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Bob Carey
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  Back to NASDAQ 5,000, with an Important Difference
Posted Under: Weekly Market Commentary Video
Bob Carey, Chief Market Strategist at First Trust Advisors L.P., discusses the developments in the market and provides his perspective on the NASDAQ hitting the 5000 level.
Posted on Wednesday, March 04, 2015 @ 6:46 AM • Post Link Share: 
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  A Snapshot Of European Equities in 2015
Posted Under: International-Global

 
View from the Observation Deck  
  1. Today’s blog post provides some consensus 2015 earnings estimates and price-to-earnings (P/E) estimates from analysts tracked by Bloomberg.
  2. Investors funneled a net $6.46 billion into European stock funds and ETFs for the 12-month period ended 1/31/15, according to Morningstar. Nearly $3.5 billion of it came in January 2015.
  3. From 2/28/14-2/27/15, the MSCI Europe Index posted a total return of -3.34% (USD), but when priced in euros the index posted a total return of 19.22%, according to Bloomberg.
  4. Please take a moment to read our recent post on the recent strength in the U.S. dollar (click here to view).  
  5. Every index in the chart has an estimated 2015 P/E below its respective 3-Year average, except for Sweden.
  6. The European Central Bank is scheduled to begin its trillion-euro quantitative easing initiative this month, according to Reuters.
This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The FTSE 100 Index is a capitalization-weighted index of the most highly capitalized companies traded on the London Stock Exchange. The CAC 40 Index reflects the performance of the 40 largest equities listed in France, measured by free-float market capitalisation and liquidity. The DAX Index is a total return index of 30 selected German blue chip stocks traded on the Frankfurt Stock Exchange. The SMI Index (Swiss Market) is a capitalization-weighted index of the 20 largest (represents around 85% of Swiss equity market) and most liquid stocks of the SPI (Swiss Performance Index) universe. The IBEX 35 is the official index of the Spanish Continuous Market and is comprised of the 35 most liquid stocks. The OMX Stockholm 30 Index is a market-weighted price index consisting of the 30 most actively traded stocks on the Stockholm Stock Exchange. The AEX-Index is a free-float adjusted market capitalization-weighted index of the leading Dutch stocks traded on the Amsterdam Exchange. The BEL 20 Index is a modified capitalization-weighted index of the 20 most capitalized and liquid Belgian stocks traded on the Brussels Stock Exchange. The OMX Helsinki Index includes all the shares listed on the Helsinki Stock Exchange. The MSCI Europe Index is a free-float weighted index designed to measure the performance of the developed equity markets in Europe.

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Posted on Tuesday, March 03, 2015 @ 2:09 PM • Post Link Share: 
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  US Economy and Credit Markets Week Ended February 27, 2015
Posted Under: Weekly Market Commentary

 
Treasury yields rose for the first time this month as lukewarm economic reports continue to cast doubt on the Federal Reserve’s willingness to raise rates in the near term. Wednesday, Germany was able to issue five-year government debt with a negative yield for the first time. Even so, prices are expected to rise further as the ECB starts making asset purchases. There are multiple countries in the Euro-area which are able to issue debt with negative yields, making US Treasuries comparatively attractive. Thursday’s report of the Consumer Price Index showed the CPI falling .7% in January. Energy’s 9.7% fall was the reason for the declining CPI as “core” CPI rose .2%. Real average hourly earnings rose 1.2% in January and are up 2.4% for the year. Also on Thursday, new orders for durable goods increased 2.8% in January – beating consensus expectations by 1.2%. While auto orders fell civilian aircraft and machinery contributed to the increase in orders. The Real GDP growth rate was reported for Q4 2014 on Friday and was revised to an annual growth rate of 2.2%. The GDP price index rose to a .1% annual rate of change and Nominal GDP growth, real GDP plus inflation, was revised down to a 2.3% annual rate. Major economic reports (and related consensus forecasts) for the upcoming week include: Monday: January Personal Income (.4%), Personal Spending (-.1%), Final February Markit US Manufacturing PMI (54.3, unch.) and February ISM Manufacturing (53.1); Wednesday: Prior Week MBA Mortgage Applications and ADP Employment Change (218K, +5K); Thursday: Prior Week Initial Jobless Claims (297K, -16K), January Factory orders (.2%, +3.6%) and February Change in Nonfarm Payrolls (235K); Friday: February Employment rate (5.6%, -.1%) and Trade Balance ($-41.5B, $-5.1B).
Posted on Monday, March 02, 2015 @ 9:25 AM • Post Link Share: 
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  US Stocks Week Ended February 27, 2015
Posted Under: Weekly Market Commentary

 
Last week, the S&P 500 Index returned -0.24% after three straight weeks of positive performance. Equities had a great February as the index returned 5.74% for the month. January existing home sales came in lower than expected on Monday and crude oil fell back below $50 a barrel. The index was mixed as it returned -0.03%. On Tuesday, investors listened to Fed Chair Janet Yellen’s comments on being patient for an interest rate increase to the Senate Banking Committee. She also expressed confidence in economic strength and the employment recovery. The index climbed 0.28% as the index hit a new all-time closing high of 2,115.48. The index traded within a 10 point range on Wednesday closing down -0.06%. The Fed Chair reiterated confidence and patience in her second day of testimony and new home sales came in higher than expected for January. Energy led the way down on Thursday as crude oil decreased $2.82 a barrel from the previous day’s close. There was positive economic news in durable goods orders, but negative news from US initial jobless claims which came in at 313K. This was an increase from the previous week’s 283K and higher than the consensus estimate of 290K. The S&P 500 index returned -0.13%. Stocks traded down on Friday with only two sectors in positive territory as the index returned -0.29%. Six of the ten economic sectors had negative performance for the week. The telecommunication services sector was the best performing sector with a 0.96% return. The consumer staples and consumer discretionary sectors followed with 0.86% and 0.69% returns, respectively. The energy sector’s -1.96% return was the worst performance of all the sectors and was followed by utilities and industrials which returned -1.05% and -0.96%, respectively. First Solar Inc., a designer and manufacturer of electricity-producing solar modules, turned in the best performance in the S&P 500 Index with a 21.88% gain. The stock jumped on the announcement of a joint venture with SunPower Corp. to create a new company. The next two best performers were Monster Beverage Corp. and Avago Technologies Ltd. with returns of 16.38% and 13.89%, respectively. This week will bring earnings news from Costco Wholesale Corp., The Kroger Co., Mylan Inc., AutoZone Inc., Brown-Forman Corp., Best Buy Co. Inc. and many others.
Posted on Monday, March 02, 2015 @ 9:22 AM • Post Link Share: 
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  Equity REITs Have Fully Recovered From Financial Crisis But Broader Financials Lagging Behind
Posted Under: Sectors

 

View from the Observation Deck  

  1. The all-time high for the FTSE NAREIT All Equity REITs Index was posted on 1/26/15, at a reading of 685.39. Its previous all-time high of 676.54 was set on 2/7/07, prior to the 2008-2009 financial crisis. It stood at 646.11 on 2/24/15.
  2. The all-time high for the S&P 500 Financials Index was posted on 2/20/07, at a reading of 509.55. It stood at 329.67 on 2/24/15, or 35.3% below its peak.
  3. REITs, which are classified as financial companies, have enjoyed a significant yield advantage over the broader financial sector since the end of 2009. This is notable considering investors’ post-crisis appetite for yield, in our opinion.
  4. The dividend yield on the FTSE NAREIT All Equity REITs Index stood at 3.49% on 2/25/15, according to Bloomberg. Its dividend yield has closed above 3.00% in every calendar year since 2009.
  5. The dividend yield on the S&P 500 Financials Index stood at 1.77% on 2/25/15, according to Bloomberg. Its dividend yield has closed below 2.00% in every calendar year since 2009.
  6. While equity REITs could potentially appreciate from current levels, investors should consider them primarily for their dividend income potential at this stage of their recovery.
  7. Financials, on the other hand, do represent a potential growth and income opportunity at current levels, in our opinion.

This chart is for illustrative purposes only and not indicative of any actual investment The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The FTSE NAREIT All Equity REITs Index is a free float adjusted market capitalization-weighted index that includes all tax qualified REITs listed on the major U.S. exchanges, while the S&P 500 Financials Index is a capitalization-weighted index comprised of 85 financial constituents.

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Posted on Thursday, February 26, 2015 @ 1:02 PM • Post Link Share: 
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  Technology & Financial Stocks Contribute Most To S&P 500 Dividend Payout
Posted Under: Equity Income

 

View from the Observation Deck  

  1. Today’s chart provides a snapshot depicting the level of contribution each of the 10 major sectors currently make to the dividend payout of the S&P 500, relative to the close of 2005.
  2. What investors may find interesting is that the dividend yield on the S&P 500 changed very little from 1.80% on 12/31/2005 to 1.99% to 2/17/15. There were a couple of major changes, however, on a sector level.
  3. The two sectors that have changed the most are Information Technology and Financials. Information Technology now ranks as the largest contributor, while the amount contributed by Financials was essentially cut in half.
  4. Today, only 45 of the 65 Information Technology constituents in the index distribute a dividend, so there is room for growth, in our opinion. Financials are still in recovery mode following the 2008-2009 financial crisis, when its contribution dropped to the 9.0% level in December 2009.
  5. Information Technology and Financials carried the two largest sector weightings in the S&P 500 at 19.5% and 16.0%, respectively, as of 2/24/15, according to S&P Dow Jones Indices.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance, while the S&P Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.

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Posted on Tuesday, February 24, 2015 @ 2:03 PM • Post Link Share: 
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  US Economy and Credit Markets Week Ended February 20, 2015
Posted Under: Weekly Market Commentary

 
Treasury prices fell for the third consecutive week after Eurozone finance ministers approved a four-month extension on Greece’s financial bailout. On Tuesday, the Empire Manufacturing report failed to meet expectations. January Housing Starts were below expectations on Wednesday due to poor weather and stagnant real incomes. The January producer price index declined more than expected, primarily due to falling energy prices and a stronger dollar. On Thursday, the February 14th Initial Jobless Claims report showed a decline in the number of applications filed for unemployment. Treasuries fell on Friday with news of Greece’s financial bailout extension and speculation the Federal Reserve will signal interest rate increases next week. Major economic reports (and related consensus forecasts) for the upcoming week include: Monday: January Existing Home Sales (4.95M); Tuesday: February Consumer Confidence Index (99.5); Wednesday: February 20 MBA Mortgage Applications, January New Home Sales (470K); Thursday: January CPI MoM (-0.6% MoM), January Durable Goods Orders (1.7%), February 21 Initial Jobless Claims (290k); Friday: 4Q GDP Annualized QoQ (2.0%), February Chicago Purchasing Manager (58.0), February University of Michigan Sentiment (94.0).
Posted on Monday, February 23, 2015 @ 8:49 AM • Post Link Share: 
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  US Stocks Week Ended February 20, 2015
Posted Under: Weekly Market Commentary

 
Major US stock indexes closed at all-time highs last week after Greece was able to reach an agreement with creditors on a four month extension on its bailout extension. Europe’s FTSE 100 returned .77% while the S&P 500 rose .68% for the week. Currently, the S&P 500 trades a P/E multiple of 18.62 and a dividend yield of 1.94%. Oil futures traded at the NYMEX closed the week at $50.34 per barrel, down from $53.78 the previous week. This caused energy stocks to lag the broader market with the S&P 500 Energy Index falling 2.36% last week. Several industry bellwethers reported earnings last week. John Deere reported a nearly 17% drop in first quarter sales. This was expected by the market as the company announced a downward revision to earnings in early January. Shares in Deere rose 2.65% for the week. Wal-Mart announced its decision to raise the wages of store employees to $9 hour, nearly a quarter higher than the current federal wage of $7.25. Shares in the retailer fell 1.76% last week. Last week brought more bad news for American Express. Year-to-date, shares in the credit card provider have fallen more than 13%. First, the company lost its exclusivity agreement with Costco, and last week, courts ruled that AmEx’s rules for merchants violated antitrust laws. Shares in fracking leader, EOG Resources, dropped more than 6% last week. The company announced it would make significant cuts to capital expenditures while communicating to investors that the company did not expect to increase production in 2015. Looking ahead to another busy week of earnings season, Dish Network, Ecolab, Comcast, Toll Brothers and Chesapeake Energy all report results.
Posted on Monday, February 23, 2015 @ 8:46 AM • Post Link Share: 
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  The Surge In The U.S. Dollar Is Noteworthy…But Not Rare
Posted Under: Conceptual Investing

 

View from the Observation Deck  

  1. From 6/30/14 through 12/31/14, the U.S. Dollar Index rose by 13.15% to an index reading of 90.27, according to Bloomberg.
  2. That surge essentially brought the index back in line with its 20-year average (year-end values). 
  3. As of 2/18/15, the index stood at 94.20, a level not seen in over a decade, and one that is well below levels posted from 1997 through 2002. 
  4. In 11 of the 20 calendar years featured in the chart, the index finished higher than its previous year’s closing mark.
  5. The surge in the U.S. dollar over the past eight months has negatively impacted the earnings of some U.S. multinational companies as well as generated either unrealized or realized losses on foreign securities held by some U.S. investors.
  6. A strong U.S. dollar, however, does not automatically translate into losses on foreign holdings, particularly with respect to equities.
  7. From 12/31/94 through 12/31/99, the U.S. Dollar Index rose by 14.82%. It was a strong period for equities. The 5-year average annual total return, priced in U.S. dollars, on the MSCI World (ex U.S.) Index was +13.08%, according to Bloomberg.

This chart is for illustrative purposes only and not indicative of any actual investment. Investors cannot invest directly in an index. The U.S. Dollar Index (DXY) indicates the general international value of the dollar relative to a basket of major world currencies. The MSCI World (ex-U.S.) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets.

To Download a PDF of this post, please click here.

Posted on Thursday, February 19, 2015 @ 3:08 PM • Post Link Share: 
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  A Good Old Fashioned Yield Rally
Posted Under: Weekly Market Commentary Video
Bob Carey, Chief Market Strategist at First Trust Advisors L.P., discusses the latest developments in the market and provides his perspective on the current yield rally. Lastly he gives an update on this quarter's earning season.
Posted on Wednesday, February 18, 2015 @ 11:55 AM • Post Link Share: 
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These posts were prepared by First Trust Advisors L. P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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Treasury Yields Are Up Sharply In The First Half Of February
US Stocks Week Ended February 13, 2015
US Economy and Credit Markets Week February 13, 2015
Technology Stocks Have Delivered Strong Returns In The Current Bull Market
S&P 500 Top-Line Growth Estimates (Updated)
US Stocks Week Ended February 6, 2015
US Economy and Credit Markets Week February 6, 2015
Asset Allocation Via The 4 Original Investment “Food Groups”
2015 & 2016 Earnings Snapshot
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