The Economy: What’s Ahead in 2014

Tags

, , , , , , , , , , ,

131203174232-economy-outlook-620xaAfter five frustrating years, the economy is ready to bust out. Stocks already had a banner run in anticipation of the rebound, housing is scorching, and jobs won’t be far behind.

There are plenty of moves you can make with your money to play to these strengths, even if the economy pulls some punches.

In Money magazine’s Make More in 2014, you’ll learn how to play to the economy’s strengths while making the necessary adjustments to navigate the stock and bond markets at a time of lofty valuations, the real estate market at a time of rising borrowing costs, and the job market at a time of new opportunities.

The Outlook

There comes a point in every feel-good story when the protagonist, after being beaten down or put upon for years, finally musters the strength to get up off the floor and face the challenges at hand. At long last, that’s where the economy finds itself today.

No one is predicting herculean growth in 2014. The consensus among forecasters surveyed by the National Association for Business Economics is that U.S. gross domestic product will actually expand a bit slower than the average rate of growth since 1930.

Yet for an economy that has performed slightly worse than expected in 2013 — and that has faced one calamity after another since the global financial panic — next year should mark the first time since the housing market’s collapse that growth reaches the 3% mark, which has historically served as the dividing line between strength and weakness.

Plus, “the underlying fundamentals in the U.S. economy are stronger than the numbers would suggest,” says Tim Hopper, chief economist for the investment manager TIAA-CREF. For instance, as housing roars back to life, consumer spending and job creation should also see a boost.

For instance, as housing roars back to life, consumer spending and job creation should also see a boost. To see how — and for other positive signs — consider the following.

1. Europe is coming back

The continent’s economy is expected to expand about 1% next year. That’s not exactly sizzling, but corporate profits there are recovering much faster.

Past 10 years
GDP: 0.9%
Earnings: 8.1%

Past 3 years
GDP: 0.2%
Earnings: 3.1%

Next 3-5 years
GDP: 1.4%
Earnings: 10.1%
Sources: Bloomberg, Eurostat

2. Housing is back

Each new home that’s built creates about three new jobs, and new construction is expected to exceed 1 million units for the first time since the crisis. (See table below.)

3. Policymakers will back off

The Fed stated it will start raising rates only after unemployment falls to 6.5%. Even if job creation picks up, that could take over a year.

When will unemployment hit 6.5%?
If the monthly rate of job creation is….
300,000: 1st quarter 2014
250,000: 4th quarter 2014
200,000: 3rd quarter 2015
150,000: 1st quarter 2018
Notes: For unemployment rate calculation, labor force participation is assumed to grow from 63.6% to 64.2% by 2014. CBO projections are used thereafter. Source: The Hamilton Project

Article and Photo from CNN Money

 

Mexico’s Congress Approves Measure to Open Oil Resources

Tags

, , , , , , , , , ,

oil_nodding_donkeys.topMexico’s Congress has approved a measure to open the state-run oil fields to foreign investment for the first time in 75 years, following a vote by the Senate earlier this week.

The programme would let private firms explore and extract oil and gas with state-run firm Pemex, and take a share of the profits.

The measure must now be approved by 17 of the country’s 32 federal entities.

Mexico nationalised its energy industry in 1938.

Thursday’s vote to approve the measure lasted hours and was reported to be heated.

Mexico’s President President Enrique Pena Nieto has said the move is necessary to modernise Mexico’s energy sector and increase oil production, which has dropped from 3.4 million barrels per day in 2004 to the current rate of 2.5 million barrels per day.

Most observers expected that the signature reform of Mr Pena Nieto’s presidency would pass.

However, the left-wing Democratic Revolution Party said it was a submission to US oil companies, and protest camps were set up outside the Senate.

They said the move strikes at the heart of Mexico’s identity.

In 1938, then-president Lazaro Cardenas nationalised the oil industry, which had been operated by foreigners up to that point, asserting that Mexico had a right to its mineral wealth.

Article from BBC Business, Photo from CNN Money

Market Losing Streak Hits Five Days

Tags

, , , , , , , , , ,

131205162427-dow-five-day-620xaGood economic news put pressure on the stock market again as investors brace for the Federal Reserve to begin dialing down its stimulus.

The Dow Jones industrial average and the S&P 500 both ended lower for a fifth consecutive day. The Nasdaq has declined on three of the past four trading days.

The government revised its initial report on third-quarter economic growth to 3.6%, up from the previous estimate of 2.8%. The improvement was largely driven by inventory growth as companies restocked their shelves ahead of the holiday shopping season.

And the number of Americans filing first-time claims for unemployment benefits fell more than expected last week, the Labor Department said. Economists said the decline may have been distorted by the Thanksgiving holiday.

But the upbeat economic numbers failed to give the market a lift. Many investors believe that good economic news makes it more likely that the Federal Reserve will begin scaling back, or tapering, its monthly bond purchases.

The yield on the 10-year Treasury rose to 2.86% after the economic reports were released. Bond yields rise when prices fall. So bond investors are selling Treasuries in anticipation that the Fed may no longer buy as much going forward.

The Fed’s $85-billion per month bond buying program has helped fuel the bull market since March 2009. But the central bank signaled earlier this year that it hopes to gradually reduce the purchases as the economy recovers. It has said that improvement in the job market could trigger this process.

The government’s November jobs report is due Friday. Economists surveyed by CNNMoney expect that report to show 183,00 jobs were added last month.

But not everyone is convinced the Fed will taper at its next policy meeting — which wraps up on December 18. Alastair McCaig, market analyst for IG in London, said the holiday shopping season would be “a fragile time of year” for the Fed to pull back on its bond purchases.

“Trying to squeeze something in before the end of the year would start a little bit of panic, the tail end of December being just an incredibly important retail period,” he said. “It would be a little bit dangerous to do something this year.”

What’s moving: On the corporate front, Apple (AAPLFortune 500) shares rose following a report that the company is nearing a deal with China Mobile (CHL) to sell Apple’s iPhone. China Mobile is the world’s largest mobile carrier.

Shares of Apple have bounced back over the past few months, rebounding more than 50% from this year’s lows in April. That’s something traders on StockTwits took note of Thursday.

$AAPL is at its 52-week high…it’s been a long time since we’ve been able to say that,” saidDaddyBiscuits.

Microsoft (MSFTFortune 500) shares tumbled on news that Ford (FFortune 500)CEO Alan Mullaly is not planning to leave the company anytime soon. Mulally had emerged as one of the frontrunners to replace current Microsoft CEO Steve Ballmer once he officially steps down. The stock, which is up 40% this year, has gained 15% since Ballmer announced plans to retire in August.

$MSFT 13 year highs….that Ballmer should quit every day,” said howardlindzon.

J.C. Penney (JCPFortune 500) shares fell 8%, extending Wednesday’s losses as investors worry about the retailer’s turnaround plan. Hedge fund manager Kyle Bass also told Bloomberg that his firm has sold its stake in J.C. Penney stock.

J.C. Penney is still the worst performing stock in the S&P 500 this year, but shares rallied in the run-up to Black Friday. Some traders were not sure why the stock was getting hit hard this week considering that the company reported strong sales growth in November.

$JCP same-store sales climbed 10% during November, while its online sales were well ahead of year-earlier levels…why is this down???” asked ValueInvestor1.

$JCP Absolutely ridiculous! I don’t care about the $$, this is the most unexcused absurd downturn I’ve ever seen. Just Criminal!!! BS!!!” said TechTrader17.

Shares of discount retailer Dollar General (DGFortune 500) rose 6% after reporting quarterly earnings that beat analysts’ expectations and raising the lower end of its outlook for full-year profits.

Electronic Arts (EA) shares tumbled 6% on continuing worries about technical problems with the video game maker’s “Battlefield 4” game.

Jos. A Bank (JOSB) reported a decline in quarterly net sales and net income, compared with the prior year. The clothing retailer has been in a bizarre takeover battle with Men’s Wearhouse (MW), which originally rebuffed a hostile bid from Jos. A Bank before turning the tables and offering to buy its smaller rival.

European markets edged lower after the European Central Bank and the Bank of England both voted to hold interest rates steady. Asian markets ended mostly lower.

Photo and Article from CNN Money.