Market Perspectives (July 2014)

by Jim Baird on July 22, 2014

Executive Summary

  • Stocks pushed higher again during June, while fixed-income markets were mostly flat. Overall, capital markets turned in a strong first half of performance.
  • Small cap equities were collectively the strongest performers amongst stocks during the month, but larger cap domestic names and international markets also advanced.
  • Treasury yields were relatively flat during the month, and fixed-income indices generally posted fractional gains.
  • Alternatives were also modestly positive. Precious metals spiked during the month, which drove commodity prices higher.
  • The prevailing view remains that the economy is likely to accelerate during the second half of the year, although recent data has been mixed. On the positive side, job growth has been very strong throughout the first half of the year, despite the outright contraction of 2.9% in the first quarter.

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Consumer Sentiment Research Notes

by Jim Baird on July 21, 2014

CaptureSentiment slips in preliminary July release

The University of Michigan Consumer Sentiment Index slipped in July to 81.3, a modest decline from the previous month’s reading of 82.5 and a directional surprise given expectations for a modest increase.  With this decline, the index has dipped below its level at the end of 2013, but remains in its year-to-date range.

The economy has clearly improved since its outright contraction in the first quarter, but economic data in recent months has been mixed.  However, some of the key drivers of the consumer mood have been among the bright spots.

Stocks posted solid gains in June, capping an impressive first half for the year, which has historically helped boost consumers sense of their financial position.

Employment data also continues to improve, suggesting that job market conditions are not only constructive, but gathering some momentum.  Gains in nonfarm payrolls have exceeded expectations while jobless claims have been edging lower.  Historically, labor market health has been a significant influence on the collective mindset of consumers and their outlook for the health of the economy.

Despite this modest backup, measures of sentiment remain near post-recession highs.  Sustained indications of improving confidence bode well for the future direction of consumer spending – a key support to overall economic growth.  June retail sales reinforce that view to a degree, as a number of retail sectors experienced solid gains for the month.  Nonetheless, the headline gain was limited by softer auto sales and retailers tied to the housing sector, which has experienced a soft patch of its own.

Limited income gains may put a lid on what households are able to spend, particularly in the absence of a greater appetite to tap credit to fuel that spending.  Household debt service levels remain low from an historical perspective, suggesting that the capacity to borrow is there.  The core issue will be how motivated creditworthy consumers may be to use it.

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Consumer sentiment hits four-month low (MarketWatch)

June Retail Sales Research Notes

July 15, 2014

June sales fall short of expectations; core result solid for month Retail sales growth has been a disappointment through much of the first half of the year. While the headline number for June was disappointing, there were some underlying pockets of strength. Retail sales grew by only 0.2% in June, falling well short of the [...]

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Economic Perspectives (June 2014)

July 15, 2014

Recent data doesn’t paint a consistent picture, but broadly continues to suggest that growth has rebounded in the second quarter, and most expect growth in the latter half of the year to surpass results for the first six months.  Nonetheless, those expectations have been tempered a bit. Read the full article>>

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Jobless Claims (week of 7.5.14) Research Notes

July 10, 2014

Jobless claims come in stronger than expected; 4-week average nears multi-year low Initial jobless claims fell to 304,000 for the week ended July 5, a decline of 11,000 from the previous week’s print and below the consensus expectation of 315,000 for the week.  That better-than-anticipated result also pulled the four-week moving average lower to just [...]

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June’s Employment Situation Research Notes

July 3, 2014

Payrolls surge as jobless rate falls to 6.1% The job market roared ahead in June, as the economy added a much stronger-than-anticipated 288,000 new jobs during the month.  Further adding to those solid results, nonfarm payrolls for the preceding two months were adjusted higher by another 29,000.  The combined increase of 317,000 easily exceeded the [...]

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Market Perspectives (June 2014)

June 24, 2014

Executive Summary Stocks and bonds continued their ascent in May, as the majority of indices that sold off during the first few months of the year have now regained losses and have risen well into positive territory. Stocks moved higher globally, led by emerging-market equities but followed closely by both domestic and international developed stocks. [...]

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June Perspectives Podcast

June 23, 2014

A new PMFA Perspectives Podcast is now available via the link below: June Market Perspectives Podcast

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Jobless Claims (week of 6.14.14) Research Notes

June 19, 2014

Jobless claims fall to 312,000; 4-week average near cyclical low Initial jobless claims fell modestly to 312,000 for the week ended June 14, in line with the four week moving average, which also declined to 311,750 for the period. The recent trend and level of claims are indicative of constructive labor market conditions, and they [...]

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May’s CPI Research Notes

June 19, 2014

CPI sharply higher in May; core CPI reaches 2% for first time in over a year Inflation rose more sharply than expected in May, as the Consumer Price Index rose by 0.4% for the month, pushing the year-over-year change in prices higher to 2.1%.  That rise effectively doubled the expected increase of 0.2% for the [...]

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