Week of April 20, 2015
If only this week were another holiday-shortened trading session. All major indexes collapsed on Friday over concerns about Greece, a bubble in Chinese stocks and less than impressive earnings results from a few companies. For the week, the S&P 500 fell 1% while the Dow Jones Industrial Average and the Nasdaq Composite retreated 1.3%. Equity markets have been held in check over the past several months by the dribble of disappointing macroeconomic news, but the next three weeks should put the emphasis on corporate earnings, where expectations are low.
Wallets And Purses Are Opening, Slowly
Last week, the Consumer Department released data showing an increase in spending for the first time in four months. Sales at retailers and restaurants jumped 0.9% to $441 billion in March, the biggest monthly gain in nearly a year. However, the rise was smaller than most economists expected as many experts thought the winter thaw would bring consumers out in greater numbers, especially given falling gas prices. So far, many appear to be putting the gas savings in the bank. For February, the personal savings rate reached 5.8% its highest level since the end of 2012. Some, including Federal Reserve Chair, Janet Yellen, expect consumer activity to pick up throughout the remainder of the year given the improving jobs data and continued low gas prices.
More Easing in China
Over the weekend, the Chinese Central Bank slashed its reserve requirements, lowering the amount of cash banks are required to hold and freeing up an additional $200 billion to lend and stimulate the economy. The cut was widely expected, but the magnitude of the cuts took many experts by surprise. The move illustrates the government’s concern of slowing economic growth over its stock market bubble. The Chinese economy is only expected to grow 7% for 2015, but some economists consider this benchmark too high. Over the past decade, most of the growth has been fueled by debt-driven infrastructure spending. Debt capacity has been stretched to near its limit, so the growth reins need to be passed to the consumer sector. However, consumption accounts for just 30% of GDP, making it harder to achieve growth targets without building new airports and highways.
Fun Story of the Week
With the weather finally warming and cookout season rapidly approaching, many are probably asking themselves one of the most important questions of the season: how much ice do I need to cool my beer or soda? Chilling drinks can be as simple as dumping ice in a cooler, but simple physics can ensure that you have the appropriate amount of ice to do the job. By taking into account the desired ending and starting temperatures of the drinks, the heat capacity of materials (cans or bottles), you can calculate the amount of thermal energy needed to achieve the temperature change and derive the amount of necessary ice. For anyone who doesn’t want to review the high school physics, the bottom line is about a half of pound of ice is needed for each 12 ounce can of beer. Next time you crack open a cold one with the perfect chill, be sure to toast science.
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Securities offered through Jacques Financial, LLC (JFLLC) a Broker-Dealer, Member FINRA and SIPC. Certain associates of Joseph W. Jacques, CPA, CFPTM are registered representatives of JFLLC. Joseph W. Jacques, CPA, CFPTM and JFLLC are affiliated. Investment advisory services are offered through Jacques Advisors, LLC an affiliate of JFLLC. Tax services are offered through Jacques & Associates Certified Public Accountants, LLC an affiliate of JFLLC.* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, consult with your financial advisor.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The Nasdaq Composite Index is a market-capitalization weighted index of the more than 3,000 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks.
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* This newsletter was prepared by CWM, LLC.
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