2014 Charts of the Week

5 Investment Resolutions for 2015

Posted December 26, 2014

It's a popular time of the year to start thinking about New Year's resolutions. Here at ICMA-RC, we offer you 5 investment ideas to consider for 2015 resolutions.

U.S. Retail Sales Increasing

Posted December 19, 2014

Many economists consider U.S. retail sales to be a key economic indicator, as consumer spending accounts for nearly two-thirds of the U.S. economy. The sales numbers for November were strong with a 0.7% increase, which was higher than the consensus forecast of 0.4% growth. October's previously reported 0.3% growth was also revised upward to 0.4%. According to Moody's Analytics, the outlook going forward remains positive as lower prices for gasoline and continued growth in the labor market should allow for more consumer spending.

U.S. Nonfarm Payroll Employment vs Wages

Posted December 12, 2014

Employment in the U.S. has steadily rebounded since the Great Recession ended in mid-2009, as shown in the above chart of U.S. Nonfarm Payroll Employment ("employment"). Average hourly earnings ("wages") have also increased, but at a disappointing rate. Wages can influence inflation, which is a key determinant to when the U.S. Federal Reserve (the "Fed") might start raising interest rates.

The True Cost of the "Twelve Days of Christmas"

Posted December 5, 2014

Since 1984, PNC Wealth Management ("PNC") has tracked the cost of the goods and services given as gifts in the classic "Twelve Days of Christmas" holiday song. After a 6.9% increase last year, this year's increase was a more modest 1.4%. The 2014 cost was $116,273 for the gifts detailed in the verses of the song, including every repetition. The increase was slightly less than the U.S. Consumer Price Index year-over-year increase, which stood at 1.7 % through October 2014.

MSCI Emerging Markets P/E minus MSCI World P/E

Posted November 28, 2014

The difference between the Price/Earnings Ratio ("P/E ratio")of Emerging Markets ("EM") equities and the P/E ratio for Developed Markets ("DM") equities, based on historical earnings, is shown in the chart above by the blue line. Except for a part of 2007, the blue line has been below zero for the time period shown on the chart, which indicates that EM equities have had a lower P/E than DM equities. In other words, investors have generally been willing to pay less (i.e., a lower price) for each dollar of earnings that EM companies have produced than they have been willing to pay for each dollar of earnings that DM companies have produced. The difference between the P/E ratio of EM and DM is referred to as the "spread" in the chart above.

Unleaded Gasoline Prices vs US Dollar Strength

Posted November 21, 2014

The recent decrease in gasoline prices has been a pleasant surprise for U.S. consumers. For the one year period ending October 31, 2014, the average price for a gallon of unleaded gasoline fell about 8% and dropped from a high of $3.70 on April 27 to a low of $3.00 on October 31. Along with seasonal factors of supply and demand, the price of gasoline was impacted by the strengthening U.S Dollar. The U.S. Dollar Index has risen 9% since the April 27 peak in gasoline prices. Since the U.S. Dollar is the world currency for oil trading, gasoline and oil prices tend to move opposite of the U.S. Dollar. This trend is shown in the chart above that compares the daily price of unleaded gasoline to the daily value of the U.S. Dollar Index.

Savings Rate by Age
Q2 2014

Posted November 14, 2014

Savings rates change over time and can vary by factors such as age. The chart above details the savings rate by age group for the second quarter 2014. Interestingly and despite thrifty attitudes during and after the recent recession, millennials (adults age 34 and younger) have stopped saving. Less savings may make them more vulnerable to unexpected financial stresses, have bleaker retirement outlooks, and possibly diminished future wealth.

Real Gross Domestic Product
(Seasonally Adjusted Quarterly Data - Annualized)

Posted November 7, 2014

The Bureau of Economic Analysis ("BEA") reported a preliminary estimate of 3.5% growth in real Gross Domestic Product (inflation adjusted "GDP") for the third quarter of 2014 based on seasonally adjusted annualized data. While this was down from the 4.6% growth reported for the second quarter, it was better than many economists anticipated and exceeded the 30-year annual average rate of 2.7% for the fourth time in the past five quarters. Real GDP growth in the third quarter primarily benefitted from a rise in net exports, consumer spending, nonresidential fixed investment and government spending. The primary detractor was a slower pace of inventory accumulation.

Earnings Expectations and the S&P 500 Index

Posted October 31, 2014

A Price/Earnings Ratio ("P/E ratio") reflects the price stock investors are willing to pay for a dollar of earnings. It can be calculated for an individual security or for a group of securities, such as those in an index. The calculation may utilize historical earnings or estimated future ("forward") earnings. The chart above illustrates the month-end closing prices of the S&P 500 Index ("S&P 500") and the corresponding P/E ratios based on estimated forward earnings. While estimated forward earnings may or may not materialize, stock prices are generally believed to represent investor expectations of future earnings.

Fixed Income Sector Performance (Total Return as of 9/30/14)

Posted October 24, 2014

The fixed income market includes many different types of securities and performance can vary substantially among them. The chart above compares the performance of eleven major fixed income sectors for the one-year periods ended September 30, 2014 (“current year” - blue bars above) and September 30, 2013 (“prior year” - gold bars above). All of the fixed income sectors shown produced positive returns for the current year reflecting a decline in longer-term yields, low inflation expectations, and stability in short-term rates. Only three sectors produced positive returns in the prior year as yields generally rose due to investor fears regarding the tapering of the U.S. Federal Reserve's asset purchasing program.

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