|Written by GSCR Staff|
|Thursday, 30 May 2013 09:03|
It may have been the ragin’ Cajun, James Carville, who made the line "It’s the Economy Stupid" famous (or infamous base on your politics) during the 1992 presidential debate. Whether it was him or not, is immaterial. The larger point is that the overall health of the US economy trumps all in national politics.
In Tuesday’s Goldman Guide we turned slightly political, addressing the three political scandals facing the president right now, and how the void of leadership can hurt the markets. At a minimum, the President will be politically exposed in the 2014 mid-terms, which could result in a loss of the Senate to the GOP, creating a true gridlock situation. This may not be all that bad if history is any indication with a huge boom economy in the mid to late 1990’s given the same situation. I digress.
The one ace in the hole for the president is the economy. As we mentioned yesterday, the University of Michigan’s Consumer Confidence Index rose to a 5-year high for May 2013. While this metric is purely a ‘feel’ from a survey, it indicates a sentiment that the general turn around will continue. The housing market continues to improve. A major indicator, the monthly jobs report, comes out next Friday. This number has continually improved, even with mixed results as a large portion of the improvement is due to people leaving the work force and therefore not counted. Finally, markets are still at record highs in the US.
Where are we going with this? The positive news on the CCI may have delayed the summer sell off for a day as the S&P opened Tuesday at 1664 and rose to 1674 on the news, before dropping to 1648 yesterday. On Tuesday, the Consumer Discrete Select Sector SPDR (NYSE – XLY) opened up from $56.80 on the close Friday up and ran up to $57.74 on the news, before the sell-off began and the ETF closed yesterday at $56.76.
We have definitely entered a general profit taking and volatility mode in the market. The VIX reached a 5 week high yesterday in inter-day trading. Investors must evaluate companies from a fundamental perspective and decide which stocks to hold. Traders on the buy side may wish to focus on big economic news and play positive news with day trading strategies. The Wall Street Journal has an excellent calendar for important dates.
To put a bow on it, expect a modest selloff this summer with some nice pops if the economy actually continues to improve. If trends continue, it should. As long as it does and the summer sell-off is not too big, the president, as we state in the Goldman Guide, should not be in any real peril, because after all, “It’s the economy stupid”.
Have a great day.
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm’s internally generated stock ideas while the Opportunity product reflects sponsored research reports.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company’s individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED “AS IS” WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com