A Daily "Thought"

6/22/2014

View of the Week: On the Economy On the Eve of Summer 2014

"Green Shots" are continuing to appear around the Economy.   In Orange County, California, the unemployment rate has dropped below 5 percent and help wanted signs seem to be springing up everywhere.   However, the growth seems to uneven at best.   This is as the IMF has cut US Growth Forecasts and the Fed itself has cut its' forecast for the US Economy even though the latest FOMC statement reflects a broad strength.  What has been a bit tragic has been how the US has led the world in the creation of low paying jobs according to reports from the Organization for Economic Cooperation & Development that had some major suggestions for the United States to strengthen development.    

Edward Jones Investment Strategiest Kate Warne shared her insights that underscores what is before us as begin the second half of the year: 

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Strong May Job Growth: More Support for Rising StocksThe economy added 217,000 jobs in May, in line with expectations for an increase of 215,000 according to Bloomberg. May was the fourth month in a row with job gains above 200,000 - it's the first time that's happened since January 2000. And over the past four years, the economy has gained 8.8 million jobs, finally recovering all those lost during the Great Recession. After a sharp drop in April, May's unemployment rate was unchanged at 6.3%, near a six-year low. 
Economy Improves after Harsh WinterThe strong job gains in April and May added one more sign that the economy is strengthening, after skidding during the winter's snow and cold. Consumer confidence is at its highest level since 2008, and as consumers feel more comfortable, they've been spending more. Auto sales are at their highest levels since 2007. We expect the economy to grow about 2.5% in 2014, accelerating slightly from its pace over the past five years of recovery. And companies have continued to indicate business is improving, putting them on track for another year of record earnings. 
Stocks Reach New Highs Stock market volatility has remained low this year, and without fanfare, the stock market has made its way higher. The S&P 500 has reached record highs in eight of the past 10 days, for a total of 18 highs this year. The Dow Jones Industrial Average has reached eight new highs in 2014. In our view, improving economic growth, rising earnings and better investor confidence can provide support for stocks to rise further. 
Set Realistic Expectations Low volatility, rising stocks and an improving economy have created a favorable environment for investors. Consider adding stocks, if appropriate, but make sure your expectations remain realistic. Since everyone knows market conditions can change, sometimes quickly, stay prepared for market ups and downs. That's one reason we think it's important to review your financial situation regularly. A diversified investment portfolio, with a mix of stocks and bonds tailored for your situation and long-term financial goals, can help you benefit from rising stocks and stay invested during the inevitable pullbacks as well.
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