Permanent Value

Weekly Update: April 19- 23, 2010

Michael La Salle
April 23rd, 2010

Stocks Up, Greece Debt Still an Issue

The stock markets rallied this week despite continued concerns over Greece’s debt situation and talk of financial regulation reform in the senate as the S&P 500 was up 2.11% and the Dow Jones Industrial Average rose 1.68% on the week.

In economic news, the Conference Board’s index of leading economic indicators was up 1.4% month over month in March.  This comes in higher than the expected change of 1.1%.  Sales of existing homes also rose unexpectedly in March as the National Association of Realtors announced sales of an annualized 5.35 million.  The median sales price also rose 3.7% to $170,700 in March.  New home sales also surprised as sales in March jumped by 26.9% to an annualized rate of 411,000, coming well above the expected annualized rate of 330,000.

In earnings news, of the companies in the S&P 500 who have already posted first quarter earnings, 84% have exceeded analysts’ expectations.  Notable names this week include Apple, American Express, Boeing, and Citigroup who beat expectations of $0.00, by posting earnings of 15 cents per share.

What opportunities are ahead?

Emerging markets have long been looked at as a largely risky investment.  But in recent years, investments in emerging markets have been becoming more and more inviting.  The populations of emerging markets have been growing at a faster pace than developed markets for some time, and it looks as if it will continue for the foreseeable future, providing a growing workforce and consumer market. 

It is estimated that the economies of the BRIC countries, Brazil, Russia, India, and China, will grow at a pace of more than two times that of some major developed markets such as the United States, France, and Japan in 2010 alone.  Brazil, the B in BRIC, in particular has caught the eye of many investors looking to take advantage of the growing economy.

Brazil is Latin America’s largest economy and the tenth largest in the world.  It is estimated by 2050, Brazil will jump to the fourth largest economy in the world, and grow by 6% in 2010 alone.

Brazil does have some problems that it needs to overcome before it can become an economic superpower of the world.  Crime, corruption, and underground black markets have slowed economic growth on a large scale in the past, but the Brazilian government is taking actions to correct these problems.

Sometime this year, the government of Brazil is expected to announce the second phase of its $342 billion infrastructure plan to aid its infrastructure system that is in dire need of repair.  Brazil is already a top exporter of iron ore and steel, and has recently found large new oil beds off the shores of southern Brazil.  The Brazilian government also boasts large cash reserves, which help soften the blow of an economic downturn by providing quick credit flows to institutions.

All in all, as Brazil gets ready for the 2014 World Cup and the 2016 Summer Olympics, there will be a lot of room for the economy to thrive for years to come.

Market Returns

  This Week Year to Date Last Year Last 5 Years
S&P 500 2.11% 9.09% 40.44% 5.59%
Dow Jones Industrial Average 1.68% 7.75% 39.12% 10.62%

 

Next Week’s Economic Releases

April 27 – Consumer Confidence

April 29 – Jobless Claims

April 30 – Gross Domestic Product, Consumer Sentiment