Jeff Voudrie’s Week-In-Review 9/16/2013

Trending Indicators (Intermediate Time Period)

 US Stock Market                 Trending Up

 Canadian Stk Mkt               Trending Up

US Bond Market               Trending Down

In the markets:

Markets worldwide gained last week, save for those whose fortunes are closely tied to oil or gold.  With the Syrian crisis seemingly easing, equities gained favor.  US indices gained by an average +2%, led by the Dow Jones 30 Industrials at +3%.  In addition to energy and precious metals, techs were also a laggard sector for the week as Apple’s new iPhones (and, especially, their pricing) were met with heavy criticism and vigorous selling of Apple shares.  Leading the worldwide gains were emerging markets, which have had a negative year so far, followed by developed markets at +3% and +2.8% respectively.  Some emerging market indices had their best week in many months.  Canada’s market did not participate in the gains, however, as oil retreated, gold fell to a five-week low and silver fell to its lowest point since June.  Canada’s S&P/TSX index fell -0.8% for the week.

Economic news in the US was, on balance, negative for the week.  The biggest positive – the lowest level of unemployment claims in years – was immediately dashed as the government admitted that a couple of states had not submitted their numbers in time due to computer problems, and therefore the number should be disregarded.  Business inventories and sales both rose to the high side of expectations.  However, hanging heavily over all other news was the inescapable fact that housing activity has dropped off significantly.  The Mortgage Bankers Association said refinancing applications plunged by -20.2% week-over-week to the lowest level since June ’09 and are now down by -70% since May when the initial taper talk from the Fed began. Home purchase mortgage applications also fell by    -2.7% to a 4 week low.  The University of Michigan consumer confidence survey fell to 76.8 from 82.1, below the estimate of 82 and the lowest since April.  The National Federation of Independent Business survey reported a 4-month low in respondents expecting a better economy in the remainder of the year.

Canada’s dollar touched a one-month high on the way to its second straight weekly gain as stronger- than-forecast economic data helped the domestic outlook.  However, the continuing hot housing market in Canada has helped the ratio of Canadian household debt to disposable income rise to a record in the second quarter, despite efforts to slow the housing market down. The ratio of Canadian household debt to income rose to a record high 163.4% in the second quarter from 162.1% in the first quarter, per Statistics Canada.

A surprise fall in industrial production across the Eurozone in July was a disappointing start to the third quarter, and calls into question the region’s recovery that was signaled after Eurozone GDP rose a stronger-than-expected 0.3% in the second quarter.

Several emerging market countries took significant actions during the week to stem market slides and runs on currencies.  Indonesia, to bolster its slipping currency, announced an unexpected 25 bps rate hike which followed a 50 bps hike on August 29^th.  India’s rupee also stabilized during the week concurrent with several central bank actions.  India’s Sensex index rallied +2.4% on the week, Indonesia up by +7.4%, and Thailand higher by +4.9%.

China’s exports rose for a second straight month in August, and industrial production accelerated to 10.4% year-over-year growth in August, the highest amount since March 2012.  Japanese second quarter GDP was revised up to 3.8% annualized growth from 2.6%.

(sources: Wall St Journal, Bloomberg.com, ft.com, guggenheimpartners.com, ritholtz.com, markit.com, financialpost.com, stat.go.jp)

With the US Stock market moving back to a confirmed uptrend, my US Aggressive Growth strategy re-entered the market on Friday. News came out over the weekend that Larry Summers declined the nomination for Chairman of the Federal Reserve once it was clear that Democrats (in general) wouldn’t vote for him. Now, Janet Yellen is the ‘favorite’. There is a big difference in the policies of Summers versus Yellen. Yellen is a Dove like Bernanke and will tend to favor easy money policies and economic stimulus. Summers is more of a Hawk and would be less inclined to continue stimulus. If Yellen becomes the new Chairwoman then it may be negative for the USD but may cause stocks to power ahead even further…just like they are today.