Weekly Update – April 13, 2012
Better-than-expected first-quarter corporate earnings were not enough to overcome news of a slowing Chinese economy and as a result, the Dow fell 137 points on Friday, ending the week down 211 points, or 1.6%. It was the Dow’s largest weekly decline so far this year.
The economic spotlight momentarily switched from Europe to China on Friday when the country announced first quarter GDP growth of 8.1%, below the 9%-plus expected number and down from 8.9% in the fourth quarter of 2011. A slowdown in construction and weakness in exports led to the decline, heightening fears that an economic downturn in China could upset the global economy. Meanwhile, in Spain, the cost of insuring Spanish debt against default (or the cost of credit default swaps) rose to an all-time high, confirming nervousness among investors.
In the U.S., although corporate earnings from the likes of Google, Alcoa, JP Morgan and Wells Fargo came in better-than-expected, an increase in initial jobless claims on Thursday, a slight uptick in inflation and a decrease in consumer confidence helped drag markets lower for the week. Because economic headwinds still exist, speculation of further monetary easing/stimulation by the Fed continues.
Despite the bumpy start to the second quarter, our trust preferred portfolios continue to return approximately 10%, on average, year-to-date through yesterday, Thursday, April 12th, beating the Dow by almost 4%.
Next week, economic releases of note include March retail sales data on Monday and March housing data on Tuesday and Friday. Expect retail sales to increase from February and housing data to show little improvement from the prior month.
Have a good weekend,