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Market Commentary
Economic Updates
Recent News |
Weekly Commentary
December 14, 2009
The Markets
One of the popular parlor games on Wall
Street these days is trying to predict how the holiday shopping season will
fare. If sales rise from last year, that may bode well for the economy heading
into 2010. If sales drop, well, that's not such a good sign.
Like many things related to Wall Street
investing, you could do exhaustive, detailed analysis to come up with a
prediction, or, you could pick one indicator that has some historical
significance and run with that. As it relates to predicting holiday sales, it
turns out that, "Christmas tree sales can be a good gauge of the strength of
the holiday-shopping season," according to The
Wall Street Journal.
So far, this simple indicator looks positive.
Christmas tree sales were up 6% the weekend after Thanksgiving and 3% the
following weekend when compared to the year earlier period, according to ISI
Group survey data as reported by the Journal.
Helping to corroborate the Christmas tree
indicator, the Commerce Department reported last Friday that retail sales rose 1.3%
in November, which was double the rate expected by economists surveyed by
Bloomberg. Consumers also seemed to be feeling a bit cheerier as the
Reuters/University of Michigan preliminary index of consumer sentiment for
December rose to 73.4 from 67.4 the month before, according to Bloomberg.
The good news doesn't stop there. Credit
Suisse and JPMorgan Chase & Co. both raised their fourth-quarter GDP forecast
to a gain of 4.5% from the 3.5% pace projected at the start of the week.
To the stock market, all this positive news
was apparently old news because for the week, the S&P 500 was unchanged. Chalk
that one up to the "wisdom of crowds."
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Data
as of 12/11/09
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1-Week
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Y-T-D
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1-Year
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3-Year
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5-Year
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10-Year
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Standard & Poor's 500
(Domestic Stocks)
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0.0%
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22.5%
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25.8%
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-7.8%
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-1.6%
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-2.4%
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DJ Global ex US (Foreign
Stocks)
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-1.8
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37.8
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40.7
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-5.8
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4.0
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1.0
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10-year Treasury Note
(Yield Only)
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3.5
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N/A
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2.7
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4.5
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4.2
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6.1
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Gold (per ounce)
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-5.6
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29.2
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35.8
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21.5
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20.9
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14.9
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DJ-UBS Commodity Index
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-1.2
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13.6
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16.5
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-7.7
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-1.5
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4.0
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DJ Equity All REIT TR
Index
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-1.5
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23.8
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51.5
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-13.6
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0.1
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11.3
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Notes:
S&P 500, DJ Global ex US, Gold, DJ-UBS Commodity Index returns exclude
reinvested dividends (gold does not pay a dividend) and the three-, five-, and
10-year returns are annualized; the DJ Equity All REIT TR Index does include
reinvested dividends and the three-, five-, and 10-year returns are annualized;
and the 10-year Treasury Note is simply the yield at the close of the day on
each of the historical time periods. Sources:
Yahoo! Finance, Barron's, djindexes.com, London Bullion Market Association.
Past
performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. N/A means not applicable or not available.
DOES THE CHANGE IN THE
VALUE OF YOUR ASSETS affect how much you spend? For years, economists have talked about the
concept of the "wealth effect." Simply stated, the wealth effect suggests that
consumer spending rises or falls based on changes in an individual's assets.
For example, if an individual's assets such as their home or investments are
rising, they may feel "richer" and be more inclined to spend money. The reverse
would also be true according to the theory. But, is it really true?
Economists
are split on the impact of the wealth effect on consumer spending. Some
economists say the wealth effect from changes in housing prices is minimal,
while others say it is significant. Some say the wealth effect from changes in
housing prices is greater than the effect from changes in financial assets,
while others say the reverse is true. Knowing how the wealth effect may or may
not impact the economy is important because consumer spending accounts for
about 70% of economic activity, according to The Wall Street Journal.
Analyzing
household net worth data is one way to help determine the trend in asset
levels. So, where does household net worth stand these days?
In
the third quarter, household net worth rose to $53.4 trillion. This represents
a 5% increase compared to the second quarter, according to the Federal Reserve.
On the bright side, this net worth number is up from the recent low of $48.5
trillion in the first quarter of 2009. By contrast, our net worth peaked at
$64.5 trillion back in 2006. Not surprisingly, declines in housing prices and
the stock market are two main culprits of our loss in wealth.
Depending
on how the wealth effect plays out, this decline of $11 trillion in our
collective net worth from the 2006 peak could impact future economic growth.
The federal government is well aware of these numbers and that's one reason why
they continue to look for ways to "stimulate" the economy.
Weekly Focus - Think About
It
"Most
of the shadows of this life are caused by our standing in our own sunshine."
--Ralph
Waldo Emerson
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Best regards,
Jim Forcella, CFP®, CFS
LPL Branch Manager
LPL Investment Adviser Representative
CA Insurance License #0635256
P.S. - Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
Closing Reminders - Should your personal or financial situation change (i.e. Marital or employment status, beneficiary changes or income needs) please contact us at 530.222.6301 or 800.546.5573 for either a phone review, or an appointment. We want to ensure that your current financial objectives meet your personal circumstances.
Forcella Wealth Management Information - Are you receiving too much mail regarding your investments? You now have the option to receive your LPL Financial communications electronically! LPL Financial is pleased to offer the convenience of viewing shareholder communications, including the fund prospectus, annual reports, and proxy statements online. Visit the link below to be directed to a secure website where you will enter your LPL Financial account number and Email address. You will no longer receive shareholder communications information through the mail but can request a hard copy at any time. Please feel free to contact us if you have any questions regarding this form.
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Forcella Wealth Management
1600 Victor Ave ● Redding, CA 96003
Phone 530.222.6301 ● Toll Free 800.546.5573 ● Fax 530.226.1677
jim.forcella@lpl.com ● www.forcellawealth.com
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* This newsletter was prepared by PEAK.
* The Standard & Poor's 500 (S&P 500)
is an unmanaged group of securities considered to be representative of the
stock market in general.
* The DJ Global ex US is an unmanaged group
of non-U.S. securities designed to reflect the performance of the global equity
securities that have readily available prices.
* The 10-year Treasury Note represents debt
owed by the United States Treasury to the public. Since the U.S. Government is
seen as a risk-free borrower, investors use the 10-year Treasury Note as a
benchmark for the long-term bond market.
* Gold represents the London afternoon gold
price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a
highly liquid and diversified benchmark for the commodity futures market. The
Index is composed of futures contracts on 19 physical commodities and was launched
on July 14, 1998.
* The DJ Equity All REIT TR Index measures
the total return performance of the equity subcategory of the Real Estate
Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any
reference to the performance of an index between two specific periods.
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Opinions expressed are subject to change without notice and are not intended as
investment advice or to predict future performance.
*
Past performance does not guarantee future results.
*
You cannot invest directly in an index.
*
Consult your financial professional before making any investment decision.
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Securities Offered Through LPL Financial Member FINRA/SIPC
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