Jan 28, 2016

FDP Quarterly Market Commentary

Market Review Q4 ’15

In some respects, 2015 was a year that unfolded as expected – predictability and surprises. The economy continued to plod ahead, the unemployment rate fell, and the Federal Reserve finally lifted the fed funds rate. But we also witnessed the tale of two economies: service industries expanded at a modest pace, but falling exports (U.S. Census) and huge cutbacks in the energy sector took a toll on manufacturers. Meanwhile, the relative outperformance of the U.S. economy versus its global partners kept upward pressure on the dollar. …READ ON

It’s the lifeblood of stocks and the biggest driver of the medium and long-term direction of equities. Using monthly data going back to 1923 (Robert Shiller, PhD, Yale.edu), there is a 96% correlation between S&P 500 earnings and the S&P 500 Index. That’s an extremely close correlation where 100% would mean the two variables move in lockstep. …READ ON

After plunging about 30% in 2014, U.S. oil prices fell nearly 40% in 2015 and have continued their downhill slide so far into 2016. Low commodity prices have benefitted nearly everyone outside of the energy industry, but woes in the commodity sector have hurt emerging market economies, and companies in the mining industry. e longer that oil prices stay this low, we will likely see more bad news from those companies and countries that rely heavily on oil sales. …READ ON

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How Do Investors Spell Relief?

Investors celebrated an ‘in line with expectations’ CPI that suggested the rate of inflation isn’t accelerating. It’s a small win, but it was enough to send the three major market indexes, the Dow, the Nasdaq, and the S&P 500 to new highs.

An Annual Ritual at the Gas Pump

You’re right if you have this nagging feeling that gas prices rise in the spring. As the graphic illustrates, on average prices rise through Memorial Day, plateau over the summer, and slip in the fall. This year is no exception, as prices echo the seasonal pattern.

Rate Cuts Still on the Table, Timing Less Certain

We often discuss the Federal Reserve and interest rates because both greatly impact investors. For starters, changes in interest rates have a significant impact on stock prices and income earned on savings. Sharply higher rates in 2022 pushed equities into a bear market.

Just Do It

That ubiquitous phrase from one of America’s most extensive athletic footwear and apparel makers seems to have been adopted by most American shoppers. The U.S. Census Bureau reported last week that retail sales jumped 0.7% in March, following a strong 0.9% rise in February.

The Road to Lower Inflation Takes a Detour

The rate of inflation is accelerating. That’s not how we hoped to start this week’s Insights. Take a moment and review Figure 1. The 4-month moving average has broken out of its long-term downward trend (red-dashed lines). On a monthly basis, prices bottomed in June and began to gradually turn higher. The upward trajectory picked up in January.