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The Franklin Planning Group's
Weekly Market Commentary
May 11, 2010
The Markets
Five little "PIIGS" went for a boat ride. The weather turned very stormy
and "G" got tossed overboard without a life jacket. Shortly thereafter,
"P" and "S" found themselves overboard and drowning in the water, too.
Unable to mount an effective rescue, the other shipmates radioed for
help. Fortunately, "EU" and "IMF" were available with a bigger boat and
more rescue equipment. As the storm continued to rage, the "PIIGS"
desperately waited for "EU" and "IMF" to arrive, hoping they would have
the tools necessary to save them.
The above metaphorically describes what is happening in Europe. The
"PIIGS" are Portugal, Italy, Ireland, Greece, and Spain. Water is code
for government debt and largesse. "EU" is the European Union and "IMF"
is the International Monetary Fund. The big question is, will the "EU"
and the "IMF's" boat and tools be enough to complete the rescue, or will
they be overwhelmed by the storm, too?
With the events of last week, world financial markets declared loud and
clear that government debt levels in certain countries are unsustainable
and have to be dealt with right now. Jolted into action by the gathering
storm, the 16 euro nations and the IMF announced late Sunday evening a
loan package worth nearly $1 trillion to help stem the budding crisis,
according to Bloomberg. This huge show of force may be enough to
convince investors that the euro nations are serious about saving the
weaker members, i.e., the "PIIGS."š
The good news is that the U.S. is not the epicenter of this latest
problem. That, coupled with an improving economy, may help the U.S.
avoid the brunt of the pain.
Notes: S&P 500, DJ Global ex US, 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. Past performance is no guarantee of future
results.š Indices are unmanaged and cannot be invested into directly.š
N/A means not applicable or not available.
THE EVENTS OF LAST WEEK REMINDED INVESTORS
that a significant drop in the markets
can happen at any time. However, as described below, the U.S. has some
positive momentum in place that may help it weather a new storm should
one arise.
First quarter corporate earnings were strong as 76% of the S&P 500
companies beat the average analyst profit forecast, according to
Bloomberg. Strong earnings growth may provide support for stock prices.
§ U.S. consumer spending hit an all-time
high in March, finally surpassing the previous peak set in November
2007, according to the Commerce Department. Consumer spending accounts
for 70% of gross domestic product so this could bode well for economic
growth, according to Forbes.
§ Job growth is finally occurring as the
Department of Labor said nonfarm payroll employment grew by 290,000 in
April, which was well above forecast. Earlier months were revised
upward, too. Employment growth is a key driver of economic growth.
§ Consumer borrowing posted an unexpected
rise in March, which was only the second gain in 14 months, according to
Associated Press. The rise may suggest consumers are feeling more
confident and that could help the economy.
Today, the economy is on its way up from a devastating decline. With the
layoffs in the past couple years, significant excess in the economy has
been wrung out, which may set the stage for sustainable growth. As
described above, many key economic indicators are pointing toward a
strengthening economy. And, while it's true that the economy and the
stock market can fall out of sync for periods of time, the fact that our
economy seems to be heading in the right direction may help provide some
underlying support for the stock market in the short term.
Weekly Focus – Think About It
"Worry gives a small thing a big shadow."
-- Swedish Proverb
Joe D. Franklin, CFP®
First Vice President € Investments
Branch Manager
GOP candidates plan election parties
(Editor’s Note: This information from the came from the Hamilton County
Republican Party, which is always active.
The county Democratic Party has been less visible since John
Bailes left the leadership.)
Tuesday, May 4, is the Hamilton County Primary voting day.
There are four races that will be decided in the primary.
Republicans are inviting party members and friends to meet and watch the
results together. Three
different events will be held election eve.
They are:
Robin Smith for Congress,
Lee Hwy next to Sportsman's Warehouse, 6231 Perimeter Drive, 7 PM/
Bill Hullander for Trustee,
Hullander Election Headquarters, Intersection of HIghway 58 and 153,
Former Kopper Kettle restaurant. 7:00 PM.
Larry Henry
for County Commission, Heritage House, Intersection of Jenkins Road and
East Brainerd, 7:30 PM.
Other events relating to the Republican Party:
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