Keeping Life in Perspective:
Today, I attended the funeral of some dear client’s and friend’s 18 year-old-daughter. She had struggled about two years over a battle with cancer. I don’t think they’d mind me telling you that the service was the most beautiful celebration of life that I have ever seen. Since she was the same age as my own youngest daughter, this service held a special meaning for me. This young lady made such a positive impact on all she touched, including and up to her last and final days. The pastor that delivered her memorial said something that will stick in my mind for quite some time, and I hope for the rest of my life. He commented that if she could be here to tell us one main thing, it would be that “how silly, stupid, and frivolous are the things we worry about every day”. At her young age, she lived far beyond her years in wisdom, and touched me even though I didn’t know her personally as well as I know her parents. If I can have 1/10th the impact on other people’s lives during my entire lifetime that she did in just over 18 years, I will feel blessed. Let’s not lose perspective on what’s really important in this life!
The Markets:
A “sigh of relief” employment report fuels new highs in equities
Mix in expectations of a weak payroll report on Friday, then surprise to the upside and you create just right mix of ingredients to create a wave of buying, pushing the S&P 500 Index and the Dow Jones Industrials to new highs. The S&P 500 Index captured a new milestone, surpassing 1,600 for the first time and ending the week at 1,614.42. The Dow couldn’t quite hold on to 15k but finished at a record of 14,973.96 (MarketWatch).
We continue to feel there could be some type of stock market “correction” at any time, with a possible drop of anywhere from 5-10% of the major stock indices from the current levels and at this time we are underweighted in stocks/equities in all risk levels. Our goal is to keep a balanced portfolio consisting of stocks/equities, fixed income, and alternative investments (made up of precious metals, a commodities fund, and a real estate fund). With the Fed here in the U.S. committing to the current $85Billion per month in bond buying, we still think there is a continued chance for inflation in the future. We will continue to monitor this on a regular basis and keep you posted.
Let’s recap. At the beginning of April, the government reported that nonfarm payrolls grew by just 88,000 in March, less than half what economists had expected (Bloomberg). And much of the economic data we’ve been seeing in recent weeks have been soft, i.e., everything from retail sales to durable goods orders. Consequently, many on the Street were bracing for another sluggish number. But that was not to be the case. Nonfarm payrolls increased by 165,000 in April, above the Bloomberg forecast of 153,000. Sure, it’s not much, but there were a number of analysts that were expecting a much weaker report (CNBC).
Moreover, the unemployment rate continued its descent, falling 0.1% in April to 7.5%. Before we get too carried away with the report, let’s get some perspective. The headline-grabbing jobless rate doesn’t include those who have given up looking for work, nor does it include part-timers who want full-time work. Plus, a slight dip in hours worked (BLS) that was buried in the release may be a signal that economic activity will continue to be modest at best.
This brings us to the Fed
On Wednesday the Federal Reserve concluded its two-day meeting with a statement that mostly mirrored its Mar 20th statement. Despite a spate of soft economic reports, the Fed did not explicitly downgrade its view on the economy or the labor market. One could speculate that maybe the Fed had a sneak peek at the upcoming labor report.
What the Fed did add –it stands ready to lower or increase the pace of its bond purchases ($85 billion each month) in response to the outlook for the labor market or inflation. This could continue to keep interest rates artificially low for an extended period of time. In some ways, the Fed is playing both sides of the fence. Stronger and consistent economic growth could be followed by fewer bond buys. Or, if the rate of inflation were to subside too quickly (or job growth stalls), the Fed said it might quicken its pace of bond buys. Although central bankers believe modest growth is still on tap, their public comment that the pace of bond buys could go in either direction suggests policy makers are feeling unusually uncertain regarding their forecasts.
As always, we are here to serve and if you have any questions or concerns, or if we can be of further service in any way, please don’t hesitate to call.
God Bless,
Your TEAM at F.I.G. Financial Advisory Services, Inc.
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