MONTHLY QUOTE
“It
takes a long time to grow an old friend.” – John
Leonard
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
MONTHLY
RIDDLE
I'm
dressed in a golden jacket. I take it off abruptly, accompanied
by a loud noise. When I do, I become larger, but I weigh less.
What am I?
Last month’s riddle:
Take
a 5-letter word identifying a crop. Take away the first letter,
and you have a form of energy. Take away the first 2 letters and
you have a verb. Rearrange the 3 letters left and you have a
drink. What is this 5-letter word?
Last month’s answer: Wheat.
THE
MONTH IN BRIEF
September
2011 was a difficult time for many investors; the best thing
about it may be that it’s over. Stocks and commodities were
battered during the month - the S&P 500 retreated 7.18% and
the Thomson Reuters/Jefferies CRB Commodity Index sank 12.97%.
Investor anxiety about the European Union’s debt problems
increased, and Wall Street was unimpressed by some of the
stateside economic statistics. Would stocks struggle for the
balance of the year? Had we entered a new recession? Investors
could only hope for market performance and economic signals in
future months that would put both questions to rest.1,2
DOMESTIC
ECONOMIC HEALTH
Consumer
spending increased by 0.2% in August, down from a revised 0.7%
gain in July. Consumer incomes declined by 0.1% in August for the
first time in almost two years. Consumer confidence – which
seemingly had nowhere to go but up in light of the July figures –
did improve somewhat. The University of Michigan’s final
September survey rose to 59.4 from the final August 55.7 reading,
1.6 points better than the consensus forecast of economists
polled by Bloomberg News; the survey’s index of current
conditions went up to 74.9 from August’s final 68.7 mark. The
Conference Board’s consumer confidence index edged north 0.2%
to 44.7. Consumer prices grew 0.4% in August, with core CPI up
0.2% and 2.0% year-over-year, the biggest annualized core
inflation number in almost three years. Producer prices were flat
in August, and so were U.S. retail sales. The jobless rate was
9.1% in August – the 25th time in the past 27 months it had
been above 9%.3,4,5
The
manufacturing and service sectors saw improved growth, at least
by the gauge of the most recent Institute for Supply Management
manufacturing and service sector indices. ISM’s service sector
index rose to 53.3 in August from July’s 52.7 mark – an
improvement few analysts were expecting. Its September
manufacturing index rose a full percentage point to 51.6. Durable
goods orders diminished in August, but not by much – just 0.1%
overall. Core capital goods orders were up 1.1% and core capital
goods shipments were up 2.8%.6,7,8
In
Washington, there were two big news items. President Obama
unveiled the American Jobs Act – a bill that would cut the
payroll tax for workers and businesses to 3.1% in 2012, offer tax
credits as large as $4,000 to companies hiring the long-term
unemployed, and devote about $80 billion into infrastructure
projects. To pay for it, the President proposed $1.6 trillion in
tax increases for upper-income Americans and corporations as a
component of a $4.4 trillion reduction of the federal deficit by
fiscal year 2021. Republicans dismissed any direct link between
taxes on the wealthy and future job creation, and it remains to
be seen if the AJA will pass in anything like its entirety.9,10
GLOBAL
ECONOMIC HEALTH
Fears
of sovereign contagion grew on rumors that Greece would soon
default on its debt. At mid-month, European finance ministers and
central bank governors (and even Treasury Secretary Timothy
Geithner) conferred to try and figure out the least disruptive
resolution to the crisis. The G-20 issued a statement promising a
“strong and coordinated international response to address the
renewed challenges facing the global economy”. That aside, both
the Federal Reserve Open Market Committee and International
Monetary Fund managing director Christine LaGarde saw appreciable
“downside risks” for the U.S. and world economies.11
When
investors weren’t worried about Greek banks going belly-up or
Greece ditching the euro for the drachma, they had concerns about
China. Its central bank was trying to arrange a soft landing for
its slowing economy. Data showed China’s consumer prices up
6.2% in August from a year earlier; the People’s Bank of China
has raised interest rates five times in the last 12 months.
China’s official PMI improved a bit to 51.2 in September, but
looking long-term, 59% of analysts and traders recently surveyed
in Bloomberg’s Global Poll of Investors think that its economy
will see growth of less than 5% by 2016. Meanwhile, key PMIs in
Australia (42.3) and India (50.4) went lower.12,13
WORLD
MARKETS
Losses
abounded. Data from Morningstar tells the tale, with all of this
measured in U.S. dollar terms. India’s Sensex lost but 1.34%
last month. The Nikkei 225 only lost 2.85%; Germany’s DAX
retreated 4.89% and England’s FTSE 100 lost 4.93%. Now the
greater descents: All Ordinaries, -6.86%; CAC 40, -8.44%; Hang
Seng, -14.33%; TSX Composite, -8.97%; Shanghai Composite, -8.11%.
After September, all of these indices were in the red by 10% or
more YTD. The biggest loser among them? The DAX, -23.99% YTD. The
MSCI World and Emerging Market indices respectively lost 8.85%
and 14.78% in September.14,15
COMMODITIES
MARKETS
The
U.S. Dollar Index rose 6.0% in September. That alone might tell
you what kind of month it was. Gold lost 11.38% last month. Other
precious metals also saw major selloffs last month – platinum,
-17.9%; palladium, 22.3%; silver, 28.0%. Oil futures slipped
10.82% in September. At month’s end, the price of COMEX gold
was $1620.40 per ounce; NYMEX crude settled at $79.20 a barrel.
The 19-commodity Thomson Reuters-Jefferies CRB Index posted a
12.97% loss on the month, and just three crops in the
24-commodity Standard & Poor’s GSCI Total Return Index of
raw materials advanced – live cattle (+7.6%), feeder cattle
(+7.7%) and lean hogs (+5.9%). The real yield of the 10-year note
was but 0.17% on September 30, hardly changed from the 0.18%
yield on August 31.2,16,17,18,19,20
REAL
ESTATE
The
housing market appeared healthier than a year ago. Perhaps that
isn’t saying much, but the progress was tangible. Existing home
sales improved 7.7% in August, putting them + 18.6% from a year
earlier. There were 3.2% more housing starts in August, and that
indicator registered 7.8% annual improvement. August data also
showed 12-month gains in new home sales (6.1%) and pending home
sales (7.7%). The S&P/Case-Shiller Home Price Index rose
again in July (0.9%); the index was still 4.1% below July 2010
levels.21,22,23,24,25
How
low could mortgage rates go? In September, the short answer was
“even lower”. Homeowners who could manage a refi were looking
at a 3.28% average rate for the 15-year fixed on September 29
according to Freddie Mac’s Primary Mortgage Market Survey. That
was down from 3.39% on September 1. The average rate on the
30-year FRM was a milestone 4.01% on September 29; it had been
4.22% on September 1. In the same interval, the average rates on
the 5/1-year ARM actually rose to 3.02% from 2.96%; rates on the
1-year ARM went from 2.89% to 2.83%.26
LOOKING
BACK…LOOKING FORWARD
Appetite
for risk truly waned in September, a month in which the dollar
seemingly beat every asset class.
| % CHANGE |
Y-T-D
|
1-MO
CHG
|
1-YR
CHG
|
10-YR
AVG
|
DJIA
|
-5.74
|
-6.03
|
+1.16
|
+2.35
|
NASDAQ
|
-8.95
|
-6.36
|
+1.97
|
+6.32
|
S&P
500
|
-10.04
|
-7.18
|
-0.86
|
+0.89
|
| REAL YIELD |
9/30
RATE
|
1
YR AGO
|
5
YRS AGO
|
10
YRS AGO
|
10
YR TIPS
|
0.17%
|
0.75%
|
2.27%
|
3.50%
|
Sources:
cnbc.com, bigcharts.com, treasury.gov - 9/30/111,27,28,29,30
Indices
are unmanaged, do not incur fees or expenses, and cannot be
invested into
directly.
These
returns do not include dividends.
Uncertainty
defines the market at this point. Could this next earnings season
be powerful enough to send stocks north in October? Could
anything divert enough attention from the risks in Europe? (Don’t
forget the pressure from a stronger dollar.) This is a market
given to rapid sentiment shifts, and its present level of
volatility might be with us for months. If it is any
encouragement, October has been a decent month for Wall Street
since 2000; in fact, it has been the DJIA’s fifth-best month of
the year since then with an average monthly performance of
+1.16%.31
UPCOMING
ECONOMIC RELEASES
Here’s what we have for the rest of October: the
August ISM service sector PMI (10/5), the September jobs report
and a report on August wholesale inventories (10/7), the initial
University of Michigan October consumer sentiment survey,
September retail sales figures and August business inventories
(10/14), September industrial output (10/17), the September PPI
(10/18), the September CPI, a new Fed Beige Book and data on
September housing starts and building permits (10/19),
September’s existing home sales and the Conference Board’s
September Leading Economic Indicators index (10/20), the August
Case-Shiller home price index and the Conference Board’s
October consumer confidence poll (10/25), September new home
sales and durable goods orders (10/26), the initial BEA estimate
of 3Q GDP and September’s pending home sales (10/27), and then
September consumer spending and the final University of Michigan
October consumer sentiment survey (10/28).
*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.
3040 Post Oak Blvd, Suite 400, Houston,TX 77056 281.220.2776.
PAS is an indirect wholly owned subsidiary of Guardian.
PAS is a member FINRA/SIPC
Wealth
Design Group is not an affiliate or subsidiary of PAS or
Guardian.
This
material was prepared by MarketingLibrary.Net 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 and may not be relied on for the
purpose of avoiding any Federal tax penalty. 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.
BSE Sensex or Bombay Stock Exchange Sensitivity Index is a
value-weighted index composed of 30 stocks that started January
1, 1986. 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 DAX 30 is a Blue Chip stock
market index consisting of the 30 major German companies trading
on the Frankfurt Stock Exchange. The FTSE 100 Index is a share
index of the 100 most highly capitalized companies listed on the
London Stock Exchange. The S&P/ASX All Ordinaries Index
represents the 500 largest companies in the Australian equities
market. The CAC-40 Index is a narrow-based, modified
capitalization-weighted index of 40 companies listed on the Paris
Bourse. The Hang Seng Index is a freefloat-adjusted market
capitalization-weighted stock market index that is the main
indicator of the overall market performance in Hong Kong. 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. The SSE Composite
Index is an index of all stocks (A shares and B shares) that are
traded at the Shanghai Stock Exchange. 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. The S&P GSCI (formerly the
Goldman Sachs Commodity Index) serves as a benchmark for
investment in the commodity markets and as a measure of commodity
performance over time. It is a tradable index that is readily
available to market participants of the Chicago Mercantile
Exchange. 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.
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2
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3
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[9/30/11]
4
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5
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nytimes.com/2011/09/15/business/economy/retail-sales-and-producer-prices-unchanged-in-august.html
[9/14/11]
6
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bloomberg.com/news/2011-09-06/u-s-ism-services-index-increased-in-august.html
[9/6/11]
7
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8
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9
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10
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[9/19/11]
11
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[9/22/11]
12
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[10/3/11]
13
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[10/3/11]
14
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15
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[9/30/11]
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[9/30/11]
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[9/30/11]
18
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[10/3/11]
19
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[10/2/11]
20
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treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldYear&year=2011
[10/3/11]
21
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[9/21/11]
22
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23
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24
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[9/29/11]
25
-
articles.latimes.com/2011/sep/28/business/la-fi-home-prices-20110928
[9/28/11]
26
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27
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[10/3/11]
28
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bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F30%2F10&x=0&y=0
[9/30/11]
28
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bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F30F2%2F10&x=10&y=18
[9/30/11]
28
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bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F30%2F10&x=0&y=0
[9/30/11]
28
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[9/30/11]
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28
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[9/30/11]
29
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[10/5/11]
30
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[7/11/01]
31
- cnbc.com/id/44758022 [10/3/11]
