Download Weekly Advisor Analysis 07-01-13 PAA

Weekly Advisor Analysis
July 1, 2013
Stocks Record Best First Half Since 1999
Following the worst week of 2013 for stocks, the S&P 500 bounced back last week to gain 0.87
percent and finished the first half of 2013 with gains of 12.6 percent, the best six-month start since
1999. This remarkable start to the year for equity investors came despite finishing 1.5 percent
lower in the month of June, the first monthly decline in 2013, according to CNBC. Meanwhile,
U.S. Treasury bonds have had their worst start to a year since 2009 and are currently suffering a
three-quarter long losing streak, the lengthiest period of consecutive quarterly declines since 1999,
according to Business Week.
Source: Yahoo! Finance
Consumer Sentiment Highest in Five Years
While investors are seemingly focused on the Federal Reserve and attempting to guess their next
move, U.S. consumers continue to see a bright future based on the most recent consumer
confidence survey conducted by The Conference Board. This survey indicates U.S. consumers’
moods are at the highest level in five years, reaching 81.4 on a 100-point scale, according to USA
Today. Sentiment has now climbed higher three months in a row and has notched these gains
despite pedestrian new job creation and economic growth.
Source: RTTNews
Understanding China’s Cash Crunch
A recent article from The Economist titled, “China’s Cash Crunch: This Isn’t The Country’s
Lehman Moment, But It Signals A Change Of Momentum,” highlights the important differences
between the banking systems in the U.S. and China. In the article, the author points to the fact
China’s banks are already owned and controlled by the nation. China’s government already
dictates the overall level of bank lending and would be responsible for losses from bad loans
which they can allocate as they choose in order to prevent a complete meltdown. Furthermore,
China’s banks are already significantly better capitalized than banks in most parts of the developed
world, and China’s consumers have remarkably higher savings rates than Americans. Banks
currently aren’t allowed to loan more than 75 percent of their deposits and are further along than
most countries in implementing the tough capital ratios that are part of Basel 3, the global
prescriptions agreed upon by world leaders to better prevent another financial collapse. In
conclusion, it appears China’s financial system isn’t facing the same scenario U.S. banks did in
2008, but it doesn’t change the fact the new Chinese government is attempting to curb excessive
lending, which has fueled the exceptional economic growth rates China has posted over the last
decade.
Source: The Economist
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.
* 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. Since the
U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark
for the long-term bond market.
* Gold represents the London afternoon gold price fix as reported by the London Bullion Market
Association.
* 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/100852152
http://finance.yahoo.com/q/bc?s=%5EGSPC+Basic+Chart&t=5d
http://www.zerohedge.com/news/2013-06-21/treasuries-worst-week-50-years-stocks-worst-week-2013
http://www.businessweek.com/news/2013-06-29/treasuries-lose-most-in-first-half-since-2009-on-outlookfor-fed
http://www.usatoday.com/story/money/business/2013/06/25/consumer-confidence/2455203/
http://www.rttnews.com/2141280/u-s-consumer-confidence-unexpectedly-improves-to-five-year-high-injune.aspx?type=gleco
http://www.businessinsider.com/chinas-cash-crunch-2013-6
http://www.cnbc.com/id/100849872
http://www.bbc.co.uk/news/business-23093548
http://www.guardian.co.uk/business/2013/jun/28/gold-price-low-federal-reserve-inflation
http://www.usagold.com/reference/prices/2007.html
http://www.bls.gov/cpi/
http://www.ebullionguide.com/price-chart-gold-last-10-years.aspx