Advisor Alert: Economy and Bond Market
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December 5th, 2009 by US Global Investors
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The following summaries are part of the weekly Advisor Alert produced by US Global Funds for the week ending …
The Economy and Bond Market
Bonds sold off sharply on Friday, ending four straight weeks of appreciation. The November unemployment report was surprisingly strong as nonfarm payrolls fell by just 11,000. As can be seen in the chart below, we don’t quite have job growth yet but unemployment appears to be recovering.
Strengths
- The employment report was exceptionally strong with positive revisions to the past two months as well.
- While the ISM Index declined in November, the new orders component rose to a very healthy 60.3, which is near four year highs.
- Mortgage rates hit a new record low, as the 30-year fixed rate mortgage fell to 4.71 percent.
Weaknesses
- Retail sales in November were generally disappointing, as 75 percent of retailers came in below their plans.
- The European Central Bank is beginning to lay the groundwork for an exit plan for monetary stimulus but stressed it did not signal immediate tightening.
- The November ISM nonmanufacturing index fell below 50, indicating contraction in the service sector.
Opportunity
- Expectations continue to build for growth in the U.S. in the current quarter, possibly as much as 4 to 5 percent. The global economic recovery appears to be taking hold.
Threat
- The Fed voiced concerns that by maintaining a very accommodative monetary policy it risks fueling speculative investments and potentially allowing another bubble to build.
More on this topic
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Why Treasury Bonds Do Not Fund Our Federal Deficit
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Your Guaranteed Triple with the Stock Market ‘Trump Card’
(Contrarian Profits, 9/29/09)
IS IT TIME TO GET OUT OF BONDS?
(THE PRAGMATIC CAPITALIST, 8/18/10)
Read more from the author/contributor here.
Tags: 30 Year Fixed Rate, 30 Year Fixed Rate Mortgage, Bond Market, Contraction, Economic Recovery, Employment Report, Exit Plan, Fixed Rate Mortgage, Global Funds, Groundwork, Ism Index, Monetary Policy, Mortgage Rates, Nonfarm Payrolls, Service Sector, Speculative Investments, Stimulus, Straight Weeks, Unemployment Report, Year Fixed Rate Mortgage
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