During periods of turbulence and uncertainty, it’s common to look at prior crises as benchmarks against which current conditions can be assessed, and there’s certainly no shortage of historic episodes that investors can look to for perspective. Economic and financial crises have been a regular feature of monetary economies throughout history. While no two have been exactly alike—they vary widely in size, scope, causes and length—they do tend to share some common characteristics.
After 17 consecutive weeks of claims registering north of 400,000, this week’s number finally fell below that psychological mark while also setting a four-month low. Hopefully, this is the start of a new trend. With the market in need of positive data to at least partially offset recent negative developments, the claims number was welcomed by investors.
As we look back over the first decade of the 21st century, we can draw one undeniable conclusion – it was a bear of a time for investors. Major market declines from 2000 to 2002 and then again in 2008 dragged equity returns well below their long-term averages.
As a result of modern medicine, most of us will enjoy a much longer life than our predecessors. Actuarially, a 65 year old is expected to live nearly 19 more years – that’s 7 years more than in 1900. That’s the good news. The bad news is that along with longevity, we are experiencing more of the chronic issues that often plague older folks and make fully independent living difficult or impossible.
After months of political wrangling, a deal has been reached to raise the U.S. debt ceiling.
Few are happy with the results, and long-term measures to address the debt must still be implemented.
While a debt-rating downgrade is still a very real possibility, the financial markets have already moved beyond the spectacle of the debate and are reacting to the host of indicators signaling a potential economic slowdown.
Despite the economic woes, we remain firmly in the camp of those who anticipate continued market advances.
We view any market pullbacks as opportunities to add to equity exposures using assets currently invested in U.S. Treasuries or investment-grade securities as a source of funding.
SEI’s Investment Strategies Group and SEI Fixed Income Portfolio Management1 share the opinion that failure to raise the debt ceiling prior to the deadline would likely have a significant, negative impact on the global economy, raising the potential of sliding back into recession.
Due to the severe consequences of late or no action by Congress, we believe an agreement will be reached by the prescribed deadline. While it would not be prudent to discount the possibility of default, we view the potential for such a scenario as being low. It is clearly in the best interests of the U.S. government to take all necessary measures to avoid missed payments or default due to the inability to raise the debt ceiling. Based on our current outlook, SEI’s portfolio managers do not view the debt ceiling debate as a reason to alter our portfolio positioning. We, along with the rest of the world, will watch and wait for Congress to do the right thing.
European leaders are working out the details in the latest effort to mitigate the financial crisis that began in Greece and started to spread to other European nations. While it may be difficult to understand, at first glance, how Greece is relevant to the global financial markets (the country is not a financial, industrial or military power, is not a strategically important commodity exporter and contributes only about half of a percent to world gross domestic product), a default on the country’s debt poses the risk of a financial meltdown similar to the one that followed the failures of investment bank Lehman Brothers and insurance giant AIG in late 2008.
Read the full SEI report
The question on every investor’s mind: Will this year’s episode of market weakness and uncertainty end as positively as last year’s, with growth reaccelerating and equity markets posting strong recoveries?
So, What about that dismal jobs report?
On June 30th, Vin Capozzi, Senior VP of Harvard Pilgrim Health Care visited the “world headquarters” of LFS/CCC to lead a discussion on the impact of health care reform under the National and Massachusetts plans.
Concern over Greek debt has again come to the forefront in recent weeks. After receiving a €110 billion loan in May 2010, it now seems that the country is in need of a second financial bailout from the European Union (EU) and the International Monetary Fund (IMF). The loan, which could be up to a further €100 billion, could help to ensure that Greece is able to continue to service its debt and meet financial obligations over the longer-term.
In recent weeks, major credit rating agencies have expressed renewed concern over the fiscal outlook for the U.S. government, even raising the possibility that it could eventually lose its AAA rating. What are the implications for investors? There’s both a short- and a long-term dimension to this question. In the near-term, the Treasury estimates that if its statutory borrowing limit is not soon raised by Congress, it could default on interest and debt repayments by August. This risk is still viewed as remote, but if it did occur, it could cause significant dislocation in markets, and a credit rating downgrade would be justified. Additionally, rating agencies worry that the U.S. government is on an unsustainable long-term fiscal path. Does any of this lead us to believe that investors should not own U.S. government debt?
The U.S. Department of Commerce’s Advance Monthly Sales for Retail and Food Services report revealed that May headline retail sales fell .2%, which was slightly better than market expectations. The report, which contains estimated monthly sales for retail and food services that are adjusted and unadjusted for seasonal variations, also showed that retail sales less gas and autos increased .3%, just above the market consensus of .2%. April’s headline number was revised lower to .3%, while the ex-gas and autos statistic was revised higher to .3%.
Speculation about inflation is increasing as geopolitical tensions disrupt the production and supply of oil. As a result, gas prices have risen dramatically, shooting up $1.02 to $3.87 for regular unleaded from $2.85 a year ago. Since prices at the pump are highly visible and have an immediate and direct impact on consumers, people […]
nearly 1,500 Americans in the summer 2009 and found that not only is the household financial hole deep, but people might not be able to dig themselves out of it as easily as they thought.
Inflation is the topic on everyone’s mind. In the United States, a visit to the gas station is enough to cause most people to worry. In emerging-market countries, the rising cost of food has resulted in significant geopolitical unrest. While the prospects of $5-per-gallon gasoline and $4-per-gallon milk aren’t things we like to […]
With a plethora of economic reports due in the next few days, all eyes will be on the fragile recovery. The housing market looks like a “double dipper”, but what will the next round of reports bring, and what impact will it have on your portfolio? SEI May31 weekly update
Please take a moment to view our video: CCC Economic Update
There is an increased amount of speculation about inflation, as geopolitical tensions continue to build and disrupt the production and supply of oil. The increase in rhetoric is focused around both short- and long-term inflation: if inflation is present, is it transitory or is it settling in for the long haul? At times, it […]
As seen on the MarketWatch website: Commentary: Market typically recovers quickly from big drops CHAPEL HILL, N.C. (MarketWatch) — It rarely pays to sell into a panic. That’s worth keeping in mind today as panic grips global stock markets. Perhaps the closest recent domestic analogy to what Japan is going through right now is the […]