Quote
of the month.
“A mind all logic is like a knife all blade.” - Rabindranath Tagore
“A mind all logic is like a knife all blade.” - Rabindranath Tagore
Idea
of the month.
“Building a retirement plan without adequate protection [against creditors, market volatility, tax increases, and inflation, among other risks] is like trying to build your nest egg with no shell.” – Jim Hecker
“Building a retirement plan without adequate protection [against creditors, market volatility, tax increases, and inflation, among other risks] is like trying to build your nest egg with no shell.” – Jim Hecker
The
month in brief.
As the weather warmed up, the market was still pretty hot: the S&P 500 pulled off a 1.48% gain for April.1 On the whole, stocks overcame some major challenges: credit ratings were slashed for three European nations, and Goldman Sachs faced an investigation on charges of securities fraud. With scandal on Main Street’s mind, a financial reform bill started a journey through the Senate.
As the weather warmed up, the market was still pretty hot: the S&P 500 pulled off a 1.48% gain for April.1 On the whole, stocks overcame some major challenges: credit ratings were slashed for three European nations, and Goldman Sachs faced an investigation on charges of securities fraud. With scandal on Main Street’s mind, a financial reform bill started a journey through the Senate.
Domestic
economic health.
There were two great economic developments in April. First, consumer spending rose by 0.6% for the month (after a 3.6% increase in the first quarter). There was also a 0.3% gain in wages, the first gain of 2010. Additionally, the Institute for Supply Management’s factory index hit 60.4 for April, the best reading since June 2004 and a nice complement to the ISM March service sector index, which moved north 2.4 points to 55.4.2,3 Durable goods orders also improved in March, with a 1.3% gain.4
There were two great economic developments in April. First, consumer spending rose by 0.6% for the month (after a 3.6% increase in the first quarter). There was also a 0.3% gain in wages, the first gain of 2010. Additionally, the Institute for Supply Management’s factory index hit 60.4 for April, the best reading since June 2004 and a nice complement to the ISM March service sector index, which moved north 2.4 points to 55.4.2,3 Durable goods orders also improved in March, with a 1.3% gain.4
On
paper, the recession seemed by all means over … but it seemed the
recovery was only starting to trickle down to Main Street. As
President Obama remarked last month, “’You're hired’ is the
only economic news [Americans] are waiting to hear.” The jobless
rate remained at 9.7% in March, and analysts see little movement for
the April report.5
Consumer sentiment polls differed: the Reuters/University of
Michigan survey slipped to 72.2 – still better than the 71.0
economists forecast – while the Conference Board’s April survey
indicated the best consumer sentiment since September 2008.6
A
massive financial reform bill was cleared for debate in the Senate.
If made law, it will create a new consumer watchdog agency
regulating banks and brokerages, impose the “Volcker Rule” to
bar banks from proprietary trading, and put tighter scrutiny on
hedge funds and derivatives – all with the ultimate mission of
preventing another bank bailout.7
Is this a good and necessary move, or more bureaucracy and more pain
for banks when they are trying to recover from the downturn? You’ll
hear both sides of the story across spring, summer and maybe fall.
Global
economic health.
In the last week of the month, Standard & Poor’s downgraded the debt ratings of Spain, Greece, and Portugal – cause for alarm, and a shock to the Euro.8 The International Monetary Fund and the European Union announced a $144 billion bailout package for Greece as April ended.9 However, investors worried about contagion. Was this just a band-aid on the way to default? How hard would this hit global banks?
In the last week of the month, Standard & Poor’s downgraded the debt ratings of Spain, Greece, and Portugal – cause for alarm, and a shock to the Euro.8 The International Monetary Fund and the European Union announced a $144 billion bailout package for Greece as April ended.9 However, investors worried about contagion. Was this just a band-aid on the way to default? How hard would this hit global banks?
In
the Asia Pacific region, the news was decidedly better. China’s
gross domestic product was growing at its fastest pace since 2007 –
annualized GDP was projected at 11.9% off the February data.10
Australia
learned that its inflation rate nearly doubled during 1Q 2010, and
Japan’s overall retail sales saw a third straight monthly gain.
Japan’s central bank changed its 2011 economic forecast to show
minimal inflation instead of mild deflation.11
World
financial markets.
Most of the foreign indices had a poor month, thanks to sovereign debt issues. Ireland’s ISE index actually rose 6.9% last month; the Philippines All Shares rose 3.3% and Argentina’s Merval rose 1.0%. Russia’s RTSI was flat for the month.
Most of the foreign indices had a poor month, thanks to sovereign debt issues. Ireland’s ISE index actually rose 6.9% last month; the Philippines All Shares rose 3.3% and Argentina’s Merval rose 1.0%. Russia’s RTSI was flat for the month.
As
for the downside, Germany’s DAX was down 0.3%. Australia’s All
Ordinaries lost 1.4%, the FTSE 100 lost 2.2%, Spain’s IBEX fell
3.0% and France’s CAC 40 slipped 3.4%. Portugal’s PSI 20 dropped
9.4%.12
The
MSCI World Index gained 0.07% in local currency terms for April; the
MSCI Emerging Markets index lost 0.15% in local currency terms last
month.13
Commodities
markets.
Call it a flight to quality, a flight to safety, whatever you wish – it was a fine month for gold and other precious metals. Gold advanced 6.0% for April, settling at $1,180.10 on the NYMEX at month’s end. Silver gained 6.4% and platinum 6.0%; palladium went north by 15.8%. Copper was not so fortunate – futures fell 5.9% in April. The metal that had such a fantastic 2009 was up only 0.3% YTD through April.14,15
Call it a flight to quality, a flight to safety, whatever you wish – it was a fine month for gold and other precious metals. Gold advanced 6.0% for April, settling at $1,180.10 on the NYMEX at month’s end. Silver gained 6.4% and platinum 6.0%; palladium went north by 15.8%. Copper was not so fortunate – futures fell 5.9% in April. The metal that had such a fantastic 2009 was up only 0.3% YTD through April.14,15
Oil
gained $2.39 a barrel in April, putting prices at $86.15 at the end
of the month and capping an 18.19% jump in crude futures since the
start of February. The U.S. Dollar Index gained 0.97% last
month.14,16
Housing
& interest rates.
The numbers got a little wacky, skewed again by the rush to take advantage of expiring tax credits. March new home sales rose by 26.9%. It was the biggest monthly jump in new home purchases since 1963. Census Bureau data had new home prices averaging $258,600 nationally, right about where they were a year before.17 Existing home sales went north by 6.8%, and pending home sales rose by 5.8% - both encouraging signs, even with the seasonal fluctuations of the residential real estate market.18 the February’s S&P/Case-Shiller Home Price Index had prices surveyed across 20 cities (on average) 0.6% above February 2009 levels. Yes, the average price was 0.9% below January, but this marked the first year-over-year gain in the index since December 2006. (In April 2009, prices were 24.0% below year-ago levels in the index.)19 Construction spending also increased by 0.2% for March.2
The numbers got a little wacky, skewed again by the rush to take advantage of expiring tax credits. March new home sales rose by 26.9%. It was the biggest monthly jump in new home purchases since 1963. Census Bureau data had new home prices averaging $258,600 nationally, right about where they were a year before.17 Existing home sales went north by 6.8%, and pending home sales rose by 5.8% - both encouraging signs, even with the seasonal fluctuations of the residential real estate market.18 the February’s S&P/Case-Shiller Home Price Index had prices surveyed across 20 cities (on average) 0.6% above February 2009 levels. Yes, the average price was 0.9% below January, but this marked the first year-over-year gain in the index since December 2006. (In April 2009, prices were 24.0% below year-ago levels in the index.)19 Construction spending also increased by 0.2% for March.2
So
did mortgage rates shoot through the ceiling last month? No. The
Federal Reserve made its way out of the mortgage market, and it was
not the end of the world.
Looking
over Freddie Mac’s Weekly Primary Mortgage Market Survey, here is
the movement from the April 1 snapshot to the April 29 snapshot:
average rates on 30-year FRMs went from 5.08% to 5.06%, averages on
5/1-year hybrid ARMs went from 4.10% to 4.00%, averages on 1-year
ARMs rose from 4.05% to 4.25%, and averages on 15-year FRMs were
4.39% on both dates.20
Major
indices.
As mentioned earlier, it was another up month for stocks. The NASDAQ led the way among the big three, gaining an impressive 2.64% for April. The Russell 2000, by the way, advanced 5.59% last month, bringing its performance to +14.58% through the first third of 2010.1
As mentioned earlier, it was another up month for stocks. The NASDAQ led the way among the big three, gaining an impressive 2.64% for April. The Russell 2000, by the way, advanced 5.59% last month, bringing its performance to +14.58% through the first third of 2010.1
%
Change
|
1-Month
|
Y-T-D
|
1-Year
|
DJIA
|
+1.40
|
+5.57
|
+34.78
|
NASDAQ
|
+2.64
|
+8.46
|
+43.32
|
S&P
500
|
+1.48
|
+6.42
|
+35.96
|
(Sources: cnbc.com, bigcharts.com, 4/30/10)1,21
Indices
are unmanaged, do not incur fees or expenses, and cannot be invested
into directly. These returns do not include dividends.
May
outlook.
As May opens, all eyes are on Europe, and on whether the EU can adequately solve the debt crisis plaguing three nations. Will Spain need a bailout? How about Portugal? And for that matter, is China’s real estate market overheated? While there is plenty of speculation, and while speculation makes for juicy economic headlines, there is also the reality that the manufacturing and service sectors and consumer spending are also quite healthy here and in other parts of the globe. So the adage “sell in May and go away” may be ignored. In fact, May is the month that has seen the best returns for the S&P 500 since 1990.22
As May opens, all eyes are on Europe, and on whether the EU can adequately solve the debt crisis plaguing three nations. Will Spain need a bailout? How about Portugal? And for that matter, is China’s real estate market overheated? While there is plenty of speculation, and while speculation makes for juicy economic headlines, there is also the reality that the manufacturing and service sectors and consumer spending are also quite healthy here and in other parts of the globe. So the adage “sell in May and go away” may be ignored. In fact, May is the month that has seen the best returns for the S&P 500 since 1990.22
Riddle
of the month.
A zoo keeper has a certain number of cages and a certain number of tigers. If she puts one tiger in each cage, she has one tiger too many. If she puts two tigers in each cage she has one cage too many. How many tigers and cages does she have?
A zoo keeper has a certain number of cages and a certain number of tigers. If she puts one tiger in each cage, she has one tiger too many. If she puts two tigers in each cage she has one cage too many. How many tigers and cages does she have?
Last
month’s riddle:
This is an
unusual paragraph. How quickly can you find out what is unusual
about it? It looks so plain you would think nothing was wrong with
it. In fact, nothing is wrong with it. It is unusual, though. Study
it, and think about it, but you still may not find anything odd.
What is missing from it?
Last
month’s riddle answer:
The paragraph does not contain a single “e” … the most common
letter in the English language.
*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.
This
material was prepared by Peter Montoya Inc, and does not necessarily
represent the views of the presenting Representative or the
Representative’s Broker/Dealer. This information 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. The Irish Stock Exchange (ISE) is Ireland's
stock exchange, formed through the merger of the Cork and Dublin
exchanges. The PSE All Shares Index is the stock index in the
Philippine Stock Exchange in which all of the stocks traded are
included in computations for the level of the index. The Argentina
Merval Index, a basket weighted index, is the market value of a
stock portfolio, selected according to participation in the Buenos
Aires Stock Exchange. The
RTS Index (RTSI) is an index of 50 Russian stocks that trade on the
RTS Stock Exchange in Moscow. The
DAX 30 is a Blue Chip stock market index consisting of the 30 major
German companies trading on the Frankfurt Stock Exchange. The
Australian All Ordinaries Index is the major stock price index in
Australia, a capitalization-weighted index made up of the largest
500 companies (as measured by market capitalization) listed on the
Australian Stock Exchange. The
FTSE 100 Index is a share index of the 100 most highly capitalized
companies listed on the London Stock Exchange. The IBEX 35 is the
benchmark stock market index of the Bolsa de Madrid, Spain's
principal stock exchange. The
CAC-40 Index is a narrow-based, modified capitalization-weighted
index of 40 companies listed on the Paris Bourse. The PSI-20
(Portuguese Stock Index) is a benchmark stock market index of
companies that trade on Euronext Lisbon, the main stock exchange of
Portugal. 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. 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.
www.montoyaregistry.com,
www.petermontoya.com, www.marketinglibrary.net
Citations.
1
cnbc.com/id/36738472 [4/30/10]
2
bloomberg.com/apps/news?pid=20601068&sid=aQ1HT_pipnLk# [5/3/10]
3
mortgagenewsdaily.com/05032010_week_ahead_jobs_income.asp [5/3/10]
4
reuters.com/article/idUSTRE63F2NT20100504 [5/4/10]
5 usnews.com/money/business-economy/articles/2010/04/30/what-32-percent-gdp-growth-says-about-our-contradictory-economy.html
[5/3/10]
6
thestreet.com/story/10742069/1/consumer-confidence-no-clarity-here.html
[4/30/10]
7
csmonitor.com/USA/Politics/2010/0428/Financial-reform-four-sticking-points
[4/28/10]
8
dealbook.blogs.nytimes.com/2010/04/28/spains-debt-rating-cut-as-finance-officials-meet/4/28/10]
9
nytimes.com/2010/05/05/business/05markets.html?src=busln [5/4/10]
10
cfdtrading.com/category/asian-markets/page/2/ [4/15/10]
11
cfdtrading.com/category/asian-markets [4/28/10]
12
emerginvest.com/WorldStockMarkets/Countries.html [5/3/10]
13
mscibarra.com/products/indices/international_equity_indices/performance.html
[4/30/10]
14
blogs.wsj.com/marketbeat/2010/04/30/data-points-energy-metals-271/
[4/30/10]
15
coinnews.net/2010/05/01/bullion-business-monthly-report-april-2010/
[5/1/10]
16
online.wsj.com/mdc/public/npage/2_3051.html?mod=mdc_curr_dtabnk&symb=DXY#IndexComponents
[5/2/10]
17
money.cnn.com/2010/04/23/news/economy/new_home_sales/index.htm
[4/23/10]
18
theatlantic.com/business/archive/2010/05/pending-home-sales-up-53-in-march/56129/
[5/4/10]
19
marketwatch.com/story/home-prices-show-year-over-year-gain-sp-2010-04-27
[4/27/10]
20
freddiemac.com/pmms/index.html?year=2010 [5/4/10]
21
bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=4%2F30%2F09&x=0&y=0
[4/30/10]
22
marketwatch.com/story/us-stock-market-on-shakier-ground-for-may-2010-05-01
[5/1/10]
