Daily Bullets….For May 19, 2014

·        Continued slow emerging markets growth……A new analysis from Schroders Asset Management (U.K.) argues that U.S. recovery will remain healthy, but due to several factors, growth in emerging market economies could be weaker than most now expect. Also, due to excess global capacity, they argue for continuation of global deflationary pressures.

What’s the point? We believe the Schroders analysis argues for continuation of U.S. financial assets, primarily quality, dividend stocks, continuing to remain attractive to investors, and also implies increased valuations for these kinds of stocks. With very weak growth in Eurozone and slowing growth in China, we have been hearing the “D" (deflation) a lot more lately in financial media. The concern over deflation is not new. Key points for investment strategy: a) inflation still does not seem to be a significant threat and b) financial assets, such as dividend stocks and bonds, both of which can provide cash flow and/or a growing income stream will remain assets of choice. Link: http://finance.yahoo.com/news/4-reasons-us-recovering-leaving-084953322.html

·        Bernanke's influential comments……Former Federal Reserve chief Ben Bernanke is now on the speaker circuit providing his views at pricy, private investor meetings. In a speech given last Friday, Bernanke is purported to have stated a couple of very important things: 1) easy money policies and below normal interest rates are here to stay for  long time, and 2) Fed will move only very slowly in raising interest rates and will only do so much later than many now expect.

What’s the point? This is a rare glimpse into the “inside thinking” at the Fed and is significant. We think new Fed chief Janet Yellen is following a policy that is a continuation of the Bernanke policy. Important implications for the financial markets include: 1) the easy money, low interest rate environment we have experienced for five years will most likely continue; and 2) continues to be supportive of financial assets, particularly quality dividend-paying stocks. Link: http://finance.yahoo.com/news/big-ticket-dinners-blunt-bernanke-200233561.html

·         Contract worker nation?.......A recent Federal Reserve study shows that contract workers are growing as a percent of overall labor force, currently accounting for 2.3% of the labor force, compared with about 1% in the 1980s. And economists predict this percentage will grow in the years ahead.

What’s the point? While the percent of contract workers may seem small, the growth of this type of worker has economic implications. Some of those implications include: 1) potential for some secular downshift growth of consumer spending which, in fact, we’ve seen in this recovery, 2) secular slowing in household formation, which has implications for durable consumer goods; 3) potential for making recessions more severe. Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140519&id=17629059