February 18 2014
With the enthusiasm of new love, American stock markets pushed higher during Valentine’s week.
Were investors enamored of the Federal Reserve’s new Chairwoman, Janet Yellen, who spoke on behalf of the Fed for the first time last week? Some suggested investors appreciated her dedication – she spent almost six hours answering questions from members of the Financial Services Committee – and were soothed by her commitment to continuing the policies of her predecessor. The New York Times said stock markets rose as a result of Ms. Yellen’s testimony and were further buoyed when the House voted to raise the government’s borrowing limit until March 2015 without any conditions.
Perhaps investors saw the good in employment numbers that were released recently. An analyst quoted in Barron’s said the American labor market “just might be tighter than most of us expected.” His argument was while long-term unemployment remains high, “…2.5 percent, higher than peaks seen in prior recessions, and much worse than the 50-year average of 1.1 percent,” the short-term jobless rate (measuring people who are out of work briefly) is 4.2 percent which is below the 50-year average of 5 percent. The article shared the thoughts of another expert, Michael Darda of MKM Partners:
“If our job market can mend even when gross domestic product (GDP) growth averaged a lousy 2.4%, what happens if growth picks up? Last week, Treasury data showed the federal fiscal deficit shrinking to just 3% of GDP from more than 10% four years ago thanks to higher taxes and restrained government spending. At this pace, our budget deficit could fall to zero next year, and we could run a surplus by 2016.”
Tarnishing this shiny outlook is the fact 36 percent of Americans who want a job and can’t find one have been unemployed for more than 27 weeks.
Maybe it was an unrequited desire for better weather. Huge swathes of the United States have been gripped by snow, ice storms, and freezing weather which Reuters.com suggested caused many investors to discount weak economic reports in the belief consumer spending and the company performance might have been stronger if weather conditions had been more favorable.
- Data as of 2/14/141- WeekY-T-D1-Year3-Year5-Year10-Year
- Standard & Poor’s 500 (Domestic Stocks)2.3%-0.00520.9%0.11318.4%4.7%
- 10-year Treasury Note (Yield Only)2.8N/A2.03.62.74.1
- Gold (per ounce) 4.89.9-19.8-1.17.012.4
- DJ-UBS Commodity Index1.73.9-6.4-7.14.8-0.8
- DJ Equity All REIT TR Index2.5 6.6 4.39.925.48.7