Consumer Spending, Housing Rise Fuel Ongoing Rally

All three major market indices finished April on the upswing.  The Dow Jones Industrial Average and the S&P 500 ended the month up 1.81% while the NASDAQ moved forward 1.88%.  This marks the fifth straight positive month for the Dow and the sixth consecutive up month for the NASDAQ and S&P 500.

  3/28/13 Close 4/30/13 Close Change Gain/Loss
DJIA 14,578.54 14,839.80 +261.26 +1.79%
NASDAQ 3,267.52 3,328.79 +61.27 +1.88%
S&P 500 1,569.19 1,597.57 +28.38 +1.81%

 

 


An unexpected growth in consumer spending in the first quarter of 2013 and a revitalized housing market have helped sustain a stock market rally that has lasted half a year.  An increase in American incomes and consumer spending allayed fears that the two percentage point rise in Social Security payroll taxes that took effect on January 1 would seriously impact consumer spending.  In fact, consumer spending increased 0.3% in January, 0.7% in February and 0.2% in March for the largest quarterly increase in that statistic in more than two years.

Not to be outdone, the latest S&P/Case-Shiller Home Price index recorded the highest annual growth rates in housing prices since May 2006 – up 8.6% in the top 10 markets and up 9.3% in the top 20 markets.  One of the many factors contributing to the housing recovery is the reduced unemployment figures, as first-time jobless claims dipped to near five-year lows last week at 339,000.

Even the now infamous AP Twitter hoax, in which a hacker hijacked the AP Newswire twitter feed with a bogus announcement of a White House terror attack resulting in a flash crash that plunged the Dow 136 points in seconds before quickly recovering, could not stem the momentum of the markets.

That said, most economists have lowered their GDP forecasts for the second quarter of 2013 due in part to the lingering effects of the fiscal cliff debate in late 2012.  And, starting in July, the Bureau of Economic Analysis, the agency tasked with calculating our national GDP, is overhauling the method by which it tracks the growth of the U.S. economy.  The new accounting will give more weight to intangible and intellectual assets of companies.  The revisions will result in an increase in our current GDP by some $16 trillion, or 3%.  However, Raymond James Chief Economist Scott Brown says this doesn’t mean that the economy is “stronger than we thought.”

“The level of economic activity and the pace of growth are whatever they are,” said Scott. “What’s changing is how we measure it.”

Please feel free to contact me with any questions about the financial markets and how they may impact your long-term financial plan.  I look forward to speaking with you.  

Sincerely,

Jeremy Lott, CFP®
Financial Advisor

 

Investing involves risk, and investors may incur a profit or a loss. Past performance is not an indication of future results. Investors cannot invest directly in an index. The Dow Jones Industrial Average is an unmanaged index of 30 widely held stocks. The NASDAQ Composite Index is an unmanaged index of all common stocks listed on the NASDAQ National Stock Market. The S&P 500 is an unmanaged index of 500 widely held stocks. The performance mentioned does not include transaction costs which would reduce an investor’s return.

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