MONTHLY QUOTE
“When
we treat man as he is, we make him worse than he is; when we
treat him as if he already were what he potentially could be, we
make him what he should be.” –
Johann Wolfgang von Goethe
MONTHLY TIP
Multiple
streams of income help to increase your financial stability,
especially in retirement. Plan to use your assets in multiple
pools instead of one big lake, so you can enjoy more of your
money and a better lifestyle.
MONTHLY
RIDDLE
It
has a back and four legs, yet it can't run. It has two arms, but
no hands. You don’t keep it as a pet, but you likely have one
in your home right now. What is it?
Last month’s riddle:
You
use it between your head and your toes; the more it works, the
thinner it grows. What is it?
Last month’s answer:Soap.
THE
MONTH IN BRIEF
The market took most of its cues from earnings in April, and earnings impressed. As the month wrapped up, 63% of the S&P 500 had reported 1Q results and 73% of those firms had beaten earnings estimates. The S&P 500 index climbed 2.85% in April. Home prices all but double-dipped; home sales improved (they seemingly couldn’t get any worse). Key indicators showed trends of economic expansion and renewed consumer spending continuing. Oil, gold, silver and gasoline prices repeatedly made headlines.1
The market took most of its cues from earnings in April, and earnings impressed. As the month wrapped up, 63% of the S&P 500 had reported 1Q results and 73% of those firms had beaten earnings estimates. The S&P 500 index climbed 2.85% in April. Home prices all but double-dipped; home sales improved (they seemingly couldn’t get any worse). Key indicators showed trends of economic expansion and renewed consumer spending continuing. Oil, gold, silver and gasoline prices repeatedly made headlines.1
DOMESTIC
ECONOMIC HEALTH
The economy was growing under price pressures. Consumers were spending more largely because they had to pay more for gas and food (gas prices alone jumped 5.7% in March). Commerce Department data showed a 0.6%increase in personal spending for March on the heels of a revised 0.9% gain for February. Disposable incomes were up just 0.1% in March, and the higher gas and food prices were akin to short-term taxes. The federal government’s Consumer Price Index measured inflation at 0.5% for March, with core CPI at a milder 0.1%; the Producer Price Index was up 0.7% for the month and 5.8% across 12 months.2,3,4
The economy was growing under price pressures. Consumers were spending more largely because they had to pay more for gas and food (gas prices alone jumped 5.7% in March). Commerce Department data showed a 0.6%increase in personal spending for March on the heels of a revised 0.9% gain for February. Disposable incomes were up just 0.1% in March, and the higher gas and food prices were akin to short-term taxes. The federal government’s Consumer Price Index measured inflation at 0.5% for March, with core CPI at a milder 0.1%; the Producer Price Index was up 0.7% for the month and 5.8% across 12 months.2,3,4
Few
things depress consumers like rising gas prices and high
unemployment, so the results of the twin consumer confidence
surveys were surprising. The Conference Board’s April poll
improved to 65.4 and the University of Michigan’s final April
survey came in 69.8, better than March’s final 67.5 reading.
Then again, the unemployment rate was down to 8.4% in March – a
full percentage point below where it had been in November. That
factor and the payroll tax holiday helped the American consumer
spend more freely in the face of inflation.5,6
Expansion
in the manufacturing and service sectors had moderated a bit: the
Institute for Supply Management’s April manufacturing survey
showed PMI at 60.4, down from March’s 61.2; its March service
sector index saw a bigger retreat, going from 59.7 to 57.3.
Still, the surveys pointed to growth in both sectors. The federal
government said factory output rose by 0.7% in March, and it also
said that total retail sales were up 0.4% in that month.3,7,8,9
Standard
& Poor’s caused a bit of a shock wave last month when it
reduced the credit outlook for the U.S. from “stable” to
“negative”. America’s rating over at Moody’s Investors
Service remained “stable”.10
GLOBAL
ECONOMIC HEALTH
China’s key PMI slipped half a percent in April to 52.9; India’s advanced a tenth of a percent to 58.0. Both of these manufacturing sector indices have now shown expansion for more than two years. South Korea’s PMI touched its lowest level in six months in April. China’s inflation rate reached a three-year peak in April even with interest rates rising and government directives to keep capital ratios high at banks. China’s GDP is projected at 9.5% for 2011.11
China’s key PMI slipped half a percent in April to 52.9; India’s advanced a tenth of a percent to 58.0. Both of these manufacturing sector indices have now shown expansion for more than two years. South Korea’s PMI touched its lowest level in six months in April. China’s inflation rate reached a three-year peak in April even with interest rates rising and government directives to keep capital ratios high at banks. China’s GDP is projected at 9.5% for 2011.11
Factories
kept humming in Europe, particularly in Northern Europe. The
Markit Eurozone PMI improved to 58.0 in April, close to the
almost-11-year high of 59.0 notched in February; sector expansion
in Germany and France amounted to the driver. The European
Central Bank took the lead among major world banks in raising
benchmark interest rates in April – the ECB raised its key rate
to 1.25% from an all-time low of 1.0 adopted in response to the
global recession.12
WORLD
MARKETS
Global benchmarks produced a mixed bag of gains and losses in April. According to Morningstar, Germany’s DAX had a banner month: +5.98%. France’s CAC 40 went +2.95%, and England’s FTSE 100 went +2.80%. Moving away from northern Europe, things were slightly less rosy. Japan's Nikkei 225 advanced 0.97%; Hong Kong's Hang Seng gained 0.82%; China's Shanghai Composite retreated 0.57%; Australia's All Ordinaries lost 0.60%; Canada's TSX Composite fell 1.21%; India's Sensex slipped 1.59%. The MSCI World Index rose 4.02% in U.S. dollar terms; the MSCI Emerging Markets advanced 2.83%.13,14
Global benchmarks produced a mixed bag of gains and losses in April. According to Morningstar, Germany’s DAX had a banner month: +5.98%. France’s CAC 40 went +2.95%, and England’s FTSE 100 went +2.80%. Moving away from northern Europe, things were slightly less rosy. Japan's Nikkei 225 advanced 0.97%; Hong Kong's Hang Seng gained 0.82%; China's Shanghai Composite retreated 0.57%; Australia's All Ordinaries lost 0.60%; Canada's TSX Composite fell 1.21%; India's Sensex slipped 1.59%. The MSCI World Index rose 4.02% in U.S. dollar terms; the MSCI Emerging Markets advanced 2.83%.13,14
COMMODITIES
MARKETS
Silver prices zoomed north 28.2% in April, and gold didn’t do too badly either with an 8.1% monthly gain. In fact, April 2011 was gold’s best month since November 2009. Gold finished April at $1,556.00 on the COMEX. A weak dollar helped, with the U.S. Dollar Index slipping 3.9% for the month.15,16
Silver prices zoomed north 28.2% in April, and gold didn’t do too badly either with an 8.1% monthly gain. In fact, April 2011 was gold’s best month since November 2009. Gold finished April at $1,556.00 on the COMEX. A weak dollar helped, with the U.S. Dollar Index slipping 3.9% for the month.15,16
Like
gold, oil has not had a down month since last August. In the last
eight months, crude prices have soared 58.4%; last month alone,
they advanced 6.8% to settle at $113.93 a barrel on April 29.
April was also a superb month for RBOB gasoline futures, which
gained 11.5%.15,17
How
did the key crop futures perform in April? Coffee went +13.5%,
cocoa +13.1%, corn +9.1%, soybeans -1.2%, sugar -17.9% and cotton
-21.1%. The Reuters-Jefferies CRB index (which symbolizes the
broad commodities market to many U.S. investors) gained 3.0% in
April; it closed the month at its highest level since September
2008.15,17
REAL
ESTATE
The double dip happened – more or less. Last month brought us the February edition of the 20-city S&P/Case-Shiller home price index – and the broad index came in at just 0.01% above its April 2009 low.18
The double dip happened – more or less. Last month brought us the February edition of the 20-city S&P/Case-Shiller home price index – and the broad index came in at just 0.01% above its April 2009 low.18
In
better news, the Census Bureau reported an 11.1% improvement in
new home purchases for March. The National Association of
Realtors noted a 3.7% rise in existing home sales for that month,
plus a 5.1% jump in pending home sales. (Scrutiny unearthed
interesting details in the NAR data: distressed properties such
as short sales and foreclosures accounted for 40% of March
existing home sales, and 35% of the homes were bought wholly with
cash – an all-time record.)19,20
Mortgage
rates declined across the board last month. At the end of March,
Freddie Mac’s Primary Mortgage Market survey had the 30-year
FRM averaging 4.86%; in the April 28 survey, the average rate was
4.78%. Average rates for 15-year FRMs had descended from 4.09% to
3.97% during that period. On April 28, Freddie Mac respectively
estimated the average interest rates on 5-year ARMs and 1-year
ARMs at 3.51% and 3.15%.21
LOOKING
BACK…LOOKING FORWARD
The Dow Jones Industrial Average ended April at 12,810.54 – a close unseen since May 2008. Meanwhile, the CBOE VIX dropped 16.74% in April - its third straight monthly decline.1
The Dow Jones Industrial Average ended April at 12,810.54 – a close unseen since May 2008. Meanwhile, the CBOE VIX dropped 16.74% in April - its third straight monthly decline.1
| % CHANGE |
Y-T-D
|
1-MO
CHG
|
1-YR
CHG
|
10-YR
AVG
|
DJIA
|
+10.65
|
+3.98
|
+14.71
|
+1.93
|
NASDAQ
|
+8.32
|
+3.32
|
+14.40
|
+3.58
|
S&P
500
|
+8.43
|
+2.85
|
+12.99
|
+0.91
|
| REAL YIELD |
4/29
RATE
|
1
YR AGO
|
5
YRS AGO
|
10
YRS AGO
|
10
YR TIPS
|
0.75%
|
1.31%
|
2.39%
|
3.52%
|
Sources: online.wsj.com, bigcharts.com, treasury.gov, treasurydirect.gov - 4/29/111,22,23,24
Indices
are unmanaged, do not incur fees or expenses, and cannot be
invested into directly.
These
returns do not include dividends.
The
old “sell in May, go away” adage may be refuted this month.
We have a mood that is decidedly bullish and a stock market that
has recently ignored historical norms. The Fed will wrap up QE2
in June, but it may opt for some kind of sequel. The Fed has also
indicated that interest rates will remain exceptionally low for
the near term; even with the ECB’s recent move to raise its key
interest rate by 25 basis points, a round of global tightening
doesn’t seem imminent. Some analysts think stocks are
overbought, yet there is prevalent optimism to counter that
feeling. As we leave this earnings season behind, the focus again
shifts to domestic economic indicators. The question now is
whether the headline indicators (the jobless rate, existing home
sales, personal spending, consumer and wholesale inflation) will
be positive enough to send the market higher in May and June.
UPCOMING
ECONOMIC RELEASES
For the rest of May, the schedule looks like this: April’s ISM service sector index (5/4), the April unemployment report (5/6), March wholesale inventories (5/10), April PPI, April retail sales and March business inventories (5/12), April CPI plus the initial University of Michigan May consumer sentiment poll (5/13), April building permits, housing starts and industrial output (5/17), April existing home sales and the Conference Board’s LEI index (5/19), April new home sales (5/24), April durable goods orders (5/25), the second estimate of 1Q GDP (5/26), April consumer spending, April pending home sales and the final University of Michigan May consumer sentiment survey (5/27), and finally the March Case-Shiller home price index and the Conference Board’s May assessment of consumer confidence (5/31).
For the rest of May, the schedule looks like this: April’s ISM service sector index (5/4), the April unemployment report (5/6), March wholesale inventories (5/10), April PPI, April retail sales and March business inventories (5/12), April CPI plus the initial University of Michigan May consumer sentiment poll (5/13), April building permits, housing starts and industrial output (5/17), April existing home sales and the Conference Board’s LEI index (5/19), April new home sales (5/24), April durable goods orders (5/25), the second estimate of 1Q GDP (5/26), April consumer spending, April pending home sales and the final University of Michigan May consumer sentiment survey (5/27), and finally the March Case-Shiller home price index and the Conference Board’s May assessment of consumer confidence (5/31).
*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.
This
material was prepared by Peter Montoya Inc., and does not
necessarily represent the views of the presenting party, nor
their affiliates. This information should not be construed as
investment, tax or legal 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 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 FTSE 100 Index is a share index of the
100 most highly capitalized companies listed on the London Stock
Exchange. 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 SSE Composite
Index is an index of all stocks (A shares and B shares) that are
traded at the Shanghai Stock Exchange. The S&P/ASX All
Ordinaries Index represents the 500 largest companies in the
Australian equities market. The S&P/TSX Composite Index is an
index of the stock (equity) prices of the largest companies on
the Toronto Stock Exchange (TSX) as measured by market
capitalization. BSE Sensex or Bombay Stock Exchange Sensitivity
Index is a value-weighted index composed of 30 stocks that
started January 1, 1986.
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. The US Dollar Index measures the performance
of the U.S. dollar against a basket of six currencies. Additional
risks are associated with international investing, such as
currency fluctuations, political and economic instability and
differences in accounting standards. 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 assistance
is needed, the reader is advised to engage the services of a
competent professional.
Citations.
1
-
cnbc.com/id/42827178 [4/29/11]
2
-
bloomberg.com/news/2011-04-29/personal-spending-in-u-s-rises-0-6-incomes-climb-more-than-forecast.html
[4/29/11]
3
-
blogs.forbes.com/heatherstruck/2011/04/15/march-cpi-increase-in-line-with-expectations/
[4/15/11]
4
-
seattletimes.nwsource.com/html/businesstechnology/2014773317_apuseconomy.html
[4/15/11]
5
-
bloomberg.com/news/2011-04-29/u-s-consumer-sentiment-gains-as-index-climbs-to-69-8-from-67-5-in-march.html
[4/29/11]
6
- bls.gov/news.release/pdf/empsit.pdf [4/1/11]
7
- ism.ws/ISMReport/MfgROB.cfm [5/2/11]
8
- ism.ws/ISMReport/NonMfgROB.cfm [4/5/11]
9
-
marketwatch.com/story/us-retail-sales-rise-04-in-march-2011-04-13
[4/13/11]
10
-
money.usnews.com/money/business-economy/articles/2011/04/18/what-sps-us-outlook-downgrade-means
[4/18/11]
11
- cnbc.com/id/42854519 [5/2/11]
12
-
reuters.com/article/2011/05/02/us-global-economy-idUSTRE7411Z020110502
[5/2/11]
13
– news.morningstar.com/index/indexReturn.html [5/1/11]
14
-
mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html
[4/29/11]
15
-
blogs.wsj.com/marketbeat/2011/04/29/data-points-energy-metals-488/
[4/29/11]
16
–
online.wsj.com/mdc/public/npage/2_3051.html?mod=mdc_curr_dtabnk&symb=DXY
[4/29/11]
17-
forexyard.com/en/news/COMMODITIES-Energy-metals-grains-end-April-up-moneys-easy-2011-04-29T222659Z
[4/29/11]
18
-
seattlepi.com/realestate/article/Home-prices-continue-to-slide-nationwide-more-so-1353033.php
[4/26/11]
19
-
bloomberg.com/news/2011-04-28/pending-sales-of-existing-homes-in-u-s-increase-5-1-more-than-estimated.html
[4/28/11]
20
- realtor.org/press_room/news_releases/2011/04/rise_march
[4/20/11]
21
- freddiemac.com/pmms/ [5/3/11]
22
-
bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=4%2F29%2F10&x=0&y=0
[4/29/11]
22
-
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=4%2F29%2F10&x=10&y=18
[4/29/11]
22
-
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=4%2F29%2F10&x=0&y=0
[4/29/11]
22
-
bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=4%2F30%2F01&x=0&y=0
[4/29/11]
22
-
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=4%2F30%2F01&x=0&y=0
[4/29/11]
22
-
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=4%2F30%2F01&x=0&y=0
[4/29/11]
23
-
treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield
[4/29/11]
23
-
treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll
[4/29/11]
24
-
treasurydirect.gov/instit/annceresult/press/preanre/2001/ofm11001.pdf
[1/10/01]
25
-
montoyaregistry.com/Financial-Market.aspx?financial-market=retirement-income-planning-the-basics&category=3
[5/4/11]
