Freezing Temperatures Cool off Economic Data
Cold temperatures across the United States set records to start off 2014, but the weather wasn’t the only thing cooling off. Stock markets around the globe dropped in January after offering investors fair returns in 2013. Despite a rebound in stock returns for the month of February, economic data from the United States has been disappointing as of late. Job creation appears to have slowed and jobless claims ticked upwards.
Although unimpressive economic data has been surfacing in the United States, Federal Reserve Chair Janet Yellen plans to keep tapering (slowing down purchases of financial assets) on a steady downward trend unless there is a significant change in the economic outlook. Economists believe that cold winter weather is partly to blame for the slowdown in US economic activity. One can decipher that investors believe the same – that weather is to blame – as stocks have resumed their 2013 upward rally. The S&P500 index has yet again closed at a record high with a reading just above the 1,850 mark. Although economic data in the United States has been weak as of late, housing continues to be a bright spot. The seasonally adjusted rate of 468,000 sales of new family homes is at the highest level since July 2008. As long as the rally continues investors will be content, but upcoming economic data will be watched closely to determine if cold weather was to blame or whether a larger economic trend is emerging. Let us be optimistic that warmer weather will heat up economic data and stock markets will continue their upward trend.
“Part of that softness [in economic data] may reflect adverse weather conditions. But at this point it’s difficult to discern exactly how much.”
-Janet Yellen, Chair of the Board of Governors, United States Federal Reserve
This newsletter was prepared solely by Bruce Morrison who is a registered representative of HollisWealth™ (a division of Scotia Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada). The view and opinions, including any recommendations, expressed in newsletter are those of Bruce Morrison only and not those of HollisWealth. TM Trademark of The Bank of Nova Scotia, used under license. Morrison & Partners Wealth Strategies is a personal trade name of Bruce Morrison.