consumer confidence Archives • Rutherford Investment

Market And Economy Continue In Uptrend

Published April 9, 2012
For the first quarter of 2012, markets showed strong growth. The S&P was up 12.1 percent, 6.2 percent from the same time a year ago. The Dow was up 8.1 percent, 7.2 percent from a year ago, and the NASDAQ was up 18.7 percent, 11.2 percent from a year earlier.

However, volumes were light – not what an investor would want to see. NYSE volume was the lowest since the fourth quarter of 2007, and down 14.5 percent from a year ago as investors remained cautious. The DJ world, excluding the U.S. was up 10.8 percent, demonstrating that despite all the news, growth outside the U.S. was strongest, with emerging markets showing particular strength.

The strength in the U.S market was a reflection of the economic gains in the U.S. economy. While GDP growth in the fourth quarter of 2011 was slightly below expectations, nevertheless the growth was a revised 3.0 percent. January 2012 personal spending rose .4 percent, followed by February’s .8 percent.

Some of the spending increase came from higher energy prices, which rose 3.6 percent in February alone, the
largest gain in a year. Federal Reserve officials acknowledged that the increase in fuel costs would “push up
inflation temporarily,” but they anticipated that prices would return to their long-term target. The core PCE
index, which excludes food and energy prices, moved up 1.95 year over year in February after moving up .1
percent in January. These numbers are within the Feds target range.

Personal saving fell to 3.7 percent, from 4.3 percent in the prior month. A lower savings rate could be a sign of higher consumer confidence, and indeed a separate report […]

April 9th, 2012|Categories: Daily Journal of Commerce|Tags: consumer confidence, economic gains, energy prices, existing home sales, federal reserve officials, fuel costs|Comments Off

Slow Economic Recovery Yields Few Jobs

Published February 11, 2011

The stock market is often regarded as a leading indicator of the economy. If so, the market is forecasting a bright future. The underlying economy has shown growth in profits with most S&P 500 companies beating estimates and raising profits. Industrial production is up. Consumer confidence is up. Retail spending and income are up. Confidence, spending and income are especially important because the consumer represents about 70 percent of the economy. Companies are sitting on large caches of money that can be expected to be redeployed through mergers and acquisitions, stock buybacks and dividends. IPO activity is picking up.

Even banks have begun to cooperate with the government in the effort to stimulate the economy by lending money to small and midsize businesses. Fed futures suggest that the Federal Reserve will not increase interest rates until the end of 2011.

Money has been leaving bond funds and flowing into stock funds in a reversal of past flows. Until the recent crisis in Egypt, money was also flowing into emerging economies because they are expected to grow faster than the U.S. economy, and because they don’t have a housing crisis. However, the trouble in Egypt reminds all investors of the political risk in sinking money into emerging countries.

The catalyst for the market’s rise has been the Federal Reserve buying bonds via so-called quantitative easing, a loose money policy, low interest rates, and rigorous belt tightening by companies. The Fed has been aided by a low rate of inflation.

The first round of quantitative easing began on May 9, 2009, after the markets rose about 80 percent from lows of March 9, 2009. When […]

February 17th, 2011|Categories: Daily Journal of Commerce|Tags: consumer confidence, economy companies, emerging economies, lending money, mergers and acquisitions, midsize businesses, retail spending|Comments Off

A Perversely Optimistic Future

With unemployment at a stubbornly high rate, home foreclosures still proliferating and commercial loans (especially for real estate) teetering, is there reason for optimism? Sometimes adversity is reason for optimism, and sometimes in a perverse way.
For starters, the economic news is not all bad. Consumer confidence is firming. Manufacturing is firming. Inventories are low and will have to be restocked. We just came off a decent quarter for earnings in the S&P. The retail sector has added jobs for three months in a row. The market, generally considered a precursor of the economy, has risen robustly. The Dow was up 4.1 percent and the S&P was up 4.9 percent for the first quarter of 2010. The equity markets were up for the fourth straight quarter.
With interest rates low for an extended period of time, money has sought a more comfortable home.
Money goes where it is treated best, and so it has found its way back into the equity markets and the
credit markets. Credit spreads have tightened, and indeed the credit markets have become more liquid.
Just a year ago banks were reluctant to lend to each other. Companies were struggling to roll over
commercial paper even with very short maturities. Companies were beginning to wonder how they would
have enough cash to meet payrolls and payables. Now, credit markets are absorbing bond sales, especially
massive U.S. government bond sales. The high-yield market is absorbing corporate debt at a record pace
and the great lump of corporate debt that needed to be refinanced is being sold. The high-yield markets
are working on repaying debt not due until 2013 and 2014, with 2010 and 2011 and much of 2012 […]

April 22nd, 2010|Categories: Daily Journal of Commerce|Tags: commercial loans, consumer confidence, credit markets, economic news, rising interest rates|Comments Off