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  • U.S. Dollar Growing Stronger

    One frequently expressed concern about the U.S. stock market is the stronger U.S. dollar. The concern is that a rising dollar will hurt U.S. corporate earnings and stocks prices by making U.S. exports more costly to foreign buyers, and by making earnings from outside the U.S. worth less in U.S. dollars. Both arguments may have merit. However, a look at the historic relationship between the S&P 500 index and the dollar suggests that, in fact, ...

    Posted at October 29, 2014 | By : | Categories : 401(k),Global Market Summary,Uncategorized | 0 Comment
  • “American Exceptionalism” Reflected in Stocks

    Periodic jitters over the Federal Reserve’s “taper” — the winding down of longstanding monetary policy liquefying economy — caused volatility in the third quarter. Nonetheless, at quarter’s end stocks ended higher, driven by a stream of improving economic data. The broad index of large American stocks was up +17.3% for the 12 months ended September 30, 2014, a 19.7% total return. The stock market hasn’t experienced even a -10% correction in over three ...

    Posted at October 29, 2014 | By : | Categories : 401(k),Global Market Summary,Uncategorized | 0 Comment
  • Bonds and the Federal Deficit

    The big surprise so far in 2014 has been low bond yields. The world’s most famous bond investor, Bill Gross, is emblematic of how bonds fooled so many investors who have been expecting higher interest rates. In March of 2011, Gross predicted yields would go “higher, maybe even much higher” upon the end of the Fed’s monetary easing policy. At the end of the quarter, Gross, made famous for his market calls, quit the mutual ...

    Posted at October 28, 2014 | By : | Categories : 401(k),Global Market Summary,Uncategorized | 0 Comment
  • Outlook for Bond Yields

    Regarding interest rates, it is important to distinguish between short-term rates and long- term bond yields. The differential between the two is the crucial measure when it comes to assessing the economic and market outlook. The blue line in the chart below represents the “yield curve” – the differential between short-term rates and long-term yields. It is obvious that when the differential has been large ...

    Posted at August 1, 2014 | By : | Categories : 401(k),Global Market Summary,Uncategorized | 0 Comment
  • Labor Slack Remains in Control of Inflation

    The two most obvious reasons for lower-than-expected bond yields are that the rate of inflation, until just the last two months, had come in well below what the Fed and private economists had been expecting, and the net new supply of U.S. Treasury bonds has contracted dramatically with falling federal deficits, even as global demand for bonds has steadily expanded.  The personal consumption expenditures deflator, the best measure of inflation at the consumer ...

    Posted at August 1, 2014 | By : | Categories : 401(k),Global Market Summary | 0 Comment
  • Long Term: Earnings Drive Stock Prices

    In the short term, many factors can influence the direction of stock prices, not least of which is investor emotion. In the long term, however, it is earnings — plain and simple— that drive stock prices.  Put another way: Applying the price/earnings multiple to the red line (earnings) in the following chart caused us to experience the black line, the S&P 500 price index. The dramatic earnings recovery from the 2009 bottom that you see ...

    Posted at August 1, 2014 | By : | Categories : 401(k),Global Market Summary | 0 Comment
  • Fracking Drives Less Dependency On Foreign Oil

    Before we leave the U.S. economic outlook, a word on the “fracking” dividend.  It is, indeed, a very significant story. Fracking has driven down U.S. crude oil net imports, further reducing the U.S. trade deficit. With the application of hydraulic fracturing technology, U.S. oil and gas production has surged and is projected to go higher still. The dividend to the U.S. economy is huge, ...

    Posted at April 29, 2014 | By : | Categories : 401(k),Global Market Summary | 0 Comment
  • U.S. & Global GDP Expected To Improve

    By mid-April 2014, economic data had strengthened after weather-related weakness in December and January. Global leading economic indicators had picked up, the U.S.’s important monthly purchasing managers’ indexes remained strong, car sales and home construction were strong, household net worth was back to its historical trend and hitting new highs and, believe it or not, the Federal Reserve litmus test of consumers’ ability to spend – the financial obligations ratio – showed that Americans’ ability ...

    Posted at April 29, 2014 | By : | Categories : 401(k),Global Market Summary | 0 Comment
  • Labor Market Slack: Issue To Watch

    Bond yields have confounded experts by staying low for longer than expected. Why? Probably because inflation, the key driver of long-term bond yields, has remained low for longer than the Fed and most private economists had been forecasting. The Fed is maintaining a stance that the annual inflation rate will return to its desired target rate of about 2%. Why? Good question.   This issue is an ...

    Posted at April 29, 2014 | By : | Categories : 401(k),Global Market Summary | 0 Comment
  • Are Rising Bond Yields Bad For Stocks?

    The big question as the new quarter began was not so much whether interest rates would rise, but by how much.  And there is a widely-held misconception about the effect of rising yields that is important for investors who want to stay broadly diversified to remember. It is a myth that rising bond yields are bad for stocks. The notion that investors are attracted away from stocks to bonds for their higher yields may sound plausible, ...

    Posted at April 29, 2014 | By : | Categories : 401(k),Global Market Summary | 0 Comment
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