WEEKLY MARKET COMMENTARY
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– Job growth has been picking up with more than 200,000jobs created in three o the past our months and frst-time flings orunemployment benefts have started to all ater stabilizing around350,000 or over a year.
– The powerully rebounding housing market, as seen in datasuch as housing starts and building permits, is a positive or growth.
– Last week’s University o Michigan data showed thatconsumer confdence ell sharply in the preliminary reading or March tothe lowest level in over a year.
– Retail gasoline prices are back up near the “danger zone”that coincided with stock market pullbacks in each o the past ew years.
– “Don’t Fight the Fed” rally is intact, but as theFederal Reserve publicly contemplates ending the latest stimulusprogram, the stock market may suer the same sell-o that surroundedthe ending o prior quantitative easing programs, so-called QE1 and QE2.
– With the Eurozone back in recession, an inconclusive electionleaving no government in Italy, a political scandal hampering the ability toimplement needed reorms in Spain, Greece unlikely to meet the termso its own bailout, and Germany pushing hard terms on any aid aheado its all elections, the events in Cyprus could provide the catalyst oranother Europe-driven spring slide in the world’s stock markets.
– The hot spots are heating up again given the power grabollowing the death o Chavez in Venezuela, the coming elections in Iran,dierent actions vying or power in war-torn Syria, and North Koreaannulling its cease fre agreement.
– A fscal drag on gross domestic product (GDP) o about2%, and showdowns over the continuing resolution unding thegovernment and the debt ceiling still to come, may weigh on investorsentiment as the recently implemented sequester threatens to halt labormarket improvement with an estimated cost o 750,000 jobs, accordingto the Congressional Budget Ofce.
– Earnings are the most undamental o all drivers o stocks.Earnings growth has been the most consistent actor driving the marketsin recent years, but growth has now slowed to the low-single digits orS&P 500 companies.
– The price-to-earnings ratio o the S&P 500, at around 15 onthe past our quarters’ earnings, is well below the 17 – 18 seen at the endo all prior bull markets since WWII.