Week of June 29, 2015
All Eyes on Greece
Over the weekend, Greece neared a default as negotiations continued between the Greek government and its creditors. While many investors are optimistic that Greece will eventually strike a deal, many believe the fallout can be largely contained to Greece and will not have a broad impact on financial markets. This is due to the fact that only a small amount of Greece’s government debt is still held by banks and private investors outside the country. The coming week should be a good indicator for Greece’s debt crisis on global markets, although the likely outcome looks like another round of kicking the can down the road.Welcome Back, Big Spender
The death of the American consumer was greatly exaggerated. Concerns about saving the gas windfall were put to rest late last week when the Bureau of Economic Analysis released data showing a 0.9% monthly spending rise in May. This was at the high end of expectations and one of the sharpest monthly jumps since mid-2009. While spending on services rose modestly, the majority of the gains game from broad increases in everyday and big ticket items. Consumer spending is being bolstered by wage growth (finally) and gasoline prices that remain depressed. Despite recent raises, the price of gas remains 24% lower year-over-year. The consumer data suggests the economic contraction experienced during the first quarter was temporary.Durable Goods Orders Remain Soft
While consumers opened their wallets in May, businesses spent more cautiously. The Commerce Department reported last Tuesday that new orders for durable goods fell to a seasonally-adjusted 1.8% in May. This marks the third time in the past four months where durable goods orders have been down. Through the first part of 2015, orders are 2.2% below the same period last year. While the economy is showing improvements in almost every other area, equipment investments by businesses is one of the few components that is not. This is not the only underwhelming manufacturing statistic. The Federal Reserve noted last week that manufacturing output fell 0.2%in May, and recent flash purchasing manufacturing index readings showed a slight decline for June, falling to 53.4 from 54.0 in May.Stock Splits Become Rare
Earlier this week, a popular streaming video company made headlines by announcing a seven for one stock split. However, splits have become rare. This was only the eighth time in 2015, compared to more than 100 in 1997. Fewer stock splits and the market’s rapid rise from March 2009 have created a lot of triple-digit stock prices. Now, more than 120 companies in the S&P 500 sport a quote over $100. Fifteen years ago there were only thirty. While stock splits and the absolute price of shares have very little bearing on a company’s valuation, the lack of splits is an interesting trend. It’s no coincidence that activity peaked during the dot com bubble when individuals were crazed with owning stocks.
Source: https://www.bespokepremium.com/wp-content/uploads/2015/06/spxstats.png
Fun Story of the Week
We have long been told that the key to long life is to eat healthy and stay active. Perhaps now we should add: be born in February. Recently, data scientists at Columbia University Medical Center analyzed 1.75 million electronic medical records for patients between 1985 and 2013. What they found was that 55 diseases including asthma, ADHD, reproductive issues, cardiovascular disease, and neurological disorders have seasonal links. People born in September, October, or November tended to have higher risks for these diseases while those born in February, March, April, May, and July were less likely to develop the illnesses. The remaining months showed no relationship. Researchers attributed the differences to the presence or seasonal risk factors at the time of birth, such as increased allergens in spring and autumn or vitamin D deficiency in winter months.
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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 (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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* 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.
* 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.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
Sources:
Wall Street Journal, June 2015, http://www.wsj.com/articles/european-stocks-bonds-euro-seen-falling-after-shutdown-of-greek-banks-1435560344
Bespoke Investment Group, June 2015, https://www.bespokepremium.com/think-big-blog/the-rise-of-the-triple-digit-stock/
Bloomberg, June 2015, https://www.bloomberg.com/news/articles/2015-06-24/it-s-the-age-of-hundred-dollar-stocks-in-u-s-as-splits-dry-up
Wall Street Journal, June 2015, http://www.wsj.com/articles/u-s-consumer-spending-soared-in-may-1435235495
Wall Street Journal, June 2015, http://www.wsj.com/articles/business-spending-on-equipment-stays-soft-1435102920
Barron’s, June 2015 (subscription required), http://online.barrons.com/articles/u-s-stocks-fall-less-than-1-1435376741
Business Insider, June 2015, http://www.businessinsider.com/birth-month-changes-disease-risk-in-strange-ways-2015-6