Week of February 1, 2016
Last week was a busy week in terms of data releases and news. Estimated US GDP, unemployment data and the Federal Reserve were just a few headlines that grabbed investors' attention. US indexes enjoyed another week in the black as domestic indexes surged on Friday.
The S&P 500 was up 3.2% while the Dow Jones Industrial Average and the Nasdaq were up 3% and 2.8%, respectively. Internationally, the picture was quite different. The Euro Stoxx 600 index was up 3.77% but Chinese equities as measured by the Shanghai Composite Index were down 5.63%.
The job market continues to look strong here in the US. The most recent release by the Labor Department indicated that initial jobless claims fell 16,000 to 278,000. Economists that were surveyed by The Wall Street Journal were expecting 280,000 claims. Economists pay close attention to the initial jobless claims because, if they are falling, it frequently means less companies are laying employees off and more are hiring. This is typically good for wages which can lead to more consumer spending and domestic growth. More generally, unemployment numbers usually fall during the fourth quarter of the year as temporary hiring picks up for the holidays. The number then tends to rise in the first quarter of the following year as those temporary jobs are no longer needed.
GDP slowed in the last quarter of 2015. Economists were expecting 0.8% growth but the first estimate of fourth quarter GDP was 0.7%. GDP results typically go through a number of revisions as the preliminary estimate includes incomplete data. The final figure can be meaningfully different than the first estimate. According to the results, business inventory investment, personal consumption and trade were the main detractors. The drop in trade is likely due to the stronger US dollar and uninspiring global growth while the lagging inventory investment and slowing personal consumption could indicate a decelerating domestic economy. On the positive side, residential investment jumped 8.1% in the fourth quarter and, by some measures, the housing market in 2015 was the most robust since the recession.
Fun Story of the Week
A team of physicists appear to have cracked a significant roadblock in quantum computing, paving the way for quantum computers that can solve "insolvable" problems. If the physicists are correct, then they have solved the causality problem by using quantum particles that are moving along "open timelike curves." Theoretically, quantum computers using "closed timelike curves" create causality problems. A more practical (or relatable) example of a causality problem takes place in the Back to the Future movie. Since Michael J. Fox's Marty McFly went back in time and tampered with the past, he almost caused a new future in which he didn't exist. The same type of problem happens at the particle level too. With the "open timelike curves," the physicists hypothesize that, as long as they entangle the time-traveling particles with one in the present, they won't interact with anything in the past, thus preventing causality problems. Think of this like Marty McFly going back in time, still tied to his present-day "self" and being able to use that information, but not being allowed to speak with his teenage mother and father or interact with anyone else during his trip. According to their report, while these particles never interact, the nature of quantum mechanics and computing still allows for the solving of impossible calculations. Confused? So am I.
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* 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 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. * The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors. * The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. * Shanghai Composite Index which is a stock exchange in China that tracks all stocks (A shares and B Shares) that are traded on the Shanghai Stock Exchange. * Stoxx Europe 600 is a group of 600 stocks that represent large, mid and small cap stocks across 18 countries in Europe. * Indexes are unmanaged, statistical composites and their returns do not include payment of any sales charges or fees an investor would pay to purchase the securities they represent. Such costs would lower performance. It is not possible to invest directly in an index. * Past performance does not guarantee future results. * Charts and graphs should not be relied upon as the sole basis for any investment decision and are for general informational purposes only. * Consult your financial professional before making any investment decision. * This newsletter was prepared by CWM, LLC. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
Wall Street Journal, January 2016, http://www.wsj.com/articles/u-s-jobless-claims-fell-to-278-000-last-week-1453988241
New Universe Daily, January 2016, http://newuniversedaily.com/2015/12/15/quantum-computing-particles-sent-back-through-time/?utm_content=bufferff63f&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
Wall Street Journal, January 2016, http://www.wsj.com/articles/u-s-gdp-advances-0-7-in-fourth-quarter-1454074312
Wall Street Journal, January 2016, http://markets.wsj.com/europe