Investment Commentary – December 3, 2014

Dow -17,879.55 (12/2/14 close) (all-time high)
S&P 500 – 2,066.55 (12/2/14 close)
10-year Treasury – 2.29% (12/2/14)

· Stock market performance has been impacted by a couple of big themes of late: Central bank stimulus overseas and the plunge in oil prices.

· Last Friday OPEC took no action to curtail oil output. Immediately after that decision oil prices fell to multi-year lows, in the process putting additional pressure on energy companies.

· U.S. GDP growth expanded 3.9% in the 3rd quarter of 2014, following a 2nd quarter expansion of 4.6%. After a weak first and very strong second quarters, generally positive data helped to reassure investors that the momentum observed in 2nd quarter 2014 is sustainable.

· U.S. automobile sales rose 4.6% in November to 1.3M, Auto data reported, with the auto sales rate coming to 17.2M last month in the strongest pace for the month since 2003. Analysts think the auto sales indicate the economy’s momentum remains on track and are moving along, basically on all fronts.

· Analysts expect U.S. short-term rates to climb next year as the Fed initiates hikes in the federal funds rate. That said, the overall rise in interest rates is likely to be inhibited by: 1) low yields in the rest of the world, which encourages foreign buying of U.S. Treasury bonds, and 2) the persistent imbalance between demand and supply. In short, while long-term rates are likely to rise next year, they will remain low relative to historical standards.

· Analysts continue to favor stocks relative to bonds and cash in the U.S., where they see modest but positive economic growth. They think that the U.S. economy is on a steadier trajectory than in most of the rest of the world.

· Analysts favor the following sectors: Technology, Healthcare, and Industrials.

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 investment strategy.


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