April was a fairly good month with oil up 15.5%. There were some slightly negative reports that came out last week with GDP heading in the wrong direction, a disappointing consumer spending report, and declining earnings reports.
Investors’ GDP concerns
The GDP report was very low, which wasn’t unexpected. Over the past two years there were big negative weather events that has pulled GDP down. This year didn’t have that which makes it a little more concerning. This impacts investors as this negative economic growth does not push profits up for big companies. When the economy is growing, companies grow and potentially their stock prices prices grow as well. That is what we want to see.
What has been pushing the market up?
In the recent past Fed has been pushing the market up. Last weeks Fed meeting came out with no relevant news. The Fed did not raise rates or pull off the June meeting. This should keep interest rates low for investors but this does not help push equity prices in the long run. The Fed has driven artificial growth but there will be now help coming from them in the near future.
Investors with technology stocks affected
While April was a relatively good month, technology companies were the big weakness. Part of that is because their earnings are down but their valuations are high. Part of that valuation problem is because of the Fed and the artificial growth it has been creating.
The bright spot in manufacturing
In what feels like a throwback to old school economics, manufacturing is showing positive growth. Manufacturing in the United States has been contracting since last summer to the end of February. ISM numbers for March were above the expansion threshold and many economist believe those numbers are going to be better for April. While manufacturing employment is at a low 10%, the industry is a big multiplier as they spend a lot of money. Technology has made our manufacturing much more efficient causing a greater output with less workers. This greater output causes employment to go up in other sectors like shipping.
Manufacturing impact on GDP and your investments
Even though manufacturing is up, their spending on equipment and buildings dropped 5.9% in the first quarter of 2016. That is about a .76% GDP impact. This is a big driver for GDP. If manufacturing would really take off, that would help GDP and subsequently investors portfolios.
As we continue to analyze all this information and how it impacts your portfolio, we encourage you to send us your comments and questions.
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
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Stock investing involves risk including potential loss of principal.