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Monthly Archives: April 2016

TAKING STOCK AFTER THE RALLY

Stocks have had quite a nice run. Since the February 11, 2016 lows the S&P 500 has gained 14%. The rally has been driven by many factors — chief among them, better U.S. economic data, higher oil prices, the Federal Reserve’s (Fed) slower rate hike timetable, increased confidence in China, and more stimulus from overseas central banks. These factors have enabled stocks to trade more on fundamentals than fear, and have pushed the S&P 500 to just 2.4% below its all-time high. Here we assess the likelihood that the rally continues from this point forward, and, if so, how much further it might have to go.

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VOLATILITY SPIKES, BUT EQUITIES PROVE RESILIENT

U.S. economy weathers market volatility as labor market improves and manufacturing steadies. Based on data received so far, first quarter 2016 real gross domestic product (GDP) growth is tracking at 1.5 – 2.0%, following 1.4% growth in the fourth quarter of 2015 and 2.0% growth in the third. Concern about global economic weakness and tightening financial conditions prompted the Federal Reserve (Fed) to delay further rate hikes and lower its internal forecast from four 25 basis point (0.25%) rate hikes in…

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CHECKING IN ON TRADE

The U.S. has run a trade deficit (importing more goods and services from other countries than it exports) since the mid-1970s, which acts as a drag on overall gross domestic product (GDP) growth [Figure 1]. Although the trade deficit narrows during recessions, when imports typically fall faster than exports, the trade gap has increased over time, and currently stands at around 3.0% of GDP. Along with the massive budget deficit, the trade deficit is one of the major economic challenges facing the U.S. and has fostered the…

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