April 2014 Monthly Outlook – Spring thaw?

The extreme winter weather that gripped most of the country had a negative effect on economic growth.  However, a host of recent economic indicators suggest that the US economy is bouncing back from the bad weather. For example:

  1. Institutional Strategy & Investment (ISI) survey of truckers, which has a high correlation with GDP (gross domestic product), has increased to an eight-year high.
  2. ISI’s homebuilder survey for March was the strongest it has been in nine years, suggesting a strong spring selling season for real estate.
  3. The Conference Board consumer confidence index rose in March to the highest level since 2008.
  4. Money is being put to work – since Feb 6, 2014 there have been 77 corporate mergers/acquisitions/stock buybacks announced.  During the last week of March alone there were 16 deals totaling $152B announced (source: ISI).

These factors appear to have overcome any immediate concerns the financial markets have about the ongoing situation in the Ukraine / Crimea.  I don’t anticipate a resolution to that matter any time soon, but as long as the political discussions don’t deteriorate or activity on the ground escalate,  I would expect the financial markets to continue to ignore the situation.  However, geopolitical uncertainties can create volatility for financial markets.

What may impact the financial markets in April will be 1st quarter 2014 corporate earnings.  Ahead of this, Corporate America’s outlook is shifting to a more pessimistic level.  93 out of the 111 companies in the S&P 500 that have issued an earnings outlook for the 1st quarter have indicated earnings will be below Wall Street consensus estimates (source: marketwatch.com).  Wall Street consensus estimates have also been trending down, such that most analysts are expecting a 0% increase in year-over-year earnings for the S&P 500.  I think that is overly pessimistic and earnings will likely surprise on the upside. However, given that the S&P 500 is back at an all-time high (as of 4/1/14)  I would not be surprised to see a 5% – 10% decline during earnings season. The unofficial start to earnings season is April 9, 2014, when Alcoa reports – stay tuned!

Remember that April 15, 2014 is tax filing deadline for 2013.  Also 1st quarter 2014 estimated tax payments are due on 4/15/14.

Finally, if you anticipate making an IRA or Roth contribution for 2014 why not consider making monthly contributions starting now, rather than waiting until you file your taxes next year.

I hope this report is informative.  Please pass this communication along to anyone who you feel would benefit from the information.

 

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

 

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results

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