It's The Economy Stupid: Why Is The Market Down?

People ask me, “John (or JB, or Broussard, or words that aren’t fit to be printed), why is the market down?”

 

Well, in no certain order, the main reasons are:

 

Greece.  Yes, I know, it’s like kicking a dead horse, but it’s still relevant because a) the government is not settled, b) the austerity plan is not yet working, c) It’s Greece, the tax revenue collection system is not an exacting standard, d) therefore the current debt load is unsustainable, and so e) new loans from the European Financial Stability Facility aren’t the answer.  There’s a default somewhere in the future.

 

Italy.  Love the food, hate the government.  a) the government is not settled, b) an austerity plan is not in place, and c) and there are no current plans for giving Italy aid from the European Financial Stability Facility.

 

Euro.  They really aren’t set up to handle this mess.  And Germany wants to change the Euro agreement so that countries can opt out of the Euro and remain a part of the European Union.  Kind of makes you go, “Hmmm”.  Investors are worried the euro currency union could be heading toward an ugly breakup.  Spain and even France, one of the continent's core economic engines, were forced to pay sharply higher interest rates to raise cash to fund government spending.

 

Contagion.  Fear that the mess in Europe will affect U.S. banks and the U.S. economy.

 

U.S. Congress.  Republicans and Democrats on Congress’s supercommittee seem to have hardened their positions with less than a week until the deadline to propose a plan to cut the U.S. deficit.

 

Earnings of U.S. Stocks.  In general, earnings of U.S. stocks are up, but a greater percentage of their earnings are derived from outside the U.S.  About 46% of the revenue of the companies in the S&P 500 are derived from outside the U.S. Like the ‘80’s song says, “We are the World.”

 

And really, we seem to be on a short, repeating news cycle.  Every couple of days something new and not good hits the fan, or headlines, and it usually has the word “European” in it.

 

Description	Ticker	Last	CHANGE	% Chg Today	Pct Chg 1Yr
STOCK MARKETS
Dow Jones Industrial Average	INDU Index	11770.800	-134.7900	-1.1322	6.6216
S&P 500 Index	SPX Index	1216.280	-20.6300	-1.6679	3.0969
NASDAQ Composite Index	CCMP Index	2587.990	-51.6200	-1.9556	4.6119
Russell 3000 Index	RAY Index	719.510	-12.2700	-1.6767	2.8795
Russell 2000 Index (Small)	RTY Index	719.070	-10.7900	-1.4784	1.7788
S&P 400 Mid Cap Index	MID Index	861.820	-16.5400	-1.8831	3.3290
S&P 600 Small Cap Index	SML Index	397.450	-6.2800	-1.5555	5.6917
TREASURIES	% Yield
3 Month Treasury	0.0051		-0.0050	-100.0000
6 Month Treasury	0.0407		0.0000	0.0000
2 Year Treasury	0.2641	99.969	-0.0469	-0.0469
5 Year Treasury	0.8659	100.656	0.0469	0.0466
10 Year Treasury	1.9585	100.313	0.3125	0.3125
30 Year Treasury	2.9762	102.656	0.7969	0.7823
ENERGY
Crude Oil, Brent Index	Brent	108.110	-3.7700	-3.3697	26.1877
Crude Oil, Louisiana Light Sweet	LA Light Sweet	109.350	-5.2400	-4.5728	28.7400
Natural Gas, Henry Hub Index	Nat Gas	3.450	0.1060	3.1699	-30.7037
PRECIOUS METALS
Spot Gold $/oz	GOLD	1719.070	-44.3100	-2.5128	28.7725
Spot Silver $/oz	SILVER	31.541	-2.2063	-6.5377	23.7624
CURRENCIES
Euro	EUR Curncy	1.346	-0.0002	-0.0149	-0.4287
Japanese Yen	JPY Curncy	76.950	-0.1100	-0.1427	8.0821
British Pound	GBP Curncy	1.576	0.0021	0.1335	-0.8926
Swiss Franc	CHF Curncy	0.921	0.0020	0.2175	7.7843
Canadian Dollar	CAD Curncy	1.029	0.0041	0.4002	-0.2725
Chinese Yuan	CNY Curncy	6.352	0.0024	0.0378	4.5750

 

 

 

Boudin Chaud. Cous Cous Froide. Allons Tigres--Poussez Poussez Poussez

 

John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury

Ph:  225-342-0013

Fx:  225-342-9721

Email:  jbroussard@treasusry.state.la.us

Street Address:

445 North Blvd, 7^th Floor

Baton Rouge, LA 70802

Mailing Address:

P.O. Box 44154 Capitol Station

Baton Rouge, LA 70804-4154

Physical Location:

One City Plaza, 7th Floor

Corner of North Blvd & 4th Street

Exit 1B I-110 Convention Street, Turn Left to get to North Blvd