Group Meeting Schedule:

If you have not already done so, please call now to reserve your spot at one of our scheduled Mid-Year Group Review Meetings.  We still have some seats available for the scheduled times below.  The scheduled meeting dates/times are:

Tuesday, July 9th: 3:00PM

Thursday, July 11th:  10:00AM

Tuesday, July 16th:  3:00PM

Wednesday, July 17th: 10:30AM

Tuesday, July 23rd:  5:30PM

We will provide a review of the first half of 2013 as well as details of our outlook and strategies as we move into the second half of the year.  If you prefer a private meeting or phone appointment, please call us as well and schedule a time that best fits your schedule.

The Markets:

July 4th fireworks begin in Europe

This year’s fireworks began in Europe after the European Central Bank (ECB) held is benchmark rate at 0.5% but added it expects its key rates to remain “at present or lower levels for an extended period of time (ECB introductory statement to the press conference).”

 Such forward-looking guidance from the ECB, which controls monetary policy in the 17 nations that use the euro as its currency, is unprecedented. Sure, we’re used to hearing that kind of talk from the Fed. But the typically conservative ECB has usually been coy about its intentions, and the unexpected transparency sent stocks surging in Europe and put downward pressure on government bond yields on the European continent.

There are a number of reasons for the move: the euro-zone economy has been mired in a recession for six quarters (BBC); Greece continues to strain under tough austerity (Reuters), and a political crisis in Portugal that may threaten recent financial gains erupted early last week (Wall Street Journal).

For the most part, however, hints from the Fed in May and June that its bond buying program (quantitative easing or QE) may soon be reduced have rippled around the globe. The resulting backup in European government bond yields has unnerved policymakers; hence, the jawboning from central bankers.  Adding icing to the cake, the Bank of England (BOE) also surprised markets by saying the recent “implied rise” it its key rate, which stands at 0.5%, is “not warranted (BOE statement on monetary policy).” In other words, the BOE made clear it’s in no mood to tighten.

Rising U.S. payrolls aid stocks, send yields surging

On Friday, the Bureau of Labor Statistics said nonfarm payrolls rose 195,000 in June, exceeding the Bloomberg forecast of 161,000. Further, May and June payrolls were revised upward by a respectable 70,000. Meanwhile, the unemployment rate held steady at 7.6%.

The better-than-forecast rise in payrolls pressured bonds, as expectations grew the Fed might soon reduce QE. In response to the report, the benchmark 10-year Treasury yield to 2.73%, the highest level since July 2011 (Federal Reserve).

It’s not all blue skies for the labor market

Although the bond market is trying to price in an eventual tapering, the labor market still has a long way to go before it’s truly healthy.

For example, one unofficial measure of unemployment, which includes those who want work but have become discouraged and stopped looking (one must be actively seeking employment to be counted in the official unemployment rate) AND part time workers who want full-time work, jumped from 13.8% in May to 14.3% (U6 – BLS).

In addition, the government said those working full time fell by 240,000, which was offset by a 360,000 rise in part-timers (discrepancy between nonfarm payrolls and PT/FT workers explained by separate surveys).  To be sure some folks are happy with part-time work, but others want and need full-time employment.

Employment

** Refers to those who worked part-time for an “economic reason” such as slack work or unfavorable business conditions, inability to find full-time work, or seasonal declines in demand. These workers would prefer full-time.

As the chart above highlights, the trend for those who work part time but would like full-time work is gradually heading in the right direction, but remains well above levels seen prior to the recession.

Although a quick peek under the surface of June’s report reveals a labor market that’s far from healed, the reaction in the bond market on Friday still seems to be pricing in possible tapering in QE beginning in the fall.  We feel we will need to see both stronger overall economic growth as well as improvement in the employment situation in the U.S. for this to actually occur.  Time will tell.

We hope you all had a very safe and relaxing July 4th Holiday, and were able to spend some time enjoying time with family and friends.  We look forward to talking with all of you over the coming weeks to review the first half of 2013 and provide you with details as to our outlook and plan moving forward.  We appreciate the privilege of serving you all and look forward to working with you in the years to come.

God Bless,

Your TEAM at F.I.G. Financial Advisory Services, Inc.

 

 

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