Prior week economic summary
There were two economic reports last week from the service and manufacturing/durable goods sectors. Together they indicated that we will have a first quarter .7% GDP growth. The service sector is barely positive and productivity has leveled out. Durable good orders were up in January but off in February. If you take out the transportation numbers, which are very volatile, you will see that durable goods were down about 1%. Also, housing numbers came in lower than expected and consumer spending came in flat. There are a lot of mixed messages from these economic reports and the economy is not able to get any growth where investors want it.
A strong dollar is not really a good thing
Over the weekend the surprising news was announced that 250 business leaders got behind the “Brexit” or the British Exit from the EU. Also, Prime Minister Abe from Japan is expected to announce stimulus sometime later this week to try and help their weakening economy. That impacts investors in an interesting way. Both of these international actions will hurt the Euro, the British Pound, the Yen, and ultimately strengthen the US dollar. As we have seen in the recent past, when the dollar strengthens, oil prices fall. When oil falls, our market falls. In this way US investors are impacted by the combination of these two separate events in England and Japan.
Can a terrorist attack cause a bear market?
A viewer sent us a question last week asking if a terrorist attack can cause a bear market. Going back to the 1970’s we can see that usually they do not. In the past, the markets have shrugged off a terrorist attack with September 11th being the exception. Five days after 9/11 the markets were down 12%. Last week we saw the markets shrug off the Brussels terrorist attack. The only real concern we would have of a terrorist attack causing a bear market would be if the terrorist attacked our infrastructure like a power plant.
Great question. Keep them coming.
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