Investment News from Sumner Wealth Management

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Economic Newsletter

 

October 2014

 
 

Dear Visitor,

With Summer now officially over, and the turning of the foliage, means another season has past.  October reminds us of change, and how we must adapt to harsh conditions, just like the stock market.  October has a history of being "BAD".  Why, 3rd quarter results are coming in and if they are not positive several things happen.  Just to mention a couple.  One, Corporate America starts laying off employees to "tweak" the numbers to please the share holders.  Less overhead, more profit! Two, production decreases, and Three, companies freeze their cash. Then they rehire next year.  A vicious cycle, just as the seasons change, but it is just a reminder of how we all need to plan. 

Below is the latest industry news from some of the economic indicators.  I hope you enjoy and please contact me with any questions.

 

 

 

A Tale of Two Markets

Equity markets went on a bit of a seemingly wild ride this week. At one point, the Dow Jones Industrial Average was down approximately 440 points from its close last Friday, and internet news sites were streaming headlines of how the small-cap Russell 2000 index had entered "correction" territory (down ten percent from its high). While stocks did end down for the week, and small caps did under-perform, by the end of the week the S&P 500 closed within just two percent of its recent high, and the VIX index, a measure of stock market volatility, was actually lower than it was on the previous Friday!

 

Index Returns (%) 

Source:  Bloomberg

Index

 1 Week

YTD

1 Year

Dow Jones 30

-0.60

2.61

12.85

S&P 500

-0.75

6.47

16.41

Russell 2000

-1.30

 -5.06    

2.46

MSCI EAFE

-3.43

-6.44

-1.34

S&P GS Commodities

-2.74

-8.70

   -9.69     

U.S. Trade-Weighted $

1.19

8.27

8.15

 

Index Levels

Source:  Bloomberg

Index

 Current Week (10/3/14)

Prior Week (9/26/14)

Year End
(12/31/13)

Year Ago

(10/4/13)

Dow Jones 30

17,010   

17,113

16,577

15,073

S&P 500

1,968

1,983

1,848

1,691

Russell 2000

1,105

1,119

1,164

1,078

MSCI EAFE

 1,792   

1,856

1,916

1,817

S&P GS Commodities

4,409

4,533

4,830

4,882

U.S. Trade-Weighted $

 86.66

85.64

80.04

80.12

U.S. 10Yr Treasury Yield(%)

2.44

2.54

3.03 

2.65

 

The Dollar Continues to Surge

The "real" story involved the U.S. Dollar, which continued its recent surge to end at its highest level in four years, and the stark difference in return between those investments that benefit from a stronger Dollar and those that do not. For example, while  domestic large caps stocks fell just 0.7 percent, international stocks (as measured by the MSCI EAFE index) dropped 3.4 percent. Commodities, which are priced in Dollars, also took a tumble. Oil (West Texas Intermediate Crude) fell below $90 per barrel, and gold dropped below $1,200 per ounce, matching its lowest levels since 2010. With commodities dropping and contained wage growth in the U.S., the chart below shows how dramatically inflation expectations have cratered over the last few months.

 

ECB Unclear on Stimulus   

The European Central Bank (ECB) met this past week. While interest rates were left unchanged as expected, ECB President Mario Draghi shied away from providing definitive guidance as to the size of the stimulus the ECB will provide to Eurozone banks. In recent months, the expectation of the ECB launching some form of substantive "private quantitative easing" had put downward pressure on the Euro, resulting in upward pressure on the Dollar. With the ECB hesitating, a falling Euro was not the cause of the Dollar's gain this week.

 

Unemployment at Lowest Level Since 2008  

What spurred the Dollar higher this month was the Non-Farm Payroll report. Despite softer economic data in Europe and elsewhere abroad, the U.S. economy not only added 248,000 jobs in September (well above consensus of 215,000), but July/August numbers were revised higher by 69,000, easing some of August's initial disappointment. Aided in part by another decline in the participation rate, the unemployment rate fell 0.2 percent to 5.9 percent, its lowest level since July 2008. Possible fears of economic overheating were alleviated by essentially no change in average hourly earnings. Given this report, and other economic data, the Federal Reserve will announce the end of its bond buying program at its next meeting on October 28 / 29.

 

 

Sumner Wealth Management, Inc.

517 Alcove Road, Suite 202

Mooresville, NC  28117

(704) 660-5510 Ext. 401

http://sumnerwealthmanagement.com

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Services Offered:

  • Business & Personal Financial Planning
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Sumner Wealth Management Office 

517 Alcove Road, Suite 202

Mooresville, NC  28117

 

Contact Information

Business Phone: (704) 660.5510 x401

Email: msumner@ssnrep.com
 

Securities offered through Securities Service Network, Inc. Member:  FINRA/SPIC

If a recommendation is included in th above email, please contact me for additional investment information supporting the recommendation.

Fee based advisory services offered through SSN Advisory, Inc. a registered investment advisor  


Sumner Wealth Management,Inc. | 517 Alcove Road | Suite 202 | Mooresville | NC | 28117

(704) 660.5510 x401 | www.sumnerwealthmanagement.com | msumner@ssnrep.com

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