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Fed study shows consumer stress…..A new study issued today by the Federal Reserve
portrays a large number of Americans are still under considerable financial
stress five years into the recovery from the Great Recession. One third of the
respondents said they were “worse off” or “much worse off” financially than
five years ago.
What’s the
point? The study supports the view
that a significant portion of Americans have not recovered from the Great
Recession. This has obvious negative implications for consumer spending (which
has been reflected in recent weak results for many retailers). The results of
the study would appear to lend further support to the Fed’s position of
maintaining a very low interest rate policy well into next year. The
implications for financial markets would seem to support more of the same,
i.e., a low interest rate environment should continue to support higher stock
prices, particularly for quality companies that generate significant free cash
flow and have the ability to raise dividends. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&Date=20140807&ID=17842889&topic=TOPIC_ECONOMIC_INDICATORS&isub=3
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Unemployment applications fell again…..Weekly unemployment applications fell 14,000 to
289,000. It is another in a continuing string of data that shows steady,
gradual improvement in the labor market.
What’s the
point? A continued gradual
improvement in employment conditions is important to continuation of the
economic recovery. Because this recovery has been so gradual, we think it can
last quite a long time and could well rival the 1990s economic expansion which
lasted nine years. With respect to investment markets, a sustained economic
recovery would most likely be positive for corporate earnings, which are the
key driver of stock prices. As of now, we don’t see Federal Reserve policy or
inflation as being factors that would cause a major disruption in either
valuations or the longer-term trend in stock prices, which we believe is
upwards. The biggest risks currently appear to be more of the exogenous or geopolitical
variety. Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140807&id=17841781
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