Mark Levy’s Economic Update – Wednesday, January 08, 2014

In the last couple of years there has been a common theme in my newsletters. The tone is usually optimistic about the economy and equity markets, and cautious regarding the near term future. The reasons for economic optimism have been obvious; an accommodating Federal Reserve policy, growing corporate earnings, an improving job market and relatively low interest rates and low inflation here in the United States. Our equity markets responded to these positives by elevating the Dow 30 Industrial Average 4,500 points to 16,500 from the 12,000 level on June 1, 2012 – 1 ½ years ago.

 I am sorry to bore you, but this letter remains basically, the same. We are optimistic about the next couple of years because of the above reasons and the belief that America’s Gross Domestic Product (GDP) which has slowly improved will show acceleration in 2014. LPL Financial Research believes  3 – 4%  global gross domestic product growth is achievable in 2014 and that this will help carry equity prices higher over the next year, but short term, be ready for pullbacks.

 As I write this letter, Janet Yellen is presiding as Chairwoman of the Federal Reserve for the first time at the FOMC (the policy making arm of the Fed) meeting currently taking place. LPL Financial expects that Yellen will aim for more transparency at the Fed in 2014, and that could mean a press conference after each of the eight FOMC meetings this year. Currently, Yellen is scheduled to hold only four press conferences – after the March, June, September, and December 2014 FOMC meetings.

 Looking ahead globally, it appears that Europe will eke out a modest gain in 2014 after emerging from a double – dip recession in 2013. China’s growth should stabilize in the coming year after slowing during the last few years and Japan could record its third consecutive year of GDP growth for the first time since the mid – 2000s.

 In early February, the employment report will be released for January 2014 and the pace of job growth is one of the keys to the pace of Fed tapering. Later in February, retailers will report their sales and earnings for their fiscal fourth quarters, the three months ending in January 2013. These results will serve as the final say on the 2013 holiday shopping season. American households’ net worth may hit a new all-time high in the fourth quarter and this rise is considered to provide solid support for consumer spending which represents two thirds of GDP.

 Lastly, in late December 2013, MidAmerican Energy Holdings Co. of Des Moines, Iowa (a company controlled by Warren Buffet), completed its cash purchase of all of Nevada Energy‘s shares. If you were accustomed to seeing Nevada Energy stock listings, now you know why it is no longer available. We wish you a prosperous and happy 2014. Please contact us if you have any investment questions. – Mark

 The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. * Stock investing involves risk including loss of principal. Economic forecasts set forth in this presentation may not develop as predicted. Past performance is no guarantee of future results.   Indexes are unmanaged and cannot be invested into directly.  Referenced material, LPL Financial Weekly Economic Commentary and LPL Financial Weekly Market Commentary, both dated 1/6/2014.

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