Week of January 12, 2015
Many financial experts are calling for increased volatility in 2015 and the first full week of trading didn’t disappoint. The Dow Jones Industrial Average posted tripled-digit moves for each day of the week. Interest rates and oil prices were also unstable and midweek the 10-year Treasury rate dipped below 2%. In the end, the S&P 500 fell 0.7% for the week while the Dow Jones Industrial Average dipped 0.5%. The rough start might be a good sign though. A Wall Street strategist noted this week that the market has started the year in negative territory after four days 40 times. Of these, stocks finished the year lower nearly half of the time when gripped by bears. However, when bulls are raging, like now, the markets finished higher 92% of the time following the initial decline.
The Goldilocks Jobs Report
On Friday morning, the U.S. Labor Department reported the economy added 252,000 new jobs in December and the unemployment rate fell to 5.6%. The number of new additions was roughly in line with expectations, and once again the positive surprise on the unemployment rate was fueled by a drop in the participation rate. Importantly, upward revisions added approximately 50,000 jobs to the previously stated figures for October and November, bringing the total number of new jobs added in 2014 to 2.95 million. This represents the best year since 1999. The one fly in the ointment was a slight decrease in hourly earnings, which fell 0.2%. However, the mild blemishes might be enough to keep the U.S. Federal Reserve from moving sooner on rate hikes than anticipated, something that could shock equity markets.
Baby It’s Cold Outside…for Natural Gas
While most of the market’s attention lately has been on oil and gasoline, the prices for natural gas have plummeted too. This week, natural gas hit a two-year low after collapsing 35% since mid-November. Interestingly, prices have remained depressed even after much of the country has been hit by arctic air this week. This is a drastic shift from the 30% jump experienced last winter during a particularly cold spell in February. A rally hasn’t materialized this time because many analysts feel that supplies are sufficient to make it through a severe winter and have plenty to spare. The U.S. Energy Information Administration released data on Thursday showing storage levels at 131 billion cubic feet, far above the 119 billion predicted by a survey of industry analysts. And, there looks to be no relief in sight. Meteorologists are expecting an unseasonably warm January after this short-lived cold snap that pushed temperatures below freezing in all lower 48 states on Thursday.
Fun Story of the Week
A new industry is cropping up with hotbeds in Portland, Oregon and Madison, Wisconsin: the cuddle-for-hire business. The industry is taking off as customers are becoming hooked on the therapeutic benefits of simply being hugged (even if it’s by a stranger) and they are paying up to $80 an hour. Additionally, women are even sending husbands and boyfriends to teach them how to cuddle properly. One app-based service, Cuddlr, was launched in September and already has over 240,000 downloads, according to its founder. Even though the jobs reports this last week show an improving economy, many Americans are still looking for a second job to bolster stagnant wages. Fortunately, this new industry is taking off for those who want to supplement their income but don’t want to get out of their comfy pajamas.
Please feel free to forward this commentary to family, friends or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.
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.* 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 10-year Treasury Note represents debt owed by the United States Treasury to the public.
* The Dow Jones Industrial Average is an unmanaged group of securities demonstrating how 30 large publicly owned companies have traded and cannot be invested into directly.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* 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.
* Past performance does not guarantee future results.
* Indices are unmanaged and cannot be invested into directly.
* Charts and graphs should not be relied upon as the sole basis for any investment decision and are for general informational purposes only.
* The prices of small cap stocks are generally more volatile than large cap stocks.
* Consult your financial professional before making any investment decision.
* This newsletter was prepared by CWM, LLC.