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Scott Minerd
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As Chairman of Guggenheim Investments and Global Chief Investment Officer, Mr. Minerd guides the Firm’s investment strategies and leads its research on global macroeconomics. Prior to joining Guggenheim Partners, Mr. Minerd was a managing director at Morgan Stanley and Credit Suisse. He is... More
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  • Sound Fundamentals But Fatigue In The Markets 2 comments
    Apr 10, 2013 10:43 AM

    Although economic fundamentals continue to strengthen, the run-up in asset prices that has unfolded over the past half-year appears to be at risk of a temporary set-back.

    The U.S. economy continues to improve, and the housing market and construction spending in particular will make larger contributions to GDP than they have in years. Markets, though, have a tendency to occasionally fall out of line with fundamentals. In 2011, for instance, the economy was gaining strength, but a temporary pull-back in the markets put stocks off nearly 20%, and high yield and bank loan spreads exploded.

    Today it appears that the rally that has been in place since the fall of 2012 is becoming frayed. From credits to stocks, there are indications of tiredness, with each advance posting less robust gains than the prior one. This does not portend a bear market, but it does appear increasingly likely that despite the favorable longer-term economic outlook, we will see some sort of correction or consolidation in the near-term.

    Recovering Housing Market Fueling Construction Job Growth

    Five years since the last recession started, payrolls in the U.S. private sector are still 2.9 million less than pre-recession levels. The construction sector, which usually employs only 6% of U.S. total jobs in the private sector, has lost 1.7 million jobs during the same period. With the recovery in the housing market accelerating, hiring in the construction sector is regaining momentum. Over the past three months, construction payrolls have increased by 111,000, accounting for approximately 18% of total job growth in the private sector.


    (click to enlarge)

    Source: Bureau of Labor Statistics, Bloomberg, Guggenheim Investments. Data as of 2/28/2013.

    Economic Data Releases

    U.S. Consumer Measures Positive
    • Fourth quarter GDP was revised up to 0.4% in the third revision. Consumption was revised down to 1.8%, while investment and net exports were up.
    • University of Michigan consumer confidence was revised sharply upward in March, contributing to four consecutive months of increases.
    • Personal income grew 1.1% in February, a strong rebound from January's negative growth.
    • Personal spending was up 0.7% in February, the highest since September.
    • Initial jobless claims rose to 357,000, an increase of 16,000 since the previous week.
    • The ISM Manufacturing Index dropped in March by the most since July 2011, from 54.2 to 51.3.
    • Construction spending gained a more-than-expected 1.2% in February.
    • Pending home sales fell 0.4% in February, after January's 3.8% gain.
    • Factory orders grew 3.0% in February, the best in five months.
    Continued Malaise in Europe, China Manufacturing Picks Up
    • Eurozone unemployment remained at 12.0% in February, the highest on record.
    • The eurozone manufacturing PMI for March was revised up slightly, from 46.6 to 46.8. PMIs in France and Germany also ticked up after revision.
    • German retail sales rose for the second consecutive month during February.
    • German unemployment in March rose 13,000, while the unemployment rate remained at 6.9%.
    • Retail sales in Italy fell 0.5% in January, the second consecutive month of negative growth.
    • China's official manufacturing PMI rose to an 11-month high of 50.9 in March.
    • Industrial production in Japan unexpectedly fell for the first time in three months in February.

    This article is distributed for informational purposes only and should not be considered as investing advice or a recommendation of any particular security, strategy or investment product. This article contains opinions of the author but not necessarily those of Guggenheim Partners or its subsidiaries. The author's opinions are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Guggenheim Partners, LLC. ©2013, Guggenheim Partners. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Comments (2)
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  • Rigorous
    , contributor
    Comments (432) | Send Message
    Fatigue in the market? What markets are you looking at? The real holly grail of S&P above 1576 the all time intra-day high was smashed, pulverized, wiped out and now is history.


    There is a new paradigm. This time it is different.
    10 Apr 2013, 11:03 AM Reply Like
  • Rigorous
    , contributor
    Comments (432) | Send Message
    I know I know I misspelled.


    Recessions are obsolete because structural formations prevent wages and prices to fall. There has to be a new monetary system to adapt to this.
    10 Apr 2013, 11:07 AM Reply Like
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