A Difficult Week
Weekly Update – April 22, 2013
Even as we share this update with you, the events that unfolded last week in
Massachusetts and Texas are still fresh in our minds. Our hearts will remain with the
victims and their families, as well as the residents of Boston and West Texas, as they
rebuild their lives from these tragedies. In times like these, we are reminded of the
things that are truly important in life. If there is anything we can do for you or someone
you know who was affected by any of last week’s events, please don’t hesitate to ask
for our help.
It was also a difficult week for equity markets, as major indices experienced their
biggest drop so far this year, pummeled by earnings reports and global concerns. For
the week, the S&P 500 lost 2.11%, the Dow fell 2.14%, and the Nasdaq trimmed
2.70%.1
Earnings drove much of the selloff last week. Although the earnings reported thus far
have largely beat estimates, disappointing reports from a handful of companies had an
oversized effect on markets.2 While 70% of the reports have beaten earnings estimates,
only 44% have beat revenue expectations. This indicates that earnings results have
largely been achieved by cost-cutting measures rather than organic growth. One factor
that appears to be driving the weakness in revenue growth is soft demand overseas.3
Markets reacted poorly to China’s unexpectedly poor first-quarter GDP report, which
showed a weak 7.7% growth instead of the 8%+ growth analysts had been expecting. 4
This indicates that China’s recovery may still be fragile. Coupled with concerns about
Europe, it’s clear that global economies still have a long way to go.
On the positive side, investors responded well to Tuesday’s upbeat economic data,
which shows that the news isn’t all bad. On the housing front, the Commerce
Department reported that March housing starts increased by 7.0% from February’s
estimate, while building permits declined slightly (though they are still 12% above March
2012 numbers).5 A key measure of inflation also declined, supporting Fed chairman Ben
Bernanke’s position that inflation is not an issue for now. Manufacturing also appears to
be on the upswing; the Fed’s report shows that industrial production increased by 0.4%
in March, beating expectations.6
In recent weeks, disappointing jobs numbers, slumping consumer confidence, and other
weak data has indicated that the economy could be slowing down. However, the Fed’s
most recent Beige Book survey shows no sign of such a slowdown. The report shows
that despite prevailing concerns, the economy continued to grow at a moderate pace,
bolstered by a vibrant housing sector and auto sales.7 With so much conflicting data to
review, many people struggle to make sound investment decisions. If you have any
questions about how certain factors could affect you or your portfolio, please don’t
hesitate to reach out to us. We pride ourselves on helping our clients cut through the
clutter to develop strategies that are suitable for them and their goals.
As mentioned earlier, our thoughts are with the victims of Monday’s Boston bombing
and those affected by the Texas plant explosion. It can be hard to think positively during
such times, but we are proud of the swift work of first responders and investigators, and
the way Americans have reached out in support of those in need.
ECONOMIC CALENDAR:
Monday: Existing Home Sales
Tuesday: PMI Manufacturing Index Flash, New Home Sales
Wednesday: Durable Goods Orders, EIA Petroleum Status Report
Thursday: Jobless Claims
Friday: GDP, Consumer Sentiment
Data as of
4/19/2013
1-Week
Since
1/1/2013
1-Year
5-Year
10-Year
Standard &
Poor's 500
-2.11%
9.05%
12.95%
2.37%
7.40%
DOW
-2.14%
11.01%
12.21%
2.64%
7.45%
NASDAQ
-2.70%
6.18%
6.60%
6.68%
12.49%
International
-2.56%
4.19%
11.24%
-4.61%
6.07%
Data as of
4/19/2013
1 mo.
6 mo.
1 yr.
5 yr.
10 yr.
0.04%
0.09%
0.12%
0.72%
1.73%
Treasury
Yields (CMT)
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources:
Yahoo! Finance and Treasury.gov. International performance is represented by the MSCI EAFE Index. Past
performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
HEADLINES:
Initial unemployment claims rise slightly. Unemployment claims jumped last week to
352,000, higher than the estimate of 347,000; the jump brings the 4-week moving
average (a less-volatile measure) back in line with February numbers. Despite
appearing to be stuck in neutral, unemployment claims are still significantly lower than
the same time last year.8
Earthquake rocks Sichuan Province China. A magnitude-7 earthquake struck the
southwestern province early Saturday morning, killing over 150 and injuring thousands.
The earthquake triggered power outages and landslides in the same region that
experienced a 2008 earthquake that left nearly 70,000 confirmed dead.9
Italy’s current president re-elected for a second term. Amid squabbling between
party leaders, Giorgio Napolitano became the first Italian president to be asked to serve
a second term. While European leaders reacted with relief, many view the election
result as a sign of political stagnation.10
Gold retreats further in massive selloff. The precious metal’s biggest drop in 30
years came as investors rushed for the exits, and worries of margin calls have spooked
goldbug investors. While gold is traditionally seen as a “safe haven” investment, it is
also a historically volatile investment, falling an average of 31.6% in bear markets.11
QUOTE OF THE WEEK:
“You miss 100% of the shots you don't take.” – Wayne Gretzky
RECIPE OF THE WEEK:
Morning Glory Muffins
Muffins studded with carrots, apples, raisins, and pineapple make for a healthy
breakfast. From Better Homes and Gardens.
Ingredients:
2 cups all-purpose flour
2 teaspoons baking soda
2 teaspoons ground cinnamon
1/2 teaspoon salt
1-1/4 cups packed brown sugar
2 medium apples, peeled, cored, and chopped (1-1/3 cups)
1-1/4 cups finely shredded carrots
1/2 cup raisins
1 8-ounce can crushed pineapple (juice pack), undrained
2/3 cup cooking oil
3 eggs
1/2 teaspoon vanilla
Directions:
1. Line eighteen 2-1/2-inch muffin cups with paper bake cups; set aside.
2. In a large bowl combine flour, baking soda, cinnamon, and salt; stir in brown sugar.
Stir in apples, carrots, and raisins. In a medium bowl combine undrained pineapple,
oil, eggs, and vanilla. Add pineapple mixture to flour mixture; stir just until moistened.
3. Spoon batter into prepared muffin cups. Bake in a 375 degree F oven about 18
minutes or until a wooden toothpick inserted in centers comes out clean. Cool in
muffin cups on wire rack for 5 minutes. Remove from muffin cups; serve warm.
Makes 18 muffins.
GOLF TIP OF THE WEEK:
Don’t Change Your Stance
Many golfers believe that their stance needs to change depending on their club choice.
Nothing could be farther from the truth. When it comes to full shots (not pitches, chips or
putts), maintaining a consistent stance is critical to improving your strikes.
Minor adjustments in spine angle, ball position and stance width, are sometimes
necessary, but generally, how you stand over an iron should not be substantially
different from how you set up with a driver.
GREEN TIP OF THE WEEK:
Remove Pollutants With Houseplants
According to NASA research, many common houseplants do a great job of ridding
homes of harmful air pollutants, such as: benzene (present on paints, plastic, and
rubber), TCE (paints, varnishes, adhesives) formaldehyde (foam, carpets, etc.) and
carbon monoxide (from car exhausts). The following plants have been shown to
significantly improve indoor air quality: Aloe Vera, Chinese Evergreen, Bamboo Palm,
Chrysanthemum, African Daisy, English Ivy, Common Ivy, Peace Lily, Golden Pothos,
and Philodendrons.
HEALTH TIP OF THE WEEK:
Use It or Lose It
Research has shown that humans keep their minds sharp by learning new and
challenging things. If you feel the need to replace the intellectual challenge found during
your professional life, try learning a foreign language, playing a musical instrument,
joining a book club, or even getting into the habit of playing brain teasers.
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The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock
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1
http://briefing.com/investor/markets/weekly-wrap/weekly-wrap-for-april-15-2013.htm
2
http://www.dailyfinance.com/2013/04/18/weak-earnings-results-drive-slight-decline-on-wall-street/
http://blogs.barrons.com/stockstowatchtoday/2013/04/18/earnings-roundup-pepsi-morgan-stanley-danaher-and-more/
3
http://disciplinedinvesting.blogspot.com/2013/04/cost-cutting-is-driving-earnings-beats.html
4
http://www.marketwatch.com/story/china-central-bank-adviser-modest-2q-gdp-upturn-2013-04-21
5
http://content.govdelivery.com/attachments/USESAEI/2013/04/16/file_attachments/204473/New%2BResidential%2BConstru
ction%2B%2528March%2B2013%2529.pdf
6
7
http://www.federalreserve.gov/releases/G17/Current/default.htm
http://www.businessweek.com/articles/2013-04-18/the-feds-latest-beige-book-economy-is-better-than-the-numberssuggest
8
http://www.usatoday.com/story/money/business/2013/04/19/unemployment-states-march/2096749/
9
http://www.cbc.ca/news/world/story/2013/04/20/china-earthquake.html
10
http://www.guardian.co.uk/world/2013/apr/20/giorgio-napolitano-italy-president
11
http://blogs.wsj.com/moneybeat/2013/04/15/gold-slumps-further-into-bear-market-whats-next/