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Winter Weather & the Market

Winter Weather and the Market

 

The polar vortex is a term few of us have ever heard of and fewer could explain. But the blame for this year’s particularly bitter winter gets placed right at the doorstep of the polar vortex. And much of the recent economic weakness is being blamed on the cold and snow.

 

Index

Weekly Return %

thru Feb 21, 2014

YTD Return %

Dec 31, 2013 – Feb 21, 2014

DJIA1

-0.3

-2.9

NASDAQ Composite2

+0.5

+2.1

S&P 500 Index3

-0.1

-0.7

Bond   Yields

Feb 21   Yield & Weekly Change

Yield - % a/o Dec 31, 2013

3-month T-bill

0.05           +0.03

0.07

2-year Treasury

0.33           +0.01

0.38

10-year Treasury

2.73             -0.02

3.04

30-year Treasury

3.69             Unch

3.96

Commodities

Feb 21 Price & Weekly Change

Year end 2013

Oil per barrel4

     $102.30             +2.09

    $98.42

Gold per ounce5

$1,323.25             +3.25

$1,201.50

Sources: U.S. Treasury, MarketWatch, St. Louis Federal Reserve, CNBC, Energy Information Admin.

 

Let’s go back a couple of weeks. Retail sales and industrial production in January unexpectedly declined (Federal Reserve, U.S. Commerce Dept., Bloomberg). Had it not been for a surge in utility production to heat homes, we would have seen an even steeper drop in U.S. manufacturing.

 

Last week, housing became the latest victim. Single-family housing starts fell a sharp 15.9% in January, which included an astounding decline of 60.3% in the Midwest (U.S Census). You can’t push around dirt covered in snow and set a foundation in frigid temperatures. Besides, in the sunny and drier western U.S., single-family starts rose 10.7% in January.

 

In addition, the Housing Market Index (measures homebuilder sentiment) provided by the National Association of Homebuilders (NAHB) and Wells Fargo slipped 10 points in February to 46, its largest one-month decline since records began in 1985 (NAHB). The NAHB cited weather as one of the factors. Moreover, we saw a sharp drop in the traffic subcomponent of the index.

 

   scanned blog graph pdf 2 24 14                    

Source: NAHB, U.S. Census Bureau

Note: a reading of 50 on the Housing Market Index suggests builders are neither optimistic nor pessimistic

 

The coldest January in 20 years

That’s the case if measured by what’s called “heating degree days, or HDD (First Trust).” HDD is defined as the number of degrees the average of the high and low temperature is below 65 degrees, which is the outside temperature the average building would not need to be heated (NOAA).

 

For example, if the high temp is 30 degrees and the low temp is 10 degrees, the average for the day is 20. Subtract 20 from 65 and the HDD equals 45 degrees. Simply put, the colder the temperature the higher the HDD. Any averages above 65 and HDD equals zero.

 

Add up the numbers and January turned out to be the coldest in 20 years. Because HDD is population-weighted, the country’s economic centers bore the brunt of the ice and snow.

 

According to the NOAA, the Midwest and northeast, and for that matter, much of the eastern U.S. is set for another Arctic blast this week. But we are in the latter stages of winter, and flowers always bloom following the cold weather.

Market Update

Last week we saw the introduction of new Federal Reserve Chair, Janet Yellen. One misstep by Yellen, who made her first appearance before a House Committee, could quickly bring a torrent of criticism. But right out the gates, markets cheered what they heard from the new Fed chief.

 

Index

Weekly Return %

thru Feb 14, 2014

YTD Return %

Dec 31, 2013 – Feb 14, 2014

DJIA1

+2.3

-2.6

NASDAQ Composite2

+2.9

+1.6

S&P 500 Index3

+2.3

-0.5

Bond   Yields

Feb 14   Yield & Weekly Change

Yield - % a/o Dec 31, 2013

3-month T-bill

0.02             -0.06

0.07

2-year Treasury

0.32           +0.02

0.38

10-year Treasury

2.75             +0.04

3.04

30-year Treasury

3.69             +0.02

3.96

Commodities

Feb 14 Price & Weekly Change

Year end 2013

Oil per barrel4

       $100.40             +0.26

    $98.42

Gold per ounce5

   $1,320.00           +60.75

$1,201.50

Sources: U.S. Treasury, MarketWatch, St. Louis Federal Reserve, CNBC, Energy Information Admin.

 

It didn’t hurt that emerging market woes have receded, removing a stiff headwind. And the Street simply ignored an unexpected decline in January retail sales (U.S. Commerce Dept., Bloomberg) and an unexpected drop in January industrial production (Federal Reserve, Bloomberg), choosing instead to blame most of the recent economic weakness on harsh winter weather.

 

Not surprisingly, Janet Yellen’s testimony before the House Committee on Financial Services turned out to be the highlight of the week.

 

Yellen noted in her prepared remarks that she expects there to be “a great deal of continuity” between her leadership at the Fed and former Fed Chairman Ben Bernanke. She expressed confidence in the economic outlook and pledged to keep rates low for a considerable period, which was just the tonic jittery investors were hoping to hear.

Finding Employment in Today's Job Market

 

Regardless of age, it is important to stay current and involved when it comes to searching for new employment. Being an active job searcher requires much more than just submitting resumes in this competitive work environment. Below, find a few tips, as well as an article from the Wall Street Journal regarding actively pursuing employment.

 

  • The resume is your first impression. Make sure to have more than 1 friend or family member review your resume for grammatical & spelling errors. Do not ever rely on spell check as a substitute for educated human eyes.
  • Stay current and focused with your networking. It is important to let friends and colleagues know that you are actively pursuing a new position, as you never know what doors may open. Actively research any job fairs or other social / networking opportunities which may be in your area.
  • Always be prepared for your interview. Not only is this your opportunity to make your first impression, but by doing some extra research on the company and the position (check the company’s website for details) shows your ambition before you even walk through the door.
  • Do not get discouraged. Look at every unsuccessful interview as an opportunity that may lead to a better job, and a learning experience for your next interview. Do not be afraid to follow up with the person you interviewed with. Sometimes a simple e-mail thanking them for their time can go a long way.

 

 

Work & Family

Looking for a Job When You're Over 55

 

Sue Shellenbarger answers readers' questions.

 

 
Jan. 28, 2014 6:32 p.m. ET

Q: I'm looking for a job at age 58, after 10 years out of the workforce caring for aged family members. I recently earned a two-year degree in accounting, and I have experience in sales and office administration. Any advice on getting interviews?

—P.M., Poulsbo, Wash.

A: The usual job-seeking rules apply, with a few added twists for a worker at your life stage. Networking is critical, and older workers shouldn't hesitate to reach back decades to high-school friends and former colleagues, plus their adult kids and their kids' friends, says Kerry Hannon, Washington, D.C., author of "Great Jobs for Everyone 50+." Tell them what you want and ask for advice on getting a face-to-face meeting, Ms. Hannon says.

Focus on industries that welcome workers over age 50, including health care, education, government and nonprofits, Ms. Hannon says. A listing of the 50 best employers for older workers can be found via a Web search for "AARP best employers." Job boards can provide clues on who is hiring. "Never lose sight of the fact that you bring some valued assets, such as loyalty and reliability," that many younger workers lack, Ms. Hannon says. Many small businesses hire older workers because they can step into a new position without training.

Build the body of your resume on a concise description of current skills and outcomes. Organize it by functional area, such as "office management" or "accounting and bookkeeping," rather than by date, says Maria Escobar-Bordyn, an executive coach and co-owner of Bridgeway Career and Professional Development, Bellevue, Wash.

Include any skills used in caring for family members, such as budgeting or managing paid home-care workers. Make it easy for employees to see how you would fit by describing outcomes in language that matches the job description, Ms. Escobar-Bordyn says.

(Copyright Wall Street Journal, 2014) 

 

Economic Update 2/10/2014

Last week started out on a sour note, with a 326-point selloff in the Dow (MarketWatch). The culprit – the closely followed ISM Manufacturing Index registered its 3rd largest decline since 1990, falling 5.2 points in January to 51.3 (ISM data). A reading of 50 suggests no growth, a reading above 50 suggests expansion, and a reading below 50 suggests contraction. At 51.3, manufacturing starts the year in low gear.

 

Index

Weekly Return %

thru Feb 7, 2014

YTD Return %

Dec 31, 2013 – Feb 7, 2014

DJIA1

+0.6

-4.7

NASDAQ Composite2

+0.5

-1.2

S&P 500 Index3

+0.8

-2.8

Bond   Yields

Feb 7   Yield & Weekly Change

Yield - % a/o Dec 31, 2013

3-month T-bill

0.08             +0.06

0.07

2-year Treasury

             0.30           -0.04

0.38

10-year Treasury

2.71             +0.04

3.04

30-year Treasury

3.67             +0.06

3.96

Commodities

Feb 7 Price & Weekly Change

Year end 2013

Oil per barrel4

     $100.14             +2.73

    $98.42

Gold per ounce5

$1,259.25             +8.25

$1,201.50

 

On Friday, the Bureau of Labor Statistics (BLS) reported that nonfarm payrolls in January rose by a sluggish 113,000, below the forecast of 181,000 (Bloomberg). To put it into perspective, payrolls have risen at an average rate of 183,000 per month since January 2011 (BLS).

 

Unlike the ISM Index, it does not appear that weather played a role due to a 48,000 increase in construction, the fastest rise since January 2007 per BLS. If any category might be affected by weather, it’s construction.

 

And stocks rallied on that sluggishness – bad news is good news – amid the possibility the Fed could delay measured cuts in its $65 billion in monthly bond buys.

 

We may get more clarity this week when the new Fed Chief Janet Yellen testifies before a House Committee on Tuesday and a Senate Committee on Thursday. Still, we’ve got plenty of data to decipher before the next Fed meeting in March (Fed meeting calendar).

 

Meanwhile, the unemployment rate fell from 6.7% in December to 6.6% in January, continuing its descent (BLS). But remember, the jobless rate doesn’t fully capture what’s happening in the labor force.

January 2014 Market Review

Last year’s advance in the S&P 500 Index came up just shy of 30% (St. Louis Federal Reserve data) and investors were primed for a strong start to 2014. Besides, the market experienced a strong start to 2013 (St Louis Fed data). Why wouldn’t we get a repeat?

 

Well, the market can be fickle. Sometimes, it just seems to have a mind of its own, doing what it can, at least in the short term, to confound and confuse. In a word or two, stocks tripped out the 2014 gates, snapping a four month winning streak (MarketWatch data).

                                   

Index

January   Return %

2014 YTD   Return - %

DJIA1

-5.3

-5.3

NASDAQ   Composite2

-1.7

-1.7

S&P   500 Index3

-3.6

-3.6

Bond Yields

Yield* - % a/o Jan 31,   2014

Yield - % a/o Dec 31,   2013

3-month   T-bill

0.02          -0.05

0.07

2-year   Treasury

0.34         -0.04

0.38

10-year   Treasury

2.67         -0.37

3.04

30-year   Treasury

3.61         -0.35

3.96

Commodities

Jan 31 price, monthly change

Year end 2013

Oil   per barrel4

      $97.41                -1.01

   $98.42

Gold   per ounce5

$1,251.00               +49.50

$1,201.50

       

Sources: MarketWatch, U.S. Treasury, CNBC, St. Louis Federal Reserve, Energy Information Administration    

*Includes monthly change

 

Let’s look at the key themes that greeted investors in January. First of all, there weren’t any strong catalysts to fuel the next leg of the bull market.

 

Last year’s surge in stocks and relative weakness in bonds had left asset allocations out of alignment. We’re in a new tax year and some folks may have locked in profits on stocks in order to get back within their recommended equity percentages. Cash proceeds – some may be going into bonds, including Treasuries, which to the surprise of many have performed admirably in January.

 

But the real culprit for the weak start originated overseas, and in particular, emerging markets. Emerging markets, sometimes called developing markets, exclude the U.S., Western Europe, Japan, Canada, and Australia. What it does include is Asia, South and Central America, and Asia-Pacific economies.

Many developing nations around the world have plenty of long-term potential, but there is heightened risk when investing in emerging markets. They may play an important role in the international component of a portfolio, they reduce investment risk over the long-term, but these countries are subject to big swings.

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