Stocks fell last week as further evidence showed the U.S. economic recovery is losing steam. The S&P 500 fell to a loss of as much as 2.3% this week before recovering to just a 0.6% decline. Stocks rallied 1.7% Friday after Fed Chairman Bernanke said that he expects a pickup in growth in 2011, adding that the Fed is ready to use "unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly." The news sparked a selloff in Treasuries, helping to offset some of the growing concerns regarding the pace of the economic recovery.
Returns to 8/27/10
One Week
YTD
One Year
Three Year
Five Year
Dow Jones Industrial
-0.58
-0.84
8.97
-5.98
2.21
NASDAQ Composite
-1.20
-5.09
6.21
-5.61
0.31
Standard & Poor's 500
-0.62
-3.26
5.36
-8.06
-0.37
MSCI EAFE (Internl.)
-0.18
-7.84
-1.15
-10.37
1.02
Source: Morningstar.com. * Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. 3 and 5-year returns are annualized.
ARE YOU CONCERNED ABOUT THE MARKETS AND YOUR MONEY? We have witnessed some of the worst global market volatility in history. This has not only been a mortgage and bank credit crisis but also a fear-based market. When fear takes over a market, thoughtful investors should review the facts. We are long-term investors and even though this market has seen historical volatility and recession, it is the long-term fundamentals that will emerge and win out in the long run. Remember, "In uncertain times, stay focused and diversified." If you are concerned! You should contact us to schedule a review of your portfolio related to your own situation.
U.S. Economic News
U.S. Federal Reserve Board Chairman Ben Bernanke said Friday that the U.S. central bank "will do all that it can" to ensure economic recovery continues. He outlined steps the Fed might take if the economy slows. In his opening remarks to the world's central bankers in Jackson Hole, Wyoming, Bernanke said the Fed is prepared to provide additional monetary accommodation through unconventional measures if necessary.
Gross Domestic Product (GDP) for the second quarter was revised lower to 1.6% from the prior reading of 2.4%. A month ago, the government estimated the rate at 2.4% after a 3.7% expansion in the first quarter. After-tax earnings rose 0.1%, off the previous quarter's 11.4% gain.
Durable goods orders rose 0.3% in July from June, mostly on the back of an increase in aircraft orders. Excluding the volatile transportation sector, orders tumbled 3.8%.
New Home Sales in July declined 12.4% to 276,000, the lowest level since the data series began in 1963. Many purchasers seem to have left the markets since the expiration on April 30 of a federal tax credit for homebuyers
Existing home sales plummeted 27.2% to a 3.83 mln seasonally adjusted annual rate in July - marking the lowest level since records began in 1999. July is typically one of the strongest months for home sales but the tax credits pulled sales into April. It is possible that new historical sales lows will be broken each month through the remainder of the year.
Initial Jobless Claims declined by 31,000 to 473,000, more than the 10,000 drop predicted by economists. However, new claims for the previous week were revised upward, and the four-week moving average rose to the highest level since November 2009.
Other Interesting Info and Events
Economic Recovery?
Federal Reserve chairman Ben Bernanke bluntly acknowledged that the U.S. economic recovery has lost considerable steam, but said the central bank has the necessary policy tools to support continued growth. "The issue at this stage is not whether we have the tools to help support economic activity and guard against inflation," Bernanke said at the Fed annual symposium in Jackson Hole, Wyo. "We do."
Making his first public comments since the central bank announced it would buy additional long-term Treasurys to boost the recovery, Bernanke said that the pace of economic growth is "somewhat less vigorous" than expected, but remained optimistic for a pickup in 2011.
Global News
Chinese Premier Wen Jiabao pledged Friday to redouble the country's stimulus program to focus on job creation, signaling that Beijing's main worry is keeping its factories humming and its restive workers making money from strong exports to the world.
Greece didn't ask for financial support, and Germany didn't offer any in talks between Merkel and Greek Prime Minister George Papandreou, while Merkel said there would be a common push to crack down on market speculation that has led Greece's cost of borrowing to skyrocket.
United Kingdom economy expanded 1.2% in the second quarter, marking its biggest growth spurt since 2001, as companies rebuilt inventories and construction work surged.
Japan's exports rose in July for the eighth month in a row as sales of products, such as cars and electronic components, in emerging markets were still solid. However, the rate of growth slowed for the fifth month in a row. That pace is expected to slow even more if the yen, which this week surged to a 15-year high against the dollar, continues to appreciate.
What's Happening This Week?
This weeks August non farm payrolls on Friday may be the biggest news for the week due to the impact of the elimination of temporary government census workers. Other data includes personal income and the Dallas Fed survey Monday. S&P/Case Shiller and Chicago PMI are released Tuesday, and construction spending is Wednesday, in addition to the ADP employment report. Weekly jobless claims are issued Thursday, as are productivity and costs; pending home sales and factory orders. The ISM non manufacturing data is released Friday morning. We then move into a three day weekend observing Labor Day.
Remember, "In uncertain times, stay focused and diversified."
In any market environment, I strongly believe that investors should stay diversified across a variety of asset classes, which helps reduce risk. By working closely with your Bankers & Investors Financial Advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss. If you don't currently have an advisor or would like a second opinion, give us a call we would love to work with you.
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