“No man thinks there is much ado about nothing when the ado is about himself.”
Anthony Trollope, English Novelist
Mr. Trollope was a prolific author in the Victorian era on English politics, money, and life in general. Trollope's fans included, among others, economist John Kenneth Galbraith. Not bad, for a writer who passed away in 1882. Trollope's quote underscores his (and our) understanding that one's wealth is often central to one's thinking. And anything impacting us and our wealth, as individuals, usually has our full attention**.
This is why the creating and executing a long term plans for investments, retirement, estate and business planning helps put the considerable weight of the never ending stream of “current events” in perspective. Knowing, with a high probability, the financial road ahead can soothe the nerves in the face of some scary headlines. Which leads to the results of last week's markets**:
The Markets
After the Japanese disaster returned domestic equities to roughly where they were on New Year's Eve, the indexes began rebounding on Thursday, though they couldn't repair all of the damage. The three-day selling streak cost the S&P 47 points, but almost half of that loss was regained by week's end. Ten-year Treasuries gained from safe-haven buying.
Last Week's Headlines
- As the nuclear and humanitarian crisis in Japan unfolded, experts began debating the extent and nature of its impact on the world's third-largest individual economy, and the potential reverberations elsewhere. The glass-half-full side argued that rebuilding will contribute to future economic growth. However, less optimistic analysts feared that at least in the short term, the loss of Japanese tourism, commodities purchases, employment opportunities, and investment dollars--not to mention the uncertain long-term environmental impact, especially if the reactor situation worsens--could impede the global economic recovery.
- The Japanese yen hit a record high of $.0127 against the dollar on Friday as investors began exchanging foreign currencies for yen in anticipation of rebuilding efforts and fear that Japan might cut its purchases of U.S. Treasuries. However, the G-7 nations intervened by selling yen to help stabilize its value, which fell a bit over the weekend.
- The Consumer Price Index rose 0.5% in February, primarily because of higher food and energy costs (gas alone was up more than 19% from a year ago). The Bureau of Labor Statistics said the accelerating price increases helped push the annual consumer inflation rate to 2.1%, with food and energy accounting for roughly half of that increase.
- Wholesale prices were up 1.6% in February, for a 5.6% increase since the same time last year. As with the Consumer Price Index, higher food and energy costs were the culprit; excluding food and energy, core prices were up only 0.2%, though it was the third straight monthly increase. According to the Bureau of Labor Statistics, core prices have now risen 1.8% from last year.
- The Federal Reserve noted the increase in inflationary pressures, but said it expects recent price increases in energy and commodities to be temporary. Though it sees the economic recovery on a sounder footing, it said weaknesses in housing and overall construction continue to keep inflation in check. As it continues to monitor the situation, it plans to continue its QE2 bond purchases through the end of the second quarter.
- Housing starts dropped a dramatic 22.5% from January, according to the Census Bureau, and were 20.8% below February 2010.
- The Federal Reserve Board said U.S. industrial production reversed course in February, falling 0.1% after three straight months of increases. Unseasonably warm weather caused a 4.5% drop in utilities output but manufacturing output rose 0.4%.
- The Treasury Department said taxpayers have received repayments of roughly $244 billion--more than 99%--of the $245 billion disbursed to banks under the TARP program to help stabilize the financial system in the wake of the 2008 financial crisis.
Eye on the Week Ahead
With earnings season in the rear-view mirror and options expiration out of the way, there is little to distract investors from the simultaneous geopolitical, environmental, and humanitarian crises around the world. The Libyan and Bahraini conflicts will likely keep a spotlight on oil supply.
Key dates and data releases: home resales (3/21); new home sales (3/23); durable goods orders (3/24); final Q4 gross domestic product (3/25).
Data source: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. Equities data reflect price change, not total return.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
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