MONTHLY
QUOTE
“Nothing
in this world can take the place of persistence.” –
Calvin Coolidge
MONTHLY
TIP
Updating
your will and estate plan is as important as having one. If you
drafted a will years back, it likely needs some adjustments. Your
“old” estate plan may not be taking full advantage of current
gifting and transfer opportunities. Revisit these issues often to
keep them up to date.
MONTHLY RIDDLE
Tom's
mother has four children. Each was born exactly one year and one
month apart from the previous child. The first she named April,
the second she named May, the third she named June. What did she
name her fourth child?
Last month’s riddle:
What
do the words Potato, Voodoo, Grammar, Revive and Banana have in
common?
Last month’s answer:
All
five words read the same backwards when their first letter is
moved to the last position. (Ex: Banana ... move "b" to
the end position to spell "ananab". Ananab = Banana
spelled backwards.)
THE
MONTH IN BRIEF
For the stock market investor, last month was pretty lackluster – the DJIA suffered its first negative August since 2005, sliding 4.31% and struggling to keep above the 10,000 level.1 Volume was remarkably light and skepticism permeated Wall Street. It was widely agreed that the economy was crawling along: the impact of the 2009 federal stimulus was fading, and the government probably wasn’t going to ride to the rescue again. Businesses and consumers would just have to wait and hope. Yet as August gave way to September, some hope arrived: indicators showed an economy that appeared healthier than proclaimed.
For the stock market investor, last month was pretty lackluster – the DJIA suffered its first negative August since 2005, sliding 4.31% and struggling to keep above the 10,000 level.1 Volume was remarkably light and skepticism permeated Wall Street. It was widely agreed that the economy was crawling along: the impact of the 2009 federal stimulus was fading, and the government probably wasn’t going to ride to the rescue again. Businesses and consumers would just have to wait and hope. Yet as August gave way to September, some hope arrived: indicators showed an economy that appeared healthier than proclaimed.
DOMESTIC
ECONOMIC HEALTH
Our first shot of hope comes in the form of consumer spending and consumer confidence. Consumer spending rose 0.4% in July after a flat June. That was the biggest increase since March, and welcome after three months without a net gain. Personal incomes were up 0.2%, and the personal savings rate declined to 5.9% from the previous 6.2%.2 The University of Michigan/Reuters consumer sentiment index improved to 68.9 in August from 67.8 in July, and the Conference Board’s August poll made the same move, rising from July’s 51.0 to 53.5. (Its expectations index rose from 67.5 to 72.5.)3,4
Our first shot of hope comes in the form of consumer spending and consumer confidence. Consumer spending rose 0.4% in July after a flat June. That was the biggest increase since March, and welcome after three months without a net gain. Personal incomes were up 0.2%, and the personal savings rate declined to 5.9% from the previous 6.2%.2 The University of Michigan/Reuters consumer sentiment index improved to 68.9 in August from 67.8 in July, and the Conference Board’s August poll made the same move, rising from July’s 51.0 to 53.5. (Its expectations index rose from 67.5 to 72.5.)3,4
Our
second shot of hope comes from the retail and manufacturing
sectors. Analysts polled by Briefing.com expected the Institute
for Supply Management’s August manufacturing index to fall to
52.9 from the July mark of 55.5. Surprise – it came in at 56.3.
Additionally, the Commerce Department said retail sales increased
for the first time in three months in July, reporting a 0.4%
gain.5,6,7
In
another positive sign, inflation reappeared. In July, the Consumer
Price Index rose 0.3% after declining the three previous months;
the Bureau of Labor Statistics measured year-over-year inflation
at 1.2%. The Producer Price Index advanced 0.2% in July for a 4.2%
year-over-year gain.8,9
Other
indicators were less reassuring. Unemployment ticked up to 9.6% in
August, and analysts were not surprised by that .1% increase. On a
positive note, the private sector gained 67,000 jobs. Durable
goods orders rose 0.3% in July, not the 2.7% economists surveyed
by MarketWatch were forecasting. (It was the first gain in the
category in three months.) The ISM service sector index also
declined for August, still showing growth but descending from
July’s 54.3 mark to 51.5.10,11,12
At
the Fed’s annual Wyoming retreat, chairman Ben Bernanke said
that the central bank would intervene in the economy if necessary,
admitting that “although private final demand, output, and
employment have indeed been growing for more than a year, the pace
of that growth recently appears somewhat less vigorous than we
expected.” He noted that Fed policymakers did not think the
recovery was fading.13
GLOBAL
ECONOMIC HEALTH
In late August, we learned that the European Union’s collective economy expanded in the second quarter at a rate unseen since 2006. The Eurozone PMI was 55.1 in August, still showing growth but down from 56.7 in July. Still, the index has been above 50 for the last 11 months of data. The pace of manufacturing growth in Germany, England, Italy and Spain slowed in August. Economists polled by Bloomberg felt the European Central Bank would keep interest rates at around 1% for an extended period.14,15
In late August, we learned that the European Union’s collective economy expanded in the second quarter at a rate unseen since 2006. The Eurozone PMI was 55.1 in August, still showing growth but down from 56.7 in July. Still, the index has been above 50 for the last 11 months of data. The pace of manufacturing growth in Germany, England, Italy and Spain slowed in August. Economists polled by Bloomberg felt the European Central Bank would keep interest rates at around 1% for an extended period.14,15
Both
the government PMI and the most respected private-sector PMI in
China advanced in August – the private sector index went from
49.4 in July to 51.9, a three-month peak. India’s manufacturing
sector grew again in August, and Russia’s manufacturing sector
expanded by the most since April 2008.15
WORLD
MARKETS
Some benchmarks did pull off gains, and many foreign indices outperformed the DJIA and S&P 500. The advances were found in the emerging markets: Indonesia’s JSX Composite, +0.4%; India’s Sensex, +0.6%; Chile’s IPSA, +2.8%; the Philippines All Shares Index, +3.4%; and Thailand’s SETI, a remarkable +6.7% last month. The big loser among notable indices was the Nikkei 225, which had its worst month since May (-7.5%). Other monthly descents: England’s FTSE 100, -0.6%; South Korea’s KOSPI, -1.1%; Hong Kong’s Hang Seng, -2.4%; Germany’s DAX, -3.6%; France’s CAC 40, -4.3%; and Brazil’s Bovespa, -4.8%.
Some benchmarks did pull off gains, and many foreign indices outperformed the DJIA and S&P 500. The advances were found in the emerging markets: Indonesia’s JSX Composite, +0.4%; India’s Sensex, +0.6%; Chile’s IPSA, +2.8%; the Philippines All Shares Index, +3.4%; and Thailand’s SETI, a remarkable +6.7% last month. The big loser among notable indices was the Nikkei 225, which had its worst month since May (-7.5%). Other monthly descents: England’s FTSE 100, -0.6%; South Korea’s KOSPI, -1.1%; Hong Kong’s Hang Seng, -2.4%; Germany’s DAX, -3.6%; France’s CAC 40, -4.3%; and Brazil’s Bovespa, -4.8%.
Now
how did the key MSCI indices fare last month? Not very well. In
U.S. dollar terms, the MSCI World Index lost 3.92% while the MSCI
Emerging Markets Index retreated 2.15%.16,17,18
COMMODITIES
MARKETS
After a bad July, gold futures enjoyed a strong August. Gold advanced 5.64% for its best month since April. (After eight months of 2010, gold looked pretty good compared to the S&P 500: +12.90% YTD.) August was rough for oil and downright awful for natural gas. Oil fell 8.90% after rising in June and July; the August slide left it at -9.30 YTD. Natural gas futures sank 22.49% in August, a major reversal after prices rose for four straight months; at the end of August natural gas was down 31.59% for the year. The U.S. Dollar Index went +1.89% for the month, moving from 81.54 at the end of July to 83.08.19,20
After a bad July, gold futures enjoyed a strong August. Gold advanced 5.64% for its best month since April. (After eight months of 2010, gold looked pretty good compared to the S&P 500: +12.90% YTD.) August was rough for oil and downright awful for natural gas. Oil fell 8.90% after rising in June and July; the August slide left it at -9.30 YTD. Natural gas futures sank 22.49% in August, a major reversal after prices rose for four straight months; at the end of August natural gas was down 31.59% for the year. The U.S. Dollar Index went +1.89% for the month, moving from 81.54 at the end of July to 83.08.19,20
REAL
ESTATE
Well, the National Association of Realtors did have a tiny bit of good news for us: in July, the median sale price of an existing home was $182,600, 0.7% higher than it had been in July 2009. That was about all the good news that the real estate sector gave us in August. Analysts knew home sales would drop without encouragement from the federal government. But they were stunned to learn just how much, especially considering that July is commonly the peak month for home buying. Existing home sales fell 27.2% on the month and were 25.5% under year-ago levels. New home purchases slipped 12.4% in July to the slowest pace since the start of recordkeeping in 1963.21,22
Well, the National Association of Realtors did have a tiny bit of good news for us: in July, the median sale price of an existing home was $182,600, 0.7% higher than it had been in July 2009. That was about all the good news that the real estate sector gave us in August. Analysts knew home sales would drop without encouragement from the federal government. But they were stunned to learn just how much, especially considering that July is commonly the peak month for home buying. Existing home sales fell 27.2% on the month and were 25.5% under year-ago levels. New home purchases slipped 12.4% in July to the slowest pace since the start of recordkeeping in 1963.21,22
Mortgage
interest rates continued their descent. Freddie Mac’s August 26
Primary Mortgage Market Survey showed rates on the 30-year FRM
averaging under 4.5% (4.36% nationally) and rates on 15-year FRMs
averaging below 4% (3.86% nationally). In the September 2 survey,
those numbers got even smaller: 4.32% and 3.83%.23
LOOKING
BACK … LOOKING FORWARD
It was an unusual August – the worst for the Dow, S&P and NASDAQ since 2001. The numbers were definitely against the norm for the Dow – historically, August is the third best month for the DJIA, with gains occurring 65% of the time.24
It was an unusual August – the worst for the Dow, S&P and NASDAQ since 2001. The numbers were definitely against the norm for the Dow – historically, August is the third best month for the DJIA, with gains occurring 65% of the time.24
| % CHANGE |
Y-T-D
|
1-MO
CHG
|
1-YR
CHG
|
10-YR
AVG
|
DJIA
|
-3.96
|
-4.31
|
+5.46
|
-1.07
|
NASDAQ
|
-6.84
|
-6.24
|
+5.22
|
-4.97
|
S&P
500
|
-5.90
|
-4.74
|
+2.81
|
-3.09
|
| REAL YIELD |
8/31
RATE
|
1
YR AGO
|
5
YRS AGO
|
10
YRS AGO
|
10
YR TIPS
|
0.95%
|
1.76%
|
1.65%
|
4.03%
|
Source:
cnbc.com, bigcharts.com, ustreas.gov, bls.gov -
8/31/101,25,26,27,28
Indices
are unmanaged, do not incur fees or expenses, and cannot be
invested into directly.
These
returns do not include dividends.
So
how optimistic should we be for September? Well, we have some very
good signs in the jobless report. August non-farm payrolls only
shrank by 54,000, compared to expectations of a loss of 120,000
positions. The private sector gain of 67,000 jobs also surpassed
the gain of 41,000 analysts had forecast. Newly revised June and
July numbers from the Labor Department indicate that the economy
lost 123,000 less jobs than previously assumed.12
Factor in the recent gains in personal spending and personal
income and the continued signs of growth in U.S. and world
manufacturing and suddenly things seem a bit brighter. However,
unemployment remains the biggest drag on the housing market and a
significant drop in joblessness isn’t seen for a long time to
come.
Here
are the key economic releases for the balance of September. We
have the Fed’s September beige book (9/8), July wholesale
inventories (9/10), August retail sales and July business
inventories (9/14), August factory output (9/15), August PPI
(9/16), August CPI and the preliminary September University of
Michigan consumer sentiment survey (9/17), a Fed interest rate
decision and August housing starts and building permits (9/21),
August existing home sales and the Conference Board’s August
leading indicators (9/23), August new home sales and durable goods
orders (9/24), the Conference Board’s September look at consumer
sentiment and the July Case-Shiller home price index (9/28). The
August consumer spending data comes to us on October 1, in
addition to the September ISM manufacturing index.
*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
Citations.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 JSX Composite is an index of all stocks that trade on the Indonesia Stock Exchange. BSE Sensex or Bombay Stock Exchange Sensitivity Index is a value-weighted index composed of 30 stocks that started January 1, 1986. The IPSA Index is a Total Return Index and is composed of the 40 stocks with the highest average annual trading volume in the Santiago Stock Exchange. The Philippine Stock Exchange All Share Index is a market capitalization weight index composed of all the stocks listed at the Philippine Stock Exchange. The Bangkok SET Index is a capitalization-weighted index of stocks traded on the Stock Exchange of Thailand. The Nikkei 225 is the benchmark stock market index for the Tokyo Stock Exchange (TSE). The FTSE 100 Index is a share index of the 100 most highly capitalized companies listed on the London Stock Exchange. The KOSPI Index is a capitalization- weighted index of all common shares on the Korean Stock Exchanges. The Hang Seng Index is a free-float capitalization-weighted index of selection of companies from the Stock Exchange of Hong Kong. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The Bovespa, the benchmark stock index of Brazil, is the second largest in the Americas, and the leading exchange in Latin America. 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. 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 |
1
- blogs.wsj.com/marketbeat/2010/08/31/data-points-us-markets-287/
[8/31/10]
2 - cnbc.com/id/38915439/ [8/30/10]
2 - cnbc.com/id/38915439/ [8/30/10]
3
-
bloomberg.com/news/2010-08-27/u-s-consumer-sentiment-rises-to-68-9-from-an-eight-month-low-index-shows.html
[8/27/10]
4
- conference-board.org/data/consumerconfidence.cfm [8/31/10]
5
- cnbc.com/id/38951763 [9/1/10]
6
- briefing.com/Investor/Public/Calendars/EconomicCalendar.htm
[9/3/10]
7
- online.wsj.com/article/BT-CO-20100813-705991.html [8/13/10]
8
- bls.gov/news.release/pdf/cpi.pdf [8/13/10]
9
- bls.gov/news.release/pdf/ppi.pdf [8/17/10]
10
-
latimes.com/business/la-fi-unemployment-rate-20100904,0,5340720.story
[9/3/10]
11
-
marketwatch.com/story/us-durable-goods-orders-inch-up-03-2010-08-25?dist=beforebell
[8/25/10]
12
- cnbc.com/id/38988946/ [9/3/10]
13
-
online.barrons.com/article/SB50001424052970204014404575455490503235852.html
[8/27/10]
14
-
bloomberg.com/news/2010-09-01/trichet-may-say-ecb-to-keep-emergency-lending-measures-in-place-into-2011.html
[9/1/10]
15
- in.biz.yahoo.com/100901/137/baw6w5.html [9/1/10]
16
- cnbc.com/id/38926843 [8/31/10]
17
- emerginvest.com/WorldStockMarkets/Countries.html [8/31/10]
18
-
mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html
[8/31/10]
19
-
blogs.wsj.com/marketbeat/2010/08/31/data-points-energy-metals-351/
[8/31/10]
20
-
online.wsj.com/mdc/public/npage/2_3051.html?mod=mdc_curr_dtabnk&symb=DXY
[8/31/10]
21
- realtor.org/press_room/news_releases/2010/08/ehs_fall [8/24/10]
22
- reuters.com/article/idUSTRE67N3B320100825 [8/25/10]
23
- freddiemac.com/pmms [9/3/10]
24
- cnbc.com/id/38923794 [8/31/10]
25
-
bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=8%2F31%2F09&x=0&y=0
[8/31/10]
25
-
bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=8%2F31%2F09&x=0&y=0
[8/31/10]
25
-
bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=8%2F31%2F09&x=0&y=0
[8/31/10]
26
-
bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=8%2F31%2F00&x=0&y=0
[8/31/10]
26
-
bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=8%2F31%2F00&x=0&y=0
[8/31/10]
26
-
bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=8%2F31%2F00&x=0&y=0
[8/31/10]
27
-
ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml
[8/31/10]
27
-
ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml
[8/31/10]
28
-
treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf
[7/12/00]
