economic outlook
Greece and Eurozone to Fall Into Economic Turmoil? How to Profit
By George Leong for Daily Gains Letter | Feb 11, 2015
There is yet another Greek tragedy playing out across the Atlantic, where legendary poets, mathematicians, scientists, and thinkers once roamed. Fast-forward several thousand years and the country once known for its proud history is cracking at its foundation, burdened by tens of billions in debt and fiscal chaos. (There is a way investors can profit from Greece’s potential demise, but more on that later…)
Syriza Party to Negatively Change Economic Outlook in Eurozone?
Making the situation even more uncertain for this poor cousin in the 19-country eurozone is the recent transformation in power with the left-wing Syriza party, under Prime Minister Alexis Tsipras, assuming control. The problem for the stability of the eurozone is that Tsipras’ party won on a platform to revise the country’s previous bailout requirements.
Greece wants to alter the austerity demands set by the previous government and lenders. Of course, the eurozone is refusing to do so and expects Greece to honor its original deal.
One of the revisions Greece wants is a cut in the country’s budget surplus to 1.5% of gross domestic product (GDP), rather than the set three percent. Simply put, Greece wants to spend more, which would impact the debt obligations to the eurozone.
Things like bringing back pensions, increasing wages, and other spending is clearly not what the eurozone wants Greece to do. The eurozone realizes that a steady return to lowering spending and debt in Greece is the way to reform and potentially strengthen the region.
Greece faces a big debt repayment this summer and all signs point to a refusal to play. This Greek drama could get messier, with … Read More
Early Preview: My Stock Market Outlook for 2015
By George Leong for Daily Gains Letter | Dec 17, 2014
I will be formulating my complete stock market outlook for 2015 in a couple weeks, but at this time, I’m feeling somewhat uneasy. This year has turned out to be what I was expecting back in January 2014, with stock market trading being characterized by uncertainty and hurdles.
Small-cap stocks are heading for their worst performance since 2011, when the Russell 2000 fell just below six percent. The index is languishing, with a loss of one percent after the nasty down week we just experienced.
The selling was, in my view, somewhat driven by panic selling and capitulation. It gave stock market investors reasons to dump positions and take profits prior to year-end. The selling last week managed to wipe out five weeks of stock market gains for the DOW and the S&P 500.
The price charts are currently displaying an uneasy picture of the stock market. The DOW and S&P 500 have almost declined to their 50-day moving averages (MAs), which will each be a key technical point to watch. The Russell 2000 could take out its 200-day MA, based on my technical analysis.
Chart courtesy of www.StockCharts.com
The big risk is the failure to hold at the key moving averages, which, as I mentioned, could result in additional downside moves due to the lack of strong technical support until we hit the 200-day MA.
What the stock market needs is for the slide in oil prices to halt at the current $57.00 for West Texas Intermediate (WTI) oil as of Monday. The historically higher-priced Brent oil from the North Sea managed to recover to $60.00 after declining below … Read More
Why a Soft First Quarter Offers Hope
By George Leong for Daily Gains Letter | Apr 3, 2014
The first quarter, by all accounts, was a dud, especially if you were invested in blue chip stocks as the Dow Jones Industrial Average retracted 0.74% in the quarter.
Yet March also saw some shifting of capital from higher-risk assets into blue chips and large-cap stocks, as the NASDAQ and Russell 2000 underperformed with declines of 2.53% and 0.83%, respectively.
But the muted gains in the first quarter do offer some hope heading forward, especially if the stock market can attract some leadership and if the economic outlook and jobs numbers can improve. For instance, the S&P 500 led the way in the first quarter with a 1.32% advance (or a 5.28% advance on an annualized basis). By comparison, in 2013, the index had already surpassed this level of advance by March.
Given the muted results to date, we could see much better gains in the quarters ahead, but much will depend on several variables that currently cast a cloud over the stock market.
First, the Fed is continuing to cut its quantitative easing and the consensus is that the bond purchases will dwindle to zero by year-end. While this is discounted by the stock market, traders are more concerned about when the Federal Reserve will begin to increase interest rates. The early thoughts are for rates to rise sometime in the first half of 2015.
Yet Fed chairwoman Janet Yellen gave the stock market a lift on Monday after suggesting the central bank would do whatever is necessary to make sure the economic renewal and jobs growth continue unabated. Now, this could imply that the bond buying could continue … Read More
As Consumer Confidence Wavers, Gold Bugs Come Back from the Sidelines
By John Whitefoot for Daily Gains Letter | Jan 21, 2014
If you listen to the Wall Street analysts, January consumer confidence numbers weren’t really all that bad. The preliminary University of Michigan Consumer Confidence index came in at 80.4 versus a forecast of 83.4—and down from 82.5 in December. (Source: “Tale of two consumers continues as US consumer sentiment slips,” CNBC, January 17, 2014.)
Some attributed the blip to the polar vortex that swept through most of North America earlier in the month. The warmer winds of February are expected to pick up the disappointing slack in U.S. consumer confidence levels next month.
But I’m not so sure. Friday’s consumer confidence numbers missed expectations by the widest margin in eight years. It also marks the seventh miss in the last eight months. Throughout 2013, consumer confidence numbers only beat projected forecasts three times, which (surprise!) means Wall Street doesn’t really have its finger on the pulse of Main Street America.
What isn’t surprising is that upper-income households have increased consumer confidence, having benefited the most from strong gains in income levels, the stock market, and housing values. On the other hand, low- and middle-income households that are not heavily invested in the stock market are being weighed down by stagnant wages and embarrassingly high unemployment.
And, since there are more middle- and low-income earners than high-income earners in the U.S., and 70% of our gross domestic product (GDP) comes from consumer spending, it’s fair to say that both consumer confidence levels and the economic outlook for the majority of Americans is bleak.
It’s not as if the disappointing consumer confidence levels have come out of a vacuum. A raft of … Read More
