01.03.12 Happy New Year to all of you! In the markets, as in life, there are no guarantees but everyone is entitled to their opinion. Here’s my opinion on four major decisions that could have impact on markets this week:
1. First, key data points for a busy reporting week. Besides the obvious political focus on the Iowa caucuses, Tuesday brings: (1) the release of the Federal Reserve minutes of its December policy meeting, (2) the Institute of Supply Management’s manufacturing index for December, and (3) the government’s metrics for construction spending in November. Wednesday data includes auto makers’ sales of new vehicles for December and factory orders for November. Thursday’s highlights include U.S. jobless claims numbers, ISM data on service-sector activity and what is sure to be a closely watched debt auction in France. The week concludes with the U.S. issuing its employment report for December.
2. Europe will again get major attention, and quickly. In addition to recessionary pressures, there is a significant amount of euro-zone debt that will be issued in January. Our opinion here at Fi Plan Partners is that there are two key issues that make a European solution particularly difficult to come by: (1) liquidity in the overall system, and (2) needed agreement by a core of 17 countries, most with their own specialized agendas that threaten the financial health of the European Union as a whole. Remember that the European Union’s economy is actually slightly larger ($15.8 trillion) than the United States ($15.1 trillion).
3. We’re very interested to see how both the Federal Reserve and the IMF begin the year. It appears that the Federal Reserve will keep interest rates low through at least mid-2013 in an effort to keep the U.S. economy growing, but will they ultimately undertake a QE3? The Fed’s first key meeting of the year is January 24-25. As far as the IMF is concerned, how aggressive will their 2010 lending be in assisting Europe?
4. The “crystal ball” forecast for the fastest growing economy in 2012? Here’s a little surprise, it could be Iraq. A recent article in “The Kiplinger Letter” suggests that as Iraq begins to bring its oil production back on line after eight years of war, it could expand by as much as 12%, maybe more, if sectarian problems can remain under control. China (+8.5%), Taiwan (+5%) and South Korea (+4.4%) look to lead the growth of industrialized nations. In the same report, the United States is forecast to grow just above 2% for the year as job creation and spending pick up.
Please call or email me if you have any questions or concerns about these issues. Myself or anyone on our team would be delighted to talk with you.
Senior Vice President
Note: The opinions voiced in this material are for general information and are not intended to be specific advice. Any indices such as the S & P 500 can’t be invested into directly. Past performance is no assurance of a future result.
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