Investment Commentary – December 2nd, 2015
Market Indices as of Market Close December 2nd, 2015
Dow 17,730 (-0.52% YTD)
S&P 2,080 (1.00% YTD)
NASDAQ 5,123 (8.17% YTD)
Global Dow 2,393 (52 week low 2,203/high 2,644)
10-year Treasury 2.18 (52 week low 1.64/high 2.50)
Gold 1,052 (52 week low $1,062/high $1,306)
Oil 40.17 (52 week low $39.84/high $70.27)
Income gains provide room for spending growth, but investors await Black Friday data
The major equity market benchmarks were relatively stable in a holiday-shortened week of thin trading. The technology-heavy Nasdaq Composite performed better than the large-cap benchmarks, and the smaller-cap indices managed to record solid returns. T. Rowe Price traders noted a modest spike in volumes on Tuesday morning, however, following news that Turkish forces had shot down a Russian jet near the Syrian border.
The week included the release of some significant economic data, but its tone was mixed. Existing home sales fell in October, while new home sales were solidly within the market-consensus range. Third-quarter gross domestic product was revised upward to 2.1% from the advance estimate’s 1.5%. While the upward revision was due to inventory accumulation, the report also highlighted stronger personal income growth, which could provide further fuel for spending. Jobless claims continued to fall this week, reflecting the lack of slack in the labor market, but core personal consumption expenditures (PCEs), remained unchanged for the month, reflecting little upward pressure on inflation. Generally, equity investors appeared to be awaiting the release of Black Friday shopping figures as the decisive signal on the strength of the consumer sector going into year-end.
Meanwhile, the slowing manufacturing sector showed some resilience. New durable goods orders beat market expectations, with a substantial increase in the transportation sector driven by orders placed via the Dubai Airshow. Excluding transportation, other durable goods orders were solidly in line with expectations, reflecting a positive environment in manufacturing.
The Stoxx Europe 600 Index finished Thursday at the highest level in three months. Since mid-November, the index has risen 3.5%, with all 19 industry groups gaining. Aided by losses of the euro, the DAX 30 jumped 1.4% to 11,320.77, hitting its strongest level since mid-August.
European business growth hit a four-year high this week, according to a broad survey of 5,000 companies in the eurozone. The upbeat data, buoyed by resurgence in German service and manufacturing sectors and increased hiring elsewhere, lends confidence that further economic expansion may be ahead in the coming months. In France, Europe’s second-largest economy behind Germany, the surveys indicated continued growth in the months ahead, with new orders picking up. However, French businesses did report that they cut some jobs. The weaker euro is also a factor in some of the increased growth because it makes goods and services cheaper for foreign buyers. The euro has fallen about 12% this year. The 19-nation eurozone is headed for its biggest monthly loss since March versus the dollar as monetary policy diverges between the European Central Bank and the U.S. Federal Reserve.
Roth IRA: The Gift That Improves with Age
Roth IRAs don’t need assembling or require batteries or keys to operate—but they may be the best gift you could ever give to a young adult.
Looking for the perfect gift for older kids who have everything? Consider a Roth IRA. Just think of the advantages: no guessing about size, color, or fashion quotient. No moving parts to break or batteries to wear out; and it doesn’t need insurance or gasoline to keep running. Best of all, unlike almost any other gift you could give, this one is almost certain to improve with age.
Although your teenager or college student may not yet fully appreciate the beauty of this gift, over time this is likely to outshine every other gift you ever stayed up all night to assemble. In fact, the longer the time, the better this gift gets. It’s never too early to start saving for retirement, as most grownups know and most young people will discover.
Minors can establish a Roth IRA as soon as they start earning an income, but few young people are likely to even consider it, much less be able to afford it. That’s where a generous relative comes in: A Roth can be established on a teenager’s behalf by someone else who can fund the account in the amount equal to that earned by the youth that year, up to $5,500. Are you listening, Mom and Dad?
THIS DAY IN FINANCIAL HISTORY
December 02, 2001: Enron Corp., the seventh-largest corporation in the U.S., goes bankrupt, filing for protection from creditors under Chapter 11 of the Federal bankruptcy code. The disclosure of the worst accounting scandal in American history has vaporized $60 billion in Enron’s stock-market value. Less than ten months earlier, Enron’s stock had traded for more than $80 per share; now it’s worth 26 cents a share.
The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.