Courtesy of Stuart Miles / FreeDigitalPhotos.net

Courtesy of Stuart Miles / FreeDigitalPhotos.net

Central bank printing presses are running full speed… and markets love easy money (QE).

Pioneer. Trendsetter. Trailblazer. Whatever term you decide to use, there’s no debate about the fact central banks around the world are taking a page or two from the U.S. Federal Reserve’s playbook. The Fed may have ended quantitative easing (QE) – its program of buying government bonds to keep interest rates low and increase money supply – in October, but that doesn’t mean QE hasn’t become popular elsewhere. Barron’s reported: 

“…virtually every other major central bank is maintaining or stepping up its pace of money printing – even where the success in spurring growth is questionable. On October 31, Japanese authorities doubled down on asset purchases by the Bank of Japan, and the nation’s pension fund, to spur flagging growth… In a surprise move on Friday, China cut interest rates for the first time in two years in an effort to spur slowing growth… That was followed by European Central Bank President Mario Draghi’s signal the ECB would expand its stimulus plan, leading observers to expect large-scale, Fed-style purchases of government debt.”

Although some Americans remain skeptical about the health of the U.S. economy, growth in the United States stands in sharp contrast to growth elsewhere. The U.S. Department of Commerce reported real gross domestic product (GDP) – the value of goods and services produced in the United States – increased by 3.5 percent during the third quarter of 2014 after growing by 4.6 percent in the second quarter. For the same period, the Eurozone’s GDP grew by 0.6 percent, which is well below its 2 percent pre-crisis growth rate, and Japan’s GDP declined by 1.6 percent during the third quarter after a 7.3 percent drop in the second quarter.

While Japan has been mired in economic stagnation for some time, it’s a relatively new experience for the Eurozone where unemployment hovers around 11.3 percent – a record high. Aggression in Ukraine is complicating matters in Europe. An expert cited by The New York Times explained, “We are at most one or two rounds of sanctions and countersanctions away from pushing Russia into a deep recession, and Europe into a recession.”

While concerns remain about the health of the global economy, markets generally were pleased about central banks’ easy money policies and most global stock markets finished the week higher.


Data as of 11/21/14

1-Week

Y-T-D

1-Year

3-Year

5-Year

10-Year

Standard & Poor’s 500 (Domestic Stocks)

1.2%

11.6%

14.9%

20.0%

13.3%

5.8%

10-year Treasury Note (Yield Only)

2.3

NA

2.8

2.0

3.4

4.2

Gold (per ounce)

3.0

0.2

-2.9

-10.9

0.6

10.4

Bloomberg Commodity Index

1.1

-6.1

-4.2

-6.2

-2.7

-2.5

DJ Equity All REIT Total Return Index

1.1

24.2

23.5

18.3

17.5

8.7

S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

*The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.  You cannot invest directly in this index.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association.

* The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

 

Sources:

http://online.barrons.com/articles/gold-no-longer-slumbers-1416626100?mod=BOL_hp_we_columns (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/11-24-14_Barrons-Gold_No_Longer_Slumbers-Footnote_1.pdf)

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

http://www.nytimes.com/2014/11/15/business/international/germany-and-france-showed-slight-growth-in-third-quarter.html (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/11-24-14_NewYorkTimes-Eurozone_Eked_Out_Growth-Footnote_3.pdf)

http://www.nytimes.com/2014/11/22/business/early-results-of-japans-economic-program-are-disappointing.html (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/11-24-14_NewYorkTimes-Early_Results_are_Disappointing-Footnote_4.pdf)

http://online.barrons.com/mdc/public/page/9_3063-economicCalendar.html (Go to U.S. & Intl Recaps, then click on “A busy Friday”)

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