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Lindsey Report – March 2014


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After domestic equities sluggishly began the year, they changed course for the better part of February and closed out the month with the S&P 500 at 1859, setting a new all-time high (Reuters).

For starters, I certainly enjoy seeing valuations at these levels and I remain optimistic that the economy is continuing to recover.  I believe part of the move in equities is based upon optimism and expectations that 2014 will finally be an economically strong year (fundamentally based).

However, I would also argue that part of the current move is “technically” or “momentum” driven.  For example, when the S&P 500 closed above 1850, setting a new high that was likely a technical buy signal.  Therefore, some of the recent gains may be for the simple reason that the market momentum is higher and some computer programs said “BUY”.

Fundamentally speaking, recent economic news has been consistent with an economy that is still in recovery mode.  For example, the Commerce Department revised its’ Q4 2013 number for GDP from 3.2% growth down to 2.4% growth (AP).  While growing, we likely need some stronger, “break out” numbers to support current equity valuations.

I am a big believer that the housing industry is a key pillar to the recovery and the potential catalyst.  Not only does a healthy housing market support a lot of jobs, home equity is a significant source of personal wealth and consumer confidence.   After falling in November and December, sales of existing homes rose 9.6% in January despite the weather.  On an annual rate, that was the fastest pace since July 2008 (AP).  Moreover, house prices are up 12% nationally over the past 12 months and are now only 17% below 2006 peak levels (CoreLogic).

Hopefully, the weather and the housing market heat up in spring, helping the economy break out.

 

 

The opinions voiced are for informational purposes only and are not intended to provide specific advice to any individual.  To determine which investments are appropriate for you, consult myself prior to investing. Past performance is no guarantee of future results.  Indices are unmanaged and cannot be invested into directly.  The economic forecasts set forth in this commentary may not develop as predicted and there can be no guarantees that strategies promoted will be successful.  The Standard and Poor’s 500 index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

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