Austerity: a word that is a necessity, but causes so much short term pain to the economy and markets. Well, with the recent budget passed by Congress we get to see a reduction in austerity over the next 2 years. It replants $60 Billion in spending that previously had been removed by sequester. That $60 Billion should reflect .25% in annual GDP per The Congressional Budget Office.
While that seems like good news and you would expect a nice market jump as a result, we have the certainty that we were lacking as recently as last week. The Federal Reserve Board is now expected to start “Tapering” within the next few meetings. I won’t speculate if it gets announced on the 18th, however it should be coming shortly.
Recent economic data, including producer prices, unemployment, corporate earnings, manufacturing, and consumer spending all point to a healthier economy. Unemployment had a major setback last week with a 68,000 increase in new jobless claims, but some feel this may be skewed from the Thanksgiving holiday.
Internationally, China’s inflation rate fell .2% annually, Greece is reporting a budget surplus (you read that right, no need to go back), and home values in the UK grew by .6% over the last month.
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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.
Sources: mfs.com, oppenheimerfunds.com, investing.com, yahoo.com, and morningstar.com
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