Brennaman’s Four
Points for the Week
1.
Economic
Results – Keeping the FED in A Box – Economic numbers this week reflected a
mix bag of positive and not so positive developments. Unemployment for the month of July ticked down
to 6.1% from 6.2% in June but this was in part because the participation rate
also went down to 62.8%, the lowest level in 36 years. Hourly incomes for non-managerial positions
also increased 2.5% from a year ago, definitely good news but the work force
only grew 125,000 for the month whereas the average for the last 6 months has
been in the 225,000 arena. A casual
observer would think these numbers would cause market jitters but the DOW Jones
and the S&P 500 both posted strong numbers for Friday and eked out another
positive week. This begs the question,
Why? The economic numbers in effect
presents the Federal Reserve Open Market Committee (FED) with a situation of a growing
economy (4.2% GDP for the 2d Qtr.) and a stagnant job market. Both representing goals along with keeping inflation
in check. The pressure to raise rates is
almost non-existent with inflation at 1.7%.
The Box the FED is in will, more than likely contain their need (or
desire) to raise interest rates until well into the 2d half of 2015.
2.
Ukrainian
Ceasefire – Who Loses? – The winners are easier to ascertain at first
glance. The European Union (EU) wins, if
the cease fire holds and Russia wins as well for it will not be long before all
is forgotten and capitalism prevails.
The EU wins because the repercussions from the conflict begin to lessen
and Putin wins as a result of the stalemate, sanctions notwithstanding. The Russian Separatists are still in
possession of a large swath of eastern Ukraine and supported by Russian
military forces. The EU (and the U.S.) will
be hard pressed to press any additional sanctions since they net effect may
well be a further drag on the European economy.
And as we have seen the past sanctions did not seem to have any effect in
regards to the current outcome. So the
losers are the people of eastern Ukraine, the 2,600 dead citizens and the
country at large. Four plus months of
fighting and Russian troops on their sovereign soil places President Poroschenko
in a tight corner with no real help in sight from the West. President Poroschenko and the EU need to
reevaluate the future in the dawning of a revitalized and emboldened Vladimir
Putin.
3.
NATO – A
Rebirth of An Alliance – The leaders of the North Atlantic Treaty
Organization met this past week and the outcome was predictable but the leadership
was different. For the first time since
the organization was formed in 1949 the United States was not the leader in the
forefront. Great Britain and France took
center stage in pushing for the establishment of a spearhead force to deter
potential adversaries or challenges to member nations. This is not necessarily a bad thing. For decades the U.S. shouldered the bulk of
the cost and responsibility for being the one on line; and Great Britain did
their part as well. The recent events in
Ukraine only highlight the state the alliance has devolved into since the fall
of the Iron Curtain in 1990. A strong
NATO will go a long way in stabilizing relations in Eastern Europe and ensuring
consistent and vital economic growth.
4.
Market
Anxiety – To Stay or Not to Stay – The volatility of late has been almost
nothing to be concerned about yet the collective anxiety of the investing world
would lead one to believe we are losing a fortune every day in the market despite
record highs on the S&P 500. Such is
the short time frame of mind investors have developed since the first market bottom
in 2002, not to mention the bottom in March of 2009. The long term investor, whether it be five,
seven or ten years’ time frame is better served to be in the market and
invested in a portfolio of securities that is aligned with his / her level of
accepted risk. Admittedly we climb a
wall of worry (or fear) each Monday morning as the financial announcers outline
the latest items of worry for the day or week ahead. However, careful analysis and planning will
help the investor weather these weekly (or daily) storms and keep their boat afloat
in a manner that assuages their own demons in regards to the market.
“Never take counsel of your fears” Thomas
J. “Stonewall” Jackson
Have a good week and read a good book.
Steve
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