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Market Insights

Market Insights Y1 Banner - Market Insights Y1 Banner - WorldView 1Q 2015

Weekly Insights

Week of March 2th, 2015

Weekly Market Recap
Start the week off right with this one-page snapshot of headlines and market performance.
Weekly Market Podcast
Start every week by listening to our market strategists' commentary.
Updated as of: 03/02/15
Weekly Economic Update
Stay current on the economic landscape and note changes from week-to-week.  
A second estimate of 4Q 2014 real GDP put growth at 2.2% q/q saar, below the first estimate of 2.6%. The downward revision largely came from a slower inventory build, which means that inventories should be less of a drag on 1Q 2015 growth. A decline in government spending and a rising trade deficit lowered 4Q GDP growth from 5.0% experienced in 3Q 2014. However, personal consumption increased by 4.2%, the strongest increase since 1Q 2006, reflecting an increase in spending on nondurable goods and services. Despite the downward revision, the U.S. economy continues to grow at an above-trend rate.
In the January employment report, nonfarm payrolls rose by 257,000 and the unemployment rate rose to 5.7% on higher participation in the labor force, remaining below the 50-year average of 6.1%. Hourly earnings rebounded from the December report by 0.5%, resulting in 2.2% growth over the past year. Initial jobless claims came in higher at 313,000, although we still expect a strong employment print for February.
S&P 500 operating earnings are estimated to be $26.67 for the fourth quarter, representing year-over-year growth of -5.6%. Lower earnings were mainly due to low oil prices, a strong dollar, and pension write-offs.
Consumer inflation fell to -0.2% year-over-year in December as measured by headline CPI. Core CPI was flat from December at 1.6% year-over-year. Final demand producer inflation was down in January (-0.1% year-over-year), with weakness coming from a 10.3% monthly drop in energy prices. Additionally, import prices decreased 2.5% month-over-month driven by falling energy prices and a stronger dollar, further illustrating deflationary pressures.
In Janet Yellen's semi-annual testimony to Congress she reaffirmed the strength of the labor market, maintained that rate increases will be data dependent, and provided additional color around inflation expectations that suggest that the Fed remains on track to begin policy normalization in the middle of this year. The latest FOMC statment indicated that, in addition to employment and inflation, the Fed is also watching international developments when considering appropriate policy action.
  • Volatility caused by the timing and communication of Fed tightening.
  • Political risk potentially caused by Middle East turmoil and lower oil prices.
  • Deflation worries in other developed economies outside of the U.S.
  • Volatility caused by sharp swings in commodity prices and exchange rates.
  • A slow upward trend in earnings (despite special factors depressing 4Q 2014 numbers), coupled with low interest rates, still make stocks look attractive in relative terms.
  • Cyclical and small cap stocks are generally favored in a rising interest rate environment.
  • High yield bonds look more attractive than Treasuries, but a diversified approach to fixed income investing seems appropriate given likely Fed tightening in 2015.
  • Despite disappointing returns due to a stronger dollar in 2014, international exposure is still warranted given growth prospects abroad.

Guide to the Markets

Guide to the Markets

February 3, 2015 | TOOL

Our popular Guide to the Markets illustrates a comprehensive array of market and economic trends and statistics through clear, compelling charts you can share with your clients.

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Timely Research

Market Bulletins

Feb 13, 2015 | DOCUMENT

Market Bulletin: 4Q14 Earnings season recap: Earnings down, but not out

This bulletin, written by James Liu and Abigail Dwyer, recaps the fourth quarter earnings season while discussing the prospects for earnings going forward.

Topics: U.S. Equities, U.S. Recovery

White Papers

Jan 31, 2015 | DOCUMENT

Investing with composure in volatile markets

This paper discusses three simple principles that can help investors maintain balance in their portfolios: keeping market volatility in perspective, focusing on longer investment time horizons and maintaining portfolio discipline.

Topics: U.S. Recovery

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Stock market cycles and global diversification 

Feb 12, 2015 | VIDEO

Meet the Team

Dr. David Kelly, CFA

Chief Global Strategist

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Andrew D Goldberg Anastasia V. Amoroso
James Liu Gabriela D. Santos, Market Strategist at J.P. Morgan Funds
David M. Lebovitz, Market Strategist at J.P. Morgan Funds

Andrew D. Goldberg, Anastasia V. Amoroso, James Liu, Gabriela D. Santos and David M. Lebovitz

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