Stocks Finish Flat after Short Week; Unemployment at 7.9%

in Market Commentary by

Market Digest – Week Ending 11/2

Hurricane Sandy closed US equity markets Monday and Tuesday. Stocks finished about flat for the remainder of the week. Better than expected employment reports offset increasing uncertainty surrounding the upcoming election. Home prices in August rose 2% from last year, the biggest increase in two years. Treasuries were little changed. Gold fell.

Weekly Returns

S&P 500: 1,414 (+0.1%)

MSCI EAFE: (0.0%)

US 10 Year Treasury Yield: 1.72% (-0.3%)

Gold: $1,677 (-2.0%)

USD/EUR: $1.283 (-0.9%)

Major Events

  • Sunday – The San Francisco Giants swept the Detroit Tigers for their second World Series victory in three years.
  • Monday – Hurricane Sandy slammed the US coast, causing loss of life, massive property loss and shutting stock markets for two days.
  • Monday – Consumer spending rose 0.8% in September, above most estimates.
  • Tuesday – The Case-Shiller 20 city home price index for August rose 2% from a year ago.
  • Tuesday – Disney announced it will buy Lucasfilm, owners of the Star Wars empire, for $4.05 billion in cash and stock.
  • Wednesday – Carl Icahn revealed he has taken a 10% stake in Netflix.
  • Thursday – The Institute for Supply Management’s US Factory index rose to 51.7 and the Conference Board’s consumer sentiment index rose to 72.2.
  • Friday – The Labor Department reported that employers added 171,000 jobs last week, ahead of most expectations. The unemployment rate rose to 7.9% as more workers entered the workforce.

Our Take

In four days, we will choose our President for the next four years. Every Presidential election has major implications, but in our opinion this one should have little impact on the stock market. Gridlock, for better or worse, is more entrenched than ever. The congressional elections won’t change this.

We are headed over the fiscal cliff regardless of Tuesday’s outcome, and tax rates will shoot up on New Year’s Day. But the reality is the “cliff” is more like a rolling hill. Most tax increases will be quickly reversed. The highest earners are more likely to see a low single digit increase under Obama. A small change for the highest earners is of little consequence to stocks.

One area with greater potential to impact portfolios is the fate of the qualified dividend tax rate, scheduled to increase from 15% to ordinary income. An Obama administration may be slightly less aggressive in reigning back taxes in this area. If so, dividend paying stocks will be disproportionately hurt, but some of this is already priced in.


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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk leads the Personal Capital Advisors Investment Committee and serves as the Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

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