Download Weekly Advisor Analysis 12-09-13 PAA

Weekly Advisor Analysis
December 9, 2013
Winning Streak Snapped, but Stocks Finish Strong
While the S&P 500 failed to extend its weekly winning streak to nine this past week, stocks bolted
higher on Friday following the release of more positive U.S. economic data. Going into 2014,
investors continue to debate whether or not positive economic data is in fact good for stocks
considering it accompanies an increased likelihood of a tapering of asset purchases by the Federal
Reserve. However, recent reports that have shown a strengthening U.S. economy are so far being
received warmly by investors indicating, that once again, good news for the economy could also
be good news for equity investors. The S&P 500 finished 0.04 percent lower for the week, but
remains up 26.5 percent so far this year.
Source: Yahoo! Finance
Employment Conditions Continue Improvement
The U.S. Labor Department announced last Friday that 203,000 net new jobs were created in
November, besting consensus expectations for an 185,000 gain, according to Bloomberg.
Furthermore, the headline unemployment number dropped to the lowest level since November
2008 and now stands at 7.0 percent, as depicted below. The report indicated broad strength across
many industries, including overall factory jobs breaching the 12 million mark for the first time
since 2009. Perhaps most interesting, the labor participation rate, or the percentage of the working
age population that either has a job or is actively seeking employment, rose to 63 percent from last
month’s 62.8 percent, which was the lowest level seen since March 1978. This should be
interpreted as a positive sign for the health of the U.S. job market because despite more people
entering the labor force, the unemployment rate still managed to decline from last month.
Gross Domestic Product (GDP) Revised Higher
The Commerce Department, who initially reported the U.S. economy grew at 2.8 percent in the
third quarter, revised their data to indicate the economy grew at a much faster 3.6 percent rate.
Many economists expressed skepticism the report indicates the U.S. economy has truly improved
at a substantial pace; however, citing the majority of the growth was due to business inventories
growing by an annualized pace of $116.5 billion, this was the most rapid acceleration witnessed
since the first quarter of 1998, according to Bloomberg. An undeniably bright increase in
household disposable income of 2.9 percent in the third quarter, on top of a revised 4.1 percent
gain in the second quarter, gives much credence to corporations’ expectations that increased
spending is on the way as households have more money to spend.
Phenomenal Year for Stocks? Actually, Not Really…
As we mentioned above, the S&P 500 has rallied an impressive 26.5 percent so far this year, but
how does that performance rank against the historical performance? The answer is, not as great as
you might think. According to J.P. Morgan, a year in which stocks rally more than 20 percent isn’t
all that uncommon. In fact, 1 in every 3 calendar years since 1897 have seen equities rally by more
than 20 percent. While investors have been, on average, deprived of normal market conditions
since the turn of the millennium, history would show that it’s three times more likely to have
equities return double-digits in a calendar year than to have single-digit gains. Should 2013 yearto-date gains hold steady, this calendar year won’t even crack the top 20 of all-time greatest years
for stocks.
Best regards,
UDB Financial
Securities offered through LPL Financial, Member FINRA/SIPC.
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the
named broker/dealer.
* Gross Domestic Product (GDP) is the monetary value of all the finished goods and services produced
within a country’s borders in a specific time period, through GDP is usually calculated on an annual basis.
It includes all of private and public consumption, government outlays, investments and exports less imports
that occur within a defined territory.
* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be
representative of the stock market in general.
* 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.
* Past performance does not guarantee future results.
* You cannot invest directly in an index.
* Consult your financial professional before making any investment decision.
Sources:
http://www.cnbc.com/id/101252916
http://money.cnn.com/data/markets/sandp/
http://chart.finance.yahoo.com/z?s=%5eGSPC&t=5d&q=&l=&z=l&a=v&p=s&lang=en-US&region=US
(Chart)
http://www.bloomberg.com/news/2013-12-05/economy-in-u-s-expands-at-3-6-rate-on-bigger-inventorybuild.html
http://blogs.reuters.com/data-dive/files/2013/12/guw34t.gif (Chart)
http://www.sfgate.com/business/bloomberg/article/Payrolls-Rise-More-Than-Forecast-as-U-S-Jobless5041113.php
http://dattaman.com/wp-content/uploads/2013/06/Unemployment-Rate3.jpg (Chart)
http://www.valuewalk.com/2013/11/sp-500-up-26-percent/
http://ify.valuewalk.com/wp-content/uploads/2013/11/annual-price-performance-JPM-113.png (Chart)