Positive Signs Abound; Time for Some Caution?

August 20, 2012

We have taken advantage of a rising stock market to slightly "de-risk" our diversified managed portfolios, by trimming our stock positions and putting the proceeds into investment-grade bonds or cash.

-Regina Shafer, assistant vice president, fixed income investments, USAA

This week's economic releases were generally positive. The highlight of the week was Tuesday's announcement that July retail sales advanced 0.8% in July, higher than expected and the strongest gain in five months. The July consumer price index advanced at a 1.4% annual rate in July, showing that inflation remains contained and providing room for the Federal Reserve to continue its easy-money policies.

Other encouraging signs were a 0.6% increase in July industrial production; a jump in building permits to 812,000, a four-year high; and a rise in the University of Michigan Consumer Confidence index to 73.6, greater than expected.

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