Slow Week Ends Lower On Fed Fears

Slow Week Ends Lower
On Fed Fears

Weekly Update - August 13, 2013

In This Issue

Markets ended a slow trading week in the red, posting the biggest weekly decline since June. Stocks were pushed down by low volume and investor concerns about when the Federal Reserve will wind down its stimulus program. For the week, the S&P 500 lost 1.07%, the Dow fell 1.49%, snapping a six-week winning streak, and the Nasdaq slid 0.80%.[1]

Last week was light on economic data and investors focused on whether or not the Fed is going to start tapering bond purchases after the September FOMC meeting. With a number of Fed officials going on record as supporting a September taper, it's looking increasingly likely that, if economic data continues to look optimistic, the Fed will pull the trigger next month. While Fed Chairman Ben Bernanke has reassured investors that no official date has been set, a chorus of top Fed policymakers suggested last week that they would like to start trimming back quantitative easing next month if economic reports turn out as expected, indicating that there may be some dissension in the Fed ranks.[2]

Although recent macroeconomic reports have been largely upbeat, some economists are disappointed by the mediocre July jobs report. The net gain of 162,000 new jobs fell well below forecasts of 180,000 (and market rumors of gains of 200,000.) Digging deeper into the data, some analysts suggest that the job gains came largely from the volatile (and low-paid) part-time employment category. Other forward-looking indicators suggest that, though the headline unemployment rate dropped to 7.4% from 7.6%, it may tick upward in the near term.[3] The unemployment rate is one of the major economic indicators that the Fed uses to guide policy, meaning a fickle labor market could throw a wrench into the Fed's tapering plans.

Looking ahead at this week's ticker, analysts and investors will be paying close attention to a raft of economic data, including July retail sales, the Philadelphia Fed Survey, and housing data for clues as to which way the Fed may jump next month. Two high-ranking Fed officials are scheduled to give speeches on Tuesday and Wednesday, meaning we may get more hints about how Fed economists feel about the economy and how likely a September taper may be.

As we've mentioned in recent commentaries, we usually do not view minor pullbacks as cause for alarm. Healthy markets do not move up in a straight line; they move up and down. For this reason, we do our utmost to keep focused on long-term trends rather than short-term movements. If you have any questions about how the tapering of Quantitative Easing (QE), or how recent market moves may affect you, please feel free to reach out to us. It is our pleasure to be of service.

ECONOMIC CALENDAR:
Monday: Treasury Budget
Tuesday: Retail Sales, Import and Export Prices, Business Inventories
Wednesday: Producer Price Index, EIA Petroleum Status Report
Thursday: Consumer Price Index, Jobless Claims, Empire State Mfg. Survey, Treasury International Capital, Industrial Production, Housing Market Index, Philadelphia Fed Survey
Friday: Housing Starts, Productivity and Costs, Consumer Sentiment

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

U.S. wholesale inventories fell in June. Wholesale inventories, an important measure of business spending, unexpectedly fell in June for the second straight month, pulled down by a drop in automobile inventories. The 0.2% drop caused economists to trim their Q2 GDP growth estimate slightly to 2.4%.[4]

Retailers boost July sales with promotions. U.S. retailers reported higher July sales, but relied heavily on discounts and promotions to lure shoppers into stores. Thus far, consumers remain frugal during the back-to-school season, the year's second-largest retail period.[5]

China's industrial production beats expectations. The country's industrial production grew in July, showing a 9.7% increase over the same period last year. Manufacturing and industrial activity are big components of the Chinese economy, and these results could indicate that the world's second-largest economy is on the mend.[6]

Detroit bankruptcy puts the heat on local bond issuers. Michigan bond issuers that wish to tap the muni bond market are feeling the effects of Detroit's debt default as higher interest rates (due to the perceived risk of new muni bonds) make bond offerings expensive.[7]

"You are never too old to set another goal or to dream a new dream."
- C. S. Lewis

Chocolate Pound Cake With Honeyed Ricotta

This simple dessert combines store-bought ingredients for an unexpected treat.
Recipe from RealSimple.com.

Ingredients:

4 slices chocolate pound cake
3/4 cup ricotta, at room temperature
1/4 cup honey

Directions:

Dividing evenly, top the pound cake with the ricotta and drizzle with the honey.

Don't Get Scammed by Fake IRS Communications

The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. So be on the alert for any suspect attempt of phishing, and if you come across any such attempt, report it (or forward the email message) to the IRS's anti-scam team at [email protected].

A Tip for Beginners

If you've taken up golf recently, probably the best tip is: Take it slow! In other words, concentrate and focus on the shot of the moment. Try to match your expectations to your skills. This way you will not become overwhelmed by trying to perfect your game too early and can focus on enjoying your time on the course.

Home Remedy for Back Pain

Back pain affects many people and can greatly diminish quality of life. If you'd like to avoid taking medication, try eucalyptus oil as it's known to be a very beneficial remedy for back pain. Apply some eucalyptus oil to the affected area. Adding ginger paste to the eucalyptus oil and then applying also helps.

Give Old Jeans New Life

Not sure what to do with that old pair of jeans? You can always donate them or turn them into jean shorts, but here are a few suggestions that require very simple skills with needle & thread:

* Floor Mat
* Pencil Case
* Apron
* Bed Book Bag
* Bucket Caddy
* Jean Purse
* Denim Dog Jacket

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The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

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The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

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[1] http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-august-5-2013.htm

[2] http://www.reuters.com/article/2013/08/08/us-usa-fed-fisher-cnbc-idUSBRE97714920130808

[3] http://blogs.reuters.com/macroscope/2013/08/09/why-the-mediocre-u-s-july-jobs-report-was-worse-than-it-looked/

[4] http://www.reuters.com/article/2013/08/09/us-usa-economy-idUSBRE9770K220130809

[5] http://www.reuters.com/article/2013/08/08/us-usa-retail-july-idUSBRE9770KH20130808

[6] http://www.cnbc.com/id/100952156

[7] http://www.cnbc.com/id/100950562

Robert G. Miller, CFP� , RFC, LUTCF
The Miller Financial Group
7700 West Camino Real
Suite 400
Boca Raton, FL 33433
561-353-3700
[email protected]
http://www.tmfg.com