Weekly Economic Update



|Harry D. Toro Presents: |

|MONTHLY ECONOMIC UPDATE |

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| | |

|MONTHLY QUOTE |February 2015 |

| |THE MONTH IN BRIEF |

|“It still holds true that man |Assumptions of a global slowdown sent stocks further down in January. The blue chips and the small caps both fell |

|is most uniquely human when he |more than 3% on the month. Gold and the dollar got off to a hot start for 2015, as did many foreign stock markets;|

|turns obstacles into |energy and crop futures mostly extended losing streaks. Housing indicators were mixed, and the latest data on |

|opportunities.” |consumer spending, inflation and retail sales raised some questions. The big economic news came from overseas as |

| |the European Central Bank announced a long-awaited easing effort; stateside, the Federal Reserve seemed to hint |

|– Eric Hoffer |that it was still considering raising interest rates this year.1 |

| | |

| |DOMESTIC ECONOMIC HEALTH |

|MONTHLY TIP |If institutional investors had felt as confident as American households last month, stocks might have performed |

| |better. January saw the Conference Board’s consumer confidence index reach an impressive 102.9, and the University|

|If you want to leave some of |of Michigan’s consumer sentiment index ended the month at 98.1.2 |

|your IRA to your children, a | |

|Roth IRA conversion may be a |While consumer confidence was rising, consumer spending abruptly tailed off. Commerce Department data showed it |

|great idea: the IRA they |retreating 0.3% in December. Retail sales also dropped 0.9% in the same month after two months of solid gains.2,3 |

|inherit could realize further | |

|tax-free growth. |On the upside, personal wages grew 0.3% in December, and the federal government announced that Q4 personal |

| |spending had advanced 4.3%, becoming the major factor in the 2.6% initial estimate of Q4 GDP released in late |

| |January.2,4 |

|MONTHLY RIDDLE | |

| |The latest Labor Department report showed more improvement. December saw the jobless rate dip another 0.2% to |

|It begins and ends with E yet |5.6%; the overall U-6 rate, which measures the marginally employed as well as the unemployed, also decreased to |

|it may contain only one letter.|11.2%. Thanks to 252,000 more Americans finding employment in December, 2014 became the nation’s best year for |

|What is it? |hiring since 2000.5 |

| | |

| |Looking at another key economic barometer, we see remarkably little inflation pressure stateside. The Consumer |

|Last month’s riddle: |Price Index dipped 0.4% in December following a 0.3% retreat in November. That meant the country experienced just |

|Isabella took her two children |0.8% inflation for 2014. The core CPI was flat in December, so its year-over-year change was 1.6%. As for the |

|to a place where stealing was |Producer Price Index, it pulled back 0.3% for December and rose just 1.1% for 2014; the core PPI rose 0.3% for |

|common and everyone wanted to |December, taking its 2014 gain to 2.1%.3 |

|run home. Where did the three | |

|of them spend an enjoyable |December saw a 0.3% rise in manufacturing production and a 0.1% dip in industrial output according to the Federal |

|afternoon?? |Reserve, but durable goods orders slipped 3.4% (they were also down 2.1% in November). The twin PMIs maintained by|

| |the Institute for Supply Management disappointed Wall Street: ISM’s December service sector PMI came in 3.1 points|

| |lower at 56.2, and its manufacturing PMI read 55.1 for December and 53.5 for January. These readings were solid, |

|Last month’s answer: |but decidedly beneath previous editions.2,3 |

|A baseball game. | |

| |In the face of this mixed bag of indicators, the Fed sounded pretty bullish. Its latest policy statement (January |

| |28) noted the economy expanding “at a solid pace” as opposed to the “moderate pace” noted in prior Federal Open |

| |Market Committee reflections. Nothing in the statement gave off impressions that the Fed would delay a rate hike |

| |until 2016.6 |

| | |

| |GLOBAL ECONOMIC HEALTH |

| |In late January, the European Central Bank unveiled a money-purchase program of proportions to rival QE3. The ECB |

| |announced it would buy €60 billion in bonds each month through September 2016. By weakening the euro, the central |

| |bank is aiding the economies of most eurozone countries, which are pegged heavily to exports.7 |

| | |

| |The ECB had to do something; annualized eurozone inflation reached -0.2% in December, the European Commission |

| |forecasts it at -0.6% for January, and it is projected to stay at +0.5% or less through 2020. For 2015, the |

| |eurozone economy is expected to expand only 1.2%; the euro area jobless rate was 11.4% in December, and that was a|

| |2-year low.7,8 |

| | |

| |Did China’s economy rev up a bit in January? No. January’s “official” China factory PMI dipped 0.3 points to 49.8 |

| |(meaning contraction) and its “official” service sector PMI dropped 0.4 points to 53.7. The HSBC/Markit China PMI |

| |stayed below 50 for another month (49.7). South Korea’s key manufacturing PMI had improved 1.5 points to 51.1 in |

| |December, and Indonesia’s rose 0.9 points to 48.5; India’s factory PMI fell 1.6 points to 52.9.9 |

| | |

| |WORLD MARKETS |

| |Indices in Europe and Asia mostly rose. Look at some of the progress made last month: FTSE 100, +2.79%; CAC 40, |

| |+7.76%; DAX, +9.06%; FTSE MIB, +7.84%; STOXX 600, +7.16%; Sensex, +6.12%; Hang Seng, +3.82%: Nikkei 225, +1.28%; |

| |S&P/ASX 200, +3.28%. Another glance reveals a few notable retreats – January losses of 0.75% for the Shanghai |

| |Composite, 6.20% for Brazil’s Bovespa, 6.75% for the Russian RTS, 5.09% for Mexico’s IPC All-Share.1 |

| | |

| |January saw the MSCI World Index fall 1.88%; the MSCI Emerging Markets Index gained 0.55%. The month saw losses of|

| |3.32% for the Dow Jones Americas index, 1.76% for the Europe Dow and 2.41% for the Global Dow; the Asia Dow, on |

| |the other hand, improved 2.73%.1,10 |

| | |

| |COMMODITIES MARKETS |

| |Gold had a tremendous month, with futures rising 8.38% on the COMEX to settle at $1,279.20 on January 30. Its |

| |ascent was mirrored by a 9.24% climb for silver, with an ounce of that commodity being worth $17.21 at January’s |

| |end. Platinum rose 2.38% on the month; copper dropped 10.91%. The U.S. Dollar Index surged north another 5.02% in |

| |January to end the month at 94.80.11,12 |

| | |

| |Apart from the greenback and precious metals, the commodities sector didn’t really offer much to cheer about. |

| |Light sweet crude fell further in New York: a barrel was worth just $48.24 on the NYMEX when the month ended. |

| |January also saw heating oil futures sink another 7.43% and natural gas futures give up another 8.20%. Crops |

| |mostly descended as well, with cotton losing 1.51%, coffee 3.80%, cocoa 8.12%, soybeans 5.79%, corn 7.23% and |

| |wheat 15.27%. It wasn’t all bad, as unleaded gasoline did rise 0.61% and sugar gained 1.79%.11 |

| | |

| |REAL ESTATE |

| |Mortgages got even cheaper last month: the interest rate for the 30-year fixed averaged only 3.66% according to |

| |the January 29 Freddie Mac Primary Mortgage Market Survey. That was down from 3.87% on December 31. Between the |

| |two surveys, average interest rates on the key mortgage types declined as follows: 15-year FRM, 3.15% to 2.98%; |

| |5/1-year ARM, 3.01% to 2.86%; 1-year ARM, 2.40% to 2.38%.13,14 |

| | |

| |New home sales soared in December: they were up 11.6% according to the Census Bureau, coming off a (revised) 6.7% |

| |drop in November. Existing home sales improved slightly in December as well – the National Association of Realtors|

| |found them rising 2.4%, much better than the (revised) 6.3% fall of a month before. NAR’s pending home sales |

| |index, on the other hand, fell 3.7% for December after a November gain of 0.6%.2,3 |

| | |

| |As for home prices, NAR said that the national median resale price was $208,500 in December – the best median |

| |price in six years, and up 5.8% from a year earlier. That year-over-year improvement surpassed the 4.3% gain in |

| |the 20-city Case-Shiller home price index for December.2,15 |

| | |

| |As for new projects, the Census Bureau noted a 1.9% decline in applications for building permits in December, but |

| |a 4.4% increase in groundbreaking which put total U.S. housing starts over 1 million for the first time since |

| |2005. Last year saw an 8.8% increase in housing starts.15,16 |

| | |

| |LOOKING BACK…LOOKING FORWARD |

| |Here was where things settled on January 30, the month’s last market day: DJIA, 17,164.95; NASDAQ, 4,635.24; S&P, |

| |1,994.99; Russell 2000, 1,165.39 (the RUT was down 3.26% YTD when January ended). The CBOE VIX was one of the best|

| |performers in January, gaining 9.22% on the month to 20.97. Bond yields went lower worldwide after the ECB easing |

| |announcement, and investors really ran to Treasuries – look at that real yield for the 10-year note as January |

| |ended.1 |

| | |

| |% CHANGE |

| |Y-T-D |

| |2014 |

| |5-YR AVG |

| |10-YR AVG |

| | |

| |DJIA |

| |-3.69 |

| |+7.52 |

| |+14.10 |

| |+6.36 |

| | |

| |NASDAQ |

| |-2.13 |

| |+13.40 |

| |+23.17 |

| |+12.47 |

| | |

| |S&P 500 |

| |-3.10 |

| |+11.39 |

| |+17.16 |

| |+6.89 |

| | |

| |REAL YIELD |

| |1/30 RATE |

| |1 YR AGO |

| |5 YRS AGO |

| |10 YRS AGO |

| | |

| |10 YR TIPS |

| |0.03% |

| |0.57% |

| |1.30% |

| |1.65% |

| | |

| | |

| | |

| |Sources: online., , - 1/30/151,17,18,19,21 |

| |Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not |

| |include dividends. 10-year TIPS real yield = projected return at maturity given expected inflation. |

| | |

| |Is downside risk increasing as we get into February? Could a correction happen? Market analysts aren’t ruling it |

| |out, as U.S. stocks didn’t especially get a sustained lift from the latest Fed policy statement or the ECB’s |

| |announcement of its stimulus. Still, what happens in January does not necessarily foretell what will happen during|

| |the rest of the year. Pessimists should note that January 2014 was even worse for the blue chips: the Dow lost |

| |more than 5%, but it gained more than 13% over the ensuing 11 months. Oil prices have been rebounding of late; |

| |earnings have been decent. Those two factors alone may give investors a bit more optimism as February unfolds.20 |

| | |

| |UPCOMING ECONOMIC RELEASES: Here is what is on tap for the rest of February: the January ISM service sector PMI |

| |and ADP employment change report (2/4), the January Challenger job-cut report (2/5), the Labor Department’s |

| |January jobs report (2/6), January wholesale inventories (2/10), December business inventories and January retail |

| |sales (2/12), February’s preliminary consumer sentiment index from the University of Michigan (2/13), January’s |

| |PPI, industrial output, housing starts and building permits and the January 28 Fed policy meeting minutes (2/18), |

| |the Conference Board’s latest leading indicator index (2/19), January existing home sales (2/23), the Conference |

| |Board’s February consumer confidence index and the December Case-Shiller home price index (2/24), January new home|

| |sales (2/25), January’s CPI and hard goods orders (2/26), and then the federal government’s second estimate of Q4 |

| |GDP, January pending home sales and the University of Michigan’s final February consumer sentiment index (2/27). |

| |

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|«RepresentativeDisclosure» |

| |

|This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This|

|information has been derived from sources believed to be accurate. MarketingPro, Inc. is not affiliated with any broker or brokerage firm that may|

|be providing this information to you. This information should not be construed as investment, tax or legal advice and may not be relied on for the|

|purpose of avoiding any Federal tax penalty. This is not a solicitation or recommendation to purchase or sell any investment or insurance product |

|or service, and should not be relied upon as such. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip |

|stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association|

|of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be |

|representative of the stock market in general. It is not possible to invest directly in an index. The Russell 2000 Index measures the performance |

|of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term |

|volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock |

|Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading |

|provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's |

|largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two |

|divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The |

|FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The CAC-40 Index |

|is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The DAX 30 is a Blue Chip stock market index|

|consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The FTSE MIB (Milano Italia Borsa) is the benchmark stock |

|market index for the Borsa Italiana, the Italian national stock exchange. The STOXX Europe 600 Index is derived from the STOXX Europe Total Market|

|Index (TMI) and is a subset of the STOXX Global 1800 Index. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY|

|STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially |

|sound companies listed on the Bombay Stock Exchange (BSE). The Hang Seng Index is a freefloat-adjusted market capitalization-weighted stock market|

|index that is the main indicator of the overall market performance in Hong Kong. Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo |

|Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. The S&P/ASX 200 measures the performance of the 200 largest |

|index-eligible stocks listed on the ASX (Australian Stock Exchange) by float-adjusted market capitalization. The SSE Composite Index is an index |

|of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The Bovespa Index is a gross total return index weighted by |

|traded volume & is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. The RTS Index (abbreviated: RTSI, Russian: Индекс |

|РТС) is a free-float capitalization-weighted index of 50 Russian stocks traded on the Moscow Exchange. The Mexican IPC index (Indice de Precios y |

|Cotizaciones) is a major stock market index which tracks the performance of leading companies listed on the Mexican Stock Exchange. The MSCI World|

|Index is a free-float weighted equity index that includes developed world markets, and does not include emerging markets. The MSCI Emerging |

|Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The Dow Jones Americas |

|Index measures the Latin American equity markets by tracking 30 leading blue-chip companies in the region. The Europe Dow measures the European |

|equity markets by tracking 30 leading blue-chip companies in the region. The Global Dow is a 150-stock index of corporations from around the world|

|created by Dow Jones & Company. The Asia Dow measures the Asia equity markets by tracking 30 leading blue-chip companies in the region. The US |

|Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international |

|investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an |

|assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future |

|results. Past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when |

|originally invested. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged.|

|Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If |

|assistance is needed, the reader is advised to engage the services of a competent professional. |

| |

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