This week, I attended The Money Show in Las Vegas, met with many of you during my presentations and fielded a number of well-thought-out questions. While there was some talk of Facebook’s initial public offering, a sense of caution about the near-term direction of the stock market was in the air as many of you, as well as me, are concerned with the number of uncertainties around the globe. These concerns were fueled early this week by Greek depositors withdrawing €700 million ($898 million) from the country’s banks, raising fears of a bank run amid the growing political disarray. Also this week, the Bank of England raised its short-term outlook on consumer-price inflation, and also lowered its outlook for British growth citing “the single-biggest threat to the recovery stems from the challenges within the euro area.” While the Greek caretaker government eventually agreed this past week to new elections, probably on June 17, the reality is that this ongoing Greek tragedy will continue for at least another four weeks, if not longer.
Despite some improvement in domestic housing starts and factory output measured by industrial production data, the conversation surrounding the fiscal cliff we face continues to get louder. The fiscal cliff refers to the expiration of Bush-era tax cuts and the payroll tax holiday, as well as the end of extended unemployment benefits and the automatic spending and budget cuts mandated by Congress if lawmakers fail to reach deficit reduction goals. This week, Goldman Sachs issued a report saying the U.S. economy could shrink as much as 4 percentage points in the first half of 2013 if Congress fails to address the expiration of $600 billion worth of tax breaks and jobless benefits by the end of this year. Reading between the lines, the Goldman forecast would put us back into a recession if a resolution is not reached. This potential situation would contrast to the moderate growth that currently is expected in 2013. The latest from Blue Chip Economic Indicators, which polls 50 forecasters, currently calls for growth near 2.5% in 2013, which is on par with 2012.
Add this situation to other uncertainties that include the fate of Obamacare, a tax overhaul and the outcome of the presidential election later this year, and I continue to see the market moving sideways, at best, in the coming weeks. That said, we could get an up day in the market here or there as traders look to capitalize on a would-be positive data point. An example of such a data point was this week’s read on April housing starts. On its face, the housing starts data was better than expected, but focusing on that lone data point fails to paint the full picture. Rather, when we view the April housing starts data in the context of more than 1.3 million foreclosed homes — and more on the way according to RealtyTrac — it looks more like the housing market may be bottoming instead of rebounding.
As I always say, it takes at least a few points to draw a straight line and this reasoning also applies to investing. We need to examine a number of data points to understand what is really going on, rather than simply listening to the barrage of headline-only news reiterated and regurgitated on the TV. After all, how can we make informed decisions if we don’t know what is really going on?
That is why each week I offer the latest confirming data points for my Great Eight PowerTrends — the more confirmation we have, the better we can sleep at night. Here are several of those data points from this past week:
This Week’s PowerTrend Data Points
- Living Longer Lives – Acknowledging that the growing obesity problem in the United States is real, more than 1,200 people gathered in Washington, D.C., last week for the Weight of the Nation 2012 conference. The Weight of the Nation also is a documentary series and public health campaign made in collaboration by HBO and the Institute of Medicine, along with the Centers for Disease Control and Prevention, and the National Institutes of Health, among others. These films that look at the severity of the obesity epidemic and its crippling effects on our health-care system can be viewed here.
- New Demand, New Solutions – Last week, I touched on improving brightness for white light emitting diode (LED) as a key step in LEDs breaking into the general illumination market. This week, Washington D.C., Mayor Vincent Gray and officials from the District Department of Transportation (DDOT) and the Department of the Environment (DDOE) completed the first phase of the relighting project in which energy-efficient, long-lasting street lights have replaced old, inefficient lights. The transition should cut the district’s annual carbon dioxide emissions by 719 tons. The LED-powered light fixtures are targeting to provide nearly 60% energy savings, compared to the old mercury vapor and high pressure sodium lights.
- The Rise and Fall of the Middle Class – Average gas prices in the United States have fallen from $3.91 per gallon a month ago to $3.72 per gallon and that equates to a 6% fall year-over-year. With NYMEX crude falling below $95 per barrel this week, we should see further moderation in gas prices in the coming weeks.
- Cashless Consumption – PayPal is hosting a media event next week where it will unveil the next batch of mega-retailers that are adopting the company’s online payment network at the register.
- Always On, Always Connected – The Western world may be in love with smartphones, but it’s Asia and Africa that see the highest percentages of mobile web traffic compared to desktop web traffic. In fact, according to a new report by Pingdom, in the past two years mobile web use has exploded by more than 190% in Asia and 150% in Africa. For some perspective, North America only saw a 69% increase in mobile web traffic share over the same period. Across the globe, mobile web use makes up about 10% of all web traffic. But in Africa and Asia, mobile web use is 15% and 18%, respectively, of overall web traffic, and as high as 40% in India. As smartphone and tablet adoption grows in these emerging economies, web traffic growth is set to explode and that bodes well for key infrastructure players.
Editor, PowerTrend Brief
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As we near the end of corporate earnings season and domestic economic data trickles in next week, the slow flow of new data likely will result in a choppy week for the market that will have little definitive direction. Here’s what I’ll be paying attention to next week:
Monday, May 21
Campbell Soup (CPB)
Dreams Inc. (DRJ)
Lowe’s Companies (LOW)
Urban Outfitters (URBN)
Tuesday, May 22
Existing Home Sales (April)
Autozone Inc. (AZO)
Avago Technologies (AVGO)
Best Buy (BBY)
Dell Inc. (DELL)(May)
DSW Inc. (DSW)
NetApp Inc. (NTAP)
PetSmart Inc. (PETM)
Wednesday, May 23
MBA Mortgage Index (Weekly)
New Home Sales (April)
FHFA Housing Price Index (March)
Big Lots (BIG)
Hormel Foods (HRL)
Toll Brothers (TOL)
Zale Corp. (ZLC)
Thursday, May 24
nitial & Continuing Jobless Claims (Weekly)
Durable Orders (April)
Costco Wholesale (COST)
Flower Foods Inc. (FLO)
Patterson Companies (PDCO)
Tiffany & Co. (TIF)
VeriFone Systems (PAY)
Friday, May 25
Michigan Sentiment Index (May)
- On Monday, May 21, listen for my weekly appearance on America’s Morning News to talk the economy, the stock market, stocks and more.