04/09/12: We hope that you had a great Easter and Masters weekend! As we always do at the beginning of the market week, we wanted to give you a “look ahead” at a few items that we will be tracking carefully during the next few days. These are just a few opinions that we have, and as with life, nothing is certain about them.
1. First, here is a “week-at-a-glance” view of several key market drivers for the next five business days. Monday and Tuesday are about international politics, as President Obama meets with Brazilian President Dilma Rousseff (reflecting the growth of that country’s global economic reach) and Syria faces a deadline to partially implement U.N. envoy Kofi Annan’s peace plan. Wednesday returns us to domestic economic data as The Federal Reserve publishes its beige book survey of regional economic conditions in the U.S. and The Treasury Department releases its budget report for March. Thursday brings the issuance of U.S. numbers on the international balance of trade for February and producer prices for March. The market week ends Friday with the publication of the consumer-price index along with China’s release of its first-quarter gross domestic product.
What does this mean for investors? We will be most interested this week in the release of the Fed’s data on the health of regional economies in the United States. Hopefully, the numbers will be positive and the continuing growth of the U.S. economy will serve as an effective “counterbalance” to some of the systemic global weakness, mainly coming from Europe and to a lesser extent the Pacific Rim. Confidence drives markets, and as long as the U.S. is on an upward trajectory, this will definitely help investors.
2. Large U.S. corporations have emerged from the 2008 crisis in excellent shape. An analysis by The Wall Street Journal of corporate financial reports finds that recent sales, profits and employment posted by S&P 500 member companies have exceeded the totals of 2007, the final full year prior to the financial crisis. A combination of deep cost cutting and caution during the recovery have put large U.S. companies on firmer financial footing. Overall, companies have large amounts of cash, are more profitable and have less debt. However, the rate of growth is slowing and the performance hasn’t translated into large employment gains.
What does this mean for investors? We have been discussing whether some of the recent employment gains in the United States are a “false positive” in that large companies are merely hiring back what was “overdone” in laying people off during the financial crisis. With Europe in recession and growth slowing in China, if U.S. companies “level off” hiring soon, will the ongoing economic recovery “stall out?”
3. And speaking of corporate profits, are we about to hit an earnings reporting period that will be lackluster and cause the market some problems? This week, we will begin to see the first round of U.S. corporate earnings in a season that many analysts are predicting will be less than stellar. Expectations for both first-quarter and full-year earnings are more modest than in recent quarters. Analysts now expect that U.S. corporations will show average growth of .95% over a year earlier in the first quarter. That would be the lowest rate of year-over-year growth since the end of the financial crisis, and down from expectations of 4.5% as late as January. Interestingly, many analysts last September were calling for 2012 growth of around 10%. What do the bulls say about this data? Simply put, that these first quarter results won’t be enough to stop the market rise, arguing that investors are expecting a “healthy breather” to recent market growth.
What does this mean for investors? As we pointed out above, investors need to be cautious that the “perfect storm” of a global growth slowdown (Europe, China and the U.S. all at once) does not take hold. Further, that a random geopolitical crisis does not give us some “piling on” as well. It seems to us that all of this happening together could begin to reintroduce a “volatility dynamic” that really challenged investors last year and sapped market confidence.
4. The Wall Street Journal posted a recent studies show that the majority of married couples disagree on the timing of their retirement. In the latest version of marital “he said, she said,” 62% of couples don’t agree on their expected retirement ages. Further, 47% disagree on whether they will continue to work in retirement and 33% have differing expectations of lifestyle spending in retirement. Of particular interest to us at Fi Plan Partners is that 73% disagree on whether they have completed a detailed retirement plan.
What does this mean for investors? A detailed planning process that both husband and wife are 100% on board with is critical. A plan that a husband and wife are not jointly involved in, and do not update together on a yearly basis, has no value.
If you have any questions, feel free to call or email me here.
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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