Stocks fell sharply again this week as concerns over global growth and plummeting oil prices spooked investors. Commodity prices fell as did treasury yields while treasury prices rose. While China’s exports fell 2.8% in 2015, the bigger issue has been the $500 Billion in capital outflows as investors seek better returns elsewhere. Never the less China still has 3.3 trillion in reserves.
While the selloff so far this year is the worst on record, the economic data is supportive of continued U.S. growth, albeit at a slow pace by historical standards. We are likely to see continued volatility in the weeks ahead but perhaps an improving market later in the year. I would pay close attention to growth in Europe, if the stimulus there finally succeeds in accelerating growth, that can have a positive impact on global growth. Consumer spending will be key to better U.S. growth. We are employing more and more people and finally real wages are increasing. This should help consumer spending pick up as the year progresses. Also, with inflation running consistently below the FED’s desired target of 2% the odds of further Fed rate increases this year will continue to diminish.
In economic news this week:
- The Treasury Department reported that the U.S. Budget Deficit fell from 2.8% of the U.S. Gross Domestic Product to 2.2%. Federal spending rose 5% while revenue rose 6%.
- The Labor Department reported
- Initial jobless claims rose to a seasonally adjusted 284,000 in the prior week up from 277,000 in the week before. A possible reason for the increase was layoffs in construction following the unusually warm December. Retail layoffs should have been reflected in the seasonal adjustment. The four week moving average of claims rose to 278,750. However, initial jobless claims remain near historic lows.
- Import prices fell 1.2% in December and 8.2% from a year earlier. The price decline was attributed to weaker oil prices and a stronger dollar.
- Producer prices fell 0.2% in December. Excluding volatile food and energy stocks producer prices rose 0.1%. Both were in line with expectations. Overall producer prices were down 1.0% in December from a year earlier. Core prices were up 0.3% from a year earlier.
- The Federal Reserve reported that industrial production fell a seasonally adjusted 0.4% in December, more than expected. Manufacturing output fell only 0.1% while mining output (including oil and gas) fell 0.8%.
- The Commerce Department reported that retail sales declined a seasonally adjusted 0.1% in December in-line with expectations. November was revised from a gain of 0.2% to a gain of 0.4%. Excluding gasoline retail sales were unchanged. Keep in mind that this figure does not include services such as rent, doctor visits and movie which have been increasing in 2015. Gasoline dollar sales declined 1.1% in December and 19.4% form a year earlier. Furniture, building supply, bars, restaurants and online retailers all showed increases in December.
We will continue to monitor the Advance & Protect accounts and make changes as necessary. Please call us if you have any questions.
Loren C. Rex, CFP®, AIF® Erik Smith
Generations Financial Planning & Wealth Management 269-441-4143
77 E. Michigan Ave, Suite 140
Battle Creek, MI 49017
Carrie Fuce, Assistant 269-441-4091
Toll Free: 800-513-8180
Visit our Website: www.genfinplan.com
Registered Representative of and securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Generations Financial Planning & Wealth Management are separate companies and are not affiliated.
These are the opinions of Loren Rex and Erik Smith and are not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.