Market update...

Each day I pen a few notes to myself about the world's goings on. This essentially helps me track what I see as important trends and to gauge my commentaries to clients as well as our allocation recommendations. The fact that I will, from time to time, share these notes  (easier than a whole new essay) should in no way give the impression that we're approaching the business of investing from a short-term perspective. And while I've been sounding pretty optimistic on the economy of late, please don't read this as a prediction on the market going forward. As I've maintained, this year's economic pickup thus far only validates last year's results...

Here's today's (cleaned up for your reading):

August 14, 2014

German and French GDP numbers came in poorly. We're going to see fairly aggressive QE coming from the ECB in the near future, I suspect. While the Eurozone economy looks suspect, I'm bullish on European stocks going forward. I'm assuming that current conditions reflect Russia/Ukraine to no small degree and that traders will respond favorably to QE... initially...

Weekly jobless claims in the U.S. shot back up to 311k, vs 295k estimate. That was disappointing and counter to the recent trend. However, the number is near previous expansion lows. So, as I heard one Bloomberg commentator report, they can only stay relatively flat or edge up from here. So, not necessarily horrible news.

The recent decline in commodities (virtually across the board) is an interesting development. With regard to grains, it's simply about bumper crops. With regard to industrial metals; it virtually has to reflect recent sketchy results out of Asia and the slowdown in Europe. The PMI's are showing pretty steady increases in the price of manufacturing inputs, so it'll be interesting to watch the trend going forward. If (IF!) the U.S. economic trend continues and can lead the rest of the world, you'd want to own industrial metals here. Oil is a bit of a conundrum... in that it began declining amid the turmoil in Iraq. Some commentators view it as a harbinger of a slowing economy (U.S. even) to come, which contradicts other indicators. The beauty of lower energy is its stimulative effect. If it's not discounting a slowdown (or if those commentators are wrong), it'll add "fuel" to the economy, or mitigate the slowdown. Could also be traders anticipating a stronger dollar --- as Europe begins printing money and U.S. interest rates begin to rise (although I haven't heard anyone pose this). Of course the end of the summer driving season is upon us, which (reduced demand) tends to depress the price somewhat.

Walmart made its number (surprisingly to some), while JC Penny beat... These two reports contradict this week's retail numbers and Macy's report. Many pundits are using this week's data to proclaim that the US consumer is still missing in action. I entirely disagree (sentiment and producer surveys re; hiring and wages tell me that the consumer is likely on the rise and that it will reflect in future numbers). That said, I'm still not crazy about discretionary stocks --- although their valuations (particularly PEG [p/e to earnings growth) have come back down to where I'm now neutral, as opposed to bearish (where I've been)...

Putin pledged to do what it takes to end the violence in Ukraine... There are hordes of skeptics, and I suspect justifiably so. However, as I've maintained from day one, Putin the businessman/politician wanting to survive can't go the distance (not even close)---beyond Crimea---on Ukraine. A recent NYT columnist virtually declared the end of globalization and totally poo-pooed we who believe that it leads to a more peaceful world. She cited Putin's antics as proof... I suspect she's on the verge of looking very foolish, which I'll for sure point out on the blog...

The stock market is having a decent week despite the weaker global economic data... I suspect it's about Putin, along with, ironically, the weak data (taking the heat off the Fed for the moment)...