As financial advisers, the first and most frequently asked question asked is, “Why is the market down?”
The bottom line is that markets go up and markets go down. In the short-run the market is not tied to fundamentals the way it is in the long run. In fact, many things are going swimmingly. Nearly 78% of companies reporting quarterly numbers have beat the estimates from The Street—better still, most predictions anticipate that type of good news to continue. Earnings for the first four months of the year are up 1.4%, which is the best four-month period we have experienced in the last two years.
Economists are predicting the service industry will have expanded for the fifth straight month and that factory orders will have increased for the eighth straight month with productivity up 2.8%. We feel this is a good sign for manufacturers, because in order to increase production they have to hire more people.
But the question remains, “Why is the market down?”
In our opinion, the market is down because the European Central Bank was late to the party. They did not take steps to prevent Greece’s debt, nor did they step up and offer a solution until after other countries stepped up with a bailout.
We also have a few economists saying that the economy is going to have a soft patch. Economists are like any other pundits. They are quick to change their numbers. Some just recently revised GDP estimates down 0.5%. While they do a lot of surveys and often they are very accurate, you should realize economists change their estimates all the time. That said, predictions are still at 3.5% over this period of time.
It is solid growth, however we still feel the economy can hit 4% growth.
And lastly, there are Employment numbers that came in at 431,000 jobs created—far below the estimates that were upwards of 503,000 jobs. Breaking down that number we can see that only 41,000 private sector jobs were created. Most of the jobs created were jobs for census workers.
In our opinion, we need to create nearly 150,000 jobs a month to begin to put a dent in our unemployment figures; however, unemployment was reported down at 9.7%. The decline is not necessarily the best news as it reflects 322,000 people dropping out of the labor force.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
