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No News, No Problem for Investors

August 13, 2012

 

During a week that had little market-moving economic or political news, stocks generally moved higher, and Treasury bond prices declined (and yields rose).

-Dan Denbow, VP of equity portfolios, USAA investments

  • Last week was fairly uneventful, but stocks generally moved higher, and Treasury bond prices declined (and yields rose).
  • The USAA team was surprised that this summer's rally in stocks has been accompanied by signs that the world economy is slowing - led by Europe's recession - and a major deceleration in U.S. corporate earnings growth. While these signs are typically negative for stocks, they have been offset by the powerful effects of record-low interest rates which appear to be sending investors into higher-risk asset classes.
  • Although big believers in diversification, the USAA team has trimmed their risk appetite over the past few months in the diversified global portfolios because of increased price in risk assets, and have a slight preference to bonds over stocks.
  • The USAA team views the Spanish and Italian government bond yields to be the best measure of Europe's financial health. With last week's data, it looks as though there are still major problems.
  • With last week's economic releases, the U.S. economy continues its painfully slow recovery. Consumer credit was still down, however jobless claims dropped and productivity of U.S. workers increased though neither is enough of a change to make a drastic difference in the overall unemployment rate.

 ...Read the Full Report