The stock market’s recent gains have gone a long way toward restoring calm in the marketplace. The rebound — 5% off the S&P 500 low on October 15, 2014 — has been driven by a combination of factors, including some better economic data, prospects for more support from central banks, old fashioned bargain hunting, and perhaps most importantly, generally solid earnings results. The market’s concerns have not fully been alleviated, but progress has been made. We would argue that the market’s biggest concern right now is slower global growth, particularly in Europe where the Eurozone is potentially on the verge of another recession. Slowing growth in China also remains a concern, though less so…..
The S&P 500 fell 1% last week (October 13 – 17, 2014) in volatile trading, leading market participants and media pundits to speculate on how far the stock market slide—now just over 6% from the September 18, 2014, closing high — might go. In last week’s Weekly Market Commentary, “Pullback Perspective,” we cited the economic backdrop, central bank support, and valuations as reasons the pullback was unlikely to turn into a bear market (a 20% decline). This week we turn to an area that has already entered bear market territory and discuss our outlook for oil and the energy sector.
Why Does Oil Matter?
Oil has a significant impact on several key sectors of the economy….
Over the past week, the LPL Financial Current Conditions Index (CCI) fell 13 points to 249. While the CCI has shown some downward movement since its June 2014 multiyear high, it still sits at the peak levels established
between the Great Recession and the end of 2014’s unusually cold and snowy weather. It remains consistent with the U.S. economy emerging from the modest, but steady, economic growth of recent years…
This latest stock market pullback has provided an unwelcome reminder that stocks do not always go up in a straight line. Even within powerful bull markets such as this one, pullbacks of 5 – 10% have been quite common anddo not mean the bull market is nearing an end. In this week’s commentary, we attempt to put the pullback into perspective. We look beyond this latest bout of volatility and share our thoughts on the current bull market, compare it with prior bull markets at this stage, and discuss why we do not think it’s coming to an end….
The U.S. Treasury will report the federal budget figures for fiscal year (FY) 2014, which ended on September 30, 2014, as soon as this week (October 6 – 10, 2014). According to a recent report by the nonpartisan Congressional
Budget Office (CBO), the United States will likely run a $506 billion deficit in FY 2014, a $170 billion improvement from the $676 billion deficit racked up in FY 2013. As a percent of nominal gross domestic product (GDP), the
deficit in FY 2014 is expected to be 2.9%, down from 4.1% in FY 2013, leaving the public debt-to-GDP ratio — a key metric for global financial markets to assess the creditworthiness of a country — at 74%…