MONTHLY QUOTE
“What
we think or what we know or what we believe is, in the end, of
little consequence. The only consequence is what we do.” – John
Ruskin
MONTHLY TIP
If I asked you “Do you
have an accumulation vehicle that will be going up in value 3
years from now, regardless of market conditions, would you be
confident in answering “yes”? If not, we should talk.
MONTHLY
RIDDLE
Which of these five
words doesn’t belong in this list: that, what, cat, sat, chat.
Last month’s riddle:
A
man tells a friend that he married three women yesterday, and it
was all legal. In fact, it was routine. How can he make such a
statement?
Last month’s answer: He
is a justice of the peace.
THE
MONTH IN BRIEF
Things
fell in May: stock and commodity prices, Treasury yields,
mortgage rates, gas prices and the value of the euro. Investors
worried about fragmentation of the eurozone, the possibility of
default in Greece and bank woes in Spain. U.S. economic
indicators ranged from tepid to middling, leading some analysts
to wonder if another stimulus was needed. All told, it was a
rough month for the market – the poorest month for the Dow
since May 2010. Would 2012 simply be a replay of 2011 on Wall
Street? Hopefully, the sense of déjà vu would pass.1
DOMESTIC
ECONOMIC HEALTH
While
May was a month marked by descents, the jobless rate managed to
tick up to 8.2%. May’s unemployment report was quite bad: just
69,000 new jobs were created, while a Reuters poll of economists
forecast payrolls swelling by 150,000.2
Actually,
some stateside indicators did hint at continuing economic
strength. Our manufacturing and service sectors were still
growing, although the pace of growth had moderated: after a 1.4%
gain in April, the Institute for Supply Management’s
manufacturing PMI fell 1.3% in May to 53.5. (However, the new
orders sub-index went all the way north to 60.1.) In April, ISM’s
service sector PMI had been at 53.5; May’s reading improved to
53.7. May car sales were very strong: Toyota's U.S. sales rose
87%, Nissan’s 21%, and Chrysler’s 30%; sales of General
Motors cars and trucks were up 11%. This was nice to hear after
the April durable goods report, which showed a 0.2% advance with
auto sales powering the gain. 3,4,5,6,7
The
federal government said that consumer prices were flat in April
(producer prices retreated 0.2%, the first such decline since
December). As it happened, 12-month consumer inflation was but
2.3% in May (the lowest annualized inflation since February
2011). Consumer confidence was either notably up or notably down,
depending on which poll you believed; the Conference Board’s
May survey recorded a 3.8% drop (down to 64.9 from 68.7 for
April) while the University of Michigan’s survey hit 79.3 – a
3.8% rise to the highest level since October 2007. 2,7,8,9,10
The
event of the month on Wall Street was Facebook’s IPO, which
ended up being fumbled by NASDAQ. Trading glitches aside, this
IPO did not turn out to be the next Google: shares were initially
offered at $38 on May 18 and closed just slightly higher at the
end of the trading day. On June 4, the share price settled at
$26.90.11
GLOBAL
ECONOMIC HEALTH
The
odds of a Greek default appeared to increase. A growing number of
economists and money managers felt that it would return to the
drachma following its June 17 elections, a direct result of being
unable to form a coalition government. After the new Greek
elections were announced on May 14, $894 million worth of assets
left Greek banks in a day. Spain’s government announced that
€100 billion had left that country in the first quarter. Major
Spanish lenders appeared in jeopardy; analysts estimated it would
take €60-80 billion from the IMF to backstop them. Adding to
worries that Europe might return to economic balkanization,
European Central Bank president Mario Draghi and EU economy
commissioner Olli Rehn both warned that the eurozone was in
serious trouble. Euro area unemployment hit 11.0% in April,
rising 0.7% in a month. The Markit eurozone PMI fell to 45.1 in
May (lowest reading in almost two years) and the U.K.’s
benchmark manufacturing PMI dropped to 45.9 from 50.2 in
April.2,12,13,14,15
In
fact, manufacturing PMIs seemed to retreat worldwide in May. For
example: China’s “official” PMI slipped unexpectedly to
50.4 from April’s 53.3 mark; China’s HSBC PMI went from 49.3
to 48.7; Australia’s went from 43.9 to 42.4; Germany’s from
46.2 to 45.2; Brazil’s remained flat at 49.3 and South Korea’s
PMI was a relatively healthy 51.0. JPMorgan’s global
manufacturing PMI was at 50.6 in May, down from 51.4 in April to
its lowest point since December.6,15
WORLD
MARKETS
The
Shanghai Composite lost only 1.00% in May; other major benchmarks
fared worse. In the rest of the Asia Pacific region, the Sensex
lost 5.81%, the Hang Seng 12.07%, the S&P/ASX All Ordinaries
7.46% and the Nikkei 225 9.32%. In Europe, the DAX dropped 8.70%,
the CAC 40 6.09% and the FTSE 100 7.51%. (All of the above May
performances have been measured in U.S. dollar terms by
Morningstar.) The MSCI Emerging Markets Index dropped 11.67%; the
MSCI World Index lost 8.99% for May.16,17
COMMODITIES
MARKETS
The
dollar certainly had a great May – the U.S. Dollar Index, in
fact, gained 5.43%. Natural gas futures also rose 6.00% for the
month. Aside from those advances, there were marked descents for
major commodities. Oil futures retreated 17.49% on the month,
falling to settle at $86.53 on the NYMEX. Heating oil slipped
15.11%; RBOB gasoline dropped 12.86%. The upside: retail gas
prices fell 5.14% last month. As for metals, gold lost 6.01% in
May and that put it at -0.17% for the year. The COMEX price was
$1,564.20 on May 31. Copper lost 12.12% in May while silver
slipped 10.51%. Marquee crops suffered May losses, too: coffee
futures declined 9.25%, corn 12.46%, cotton 19.63% and wheat only
1.64%.1,2
REAL
ESTATE
Some
good news came in from the Census Bureau and the National
Association of Realtors: new and existing home sales had improved
in April.
New home purchases rose by 3.3% while residential resales were up
3.4% for the month to near-January levels (January 2012 saw the
best sales pace in almost two years). NAR said that pending home
sales had decreased 5.5% in April, but they were up 14.1% from a
year ago. The March edition of the S&P/Case-Shiller Home
Price Index hinted that the pace of decline in housing prices
could be moderating – the index was down just 1.9% for the last
12 months.18,19,20
With
Treasury yields moving further into negative territory during
May, mortgage rates went still lower. Freddie Mac noted the
following decreases in average home loan interest rates between
its April 26 and May 31 surveys:
30-year FRMs, 3.88% to 3.75%; 15-year FRMs, 3.12% to 2.97%;
5/1-year ARMs, 2.85% to 2.84%. Average rates on 1-year ARMs
actually ticked up from 2.74% to 2.75%.21
LOOKING
BACK…LOOKING FORWARD
After
the worst month for stocks in two years, the major U.S. indices
were all still in the black YTD. At the end of the month, the S&P
500 was at 1,310.33, the NASDAQ at 2,827.34 and the Dow at
12,393.45. Look at the month-ending real yield on the 10-year
Treasury.1,22
%
CHANGE
|
Y-T-D
|
1-MO
CHG
|
1-YR
CHG
|
10-YR
AVG
|
DJIA
|
+1.44
|
-6.21
|
-1.40
|
+2.49
|
NASDAQ
|
+8.53
|
-7.19
|
-0.28
|
+7.50
|
S&P
500
|
+4.19
|
-6.27
|
-2.59
|
+2.28
|
REAL
YIELD
|
5/31
RATE
|
1
YR AGO
|
5
YRS AGO
|
10
YRS AGO
|
10
YR TIPS
|
-0.50%
|
0.80%
|
2.54%
|
3.48%
|
Sources:
money.msn.com, bigcharts.com, treasury.gov - 5/31/121,23,24,25
Indices
are unmanaged, do not incur fees or expenses, and cannot be
invested into
directly.
These
returns do not include dividends.
June
1 marked the Dow’s worst day of 2012 as anxieties over the
eurozone intensified. The middle of June could bring some
pronounced volatility before and after Greece’s special
elections. Could U.S. economic indicators be encouraging enough
to divert Wall Street’s attention from Greece and Spain this
month or even provide a shot of confidence? That seems a
best-case scenario. While few analysts think the U.S. could slip
back into a recession, there was basically a market correction as
of June 1 (the S&P 500 was down 9.94% at the close of trading
on that day from its April 2 peak), and even bulls are bracing
for severe fallout from Europe. At the top of June, the Dow,
NASDAQ and S&P were all below their simple 200-day moving
averages yet oversold according to their relative strength
indexes. Interpret that as you wish; staunch bulls might see
grounds for a rally, should the Street somehow take its mind off
Europe.5
UPCOMING
ECONOMIC RELEASES
Here’s what ahead in terms of stateside news for the rest of
June: a new Beige Book from the Federal Reserve (6/6), April
wholesale inventories (6/8), May retail sales figures, April
business inventories and May’s PPI (6/13), May’s CPI (6/14),
the initial June consumer sentiment survey from the University of
Michigan and the report on May industrial output (6/15), May
housing starts and building permits (6/19), a Fed policy
announcement (6/20), May existing home sales and the May
Conference Board Leading Economic Indicators index (6/21), May’s
new home sales (6/25), the Conference Board’s June reading of
consumer confidence and the April Case-Shiller home price index
(6/26), April durable goods orders and May pending home sales
(6/27), the federal government’s final estimate of Q1 GDP
(6/28), May personal spending (6/29) and the University of
Michigan final June consumer sentiment survey (6/30).
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 MarketingLibrary.Net Inc., and does not
necessarily represent the views of the presenting party, nor
their affiliates. Marketing
Library.Net Inc. is not affiliated with any broker or brokerage
firm that may be providing this information to you. 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. This is not a solicitation or recommendation
to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. 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 US Dollar Index measures the performance of the U.S. dollar
against a basket of six currencies. The SSE Composite Index is an
index of all stocks (A shares and B shares) that are traded at
the Shanghai 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 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/ASX All Ordinaries Index represents the 500 largest
companies in the Australian equities market. 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 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.
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. 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
-
http://money.msn.com/market-news/post.aspx?post=a78bb8b0-421f-43b2-afb3-f036986bc71a
[5/31/12]
2
- www.cnbc.com/id/47645265 [6/1/12]
3
- www.ism.ws/ISMReport/MfgROB.cfm [6/1/12]
4
- www.ism.ws/ISMReport/NonMfgROB.cfm [6/5/12]
5
-
money.msn.com/market-news/post.aspx?post=109dd732-6daa-4f8a-b878-a8ee80dd9aba
[6/1/12]
6
-
articles.marketwatch.com/2012-05-24/economy/31831869_1_orders-for-long-lasting-goods-aircraft-and-parts-orders-durable-goods-orders
[5/25/12]
7
-
online.wsj.com/article/SB10001424052702304192704577405853805485804.html
[5/15/12]
8
- www.bls.gov/news.release/ppi.nr0.htm [5/11/12]
9
- www.conference-board.org/data/consumerconfidence.cfm [5/29/12]
10
-
thomsonreuters.com/content/financial/pdf/i_and_a/438965/gains_in_confidence_depends_on_job_growth.pdf
[5/25/12]
11
- www.businessweek.com/ap/2012-06/D9V6I7401.htm
[6/4/12]
12
-
www.nytimes.com/2012/06/04/business/global/euro-zone-nears-moment-of-truth-on-staying-together.html
[6/3/12]
13
-
www.npr.org/blogs/thetwo-way/2012/05/16/152816508/greece-sets-new-election-for-june-17-fear-of-bank-runs-reported
[5/16/12]
14
-
epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-01062012-AP/EN/3-01062012-AP-EN.PDF
[6/4/12]
15
- seekingalpha.com/article/635791-a-bad-week-for-risk [6/4/12]
16
- news.morningstar.com/index/indexReturn.html [5/31/12]
17
-
mscibarra.com/products/indices/international_equity_indices/gimi/stdindex/performance.html
[5/31/12]
18
-
www.freep.com/article/20120523/BUSINESS07/120523032/U-S-new-home-sales-April-housing-market
[5/23/12]
19
- www.mortgageloan.com/pending-home-sales-hit-bump-9083 [5/30/12]
20
-
blogs.wsj.com/developments/2012/05/29/behind-the-numbers-does-case-shiller-show-a-market-bottoming-out/
[5/29/12]
21
- www.freddiemac.com/pmms/ [6/4/12]
22
-
montoyaregistry.com/Financial-Market.aspx?financial-market=an-introduction-to-the-stock-market&category=29
[6/4/12]
23
-
bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F31%2F11&x=0&y=0
[5/31/12]
23
-
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F31%2F11&x=0&y=0
[5/31/12]
23
-
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F31%2F11&x=0&y=0
[5/31/12]
23
-
bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=5%2F31%2F02&x=0&y=0
[5/31/12]
23
-
bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=5%2F31%2F02&x=0&y=0
[5/31/12]
23
-
bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=5%2F31%2F02&x=0&y=0
[5/31/12]
24
-
treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll
[6/4/12]
25
-
treasurydirect.gov/instit/annceresult/press/preanre/2002/ofm10902.pdf
[1/9/02]
