THE MARKETS
The stock market seems to be climbing the proverbial "wall of
worry."
Despite potential road hazards such as sovereign debt issues,
rising interest rates, a weak job market, and a stalled housing
recovery, investors bid up stock prices last week to an 18-month
high, according to MarketWatch. Of course, these things could
eventually affect stock prices, but, for now, stocks are riding the
momentum of improving earnings and some underlying stability in the
economy.
Lack of job growth has been a major problem for our economy the
past couple years, but that could change this week. On April 2, the
government will release the March employment report and, according
to CNBC, economists expect it to show a rise of about 200,000
non-farm jobs. That would be a small down payment on the 8.4
million jobs lost since December 2007, according to Bloomberg. The
fact that the S&P 500 has risen for four consecutive weeks may
suggest that the market has been anticipating a good report.
Ironically, on the day the employment report is released, the U.S.
stock market will be closed for the Good Friday holiday, so we
won't know the market's reaction until the following Monday.
Fear of a double-dip recession seems to be fading, too. In its
final revision, the Commerce Department said fourth quarter 2009
GDP increased at a 5.6% annualized rate, which is the fastest rate
in six years. For 2010, economists surveyed by MarketWatch expect
GDP to expand at a non-recessionary 3% rate. On a regional note,
the Great Lakes commercial shipping season has started early partly
due to increased demand for iron ore and coal. "Things are moving
quicker, sooner than a year ago. And it seems like more ships are
involved," said Eric Reinelt, Port of Milwaukee executive director
as quoted in the March 28 edition of the Milwaukee Journal
Sentinel.
So, despite the worries, there is some good economic news
supporting stock prices.
|
Data as of 3/12/10
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
|
Standard & Poor's 500
(Domestic Stocks)
|
0.6%
|
4.6%
|
43.0%
|
-6.7%
|
-0.1%
|
-2.6%
|
|
DJ Global ex US
(Foreign Stocks)
|
-0.2
|
0.5
|
50.6
|
-6.9
|
3.6
|
0.5
|
|
10-year Treasury Note
(Yield Only)
|
3.9
|
N/A
|
2.7
|
4.6
|
4.6
|
6.2
|
|
Gold
(per ounce)
|
-0.8
|
-0.7
|
16.9
|
18.3
|
20.8
|
14.5
|
|
DJ-UBS Commodity Index
|
-2.0
|
-6.8
|
14.9
|
-8.5
|
-3.9
|
2.8
|
|
DJ Equity All REIT TR Index
|
1.2
|
11.0
|
100.5
|
-10.2
|
4.5
|
12.0
|
| Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS
Commodity Index returns exclude reinvested dividends (gold does not
pay a dividend) and the three-, five-, and 10-year returns are
annualized; the DJ Equity All REIT TR Index does include reinvested
dividends and the three-, five-, and 10-year returns are
annualized; and the 10-year Treasury Note is simply the yield at
the close of the day on each of the historical time
periods.Sources: Yahoo! Finance, Barron's, djindexes.com, London
Bullion Market Association.Past performance is no guarantee of
future results. Indices are unmanaged and cannot be invested into
directly. N/A means not applicable or not available. |
THE DAY OF RECKONING due to our country's
ballooning deficits may be getting closer. Back in 2008, the
Congressional Budget Office (CBO), projected the U.S. would run a
budget surplus of $247 billion for the years 2009 through
2018. Now, just two years later, CNBC and the CBO have crunched the
numbers again and project that we will incur a $7.4 trillion
deficit during that 10-year period, according to a March
26 CNBC article.
How could the situation deteriorate so much in just two
years?
The CBO said 57% of the projected deficit increase was due to
lower government revenues--much of which is due to the decline in
our economy and projected sluggish economic growth. The other 43%
included expenses such as, "the stimulus bill, a change in
accounting for the war, extended unemployment benefits, and
additional interest on debt."
At the end of 2009, the U.S. national debt stood at $12.3
trillion, according to the Treasury Department. Tack on the
projected deficit over the next 10 years and we could be close to
$20 trillion in the hole 10 years hence.
Like chocolate chip cookie dough, a spoonful of annual deficit
and national debt is fine, but gorging our country on borrowed
money may eventually cause significant problems. Too much
government debt could lead to rising interest rates and slower
economic growth, according to Fortune Magazine. In a
worst-case scenario, it could lead to economic collapse.
We have several options to solve the budding debt problem before
it gets completely out of hand. First, we could grow our way out of
it. This is the preferred method and the least painful. Second, we
could raise taxes. Third, we could cut government spending. Most
likely, we'll see a combination of the three.
Given the magnitude of our swelling deficits, we will likely
have pain in our future. Whether that pain happens in our
generation, our children's, or our grandchildren's, remains to be
seen.
For your convenience the sources
have been listed below:
www.marketwatch.com/story/marketwatchs-top-stories-march-22-26-2010-03-26
www.bloomberg.com/apps/news?pid=20601087&sid=a8qAxLY2AvLw&pos=2...
www.marketwatch.com/story/us-stocks-open-higher-2010-03-25
www.jsonline.com/business/89313467.html
www.bloomberg.com/apps/news?pid=20601087&sid=aZnl5N6kjF_A&pos=3
www.bea.gov/newsreleases/national/gdp/2010/gdp4q09_3rd.htm
www.marketwatch.com/story/us-gdp-revised-slightly-lower-in-fourth-quart...
money.cnn.com/2009/06/05/retirement/next_crisis_americas_debt.fortune/
www.cnbc.com/id/36054221
www.treasurydirect.gov/govt/reports/pd/mspd/2009/opds122009.pdf
www.fms.treas.gov/bulletin/b2010_1fd.doc
thinkexist.com/quotation/the_way_to_wealth_depends_on_just_two_word...
