Short, but Busy, Wekk Forthcoming

Economic & Market Update: June 29, 2009

“Short, but Busy, Week Forthcoming”

The Fortigent Investment Research Team

http://www.Fortigent.com

Last Week’s Highlights:

Existing Home Sales:      4.77M – sales up 2.4% from April

le Orders:                         1.8% – unexpected increase with solid numbers throughout

New Home Sales:           342K – sales below consensus but median price increased

Q1 GDP:                          -5.5% – modest change from previous releases

Personal Spending:         0.3% – savings rate jumped to 6.9% in April

Stocks:                                919 – stocks end week flat on light volume

10-year T Bonds:         3.53% – signs of life revive flailing bond market

Oil:                                      $69 – weak demand weighs on crude prices

Dollar/Euro:                    $1.41 – Chinese once again call for new reserve currency

Economics This Week:

Date      Item                                                Est.                     Comment

6/30      Consumer Confidence:    55.1          Future expectations offer most hope

6/30      Home Price Index:       -18.75%        Prices fall as distressed sales pick up

7/1        ISM Index:                             44.0        Approaching important 50 threshold

7/2        Nonfarm Payrolls:           -400K        Layoffs remain elevated

7/2        Unemployment Rate:        9.6%        Unemployment steadily increasing

Bumpy Ride Leads to No Change

Markets traded in volatile fashion last week with the S&P 500 index selling off considerably during Monday’s trading session.  There was no overriding reason for the sell-off but comments from the World Bank may have led investors to question the ultimate depth of the current recession.

Stocks ultimately recouped those losses and the S&P 500 finished down a mere 0.3% for the week.  As expected, the Federal Reserve chose to leave the fed funds rate unchanged at 0.0% to 0.25%.  The Fed acknowledged that policy rates are likely to stay low for some time as concerns over a potential double-dip recession are prevalent. 

One disappointing announcement during the week was unemployment claims.  Initial claims came in at 627K, slightly worse than the previous week and continuing claims rose to 6.74M.  Both were worse than expected and it looks increasingly likely that prior improvement in continuing claims was due to individuals exhausting their unemployment benefits.  Either way, the nonfarm payrolls number this week end will provide additional insight. 

Source : Briefing.com

Optimism is Contagious

The rally in equity prices from March 6th lows is renewing confidence in investors worldwide.  Even the professionals are suddenly feeling more optimistic about the future trajectory of the equity markets.  Two strategists, from Deustsche Bank and Morgan Stanley, recently raised their year-end targets for the S&P 500 index to 1050 and 900, respectively.  The average expected price for the end of year now stands at 968, roughly 6% above the current price. 

 Source : Bespoke Investment Group

The Week Ahead

The holiday shortened week brings no lack of interesting developments.  Bankers in the UK meet on Tuesday for a conference arranged by the British Bankers’ Association to discuss the future of the banking sector and what can be done to restore confidence.

Also on Tuesday, Iraq is expected to award the first contracts for development of the country’s oil and gas fields.  At the same time, US troops will withdraw from urban areas in Iraq and cede control to Iraqi security forces.  The move has been received with a mix of skepticism and excitement as Iraqi citizens are anxiously ready to begin the next chapter in their countries history. 

Quotable:         “The concept of happiness is such an indeterminate one that though everyone wishes to attain happiness, yet he can never say definitely and consistently what it is that he really wishes and wills.” Immanuel Kant in Groundwork for the Metaphysics of Morals.

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