08/20/12: As we always do at the beginning of the market week, we take a “look ahead” at a few items that we will be tracking carefully. These are just a few opinions that we have, and as with life, nothing is certain about them.
- First of all, here’s a “week-at-a-glance” view of what’s coming up over the next five market days.
Monday should be a relatively “quiet” day, without much coming out in the way of economic data either in the United States or Europe. Tuesday will bring tallies of weekly sales at chain stores, discounters and department stores. On Wednesday, The National Association of Realtors reports on existing home sales for July and The Federal Open Market Committee issues minutes of its August 1st policy meeting. Thursday will see the release of metrics on July’s new homes sales, and on the international front, German Chancellor Merkel meets French President Hollande for talks about the euro-zone crisis. The market week ends Friday with The Commerce Department releasing data on durable goods orders for July.
What does this mean for investors? There is not much “data driving” this week on markets, as Europe continues a month long vacation and “market moving” numbers in the United States are in short supply. Unless there is a political “flare up” somewhere in the world that is not expected, we anticipate a market week that is somewhat lackluster.
- In addition to the market concern over the “fiscal cliff,” we are also tracking what could be a “regulatory cliff” that could be just as bad.
In an excellent opinion piece in last week’s Wall Street Journal, Senator Rob Portman of Ohio argues that the Obama Administration is “sitting on” several multi-billion-dollar regulations until after the November election. These delayed rules, together with more than 130 unfinished mandates under the 2010 Dodd-Frank financial law, could significantly increase the regulatory drag on our economy in 2013. As one example, the Environmental Protection Agency (EPA) has an Ozone Rule first proposed in 2010 that is so strict that up to 85% of U.S. counties would be in violation, thus practically “choking off” new industrial expansion.
What does this mean for investors? According to a 2011 Gallup survey, overregulation tops the list of “most important problems” facing America’s small business owners. With our economy stuck in the worst jobs slump since the Great Depression, the pressing need is to build a regulatory climate that encourages investment, growth and job creation. Will the upcoming election once again give us that?
- Mortgage rates are inching up as the economy improves
. Rates for a 30-year fixed mortgage rose to an average of 3.62% for the week ended August 16th from 3.59% a week earlier. That was below the 4.15% average rate a year ago and this year’s 4.08% high in March. The economy’s growth, though still weak, has pushed Treasury yields. This in turn is putting pressure on mortgage rates.
What does this mean for investors? Although it may seem somewhat counterintuitive, we could use a little rate stabilization right now. The housing sector, historically such a major part of our economy and investor confidence, has really been “missing in action” for the past four years. Though still very anemic, any sustained “pick up” in this sector would be very welcome news, indeed.
- Could better “back to school” August sales from retailers signal a boost to financial markets through the remainder of the year?
It appears that this “back to school” spending season, the second most important of the year for retailers (other than the holidays), may end up better than expected. Several factors could help boost sales. Compared with last year, there isn’t the same overwhelming sense of crisis. Although Europe remains very “iffy” and there is uncertainty in the United States over the looming fiscal cliff and the presidential election, August 2011 had more angst in it. Remember that last August saw the U.S. credit downgrade and a quickly worsening European situation all at the same time. Recent consumer-related data is also encouraging. A survey released Friday showed consumer sentiment in early August at its highest level in three months. That followed the July retail-sales report that showed the first month-on-month gain since March. Further, input costs for retailers, mainly in apparel, appear to be easing after a sharp spike in the price of commodities like cotton through 2011. That should take some pressure off margins.
What does this mean for investors? It would really be good for markets to get a confident consumer once again spending more. Remember, as opposed to what many people think, the major market driver is the consumer. 70% of the impact on financial markets ultimately comes from consumer purchases and how confident about the future that he/she feels.
That’s our focus for the week. Please connect with us on Facebook here to keep up with other things that could affect you through out the week.
Call me at (205) 989-3498 or email me here if you have any questions.
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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