Yesterday there was lots of doom and gloom being reported with Europe raising its ugly head again. And today Spain is providing a drag on market sentiment this morning, as Moody's has finally decided to downgrade the country's credit rating by one notch from AAA to Aa1, citing weak growth prospects (where have these Moody's guys been?). Ireland is also a source of concern as the country's central bank releases its assessment of bailout costs, saying Irish banks could need another $19.4 billion in capital and that nationalized Anglo Irish bank could need more than $40 billion to cover expected losses. I guess in about 6 months Moody's will realize there is a problem here too and downgrade their credit rating too!
Here at home today there is a lot of economic events taking place. One potential mover today could be the Labor Department's weekly report on initial jobless claims which is expected to come in at 460,000, a slight drop from last week's 465,000 (release set for 8:30 am ET).
At the same time we will get the final estimate of third quarter GDP. Consensus forecasts call for a 1.6% annual growth rate for the U.S. economy, unchanged from the last reading a month ago.
Then at 9:45am ET, the Chicago Purchasing Managers Index is seen coming in at 56.0 for September, down slightly from August's 56.7.
Fed chairman Ben Bernanke, AKA Helicoter Ben, will be testifying before the Senate Banking Committee at 10am ET on the implementation of the Dodd-Frank financial regulation reform law. Also testifying: FDIC Chair Sheila Bair, SEC Chair Mary Schapiro, CFTC Chairman Gary Gensler, and others. This should cause some ripples in financial stocks.
For TSP funds it appears 1148 on the S&P 500 has now become a point of strong resistance.......
We need a catalyst to go higher.
Here are some other items I found interesting........
I received this chart from Mark (Source: Haver, BLS, First trust Advisors). The chart compares the performance of the S&P versus unemployment.
One year average return after peak since 1948: 17.7%
Two year average return after peak since 1948: 21.4%
One year average return after trough since 1948: -1.96%
Two year average return after trough since 1948: 8.5%
And from the Big Picture and the Economist……
Global Public Debt Clock
Global Public Debt Clock, from The Economist:
Track and forecast public debt in countries around the world, is now live on the
Buttonwood Gathering website. The Global Public Debt Clock provides a graphic perspective on an important and much discussed global economic issue.
Global public debt for 2010 is close to $40 trillion and is predicted to rise to over $42 trillion in 2011. In 2009, global debt was just under $37 trillion:
-US public debt is currently at $8.5 trillion, 58 % of GDP. It is predicted to rise to $9.5 trillion in 2011, which will be 63.1% of GDP.
-Japan’s public debt is currently $10.6 trillion, 196.1% of its GDP
-Greece’s public debt is currently $374.6 billion, 127.8% of its GDP.
-Chinese public debt is approximately $949 billion, 17.3% of its GDP.
Now if The Economist would make this an embeddable widget, they would be on to something . . .
From the Business Insider………
Global Debt Cycle
CHART OF THE DAY: Where Every Major Country Is In The Global Debt Cycle
Societe Generale has mapped out the world by each country's place in the global debt cycle.
The cycle starts with countries paying down debt, followed by growth with little debt, then a rapid increase in leverage, closing with the bubble bursting.
Every major developed country fits on a part of the chart.
Right now, the U.S. is starting over, paying down debt and a long way from the growth portions of the cycle. At the opposite end of the spectrum are Brazil and China, ramping up growth and increasing debt.
Might be a good graph to follow if you're someone who plays the markets by country.
Mid Term Elections and Consumer Confidence - Tuesday, September 28, 2010
Today's weaker than expected Consumer Confidence report for the month of September certainly isn't welcome news for Democratic members of Congress. As George Bush I learned in 1992, it's the economy stupid, and with Democrats in control, voters are likely to take out their frustrations on the party in power. The table below highlights the results of US mid-term elections since 1970 and summarizes how many seats the party of the President gained or lost in the mid-term elections. For each year, we also highlight the most recent Consumer Confidence reading ahead of that year’s mid-term elections.
As shown, no matter what the Consumer Confidence reading is leading up to the mid-terms, it is common for the President's party to lose seats. While one would think that lower readings in Consumer Confidence would have some correlation with the number of seats the party in power loses, the reality is that voters have been just as prone to 'throwing the bums' out no matter what their mood. True, in the two other periods where Consumer Confidence was in the 50s leading up to the mid-terms (highlighted in grey), the party in power lost an average of 37 seats in the House. However, back in 1994 when Democrats lost 54 seats in the House, Consumer Confidence was at 89.1 (67% above current levels), and in 2006 the Republicans lost 30 seats in the House when Consumer Confidence was at 105.1 (98% above current levels).
The table below was originally published in an August report for Bespoke Premium clients where we analyzed market returns during mid-term elections.
