CIO Vantage Point;
Economic Outlook
March 08, 2013 Posted by:
Joe Morgan, CFA
Top Eight
- The job market performed well in February, growing 236,000 positions, driving the unemployment rate down to 7.7 percent. Job growth has increased recently, averaging 205,000 per month over the last four months after ending 2012 at just 183,000 per month. These numbers are improving, but are nowhere near strong enough to cause the Fed to consider changing course. We are still down about 8 million jobs from 2007. The unemployment rate is less informative given it subtracts people who drop out of the labor force which continues to be a problem.
- The Dow gained and maintained all-time high levels this week as other equity indices threaten the same. The S&P 500 was up for the ninth week in the last ten as Bernanke continued to confirm QE's position in the valuation equation. Let's see, the economy treads water while the stock market soars. Stock prices are the discounted opinions of future activity.
Will today's stock prices hold as the economy recovers or will continued anemic economic activity drag markets? Stay tuned!
- Economy continues its "modest to moderate" expansion according to the Fed's Beige Book. Loan demand remained steady or increased while residual effects of Sandy and other storms affected the economic outlook of participants in the Fed's anecdotal survey on activity. On the positive side, manufacturing seems to be recovering nicely as does home construction.
- The rising stock market has driven household net worth to its highest level since 2007. Net worth of U.S. families rose by $1.2 billion in the fourth quarter, or 1.8 percent, to $66.1 trillion. Ok, so we have the wealth. Now if we can just get some uncertainty out of the way so we can get people to transact.
- Germans back off austerity for the moment. In the midst of today's European recession, European finance ministers agreed to allow looser budget policies, cutting back on recent austerity measures. When there are losses to be had, pain must follow. There is no way around this. For reference see the experience in Ireland whose borrowing rates have now recovered much to Spain/Italy minus 100bps vs +900 at their peak in 2011.
- Italian "near-Prime Minister " Berlusconi given one-year prison sentence for publishing wire-tapped conversations. Silvio Berlusconi remains hopeful to regain the PM position as he will likely appeal these charges. Italy's €2 trillion debt market makes it vitally important when it comes to the health of the currency. As far as the political situation, let's just say it remains in flux.
- One-third of investment advisors examined by the government were found lacking in the protection of client funds. Some of the violations have been referred to the SEC's enforcement division for possible further action. Business school taught us about the agency problem. Bernie Madoff taught us about self-custody.
- Washington looks ready to approve a continuing resolution keeping the government open until October. Another kick of the can.
Key Indices
|
|
Return
|
|
|
|
|
|
|
3/8/2013
|
1 week
|
YTD
|
|
Treasury
|
3/8/2013
|
3/1/2013
|
Change
|
Dow
|
14,397
|
2.2%
|
9.9%
|
|
30yr
|
3.25%
|
3.06%
|
0.19%
|
S&P 500
|
1,551
|
2.2%
|
8.8%
|
|
10yr
|
2.04%
|
1.85%
|
0.19%
|
Nasdaq
|
3,244
|
2.4%
|
7.5%
|
|
5yr
|
0.89%
|
0.74%
|
0.15%
|
Euro Stoxx
|
2,729
|
4.3%
|
3.5%
|
|
2yr
|
0.25%
|
0.24%
|
0.01%
|
Nikkei
|
12,284
|
5.8%
|
18.2%
|
|
1yr
|
0.15%
|
0.15%
|
0.00%
|
Hang Seng
|
23,092
|
0.9%
|
1.9%
|
|
3mo
|
0.09%
|
0.10%
|
-0.01%
|
Source: Bloomberg
Looking Ahead
- Next week's economic data will be highlighted by retail sales and inflation as represented by the producer and consumer price indices.
- Earnings releases next week include:
- Thursday: Affymax Inc., Keryx Biopharma
- Silver Spring Networks is scheduled to price its IPO on Tuesday.
The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or SVB Asset Management, or any of its affiliates. This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decisions. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.
SVB Asset Management, a registered investment advisor, is a non-bank affiliate of Silicon Valley Bank and member of SVB Financial Group. Products offered by SVB Asset Management are not FDIC insured, are not deposits or other obligations of Silicon Valley Bank, and may lose value.
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Thoughts From Joe - March 8, 2013March 08, 2013 Posted by: Joe Morgan, CFATop EightThe job market performed well in February, growing 236,000 positions, driving the unemployment rate down to 7.7 percent. Job growth has increased recently, averaging 205,000 per month over the last four months after ending 2012 at just 183,000 per month. These numbers are improving, but are nowhere near strong enough to cause the Fed to consider changing course. We are still down about 8 million jobs from 2007. The unemployment rate is less informative given it subtracts people who drop out of the labor force which continues to be a problem.The Dow gained and maintained all-time high levels this week as other equity indices threaten the same. The S&P 500 was up for the ninth week in the last ten as Bernanke continued to confirm QE's position in the valuation equation. Let's see, the economy treads water while the stock market soars. Stock prices are the discounted opinions of future activity.
Will today's stock prices hold as the economy recovers or will continued anemic economic activity drag markets? Stay tuned!Economy continues its "modest to moderate" expansion according to the Fed's Beige Book. Loan demand remained steady or increased while residual effects of Sandy and other storms affected the economic outlook of participants in the Fed's anecdotal survey on activity. On the positive side, manufacturing seems to be recovering nicely as does home construction.The rising stock market has driven household net worth to its highest level since 2007. Net worth of U.S. families rose by $1.2 billion in the fourth quarter, or 1.8 percent, to $66.1 trillion. Ok, so we have the wealth. Now if we can just get some uncertainty out of the way so we can get people to transact.Germans back off austerity for the moment. In the midst of today's European recession, European finance ministers agreed to allow looser budget policies, cutting back on recent austerity measures. When there are losses to be had, pain must follow. There is no way around this. For reference see the experience in Ireland whose borrowing rates have now recovered much to Spain/Italy minus 100bps vs +900 at their peak in 2011.Italian "near-Prime Minister " Berlusconi...
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