News


Since the start of the New Year, the markets seem to have been in rally mode.  This is mostly due to short-term positive economic data combined with undervalued stock prices marking 2012 so far, both at home and abroad.  This kind of encouraging data will surely bolster the markets, at least short term.  We can’t deny that it has been a great way to start the quarter.


However, simultaneously to uncovering positive economic data this month, we have learned of less positive revisions to what December looked like in reality.  Therefore, it is important to keep in perspective that such a rally this month is coming off the heels of a slow, and at times really rough, 2011.  In looking back at December momentarily, there will likely be downward revisions to fourth quarter GDP estimates.  Additionally, US retail sales in December saw a modest 0.1% increase, in comparison to the 0.3% increase that was generally estimated.  However, on a more positive note, job creation numbers were revised slightly, from 200,000 up to 203,000.


Thankfully, January has proven a positive month for the markets, due in large part to statistics and fundamentals, as opposed to more isolated events whose volatile nature tended to drive the markets throughout the second half of last year.


Europe


Although there was reason to feel a sense of restored confidence in the European Central Bank’s Long Term Refinancing Operations program announced in December, the crisis has not been averted all together as a result.  Actually, the $624 billion in low cost liquidity hasn’t been truly capitalized on yet because the money has, in large part, been sitting at the ECB, since banks are still skeptical of lending.  In addition, mid-month we saw Standard & Poor’s rating agency downgrade the credit of nine governments in the European Union.


Despite these couple of setbacks and the still present debt crisis, the outlook is certainly brighter for the euro zone.  The last week of January, EU leaders agreed to move forward with a closer and tighter fiscal union.  Also, borrowing rates for Italy and Spain are down, which is indicative of higher confidence.  In terms of Greece, we are hopeful about progress being made in Greek debt restructuring talks, and look forward to a deal proposal in the upcoming days or weeks, depending on how long it takes to sort out the details.  Even if it is just purely perception of improvement or stability in the euro zone, more so than tangible evidence of such, its power in driving investor confidence seems just as strong, allowing for a significantly impressive start to the year.


A Domestic Look


The S&P 500 has already broken through all the 50, 100, and 200 day moving averages, as stated by economist David Rosenberg. 


Towards the end of the month, we saw very healthy manufacturing surveys from several countries.  According to Reuters, growth in the US manufacturing sector in January reached its highest level since last June. 


We have looked forward to the release of US jobs data from January, because such information is typically a strong indicator of growth.  The US economy saw the addition of 243,000 jobs in January, beating expectations.  Further, the unemployment rate fell to 8.3%, making that and the number of jobless claims the lowest since February 2009.  These are certainly statistics to feel confident about, and there is reason to believe they are evidence of our growth and slow emergence from the drawn out economic slump we have been experiencing.