Thursday, July 25, 2013

Perspectives from Above the Noise – Week of July 22, 2013

3 Stories in the global economy that should not go un-noticed


Markets closed mixed for the week again, logging new highs for the S&P 500 and the Dow, while the Nasdaq lost ground due to some earnings misses. So far, Wall Street is experiencing its best month this year since January, buoyed by reassurances from the Fed and generally positive economic data.

For the week, the S&P 500 gained 0.71%, the Dow increased 0.55%, and the Nasdaq lost 0.35%.

Here are the 3 stories this week that rose above the noise:

Time to Expect Inflation?

Inflation remains subdued below 2 percent across the developed world. While many economists fear deflation, this article details that this isn’t a one-way trade and presents several factors that argue that inflation is more likely. Massive ballooning of central bank balance sheets has not yet led to inflation; however this may not be the case in the future.

Additionally, in the emerging-markets space, structural changes and tightening labor forces will likely add to wage pressures. Similar pressure is likely to be seen in Germany as it hovers around full employment and within the United States as the economy continues to rebound.

Boehner Signals Clash with White House on U.S. Debt Limit

A Bloomberg article summarizes some recent rhetoric out of Washington that suggests Congress is heading for another bruising political fight over raising the debt ceiling in September. Neither political party’s views on the debt ceiling appear to have significantly changed since the last fight and public opinion remains mixed.

Over the coming weeks it seems likely that the political rhetoric over raising the debt ceiling will become increasingly contentious, which represents one potential headwind for financial markets over the remainder of the third quarter.

U.S. Home Resales' Surprise Drop Snaps Streak of Gains


On Monday, the National Association of Realtors released the latest home sales report which showed a fall in June, after two months of price increases. Sales in June fell 1.2 percent to an annual rate of 5.08 million units. Many economists remain optimistic about the housing recovery despite June’s lower numbers.

Annual increases vs. a year ago are up more than 15 percent and other measures, such as distressed property sales, accounted for a lower percentage of total sales, which is encouraging. The median time on the market for homes also has dropped considerably, to 37 days from 70 days a year ago. While June’s drop in home sales may raise some eyebrows, the long-term trend of improving home sales appears to remain on track.

Articles chosen and summarized by the First Allied Asset Management, Inc. investment management team.