3 Stories in the global economy that should not go un-noticed
Markets rose early last week on a couple of lukewarm economic reports, which raised expectations that the Fed will be forced to continue to bolster the economy with its quantitative easing program. The last weekly jobless report for the month showed an increase in unemployment claims, meaning job growth looks to have been essentially flat over the last two months.
Markets ended the shortened trading week down, battered by selling pressure and volatility around possible Fed actions. For the week, the S&P 500 lost 1.14%, the Dow slid 1.23%, and the Nasdaq trimmed 0.09%.
Here are the 3 stories this week that rose above the noise:
'Underlying Bullish Story' for Stocks: Strategist
U.S. equities were able to record their strongest May performance since 2009, despite ending the month with the worst one day decline in nearly two months. U.S. equities have not had a correction this year and finished in positive territory each of the first five months this year.
Although a correction could be in store, Thomas Lee, JP Morgan's chief equity strategist, feels U.S. equities have more upside because the "underlying bullish story for stocks remains intact." He points out there is a shift in momentum from defensive stocks to cyclical stocks, continued strengthening in the housing sector and the wealth effect from rising stock and home prices is helping the American consumer.
April Case-Shiller Composite to Show Annual Appreciation Above 12%
A blog posting on the real estate site Zillow.com provides some interesting insight on the Case-Shiller Home Price Index, which Zillow has begun forecasting in advance (and fairly accurately so far) using their own housing data. The Zillow model expects that next month's Case-Shiller Index will show an eye-catching 12.1% year-over-year rise, which may provide further optimism regarding the housing market's strength.
However, Zillow also makes the important observation that the recent rate of appreciation in the Case-Shiller Index is being driven by a bias toward large, coastal cities currently seeing large price gains and by the inclusion of distressed sales, which are seeing very large year-over-year gains. As a result, the current magnitude of the gains in the Case-Shiller Index is likely to be fleeting and appear far more pedestrian by next year.
Auto Sales Continue to Be Economic Bright Spot
Record energy production coupled with a sustained housing recovery are pushing pickup sales to the highest level in as much as eight years and driving Detroit's comeback. This latest report is encouraging since pickup sales are often viewed as an indicator of the health of small business activity. Fueled by low-interest rate car loans, light-vehicle sales have picked up every month this year. An official at General Motors said that "if we use our sales as a barometer, it appears that the recovery is becoming even more broad-based".
Articles chosen and summarized by the First Allied Asset Management, Inc. investment management team.
