiV44A [12/16/09]
19
washingtonpost.com/wp-dyn/content/article/2009/12/26/AR2009122600031.html
[12/26/09]
20
freddiemac.com/pmms/ [12/31/09]
21
ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml
[12/31/09]
22
ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml
[12/31/09]
23
reuters.com/article/idUSN0423748820100104 [1/4/10]
