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Weekly Economic And Market Reviews 04-22-2012 | Market Gained On Solid Earnings And Decent Spanish Bond Auctions

Top Stories Last Week

  • Equity Markets Were Slightly Higher

U.S. stocks ended a volatile week slightly higher, with solid earnings reports from some of the nation's biggest firms. GE, Microsoft and McDonald's all got lift from stronger results. Bank of America and Morgan Stanley beat the estimates. The Dow ended the week up 1.4% and the S&P 500 added 0.6%, while the Nasdaq Composite shed 0.4% on concerns about Apple earnings. Apple, which will report earnings this week, fell under $580, dragging the company more than 10% below a recent record high of $644.

  • US Retail Sales Increased More Than Forecast, But Housing Starts Dropped to Five-Month Low

An improving job market and stock market gains were giving households more confidence to increase spending in the face of higher gasoline costs. Retail Sales climbed by 0.8% in March, almost two times higher than the forecast. The optimism on economic outlook was tempered by the unexpected drop of 5.8% in the housing starts. Builders began work on fewer homes in March than in February, signaling the housing recovery may take time to gain a solid footing.

  • Euro-zone Crisis and Spanish Bond Auctions

The Spanish bond auction of about €2.5 billion met with decent demand on Thursday. The 10-year bonds were auctioned at a yield of 5.74%, but that did not completely quell the nervousness of investors. The average yield for the 10-year bond dipped in its initially, but then reversed direction and rose to more than 5.9%.

  • IMF Upgraded World GDP Growth to 3.5% in 2012

International Monetary Fund (NYSE:IMF) released new economic forecasts this week. The world GDP was set to grow by 3.5% this year and by 4.1% in 2013. The risks still lied ahead: the euro crisis and fiscal austerity in the developed countries, upheaval in the Middle East and possibilities of hard-landing in the countries such as China.

  • India and Brazil Cut Interest Rates to Boost Economic Growth

Reserve Bank of India cut its benchmark interest rate for the first time in three years, by 50 basis points to 8%. After thirteen consecutive rises of interest rates to fight inflation, the central bank has become more concerned about India's decelerating economy. Brazil also cut interest rates for the sixth time, by 75 basis points to 9% to boost its slowing economy.

  • China Loosened the trading limits for RMB to 1%

In its effort to liberalize its currency, China took a moderate step to loosen the trading limits for the yuan, allowing the exchange rate against dollar to fluctuate by up to 1% of the reference rate set by the People's Bank of China each day.

Top Stories to Watch This Week

  • Federal Reserve Policy Meeting

The Fed will conclude its two-day meetings on Wednesday. It is expected that the Fed will keep interest rates at 0 - 0.25%. Most economists don't expect the Fed to do QE3 in the near term.

  • Manufacturing Activities in Euro-zone

Euro-zone PMI manufacturing index is expected to improve to 48.1, still indicating contraction.

  • Full-Swing Earning Season In US and Europe

The earning season is in a full-swing. In the US, Apple, Netflix and Boeing will report earnings this week. In Europe, Peugeot, Renault and Daimler report earnings.

  • US GDP and Housing Data

The first-quarter GDP in US is expected to grow by 2.6% YOY. Housing data on new home sales and Case-Shiller Index will show the housing markets are slowly finding their bottoms.

Weekly Performance Summary

All the portfolios rose as results of positive performance of all risk assets during the week.

Table 1: ETF Performance

Asset Class Return     Last Week Return MTD Return YTD Return
Equities          
  SPY US Large Cap 0.59% -2.03% 10.40%
  IWM US Small Cap 0.84% -3.14% 9.10%
  EFA Developed Market Equity 2.16% -2.62% 7.91%
  VWO Emerging Market Equity 0.42% -1.66% 11.88%
Dividend Assets          
  IYR US REIT 2.51% 0.35% 11.01%
  AMJ US Energy Master Trust 1.91% 0.66% 2.26%
Commodities          
  GLD Gold -0.81% -1.59% 4.97%
  GSG Commodity -0.64% -1.27% 4.12%
Bonds          
  HYG US High Yield 0.52% 0.16% 2.78%
  AGG US Bond 0.11% 0.79% 0.93%
  TIP US Treasury Inflation Indexed Bond 0.03% 1.52% 2.35%
  IEF US Treasury Bond 0.19% 2.16% 0.29%
  TLT US Long Term Treasury Bond 0.20% 4.61% -2.74%
  SHY US Short Term Bond 0.04% 0.18% 0.05%

Table 2: Portfolio Performance

Portfolio Solutions WTD MTD
(1 day delay)
YTD
(1 day delay)
1-YR
(as of 12/11)
5-YR
(as of 12/11)
10-YR
(as of 12/11)
Aggressive 0.8% -1.5% 6.9% 12.4% 16.4% 16.1%
Moderate 0.7% -1.1% 5.6% 12.4% 14.8% 14.4%
Conservative 0.6% -0.3% 4.4% 12.5% 13.7% 12.8%
Defensive 0.4% 0.3% 3.2% 13.2% 12.5% 11.1%
Concentrated Portfolio 1.7% -1.4% 4.7% 12.1% 19.1% 19.3%
S&P 500 Index 0.6% -2.0% 10.4% 2.0% -0.3% 2.9%
Barclays Bond Index 0.1% 0.8% 0.9% 10.3% 6.9% 5.8%
CPI Inflation       3.2% 2.3% 2.5%

For more information about the multi-asset investment strategies, please visit allseasoninvesting.com.

About ALL SEASON INVESTING: All Season Investing is an investment blog, created in December 2011 to offer investors insights and researches on how to implement a dynamic multi asset allocation strategy with the low-cost index funds or ETFs to achieve consistent returns while limiting downside risks through all stages of a market cycle.

Disclosure: I am long SPY, IWM, EFA, VWO, IYR, AMJ, GLD, GSG, HYG, JNK, AGG, TIP, IEF, TLT, VNQ.