Senior Advisor to BlackRock®   

In a relatively low-volume week of trading, stocks managed to post some gains yet again, continuing the rally that has been in place since early June. For the week, the Dow Jones Industrial Average climbed 0.5% to 13,275, the S&P 500 Index advanced 0.9% to 1,418 and the Nasdaq Composite rose 1.8% to 3,076.

One of the factors underlying the upturn in stock prices over the past couple of months has been a modestly improving trend in US economic data. Last week, retail sales advanced 0.8%, well ahead of expectations. This was the first increase in four months, which suggests that while households remain generally cautious, spending levels are beginning to tick higher. We also saw a slight increase in unemployment claims last week, but the longer-term trend on this front has been positive. The August employment data will be released in a couple of weeks and the recent improvements in unemployment claims should bode well for those figures. Additionally, as we have pointed out before, the US housing market has been showing signs of recovery and while we expect that segment of the economy to recover slowly, we do believe that housing has turned a corner. The United States is hardly growing at a robust pace, but we are hopeful that the economic soft patch that began in the second quarter is in the process of ending. Our view is that the ongoing and halting recovery should be sustained, provided that we are able to avoid large negative shocks. The two most obvious candidates to derail the current growth trajectory are, of course, financial contagion from Europe and the US "fiscal cliff."

With recent economic data being better than expected, the next steps for the Federal Reserve look unclear. The Fed has been clear that additional easing measures would be contingent on the direction of the data, so at this point the odds of additional easing measures appear to be somewhat reduced. A new round of easing (i.e., QE3) is hardly off of the table, but should economic growth continue to improve its likelihood would diminish.

Historically, August tends to be a quiet month for the markets, but there have been some significant exceptions. Last year, for example, saw heightened levels of volatility sparked by the Standard & Poor's decision to downgrade the rating of US debt in the midst of a political crisis. This year, there are also some undercurrents that could have the potential to cause some disruption in the markets. The European Central Bank's bond buying program has been greeted with relative quiet, but that could change quickly. Food prices have been rising, which could cause political instability, particularly in emerging markets. China is in the midst of a leadership change that could have a number of unforeseen consequences. And, of course, the US political backdrop and the related fiscal crisis has the potential to spark higher levels of uncertainty. We have been relatively constructive toward the markets for some time, but we acknowledge that these risks plus the fact that the rally has come so far so quickly could mean that stocks are poised for a pullback.  

So...now you know "What in the world a "Higgs boson is" when someone mentions it at a dinner party! Let's add a few other items of knowledge that you can use to impress friends and relatives regarding this Higgs boson news story:

CERN is a high-energy particle physics organization headquartered in Geneva, Switzerland. The organization, founded in 1954, currently has about 20 member countries. In French, the acronym CERN stands for "Conseil Europeen pour la Recherche Nucleaire" which translates to the English "European Council for Nuclear Research."    To see a picture of the accelerators used by scientists at CERN,  Click Here. (3)

Peter W. Higgs: His 1964 publication titled "Broken Symmetries and the Masses of Gauge Bosons" published in Physical Review Letters, Volume 13: Issue 16 began the whole Higgs boson search. Interestingly,Higgs' paper was initially rejected! Higgs had written two papers, each just two pages long, on what is now known as the Higgs field. The journal, Physics Letters, accepted the first paper, but sent the second one back, rejected! Yoichiro Nambu, a highly regarded physicist who had reviewed the second paper, suggested Higgs add a section explaining his theory's physical implications. Higgs added a paragraph predicting that an excitation of the field, like a wave in the ocean, would yield a new particle. He then submitted the revised paper to the competing journal Physical Review Letters, which published it." (4)

Stephen Hawking, the world famous British cosmologist, had to pay a $100 bet after the July 4, 2012, announcement about the Higgs boson! Ten years ago Hawking bet the University of Michigan theorist Gordon Kane $100 that the Higgs boson particle did not exist. Mr. Hawking has told reporters that he is conceding defeat. (5)

CMS and ATLAS were the two experiments that analyzed particle decay data from approximately 500 trillion collisions that produced the Higgs boson data. "Joe Incandela, spokesperson for the CMS experiment, said that if you imagine each collision as a grain of sand, you'd have enough sand to fill an Olympic swimming pool. However, Higgs-related collisions are so rare that the grains of sand would only cover the tip of a finger...." (6)

Standard Model:  "The standard model is the name given in the 1970s to a theory of fundamental particles and how they interact. It incorporated all that was known about subatomic particles at the time and predicted the existence of additional particles as well. There are seventeen named particles in the standard model...The last particles discovered and added were the W and Z bosons in 1983, the top quark in 1995, the tau neutrino in 2000, and the HHiggs boson in 2012." (7)

In conclusion, one might think, "Does this all matter to me - or only to physicists and academics?"  Well, many scientists think that it does matter to all matter, and without it all matter would not exist - that includes humans!   

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