Week in Brief: March 28

March 28, 2014

Last week's global markets appeared as nonsensical as Gwyneth Paltrow's divorce explanation. Europe and Asia rose broadly, while U.S. equities were up and down.

Still, stocks finished the quarter on a positive note. Aside from the DJIA, all indices moved into the green for the year. Though, stocks did see their worst quarterly performance since 2012.

The S&P 500 and the DJIA sit just below new all-time highs. Should they break that ceiling, there could be room to run.

Analysis of U.S. Department of Labor data indicates that a growing swath of the population is leaving the labor force - for good. 61% of those who left from 2010 to 2013 were retirees. Compared with just 25% of those leaving from 2007 to 2010. The interesting aside will be how this data impacts the Fed's decision to raise interest rates sooner than expected.

The Good

As the S&P 500 hit new highs this week, there remains ceaseless bubble banter and discussion of coming crashes. Surveys reveal that most still do not like the idea of investing in stocks. Barry Ritholtz calls it "Irrational Non-Exuberance." For us, it's a positive. Because when we drop the "Non" and are left with Irrational Exuberance, the party's over. Article here.

U.S. economic data was largely positive. Q4 GDP was revised higher. Consumer spending, income and confidence improved. Inflation remains subdued. Durable goods orders rose. While jobless claims dropped.

The Bad

Fresh data confirmed China's significant economic slowdown. The Chinese government may undertake some stimulus effort. Does the stimulus ever end? Apparently not. Once the Genie is out of the bottle, she's a real witch when it comes to getting her back inside.

The Ugly

General Motors is up a creek. The company's recall issues widened to 2.6 million vehicles. Not to mention a massively damaged reputation as the public learns that GM systematically put profits over safety for 15 years. Thus far, the faulty ignition issue has resulted in 31 serious crashes and at least 13 deaths.

As I write this, GM's new CEO Mary Barra is testifying before Congress. I have to assume they'll march Rick Wagoner into Congress, as well. He led the company for the decade leading up to 2009.

The company will survive, but this represents a major setback. A PR disaster. And to think that all of this was going on while the U.S. taxpayer was bailing the company out of its difficulties? Talk about a slap in the face.

The Bottom Line

Indexes formed a base and headed higher right at Q1's end. Stable inflation, monetary policy and better economic data will likely continue to buoy stocks. Considering that earnings expectations may be artificially because of severe weather, we may see Q1 earnings season provide a catalyst for the next leg up. Till then, expect choppy seas.

Weekly Results

Major markets finished mixed last week. The DJIA rose 0.12%, the S&P 500 fell 0.48%, and the Nasdaq dropped 2.83%.  Small cap stocks declined 3.51%.  And the 10-year Treasury bond yield fell 2 basis point to 2.72%. Gold fell $39.43 per ounce, or 2.95%.

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