August 22, 2008
Market Commentary
by Scott J. Brown, Ph.D., Chief Economist
Next week, the economic data calendar heats up, as data become available on home sales, home prices, consumer confidence and durable goods orders. The estimate of second quarter 2008 gross domestic product (GDP) growth is expected to be revised higher – it was +1.9% in the advance estimate – but the upward revision may add to the downside risks to the third quarter of this year.
Personal income and spending figures for July will help to refine estimates of third-quarter growth – and these figures could be rather weak, reflecting little carryover from the economic stimulus payments and a large drag from higher food and energy prices.
The Democratic convention, which gets under way next week, is to conclude with Barack Obama’s speech on Thursday. However, the financial markets rarely react to these events (the Republican conventions will be during the first week of September). The bond market will close early on Friday ahead of the three-day Labor Day weekend.
Figures for the following week will carry more weight, with the August Employment Report likely to have a large influence on the economic outlook and expectations for future Federal Reserve policy moves.
Indices
| |
Last |
Last Week |
YTD return % |
| DJIA |
11430.21 |
11615.93 |
-13.83% |
| NASDAQ |
2380.38 |
2453.67 |
-10.25% |
| S&P 500 |
1277.72 |
1292.93 |
-12.93% |
| MSCI EAFE |
1778.54 |
1818.44 |
-16.89% |
| Russell 2000 |
725.25 |
754.38 |
-5.32% |
Consumer Money Rates
| |
Last |
1-year ago |
| Prime Rate |
5.00 |
8.25 |
| Fed Funds |
2.00 |
5.25 |
| 30-year mortgage |
6.31 |
6.19 |
Currencies
| |
Last |
1-year ago |
| Dollars per British Pound |
1.878 |
1.982 |
| Dollars per Euro |
1.490 |
1.347 |
| Japanese Yen per Dollar |
108.43 |
114.43 |
| Canadian Dollars per Dollar |
1.043 |
1.062 |
| Mexican Peso per Dollar |
10.09 |
11.14 |
Commodities
| |
Last |
1-year ago |
| Crude Oil |
120.93 |
69.47 |
| Gold |
836.87 |
657.30 |
Bond Rates
| |
Last |
1-month ago |
| 2-year treasury |
2.39 |
2.65 |
| 10-year treasury |
3.87 |
4.05 |
| 10-year municipal (TEY) |
5.75 |
5.77 |
Treasury Yield Curve – 8/22/2008
S&P Sector Performance Charts – 8/22/2008
Economic Calendar
| August 25 |
— |
Existing Home Sales (July)
Democratic Convention begins (through August 28) |
| August 26 |
— |
S&P/Case-Shiller Home Prices (June)
New Home Sales (July)
Consumer Confidence (August)
FOMC Minutes (August 5) |
| August 27 |
— |
Durable Goods Orders (July) |
| August 28 |
— |
Jobless Claims (week ending August 23)
Real GDP (2Q08, revised) |
| August 29 |
— |
Personal Income and Spending (July) |
| September 1 |
— |
Labor Day (markets closed) |
| September 16 |
— |
Consumer Price Index (August)
FOMC meeting |
| November 4 |
— |
Election Day |
Past performance is not a guarantee of future results. There are special risks involved with global investing related to market and currency fluctuations, economic and political instability, and different financial accounting standards. The above material has been obtained from sources considered reliable, but we do not guarantee that it is accurate or complete. There is no assurance that any trends mentioned will continue in the future. Municipal bond interest is not subject to federal income tax but may be subject to AMT, state or local taxes. Investing involves risk and investors may incur a profit or a loss.
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business August 14th 2008.
