Investment Commentary – September 17, 2014
Dow – 17,156.92 (9/17 close)
S&P 500 – 2,001.57 (9/17 close)
10-year Treasury – 2.60% (9/17 close)
· Stocks jumped higher today and the Dow hit a new record high after the Fed reaffirmed that a key short-term interest rate will stay near zero for a “considerable time” after its bond- buying program ends next month.
· Consumer prices fell in August for the 1st time in 16 months as gasoline prices tumbled. Excluding volatile food and energy costs, prices were unchanged; the 1st time so-called core prices have not increased since October 2010. This latest economic report gave the Fed more evidence that inflation remains a low threat as consumer prices fell last month.
· On the political front analysts think that a government shutdown is highly unlikely this year, and most need-to-pass bills will likely pass either before the election or during the “lame duck” session of Congress. Should Republicans take the Senate, analysts expect heightened policy uncertainty around issues such as the debt ceiling increase in 2015.
· The 2nd quarter earnings season hit another record high in S&P 500 operating earnings per share (EPS), posting healthy 11.4% year-over-year growth. Margins and share buybacks continue to be important drivers of earnings growth.
· Although the slow economic expansion has been frustrating for millions of American households, it has been an ideal climate for corporate profits, with U.S. companies as profitable as they have ever been.
· In the U.S., the data continue to point to a strengthening economy resulting in a stronger dollar and higher interest rates.
· The innovative spirit in the U.S. is driving growth in health care, industrials, and technology. Recent indicators signal that the technology sector may benefit from a potential increase in capital expenditures on technology over the next year.
· Analysts like Technology, Healthcare, and Industrials. Financials are also looking attractive especially if rates start to normalize in the future.
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.