Monthly Economic Update November 2012
Beginning with the aftermath of Hurricane Sandy and ending with a U.S. government fiscal stalemate, November was an eventful month. The election changed very little in terms of government leadership, key players, or political dynamics. Democrats retained the White House and gained seats in both chambers of Congress. U.S. Government remains divided, however, with Democrats retaining the Senate and a solid Republican majority still in the House. Furthermore, Boehner, Reid, Pelosi, and McConnell have retained their respective leadership positions in the 113th Congress.
Post-election, nearly all attention turned to the so-called fiscal cliff. The scheduled set of year-end tax increases and spending cuts all but overshadowed a number of other important developments during the month. For example, third quarter U.S. GDP growth was revised up to 2.7%, U.S. consumer confidence hit a new post-crisis high, and Thanksgiving weekend holiday sales were encouraging. Internationally, Chinaâ€™s economy showed evidence of bottoming and reacceleration and Greece successfully negotiated its next round of bailout funding and a two year extension of its timeline to meet deficit targets. On a more somber note, continuation of Mid East tension resulted in an eight day period of dramatic hostility between militants in the Gaza Strip and Israel.
As for the fiscal cliff, by month end it was clear that little progress had been made. Republicans have agreed to higher tax revenue, but not in the magnitude suggested by Obama, and not through an increase in tax rates. Democrats are firm on higher tax rates for the wealthy and show little appetite for Republican desired structural changes to entitlement programs (Medicare, Medicaid, and Social Security). The first formal proposal, offered by Obama, was literally laughable to Republicans and well off the mark of anything that could be considered sincere. The GOP has not yet countered with a proposal of their own. Yes, the election changed little.
Novemberâ€™s Economic Releases
The S&P 500 gained 0.6% for the month and is now up 15.0% for the year. Developed international equity markets, as defined by the MSCI EAFE index, were up 2.4% in November while the MSCI Emerging Markets index rose 1.3%. Year-to-date, international developed and emerging markets are up 13.7% and 12.7%, respectively.
In the fixed income market, the Barclays U.S. Aggregate index gained 0.2% for the month and the yield on the 10-year U.S. Treasury bond fell slightly for the month to end at 1.62%. For the year, the Barclays U.S. Aggregate is up 4.4%. High yield credit spreads rose significantly by mid month, but rallied materially by month end to show little net change for the period. Spreads remain modestly below the 15 year average. The Barclays High Yield index gained 0.8% in November and is up 14.0% this year. International bonds lost 0.1% for the month to finish up 4.6% for the year-to-date. Lastly, the Dow Jones UBS Commodity index was flat in November and the Dow Jones U.S. Real Estate index gave back 0.6% for the month.
This market commentary was produced by Summit Financial Resources, Inc., 4 Campus Drive, Parsippany, NJ 07054. Tel: 973-285-3600, Fax: 973-285-3666. Source of performance: MorningstarÂ®. Indices are unmanaged and cannot be invested into directly. The investment and market data contained in this newsletter is not an offer to sell or purchase any security or commodity. Standard & Poorâ€™s 500 Index (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The MSCI EAFE and Emerging Markets Indexes were created by Morgan Stanley Capital International (MSCI) and designed to measure equity market performance in global developed and emerging markets, respectively. The Barclays Aggregate Bond Index is a market capitalization-weighted index comprised of government securities, mortgagebacked securities, asset-backed securities, corporate securities, and a small number of foreign bonds traded in the U.S. It is used to represent the universe of bonds in the domestic market. REITs, Real Estate Investment Trusts, are securities that invest in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, however, have liquidity constraints. Past performance does not guarantee future results. Information throughout this Newsletter, whether stock quotes, charts, articles, or any other statement or statements regarding markets or other financial information, are obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. Neither we nor our information providers shall be liable for any errors or inaccuracies, regardless of cause, or the lack of timeliness of, or for any delay or interruption in the transmission thereof to the reader. To unsubscribe from this investment newsletter please reply to this email with â€œunsubscribeâ€ in the subject. Opinions expressed are subject to change without notice and are not intended as investment advice or a guarantee of future performance. Consult your financial professional before making any investment decision. with â€œunsubscribeâ€ in the subject. Opinions expressed are subject to change without notice and are not intended as investment advice or a guarantee of future performance. Consult your financial professional before making any investment decision.