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Momentum from a Strong Start (but it’s still the first quarter)

February 5, 2013

 The question now becomes how long the first quarter strength can last.
-Jason Pride, director of investment strategy, Glenmede

The first month of the year ended with a strong market rally on the back of mostly favorable data. GDP for the fourth quarter was weaker than expected, negative in fact, due to a sharp drop in defense
spending and inventory destocking, but the ISM manufacturing index and nonfarm payrolls (including
revisions) were stronger. The unemployment rate ticked up to 7.9%, 58% of companies have beaten
4Q2012 EPS estimates, and housing remains an economic tailwind.

- A slower data week will allow the market to take stock of its current position. The ISM nonmanufacturing index, initial claims, and productivity are the only major statistics released this week.

- The question now becomes how long the first quarter strength can last. Is it sustainable or simply the reflection of recovery from the hurricane-impacted fourth quarter? How much is Fed-induced and likely to eventually wane? While inclined toward growth expectations, we remain unconvinced that a
sustained high-growth surge is upon us.

Dates of Interest:
2/5: ISM Svc 2/7: Initial Claims, Productivity

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