Yes, you can clean up spilled milk in no time… and yes, spilling milk is not the end of the world; but as many of you would probably agree, the cost of groceries has started to inch up again. I don’t cry over spilled milk for the work that it creates, but rather because I am cheap!
Last week the markets came out fighting with a buy mentality, but late in the week economic data cooled things off, leaving the markets fairly unchanged when everything was said and done. Interestingly the two reports that probably curbed market enthusiasm the most, lead you to believe that the economy continues to improve.
The core consumer price index (Core CPI), a measure of inflation, rose at a pace of 1.8%[1] year over year, hence why I cry over spilled milk. This rate is a mere .2% off of the Federal Reserve’s long term target of 2%. While too much inflation can cause problems for the overall market and economy, mild inflation indicates strong consumer demand and healthy growth throughout our economy.
The other report that got much attention was the initial jobless claims report. The 4 week average sits at 323,000 while the most recent week came in at 297,000[2]. This represents a steep fall from recent weeks. This is also a good indicator of a strengthening economy; however it’s also well known that the Federal Reserve uses “full” employment as a measure of when they should start tightening the belt. This is only one weekly measure and by no means a large enough indication that the Federal Reserve would deviate from their current course. Current projections for the first rate hike are for the middle of 2015.
On the brighter side, housing starts and building permits surprised to the positive, up 13.2% and 8% respectively[3]. Perhaps the spring thaw and the recent ease on rates has spurred the spring buying season into light activity.
Internationally, Russian GDP surpassed expectations at .9% quarter over quarter[4], as more of a drag was anticipated due to economic sanctions. China’s economic development continues to slow as industrial production weakened. The European Central Bank is indicating that stimulus could be coming in early June in order to spur small business investment and make lending more readily available[5].
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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment. Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.