Stocks are up, but the economy slowed in the first quarter
The United States gross domestic product (GDP) in the first three months of 2015 was revised down on Friday, clocking in at -0.7%. Many economists are blaming this on a harsh winter, a strong U.S. dollar that hurt exporters, as well as a strike by West Coast dockworkers (Source: http://www.usnews.com/news/articles/2015/05/29/us-gross-domestic-product-revised-into-negative-territory) Whether or not those excuses hold weight will be determined after this quarter when we see the GDP number for the second quarter in late July. In the meantime, the data we have reviewed has been a mixed bag. According to the U.S. Census Bureau, sales of new single-family houses in April 2015 had a 6.8% growth rate versus March, and 15.4% more than April of 2014. However, the University of Michigan final Consumer Sentiment reading for May came in at 90.7, which is down from 95.9 in April (Source: http://www.advisorperspectives.com/dshort/updates/Michigan-Consumer-Sentiment-Index.php). Since consumer spending is a large component of the economy, we keep a close eye on it. It appears increasing gas prices may be hurting the consumer’s wallet lately.
If the economy was shrinking in May, the stock market did not take note. The S&P 500 was up 1.29% and the DOW Jones was up 1.35% for the month. However, for the second month in a row, bonds lost money according to the Barclays US Aggregate bond index (Source: http://news.morningstar.com/index/indexReturn.html?msection=IdxReturns). Despite that the losses in bonds are piling up, our TD Ameritrade portfolios had a great month because of our decision to invest in specific bond sectors. The bond market as a whole is off to a rough start so far in June as volatility has increased within fixed income investments with the rise of global bond yields.
Many of our economic indicators have turned yellow, but are not yet red. We are always aware of the fact that the market has had a good number of years in a row without an annual loss, and a very long streak of avoiding a 10% correction. This is concerning, so we typically tend to play defense shortly after our indicators turn red rather than waiting it out. For now, we’re watching and waiting, but rest assured we have an exit strategy in hand if we need it.
If you don’t have an exit strategy after the market has been up for six years in a row with your current advisor, it might be time to sit down and discuss it. We would be happy to schedule a no obligation visit at your home or our office.
Changes in technology – In the past 15 years, the number of news-stands has dropped by half and video-rental stores have dwindled by 85%, but nothing can rival the 94% death-rate for America’s photo-processing shops, which have vanished faster than any other business tracked by the U.S. Census Bureau. – Bloomberg, April 30, 2015
Getting Better or Worse? – Just 10% of American adults believe those around them are becoming kinder and gentler, while 75% think Americans are becoming ruder and less civilized. – Rasmussen Reports, May 6, 2015
Vanity – On average, men look at themselves in a mirror 23 times a day, compared with 16 times a day for women. – The Daily Mail, May 12, 2015
Expectations of Retirement – Sixty-seven percent of workers say they plan to work for pay in retirement, but of those that are currently retired, only 23% actually do. – MarketWatch, April 21, 2015
Paying for that Movie? – Almost one-in-ten people accessing video streaming services like Netflix and HBO Go are using somebody else’s login information. – CNBC, May 18, 2015
Debt – The United States is $19 trillion in debt, which, if stacked with $100 bills, would cover every NFL stadium playing field 8 feet deep sideline-to-sideline and goal line-to-goal line. – MarketWatch, May 25, 2015
Paid Speaker – For giving two speeches in one day, Hillary Clinton was paid $625,000 – more than enough to place her in the top 1% of earners for a single day of work. – The Washington Post, May 18, 2015