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Monthly Archives: August 2013

Deficit Distraction

In the 12 months ending July 2013, the federal government spent $3.4 trillion and took in $2.7 trillion in revenues, making the federal deficit (revenues less spending) about $725 billion, the smallest deficit recorded since late 2008. At just 3.5%, the deficit as a percent of nominal gross domestic product (GDP) over the past 12 months was also the smallest since late 2008, and stands in sharp contrast to the…

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Deficit Distraction

Two Bears and a Bull

The month of August has not been friendly to investors in any of the major asset classes. Stocks have dipped and bond yields have climbed, pushing bond prices lower. And, with the rise in inflation to 2.0% (as measured by the Consumer Price Index), there is greater purchasing power loss associated with holding cash or money market investments…

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Two Bears and a Bull

Exporting Good Old American Know-How

The United States has run a trade deficit (importing more goods and services from other countries than it exports) since the mid-1970s. Although the trade deficit narrows during recessions — imports typically fall faster than exports during a recession — the trade gap has increased over time, and currently stands at around 3.5% of gross domestic product (GDP) [Figure 1]. This large and persistent trade deficit acts as a drag on overall GDP growth, since…

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Exporting Good Old American Know-How

Change in China and What it Means for Investors

Last week’s economic reports from China for July added fuel to the fiery debate over whether China’s economy is slowing rapidly, possibly forming a sharp “hard landing,” or slowing more gradually and likely forming a more shallow dip or “soft landing,” which could already be stabilizing. This debate focuses primarily on the pace of the decline and all sides assume an eventual rebound. However, the debate misses the point…

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Change in China and What it Means for Investors

Measuring Economic Expansion

The U.S. economy is now in the fifth year of the 12th economic recovery (or expansion) since the end of World War II. It is already the sixth-longest expansion and would have to last another year to become the fifth longest…

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Measuring Economic Expansion

Revisiting the Recovery

Last week, financial markets absorbed a nearly unprecedented amount of information on the health of the economy and corporate America. It was just the eighth week in the past 708 (since January 2000) that the U.S. Department of Labor’s monthly labor market report, the Institute for Supply Management’s (ISM) monthly Report on Business, the Federal Reserve’s (Fed) Federal Open Market Committee’s (FOMC) statement and the first look at gross domestic product (GDP) for the prior quarter were all released in the same week. In general, the equity market took the data deluge in stride, with far less volatility than it had seen in the past when those four key economic events occurred in the same week…

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Revisiting the Recovery

Summer of Love

It has been a summer of love for the stock market. As the temperatures heated up, so did the stock market. From June 24 to August 2, 2013, the S&P 500 Index rose 9%, pushing stocks up about 20% for the year. The last time we saw stocks perform the way they have this year in both pattern and magnitude was…

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Summer of Love

Under the Surface

Stocks in Europe have bounced about 9.7%, measured by the performance of the MSCI Europe Index in dollars, from their low point of a little over a month ago. This is ahead of the gain of 7.5% in the U.S. stocks in the S&P 500 Index over the same period. Several recent surveys and economic data points appear to have renewed a sense of optimism over Europe’s economic future and lifted European stocks. Last week, four of these grabbed investors’ attention…

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Under the Surface