There were negative results and news across much of the economic calendar, however the markets reached new highs last week.

Economic data pointed to a sluggish early 2014 with downward revisions to Q4 ’13 GDP, weak jobs data, issues developing in the Ukraine, and continued harsh weather across much of the US during the month of January.  So why then, was the S&P 500 up 1.3% YTD (as of 2/28/14)[1] and reaching all-time highs at close on Thursday and Friday?

While much of the data mentioned above was a continued reminder to the slow start in 2014, it was nothing more than a reminder.

• Most of the revisions to Q4 GDP came as a result of downward revisions to consumer spending during Q4, which makes up 70% of GDP.  Core retailers still did well, while major line items lagged[2].
• Jobs data has continually disappointed over the last few months.  The unemployment data this Friday will be responded to quickly by the market.
• The weather has made many of the economic reports this winter tough to interpret effectively.

On the bright side some retailers beat expectations for Q4 profits, new home sales surged, and probably most importantly… Spring training started.  I love baseball season!

Internationally, Japan’s unemployment rate came in at 3.7%, while factory output rose to 4%.  Sovereign bond auctions throughout much of Europe continued to see rates ease.  The Wall street Journal estimated average homes prices in 70 Chinese cities increased by 9% in January. Brazil’s GDP grew by 2.75% in Q4 ’13[3].

In summary the market is not psychotic.  Valuation are at historic norms and there is not a buying frenzy that puts price to earnings drastically overvalued.  Rather than psychotic I would say the market is scratching its theoretical head waiting for reports that do not have underlying adjustments to the topical data…

If you would like an in-depth analysis of your current positions and allocation, please feel free to call Jason Roque at 719-313-7536 to schedule an appointment.

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.