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March 21, 2015
Bob Brinker's Stock and Bond Advice Plus Market Outlook


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MARKET NUMBERS AS OF Friday's close on March 20, 2015

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Stocks - S&P500:  As relayed to us by a reader who got this from a "The Bob Brinker Group" email1:

Bob Brinker continues to be constructive on the Equity markets and the keys to future stock market gains will be the resiliency of the economic recovery, the ability of the Federal Reserve to manage monetary policy and the prevailing level of stock market valuation.

With that said, expect more volatility this year.  Equities are hovering near the top of the range that began last Fall and we have not had a market correction (more than 10%) since 2011.  Corporate profits have entered a difficult phase; weak pricing power, rising wages and a strong U.S. dollar have dampened earnings projections. .
Kirk Here: Bob Brinker remains fully invested and has recommended dollar cost averaging in new money into the stock market.   Bob Brinker has had his model portfolios FULLY INVESTED, 100% in equities, since March 2003.  Bob Brinker's "Marketimer" newsletter missed the biggest bear market since the Great Depression where he was wildly bullish near the top so take his ability to time the stock markets with a grain of salt.  For more on this, read:
Excerpt from Kirk Lindstrom's Investment Letter
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More from the "The Bob Brinker Group" email:

Economic update:
 
US economic growth slowed as the second estimate for Q4 GDP came in at 2.2% (annualized), down from the 2.6% increase observed in the preliminary reading.  The slowdown, which follows two back-to-back quarters of very strong growth, was due to weak business spending and the stronger dollar put pressure on exports (wider trade deficit). 

The ISM Manufacturing index fell from 55.1% in December to 53.5% in January, marking the worst performance in 12 months.  Nevertheless, even at that lower level the index is still in growth territory.  The ISM Non-Manufacturing index ticked up .02% to 56.7% in January, suggesting the economy continued to grow at a good pace. (values below 50 indicate a recession trend & values above 50 are a growth trend)

The Leading Economic Index (LEI) rose by 0.2% in January, the weakest gain since a 0.1% rise in August.  In addition, the December increase was revised lower to a 0.4% rise from the initially reported .05% increase.

The January Nonfarm Payrolls registered a better than expected 257K jobs, while the December reading saw a large upward revision to 329K from 252K jobs.  The unemployment rate ticked up to 5.7% in January from 5.6% in December as a result of an uptick in the labor force participation rate. 

 Consumer Confidence Index fell to 96.4 in February from an upwardly revised 103.8 in January, as payback was expected after a more than 10 point surge in January.  Although the index fell, a reading of 96.4 is still consistent with prerecession levels and the underlying trend still points to improving sentiment among consumers. 

Retail sales declined 0.8% in January after declining 0.9% in December.  Gasoline sales have continued to push down the retail sales number.  In January, gasoline sales plunged 9.3% month-over-month and by 23.5% compared to a year ago.  This is compared to a drop in gasoline sales of 7.4% in December 2014 compared to November.  The good news is that if we exclude gasoline and automobile sales, sales increased 0.2% in January.

Existing home sales dropped 4.9% in January to a 4.82M unit rate, the lowest level in nine months.  New home slipped 0.2%% in January, but sales were revised slightly higher during each of the three previous months.  Improvements in the labor market, gains in stock prices, and a general decline in mortgage rates were not enough to boost overall housing demand in 2014.  For the year pre-owned homes sales were down 3.1% from the homes sold in 2013.

Many developed economies abroad are struggling with sluggish growth, and many commodity-linked Emerging Markets (EM) countries are feeling the pain of the sharp impact from energy and metal price declines.  The International Monetary Fund (IMF) cut its 2015 global growth outlook to 3.8%.  The European Central Bank (ECB) cut its 2014 growth forecast to 0.8% annualized.  The ECB announced an extended asset purchase program to buy asset-backed securities worth 60 billion euros ($69B US) per month starting in March through to September 2016.  In Asia, both Japanís and Chinaís central banks also attempted to boost slowing growth.  Japan increased its monthly monetary stimulus program and the Chinese central bank unexpectedly lowered its benchmark lending to 5.6%, previously 6.0%.

Unlike the US, most of the major central banks in the world will be easing rather than tightening monetary conditions in 2015.  We will see how the US data will hold up with lingering weak global growth.  

The market volatile has risen dramatically, which provides no room for investor complacency.

The current issue of Timer Digest also lists Bob Brinker as "Bullish" for Bonds.  See
Kirk Lindstrom on Cover of Timer Digest
Note1.  Commentary emailed to a reader from John Rosati of the "Bob Brinker Group"
Kirk Here:  My core and explore portfolios recently made all time highs!!!   For more conservative investors who have no interest in individual stocks, I co-edit "The Retirement Advisor"  where our most aggressive model portfolio is slightly less aggressive then the "core conservative portfolio" in Kirk Lindstrom's Investment Letter."   For more explanation, see  "Kirk's Two Investment Letters - Which is Best for You?

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