Typical reactions to market data have continued to play in reverse of standard responses. This has been due to the speculation over how the FRB will react to the data. We should begin to see that become less common as we move past the FRB meeting this past week.
The FRB affirmed many beliefs that they were going to delay tapering until there is stronger economic data. Many investors feel that economic data supports 1st quarter of next year; however the FRB has made reference to later this year, which has given us much of our mixed performance recently. The FRB made sure to give the ever present caveat that the economic data needs to be strong enough to support the reduction.
One thing that could derail this would be the budget deadline of 1/15 and the debt ceiling deadline of 2/7. That remains to be seen, however, the good news is that politics has moved to the back burner for the remainder of 2013’s economic calendar. As we move further away from the Government shutdown it’s expected that we’ll see strengthening economic data and consumer confidence, which should help mend 4th quarter GDP.
Economic data over the past week has been mixed: With 70% of S&P 500 companies reporting, 76% have beat earnings estimates and 53% have beat revenue estimates. The S&P 500, while having difficulty throughout the year (or so it felt), is up over 25% year to date. Inflation was light (a good indicator of demand) YoY results were 1.2% for September and the Manufacturing PMI fell to 51.8 (still expansionary, but lower than anticipated) for October.
International Data: China, South Korea, and Taiwan all reported improved PMI data, EU unemployment remains elevated at 12.2%, and inflation remains muted at just 0.7% YoY. Japan is reporting a strengthened outlook for both GDP and inflation for 2014, which is a great signal of progress.
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.
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.
Sources: mfs.com, oppenheimerfunds.com, and morningstar.com
* Financial Action, Inc. is a Registered Investment Advisor.