This past week was a disappointing one in terms of economic data and market returns. Of the more than 15 global economic data points released in the last few days that covered housing, employment, domestic and foreign purchasing managers’ indices, and personal spending, the vast majority pointed to a slowing global economy. My analysis is that a growing cloud of uncertainty has and will continue to pressure markets in the near term.
That larger cloud of uncertainty includes the impact of slowing growth around the globe, problems in the euro zone and what it may mean at home, Obamacare, a changing U.S. tax code, the federal debt ceiling, the November election and the increasingly talked about fiscal cliff at the end of the year. That domestic cloud, along with growing confirmation of the slowing growth in both Europe and Asia, has taken its toll on the stock market with the S&P 500 closing down 6.3% in May. The retreat caused the S&P 500 to give up its gains so far in 2012 and start June in the red.
Despite the market turmoil, a good investor is a proactive one. With that in mind, each week I offer the latest confirming data points for my Great 8 PowerTrends — the more confirmation we have, the better we can sleep at night. Here are several of those data points from this past week:
• Living Longer Lives – Reuters ran an article this week reporting that thousands of Americans aged 55 and older are going back to school — reinventing themselves to get an edge in a difficult labor market and hoping to rebuild retirement nest eggs that almost were destroyed by the recession. What’s prompting this trend? According to the Public Policy Institute of the AARP, a quarter of Americans 50 years and older used up all of their savings during the 2007-09 recession. About 43% of the 5,000 respondents who took part in the survey said their savings had not recovered.
• The Rise and Fall of the Middle Class – The Wall Street Journal ran an interesting and confirming story on the modern consumer in China. The article lists three key rules that companies need to follow to woo Chinese buyers. One, products should be consumed in public, directly or indirectly, and command huge price premiums relative to goods used in private. Two, the benefits of a product should be external, not internal. Three, products must address the need to navigate the crosscurrents of ambition and regimentation, allowing a person to stand out but still fit in. Read more about this fascinating article that underscores The Rise of the New Middle Class by clicking here.
• Cashless Consumption – VeriFone and PayPal just announced they’re teaming up to bring PayPal’s next-generation payment system to the country’s large retailers. While you already can use PayPal in about 2,000 Home Depot Stores, which I did last week, Verifone’s card transaction machines are found in 80% of the top 200 largest retailers in the United States. Aside from Verifone, PayPal has made deals with 15 retailers, including Toys R Us, J. C. Penney and Barnes & Noble that will allow consumers to pay for purchases with their cell phones.
• Better, Smarter America – A new study by staffing services giant ManpowerGroup found 34% of employers around the world report trouble filling jobs because of a lack of available talent. The percentage is unchanged from 2011 but up from the prior three years.
• Safety & Security – This past week, the “Flame” virus was discovered after having lurked for years inside Iranian government computers, spying on the country’s officials. Flame has been called the most complex computer bug ever discovered and security professionals say it marks a new milestone in the escalating digital espionage battle. Research firm Kaspersky Lab wrote the following about Flame in a dispatch that I received — Flame’s complexity and power exceeds those of all other cyber menaces known to date. Clearly, cyber security and malware are here to stay.
• Always On, Always Connected – As I have been saying for some time, the smartphone and tablet blood bath will take its toll on companies. This past week, Research in Motion pre-announced disappointing results for the current quarter and shared that it hired investment bankers — JPMorgan and RBC Capital — to assist in reviewing strategic alternatives. Cisco also announced it would discontinue its tablet offering that it had been using to target enterprise customers.
Each week, PowerTrend Profits subscribers get more of these confirming signs, as well as how we can profit from them by investing in companies that offer favorable, if not compelling, risk-to-reward ratios in their respective shares.
I will offer more analysis as conditions develop.
Editor, PowerTrend Brief
P.S. Today’s challenging market conditions require even more knowledge than ever for investors and traders like you to keep pace with the latest market intelligence to safeguard your portfolio and to profit from opportunities that only may be available for short periods of time. Join me at this year’s MoneyShow San Francisco, August 24-26, at the San Francisco Marriott Marquis to hear recommendations and advice about how best to profit in 2012 and beyond! Register FREE today by clicking here, by going to ChrisVersace.sanfranciscomoneyshow.com or by calling 1-800/970-4355 and mentioning priority code 027877.
The data flow will settle down next week, as will the number of companies reporting earnings. The one item that many, including me, will be watching closely will be the Fed’s Beige Book report for May that is set to be released on Wednesday. The Beige Book is published eight times per year and is comprised of each Federal Reserve bank’s anecdotal information on current economic conditions in its district. Many observers see it as a more real-time indicator of the economy than several of the formal data streams produced by the federal government that often are backward looking in nature. Here’s a greater look at what to expect next week:
Monday, June 4
Factory Orders (April)
Conn’s Inc. (CONN)
Dollar General Corp. (DG)
Hooker Furniture Corp. (HOFT)
Navistar International Corp. (NAV)
Shuffle Master Inc. (SHFL)
Tuesday, June 5
ISM Services Index (May)
Bob Evans Farms Inc. (BOBE)
Oxford Industries Inc. (OXM)
Ulta Salon Cosmetics & Fragrance Inc. (ULTA)
United Natural Foods Inc. (UNFI)
Wednesday, June 6
MBA Mortgage Index (Weekly)
Unit Labor Cost (1Q 2012)
Federal Reserve Beige Book (May)
Hovnanian Enterprises Inc. (HOV)
Measurement Specialties Inc. (MEAS)
Men’s Wearhouse Inc. (MW)
Pall Corp. (PLL)
Thursday, June 7
Initial & Continuing Jobless Claims (Weekly)
Consumer Credit (April)
Cooper Companies (COO)
IDT Corp. (IDT)
J.M. Smucker Co. (SJM)
Friday, June 8
Wholesale Inventories (April)
Duckwall-ALCO Stores Inc. (DUCK)
Oracle Corp. (ORCL)
• Listen for my weekly Monday appearance on America’s Morning News to talk the economy, the stock market, stocks and more.