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Deficit Distraction

In the 12 months ending July 2013, the federal government spent $3.4 trillion and took in $2.7 trillion in revenues, making the federal deficit about $725 billion, the smallest deficit recorded since late 2008. At just 3.5%, the deficit as a percent of nominal gross domestic product (GDP) over the past 12 months was also the smallest since late 2008, and stands in sharp contrast...

Two Bears and a Bull

The month of August has not been friendly to investors in any of the major asset classes. Stocks have dipped and bond yields have climbed, pushing bond prices lower. And, with the rise in inflation to 2.0% (as measured by the Consumer Price Index), there is greater purchasing power loss associated with holding cash or money market investments. The stock market is likely in the midst of another temporary pullback in a continuing...

Exporting Good Old American Know-How

The United States has run a trade deficit (importing more goods and services from other countries than it exports) since the mid-1970s. Although the trade deficit narrows during recessions — imports typically fall faster than exports during a recession — the trade gap has increased over time, and currently stands at around 3.5% of gross domestic product (GDP). This large and persistent trade deficit acts as a drag on overall GDP growth...

Markets Entering Area 51

Area 51 has been steeped in mystery and a favorite subject of conspiracy theorists for decades. But CIA documents released late last week officially acknowledge its existence and suggest that its actual function was far less extraordinary or essential than believed by some. Like Area 51, the latest round of quantitative easing has been surrounded by mystery (What is it actually doing? Is it working? When will it end?)...

Measuring Economic Expansion

The U.S. economy is now in the fifth year of the 12th economic recovery (or expansion) since the end of World War II. It is already the sixth-longest expansion and would have to last another year to become the fifth longest, as discussed last week. This week, we will compare the performance of gross domestic product (GDP) and its components...

Change in China and What it Means for Investors

Last week’s economic reports from China for July added fuel to the fiery debate over whether China’s economy is slowing rapidly, possibly forming a sharp “hard landing,” or slowing more gradually and likely forming a more shallow dip or “soft landing,” which could already be stabilizing. This debate focuses primarily on the pace of the decline and all sides assume an eventual rebound. However, the debate misses the point: whatever the landing, there may not be a rebound...

Summer of Love

If the pattern in the stock market mirroring 1967 that has unfolded so far this year holds in the second half, we may see a volatile market with a slower pace of gains — but more record highs ahead. It has been a summer of love for the stock market. As the temperatures heated up, so did the stock market. From June 24 to August 2, 2013, the S&P 500 Index rose 9%, pushing stocks up about 20% for the year...

Revisiting the Recovery

Last week’s data deluge did not change our view (or the markets’) about the economy or the Fed. We still expect modest 2.0% real GDP growth in 2013. We believe the labor market is still growing quickly enough to allow the Fed to begin to taper its bond-buying program known as quantitative easing sometime this fall. The recent high-profile reports on the economy did little...

Under the Surface

Conditions have stopped worsening, and Europe’s economy may be stabilizing after a period of rapid economic deterioration. However, the deep-rooted negatives that lie not far under the surface may disappoint those expecting steady improvement. As we have all year, we continue to believe U.S. stocks will outperform their international peers...

Midsummer Madness

We continue to expect the Fed to begin to slow its bond-buying program (QE) in the fall of 2013. We believe the U.S. economy will continue to grow at about 2% in 2013, supported by housing as well as consumer and business spending, offsetting the government spending drag. The health of the labor market as measured by the monthly job count (around 200,000 jobs per month) has met the Fed’s “real and sustainable” improvement expectations, but other job market measures tell a different story...

Unseasonable Weather Still Weighing on the Economy

The latest edition of the Fed’s Beige Book, released on July 17, 2013, continues to underscore the impact of the unseasonably cool weather on the U.S. economy. Housing and commercial real estate were mentioned as key drivers of growth and, for the first time this year, mortgage rates were mentioned. The number of negative words in the Beige Book has dropped to a seven-year low, reflecting...

Walking Dead Stock Market

Last week revealed the nominations for the 2013 Primetime Emmy Awards. Overall, 10 different dramas scored nominations for the shows or lead actors. But missing from the list was the show that is the number one drama in the coveted 18-to-49-year-old demographic: The Walking Dead. There was no respect for the unstoppable zombie drama from the television academy. Likewise, this unkillable stock market rally seems to get no respect. U.S. stocks have been snubbed by investors this year...

What We Are Watching for This Earnings Season

Four times a year, investors focus on the most fundamental driver of investment performance: earnings. Unfortunately, like the economy, earnings growth remains sluggish. The second quarter of 2013 is likely to mark another quarter of low to mid-single-digit earnings per share growth. We will be watching for key trends that may impact future quarters: fiscal drag, slower global growth, wider profit margins, rising buybacks, and higher interest rates...

Crash Course on Student Loans

In recent months, student loans have been all over the news. Some recent headlines include: ƒƒ“Student loan crisis”; ƒƒ“Student loan rates to double”; ƒƒ“Student loan delinquency skyrocketing”. In our view, the outlook for the student loan situation is much more balanced than recent headlines suggest. Student debt is soaring, but the devil is in the details behind the headlines. The federal government guarantees...

The Right Recipe for Stocks

The summer means cookouts. The recipe for success is usually simple: take a basic ingredient, add some characteristic flavors, and apply some heat. The recipe for stock market investing success may be as simple as taking the S&P 500 and adding the characteristics provided by buybacks as the market heats up in the second half of the year. Some characteristics to consider for a good core U.S. stock portfolio for the second half include...

Real and Sustainable: An Update

The June 2013 employment report revealed that the private sector economy continues to add about 200,000 jobs per month, keeping the Fed on a pace to taper quantitative easing this fall. The labor market is at best a coincident indicator of economic activity, so the uptick in jobs is not likely to signal an uptick in the pace of economic growth.

Mid-Year Outlook

The investment landscape for the first half of 2013 has proven to be a toughone to navigate. And this is likely to continue through the second half of this year. There is a lot of rocky terrain and potentially some surprises ahead that investors need to prepare for...

Revisiting the Residential Recovery

The recent rise in mortgage rates — from just under 3.5% (for a conventional 30-year loan) to just under 4.5% since mid-May 2013 has led to widespread fears the housing recovery would come grinding to a halt. Those fears appear to be overdone, in our view, as almost all of the factors supporting an ongoing recovery in housing remain in place. At this stage of the recovery, satisfying pent up demand for housing rather than mortgage rates is likely to be the bigger driver of housing...

The End Is Near - But That Is Good News

Overview: Market participants heard from the Fed last week that it is ready to soon end the bond-buying program and continue to expand its purchases at a slower pace. It appears the stock market started to move to price in the start of tightening rather than the potential end of stimulus. The knee-jerk reaction of selling across all markets - stocks, bonds, and commodities - may not persist for long and could create opportunities to buy the dip.

What’s It Worth?

What has mattered most to the market in recent years? What has explained the ups and downs and how the market got back to all-time highs? There are a lot of drivers that could be argued as critical components of the markets’ rise, such as the European fiscal issues, the housing rebound, and U.S. fiscal policy developments. But, setting emotion and headlines aside and measuring statistically, there are three things that have really mattered to the markets...

Sizzling Summer Fed FAQ

Find out: What the schedule of events are for the Fed this week; whether the Fed will raise rates at this meeting; whether the Fed is tapering Quantitative Easing (QE) or is tightening the Monetary Policy; whether the Fed will act to calm financial markets; when the Fed will stop QE; whether Congress can make the Fed stop QE; and more.

The Butterfly Effect

The “butterfly effect” is a term from a pioneer of chaos theory, Edward Lorenz; his 1972 presentation Predictability: Does the Flap of a Butterfly’s Wings in Brazil Set Off a Tornado in Texas? describes the idea that a tiny event can start a chain reaction and have large and wide-reaching effects. We know the big changes and events the markets face in the second half of 2013: the potential end of the Federal Reserve’s (Fed) bond-buying program, the need for Congress to...

Unseasonable Weather Weighs on the Economy

At the start of 2013, most market participants expected the economy to struggle under the weight of the fiscal cliff, and later, the sequestration imposed on the federal budget by Congress. Instead, it appears that a colderthan-normal winter and a cooler-than-usual spring is having a more pronounced impact on the economy...

Real and Sustainable

The U.S. Department of Labor’s monthly employment report always generates plenty of attention from the media, Main Street, and the markets - and this week will be no exception. The May 2013 report scheduled for release on Friday, June 7, is expected to show that the economy added a net new 165,000 jobs in May 2013, (the same number of net new jobs created in April 2013) and that the nation’s unemployment rate held steady at 7.5% in May 2013...

Love-Hate Relationship Between Bond Yields and Stock Prices

Stock prices and bond yields have historically had a love-hate relationship that would make the romantic ups and downs of any soap opera seem mild by comparison. But, currently, the relationship between them remains tight and far from crossing the line that would lead to a breakup. With the 10-year Treasury yield rising a half of a percentage point last month, investors are beginning to wonder when rising interest rates may start to negatively affect stock prices...

Summer Rentals

Memorial Day weekend kicks off the summer season in sunny destinations across the country as city dwellers and others seek to escape the heat and enjoy some natural beauty and relaxation. But like unwanted guests crowding a cabin or a cottage, a lot of unwelcome events that impact the markets can really ruin a summer vacation...

What’s Broken in Europe?

The Eurozone is likely to be in a recession throughout 2013, despite the best efforts of the European Central Bank (ECB) and other policymakers. Fixing Europe’s broken financial transmission mechanism should be at the top of European policymakers’ long “to do” list. In the United States, the Federal Reserve’s (Fed) quantitative easing (QE) program is helping to boost bank lending and the overall economy.​

Buyers & Sellers

We devote this commentary each week to assessing the many reasons markets may rise or fall. But at the heart of it, all markets come down to just one thing: buyers and sellers. Taking a look at who is buying and who is selling can tell us something about the durability of the market’s performance and what may lie ahead. Currently, there are six notable trends...

Listening to the Leaders: Leading Indicators Continue to Point to Slow Economic Growth, but no Recession

Based on the Leading Economic Indicators (LEI), the odds of recession over the next 12 months are low but not zero. We expect gross domestic product (GDP) growth of 2.0% for the remainder of 2013, based on our Base Path scenario discussed in our Outlook 2013 publication and additional data.* We expect that the Federal Reserve (Fed) will continue its program of quantitative easing (QE).

The Rally Is Getting Old, but a New Trend May Be Emerging

The overall stock market has only seen a couple of 2 – 3% dips this year, but there have been 5 – 10% pullbacks among cyclical sectors. It may be time to begin to buy some of the laggard cyclicals, especially on any pullback in the overall market...

Clearing Up Confusion on Common Queries

In this week’s commentary we attempt to clear up some of the confusion around some of the most common questions we encounter regularly, including: 1)The Federal Reserve (Fed), its balance sheet, its role in the economy and its impact on inflation; 2) The federal budget deficit; 3) The federal debt outstanding, and the debt-to-GDP ratio; and 4) The trade deficit and a related topic, the US dollar...​

Borrowing for the Future

A recently detected error in a study by Harvard economists Reinhart & Rogoff has garnered much attention in the financial press lately. The study had initially concluded that once a country exceeded a 90% debt-to-gross domestic product (GDP) ratio, the pace of economic growth slowed sharply. The corrected data reveal that growth slows as debt-to-GDP rises, but at a pace not meaningfully different than at other round numbers...

The ABCs of GDP

The U.S. Department of Commerce’s just released first estimate for gross domestic product (GDP) for Q1-13 which shows continued declines in federal spending, including defense spending and state and local spending. There were few, if any signs, in the GDP report for the first quarter of 2013 that the U.S. economy will re-accelerate anytime soon. We continue to expect GDP growth to average around 2.0% over the course of 2013. We examine the various components and drivers of GDP in this...

Soft Spot Arrives on Schedule

There are certain things we have gotten used to counting on each spring: the season changes and the weather warms, baseball games bring fans to the stadiums, the economy weakens, and investors “sell in May and go away.” The old Wall Street adage “sell in May and go away” refers to the seasonal tendency of stocks’ performance to weaken in the spring until the fall. In recent years, this spring slide in the stock market was driven by the arrival of a spring soft spot in the economy...

Is Investor Complacency Finally Ending?

Last week, U.S. stocks suffered their worst drop in over nine months as a terrorist attack and poor economic and earnings data shook investor confidence. Breaking down last week’s market drivers may reveal insights about the likely future direction of the stock market...

Beige Book: Window on Main Street

Our Beige Book Barometer hit an eight-year high in April, despite adverse weather in late February, March, and early April 2013. This suggests that a return to “normal” weather could provide a significant lift to upcoming readings on our Barometer.


Each time we publish the Weekly Economic Commentary, we include our calendar on page 3 that details all the key economic and policy events for the week. While we try to keep the Weekly Economic Commentary “relevant” by tying our commentary to one of the events of the week, many times we don’t refer to the calendar at all...

First Quarter Earnings Insights

Four times a year, investors focus on the most fundamental driver of investment performance: earnings. Unfortunately, like the economy, earnings growth remains sluggish. The first quarter of 2013 is likely to mark the fourth quarter in a row of low to mid-single-digit earnings per share growth. The dollar amount of earnings per share for the S&P 500 companies is expected to be lower than in each of the past three quarters and only 1% higher than a year ago...

What’s Fueling Gasoline?

The year-to-date price rise in gasoline prices has been more muted than usual, while a sharp rise in consumer energy prices poses a threat to the economy. U.S. gasoline usage has curtailed with the combined help of a of slower economic growth, a slight increase in fuel economy among the nation’s vehicle fleet, a sharp slowdown in miles travelled, and an aging population. Find out what other answers the emerging consumer reports will reflect on gasoline...

Message From the Markets

Stocks posted a strong first quarter. While shy of last year’s 12% first quarter gain, the S&P 500 Index’s 10% gain seen this year reflects very strong performance. Consistent with the powerful gains for stocks, bond yields and oil prices also rose in the quarter. Given the average-atbest economic readings during the first quarter, the performance of the stock, bond, and commodity markets begs the question: what are the markets saying about where the economy is headed?

Business Capital Spending

On March 28, 2013, the Bureau of Economic Analysis of the U.S. Department of Commerce reported that corporate profits of all U.S.-based corporate entities hit an all-time high in the fourth quarter of 2012. Strong overseas economies, restrained hiring, modest wage gains, low interest rates, solid worker productivity, and an economic cycle that is just three months shy of its fourth birthday have all contributed to the record level of profits. Economy-wide...

10 Indicators to Watch for a Spring Slide in

In each of the past three years, the stock market began a slide in the spring that lasted well into the summer months. One year ago, we provided our list of the 10 indicators to watch that seemed to precede the stock market declines in 2010 and 2011 and accurately warned of another spring slide in 2012. We again look to these indicators for signs of a potential spring slide in the stock market this year...

Watch What the Fed Watches

The Unemployment Rate remains well above the Fed’s “Threshold” of 6.5%, but it is only one of many labor market indicators the Fed is watching. The “center of gravity” at the Federal Reserve (Fed) is still not seeing “substantial improvement” in the labor market. And, if the Fed waits too long to remove stimulus, higher inflation and higher interest rates could result.

The Inflation Situation Revisited

We last wrote about the inflation outlook in the September 24, 2012. Since then, while inflation and inflation expectations in the United States have remained in check, the Federal Reserve has begun another round of bond purchases, known as quantitative easing (QE). This decision — along with the recent run-up in consumer gasoline prices and recent comments from some members of the Federal Open Market Committee that the costs of QE may soon begin to outweigh the benefits...

The Market’s March Madness

It has been a sweet sixteen weeks for the S&P 500. The broad stock market index has had only three down weeks out of the past sixteen. While this stretch is tied by the same period a year ago, it is important to note that there has not been a sixteen-week period with fewer weeks of losses in over 20 years - since the period ending September 1, 1989. March has been maddening for investors in the past few years (2010-2012) as the S&P 500 raced higher in March only to reverse...

Dow: The Great and Powerful

The film, Oz: The Great and Powerful, the prequel to The Wizard of Oz, premiered last week. The story of how the wonderful wizard overcame the risks and prevailed worked its magic on moviegoers and proved popular with a strong box office showing. In the same week, the Dow Jones Industrial Average (Dow) proved popular with investors as it powered its way to a new all-time high, as it overcame many risks to reach the fourth anniversary of the start of the current bull market from the low point...

Beige Book Bounce-Back

Despite the post-Sandy bounce, our Beige Book Barometer describes an economy that is growing - but only modestly. When we wrote about the Barometer in early December 2012, indicators generally suggested the economy was stronger during the summer and early fall of 2012, prior to the impact of Superstorm Sandy and uncertainty ahead of the fiscal cliff than it was in early 2011, before the bruising debt ceiling debate...

Growing Gap Between Health of Consumers

Last week’s data highlighted the growing gap between the health of businesses and consumers that is starting to contribute to a widening gap in the performance of consumer and business-driven stocks, as well. The economic reports released last week covering the time period of January and February 2013 for orders of equipment by businesses and manufacturing activity point to strengthening business demand...​

Marching Toward the Pre-Recession Peak

The U.S. economy needs to add another 2.7 million net new jobs to get back to the all-time high set in early 2008 during the early months of the recession. How quickly the economy can create those 2.7 million jobs will in large part determine if, when, and how the Federal Reserve (Fed) begins to scale back its quantitative easing (QE) program...


The Humphrey-Hawkins testimony used to be a rare window of transparency for an otherwise opaque Federal Reserve (Fed), but now it is just one of the many ways the Fed is transparent. In this week’s Humphrey-Hawkins testimony, the market is looking to Federal Reserve Chairman Ben Bernanke to apply more of a quantitative threshold on the pace of quantitative easing....

Gasoline Prices Racing Toward Danger Zone

Do you feel like you are paying too much for gasoline? The national average price has seen double-digit increases two out of the last three weeks and is up 45 cents since the beginning of the year. The race higher in gasoline prices is worth watching closely. In each of the past two years, we have tracked 10 “spring slide” indicators that helped us to predict the stock market pullbacks that took place during the second quarter of each year...

Investing in an Up-and-Down Market

The volatility and classic 5 – 15% pullbacks we have seen in each of the past few years is perfectly normal and very likely to be a recurring pattern in 2013. There are several ways to benefit from market volatility and potentially enhance returns, including....

JOLTS Show Labor Market Still Healing

The nation’s labor market has come a long way since the depths of the Great Recession and its aftermath, but it still has a long way to go to get back to “normal.” We continue to expect modest improvement in the labor market in 2013. How quickly the labor market heals in 2013 will help to determine if, how, and when the Federal Reserve begins to scale back quantitative easing (QE) and eventually begins to raise interest rates...

Investor’s Guide to the State of the Union Address

President Obama’s State of the Union, scheduled for Tuesday, February 12, is unlikely to be a big market mover. However, two major themes that we will be listening for with potential market impacts: the fiscal cliff and energy independence.

Residential Recovery

Over the second half of February 2013, financial markets will begin to digest early 2013 data on the housing market: housing starts, home prices, new and existing home sales, and pending home sales. Housing made a splash in late January 2013, as the gross domestic product (GDP) data for 2012 revealed that housing added to GDP in 2012 for the first time since 2005. Market participants are now asking whether housing can continue to contribute to the economy in 2013 — and beyond.

Seeing Shadows

This Groundhog Day, when looking at the Dow, we are seeing shadows of what took place in each of the past three years as a new milestone was reached. It took the better part of a year for the market to break free of a period of ups and downs after reaching the milestone before beginning to move toward the next one. That pattern may be repeated this year; however...

Less Defense?

If Congress can agree to substantial cuts in defense spending as part of an overall budget deal, defense would likely be a modest 0.1 to 0.2% drag on overall gross domestic product (GDP) growth in 2013 and beyond.Eliminating all “waste, fraud, and abuse” from the defense budget, while a worthwhile endeavor, would only make a small dent in overall spending...

Following the Center of Gravity at the Fed

In recent weeks, markets and the media have been buzzing about this week’s Federal Open Market Committee (FOMC) meeting and, in particular, whether or not the Fed will adopt formal thresholds to monitor the effectiveness of the latest round of quantitative easing. The FOMC has already set thresholds for monitoring its “highly accommodative stance of monetary policy” (fed funds rate target between....​

Still Waiting for the Bonds-to-Stocks Rotation

Stock mutual funds have seen inflows each week so far this year, providing some evidence that investors are finally favoring stocks after years of selling. However, the details of the data reveal that the money is not going to U.S. stock funds and not coming from bonds. A long-term rotation from bonds to stocks is likely to begin sometime this year, but those claiming that it is already underway are premature and may be in for disappointment if they expect the stock market rally to continue...

Same Europe, Different Crisis

This week’s European finance ministers’ meeting is a reminder that each spring for the past three years, U.S. stocks have started a slide of about 10% during thesecond quarter, led by events in Europe. In 2012, the European fear gauge was the rise in southern European bond yields as the financial crisis worsened. In 2013, it is northern European bond yields falling as the economic crisis worsens.

Beige Book Rebounds

Despite elevated levels of uncertainty surrounding the debate over the fiscal cliff, our proprietary “Beige Book Barometer” moved up to +56 in January 2013, rebounding from a Superstorm Sandy-related dip to +30 in November 2012. Still, our Barometer remains well below its recent high of +101, hit in April 2012. The improvement in our barometer between November 2012 and January 2013 was largely the result of...

What Does GDP Say About EPS?

This week the World Bank will release its bi-annual Global Economic Prospects report, which forecasts the economic growth trends in the global economy for 2013 and beyond, and gauges the impact of these trends on developing nations. While the media may pay a great deal of attention to the fourth quarter corporate earnings reports, the markets are likely to look past the earnings reports and focus more on corporate guidance on earnings and revenue for the new year.

Consulting the Crystal Ball

It is inevitable that around this time of year, investors ponder what the year may hold in store for the markets. While we present many drivers in our Outlook 2013 that will combine to define the path of least resistance for the markets to follow in 2013, the interrelationships between economics, fiscal and monetary policy, geopolitics and corporate actions can seem complex. Investors can feel overwhelmed and seek a simple answer.

Checking for Collateral Damage

This week, we will begin to see if any collateral damage from the fiscal cliff battle was done to corporate profits in the fourth quarter as companies begin to release their fourth quarter earnings reports. When the earnings season winds down in February 2013, the fiscal cliff battle part II may emerge as we approach the limit on U.S. borrowing authority, the end of the delay to the spending sequester, and funding of the U.S. government.

Full Speed Recovery?

The current economic recovery is running at about half the speed of recent recoveries, and the speed of a “normal” recovery. Failure to address the debt ceiling may lead to a recession in early 2013, though this is not our Base Path in our Outlook 2013 publication. The current quarter may receive a boost from Superstorm Sandy, but the payroll tax increase may put a dent into consumers’ disposable income.​

Quick Start

2013 will get off to a quick start, as many market participants return from the holidays to face several key economic reports at home and overseas including: China’s Purchasing Managers' Index, the U.S. Institute for Supply Management, U.S. light vehicle sales, Federal Open Market Committee Meeting, and December's employment report.

Standing on the Edge

As the battle rages on in Washington over the tax increases and spending cuts, known as the fiscal cliff, their impact has already been felt in some ways and not in others. Confidence has taken a hit, while activity has not — yet. While a deal has yet to be struck, steps could be taken to blunt the initial tax and spending impacts of temporarily going over the fiscal cliff to minimize the economic and market damage until a deal can be finalized.

Apocalypse Now?

Given all the news coverage and the drama over what is at stake, it can be easy to think of going over the fiscal cliff — as the spending cuts take effect and tax cuts finally expire — as the end of the world. Wary of the consequences of this collision course with destiny, investors have shunned stocks by selling their holdings of U.S. stock mutual funds on a

This Is Mandatory Reading

As Congress and the President work together to avoid the looming fiscal cliff during the lame duck session of Congress, a more intransient problem remains in the background: the United States’ structural budget deficit. In our Weekly Economic Commentaries of October 29, 2012 (Budget Debate), November 19, 2012 (Budget Myths), and November 26, 2012 (Budget Defense), we wrote about how often the budget was mentioned during the campaign season and how the

Washington’s Dilemma

The advance in the S&P 500, boosted by the latest three weeks of consecutive gains, is at risk if negotiations over the tax increases and spending cuts, known as the fiscal cliff, make no progress in the coming weeks. The fiscal cliff negotiations between the two parties in Washington are reminiscent of a prisoners’ dilemma. The “prisoners’ dilemma” is the name of an

Festive Fed FAQ

The Fed may deliver the most important policy announcement of the week, given the ongoing behind-the-scenes fiscal policy debate in Washington. The Fed continues to play a key role in markets and the economy, and that will continue into 2013 and beyond. Although Fed Chairman Ben Bernanke has said that the Fed cannot offset the impact of the fiscal cliff, Fed policymakers are keenly aware that they remain the “only game in town” when it comes to simulative policy.

Shareholders’ “Powerball” Payout

Last week’s record $587 million Powerball jackpot grabbed headlines. But some shareholders may get their own “Powerball” payout in the next few weeks as companies seek to distribute special dividends that may total a record $100 billion to shareholders ahead of the likely expiration of the Bush-era 15% top tax rate on dividends at the end of the year.

Sandy Clouds the Beige Book

Heavily influenced by the impact of Superstorm Sandy and the uncertainty generated by the election and fiscal cliff debate, our proprietary Beige Book Barometer (at +30), is down from a recent high in the April 2012 Beige Book (+101). The Barometer is now back down to the levels seen in the summer and fall of 2011, amid the disruptive debt ceiling debate in the United States and the fiscal and financial worries in Europe.

Does Black Friday Mean Green

Retail sales during Thanksgiving weekend — the traditional start of the holiday shopping season — climbed 13% as more shoppers hit the stores and spent more money, according to the National Retail Federation, wildly exceeding consensus estimates. The news helped to lift stocks on Friday, making for the strongest week for stocks since early June 2012.

Budget Defense

This week’s commentary continues our series on the long-term U.S. budget problems and possible solutions. The defense budget is a sizable portion of the U.S. budget and likely to be part of any long-term fix. As in other large areas of the U.S. budget, there are no easy fixes, and hard choices will have to be made.

Budget Myths

As Congress and the President work together to avoid the looming fiscal cliff during the lame duck session of Congress, a more intransient problem remains in the background: the United States’ structural budget deficit. In our recent Weekly Economic Commentary: Budget Debate (10/29/12), we wrote about how often the budget was mentioned during the campaign season

Global Gridlock

Last week’s post-election press conferences from the President, Senate Majority Leader Reid, and House Speaker Boehner offered some hope of a bipartisan deal to mitigate the budget bombshell of tax increases and spending cuts known as the fiscal cliff, due to hit on January 1, 2013.

Return of Recession Obsession

The results of last week’s presidential and congressional elections in the United States — and the looming fiscal cliff — provide us with another opportunity to revisit the odds of a recession in the United States in the coming quarters. We will provide a full update on our economic forecast for 2013 in our 2013 Outlook publication, due later this month.

How Wall Street Is Voting

The stock market has priced in a close election. As the race has tightened over the past month, the market has slipped lower while Republican-favored industries have outperformed Democrat-favored industries. While much attention has been focused on the White House, the dwindling prospects for Republicans in the Senate may have limited the outperformance by Republicanfavored industries in recent weeks and helped contribute to the modest pullback in the overall market.

Still Slow Growth

The much anticipated October 2012 employment report was released by the U.S. Bureau of Labor Statistics on Friday, November 2, 2012, to great fanfare from both the financial and mainstream media which, appropriately, are hyper-focused on the implications of the report for this Tuesday’s elections.

Post-Election Apprehension

Our view remains that a closely divided and hard-fought election will be followed by more fighting in a divisive and bitter lame duck session in Congress, resulting in higher volatility and a potential pullback for the stock market. As the race continues to tighten, the market shed -3.3% during last seven trading days (October 18 – 26).

Budget Debate?

The LPL Financial Research Department has written extensively this year on the looming fiscal cliff, the potential for the upcoming elections to influence the resolution of the fiscal cliff, and the fiscal cliff’s impact on the economy today and early in 2013. This week, we will discuss to what extent the nation’s longer term budget woes have been part of the campaign, and how the election outcome may help to influence how these longer term issues get addressed.

Gauging Global Growth in 2013

The broadest measure of the health of the U.S. economy is Gross Domestic Product (GDP). This Friday, October 26, 2012, the Bureau of Economic Analysis of the U.S. Department of Commerce will release its initial estimate of GDP for the third quarter of 2012. The consensus is looking for a 1.8%annualized increase in GDP between the second and third quarters, a slight acceleration in growth from the 1.3% pace in the second quarter. We continue to maintain

Battle of the Central Banks

Despite Friday’s sharp drop as companies reported poor earnings results, the S&P 500 Index posted a gain last week. This week, vying for investors’ attention from the flood of generally weak earnings reports will be the Federal Reserve (Fed) meeting on Tuesday and Wednesday. The Fed is highly likely to confirm on

The Five Long Years

This week will mark five long years since the S&P 500 reached its all-time peak on October 9, 2007. As the S&P 500 nears the previous highs for the third time in 15 years, is the market poised to repeat the pattern and soon embark on a third long and deep multi-year slide? We see four key supports that make it unlikely that stocks will follow the pattern of another multiyear trip back to the bottom of the 15-year range: earnings, dividends, valuations, and the economy.

What’s the Fed’s Number?

The September 2012 employment report did little to change our view on the labor market, the overall economy, or on the outlook for the Federal Reserve’s (Fed’s) quantitative easing (QE) program. The Federal Open Market Committee (FOMC) minutes revealed that when discussing the labor market, FOMC members noted that “growth in employment had been disappointing.”

A Fiscal New Year’s Resolution

This week marks Golden Week, a national holiday in China. However, the United States has its own holiday to observe. Today begins a new fiscal year for the U.S. government. Unfortunately, a new year likely brings another trillion in federal debt to add to the mounting total. The proportion of U.S. federal government debt

Are You Better Off?

It was one of the most famous moments in the history of presidential debates. About a week before the 1980 election, Ronald Reagan asked the nation, “…are you better off than you were four years ago?” With the first

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