April, 2013 Review and Outlook
May 1, 2013
2013 F.I.G. Annual Client Event:
If you have not yet done so, please call now to reserve your spots at our Annual Client Event this coming October 3rd. We will be celebrating our 30th year anniversary and want you all to come! The event is scheduled at the top of the new Devon Tower in downtown Oklahoma City. Seating is strictly limited, so call now and be sure to reserve your spot. Once we reach the limit, we will start a waiting list. We will be sending out formal invitations later this year, but you will want to be sure to reserve your seats early.
The Markets:
After a somewhat bumpy ride in April, the major U.S. stock indices managed to end the month with overall gains. The Dow Jones Industrial Average closed at 14,480, while the broader based Standard & Poor’s 500 stock index finished the month at 1,598.
Interest rates continued to remain low, with the national average for the 30 year fixed rate mortgage at 3.43% and the 15 year fixed rate average down to 2.66%. (BankRate.com)
The price of gold and silver fell during April, with gold ending at 1,476.70 per ounce and silver at 24.29 per ounce. The drop in prices came basically in two trading days, Friday April 12th and Monday, April 15th. The price of both metals began to recover off the April 15th prices as of 4/30/13. (Bloomberg)
Corporate earnings season is in full swing, and with just over 50% of S&P 500 companies having reported, 68% are topping analysts’ reduced profit forecasts, which is ahead of the longer-term average of 63%. Moreover, first quarter earnings are now expected to rise 3.7% from one-year ago, ahead of the April 1st estimate of a scant 1.5%. The ability to clear a very low hurdle did attract some cash off the sidelines, helping equities erase some of the losses in the third week of April. But the quality of earnings is being called into question given soft revenues as only 43% of the firms have beaten sales estimates, which is below the average of 62% (all data Thomson Reuters).
Economic Growth fails to impress
Gross Domestic Product (GDP), which is the broadest measure of economic activity, accelerated from an annual pace of 0.4% in the final quarter of 2012 to 2.5% in the first quarter of 2013, but came up shy of the consensus estimate from Bloomberg of 3.1%. This is just the first look at Q1 GDP and we’ll get two more revisions before the end of June, but the data highlight an economy that can’t seem to shift past second gear.
When comparing the first 15 quarters of the current economic expansion with the start of the recoveries from the 1981-82, 1990-91, and 2001 recessions, you’ll note that the latest recovery is the weakest of the bunch.
| Year recovery begins | Average quarterly annualized % change in GDP first 15 quarters |
|
1982 |
5.29% |
|
1991 |
3.39% |
|
2001 |
2.93% |
|
2009* |
2.15% |
*We are 15 quarters into the economic recovery as measured by the Nat’l Bureau of Economic Research (NBER), BEA; GDP data obtained from BEA
What does all this mean? Many job seekers face tougher odds landing a new position. Though corporate profits are high (thanks to stringent cost controls), soft growth may hinder earnings going forward.
The Federal Reserve announced today at the end of its two day meeting that its planned purchases of $85 billion in Treasuries and mortgage backed securities each month will continue. This should help keep interest rates low for now. They indicated they will adjust this program as they feel is warranted based on overall economic activity and the unemployment rate.
In addition to the Fed’s meeting, we’ll also get the latest readings on the unemployment rate and other key economic reports that could confirm the economy is entering a softer period of growth, much as we saw over the last three years, as spring and the summer rolled around.
One difference: housing is on a firmer foundation.
We still anticipate a near term correction in the stock market and have remained cautious as of this date with our overall stock/equity exposure for all our present risk levels. We continue to feel commodity prices in general will still have the chance to perform well over the coming 12-18 months, even though they have lagged so far in 2013. We will continue to monitor the overall situation and make adjustments as warranted.
We appreciate the privilege to serve each of you and please don’t hesitate to call if you have any questions or if we can be of further service in any way. Also, if you have not yet scheduled your review for the current quarter, and wish to do so, please call us today. We can either set up a private meeting or a phone review, whichever best fits your personal schedule.
God Bless,
Your TEAM at F.I.G. Financial Advisory Services, Inc.
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