Below are some headlines which have been moving the markets this week. The articles highlighted below are provided by First Allied Asset Management. I’m not sure how many of you did “Black Friday” shopping last week but I can tell you the malls were dead around Long Island, New York. It was much quieter than years past and from what I understand, Cyber Monday was somewhat disappointing as well. On the issue of gas prices, I feel great about the $15 I’ve been saving each time I fill up my car. The price is finally hitting that $3 point on Long Island which is well below the $4.30 per gallon which we were paying just a few months ago. This should create some additional household saving and spending as gas is a major expense for people between heating their homes, their businesses, and operating automobiles.
This morning’s The Wall Street Journal MoneyBeat examined a different perspective on the Santa Claus rally, a common belief that the market tends to perform well at the end of the year. Tim Edwards, director of index investment strategy at S&P Dow Jones Indices, developed a Santa Score which measures December performance relative to annualized return.
And, over the last 20 years, the Santa Score for the S&P 500 is 0.17, meaning 17 percent of the average annual return has occurred in December, confirming the view that the market tends to perform well at the end of the year. Interestingly, this high Santa Score is also consistently seen across a variety of global equity markets.
Spending over the four-day Thanksgiving weekend declined by an estimated 11 percent compared to last year, according to the National Retail Federation. Many analysts predicted strong growth in Black Friday sales this year because of rising consumer confidence and labor growth, falling energy costs, and the increase in retailers open on Thanksgiving.
But it’s still possible for overall holiday season spending to increase compared to 2013. Consumers might not be as enticed by Black Friday bargains as in years past because retailers now provide deep discounts on prices throughout the entire holiday season and also provide special online discounts.
This blog posting from The Wall Street Journal provides a nice summary of what impact lower oil prices are likely to have on the U.S. economy. The benefits that most businesses and consumers receive from falling energy prices are partially offset by headwinds potentially created from reduced investments by the domestic energy industry.
However, as the energy industry still represents a relatively small percentage of employment, the net impact of lower oil prices is likely to be a 0.2 to 0.3 percent boost to economic growth in 2015 if the price of oil remains near current levels.
U.S. manufacturers barely slowed down in November even as major competitors around the world continued to scale back production. The Institute for Supply Management (ISM) said its U.S. manufacturing index edged down to 58.7 percent last month from 59 percent in October.
Yet any number above 50 percent signals expansion, and the latest reading kept the ISM index near a three-year high. Fourteen of the 18 industries tracked by ISM said business increased in November while the closely watched new orders component hit a three-month high.
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