Three Favorite Investment Themes

Stocks have bounced around this week. They jumped on Tuesday because of increased evidence and/or hope of an improving economy. But they tumbled on Wednesday because of rising interest rates and concerns about the dollar and inflation. Today the trend was up again, led by energy and metals.

Energy, inflation protection and international diversification as a hedge against a weak dollar are three of the related investment themes we discuss in the upcoming issue of Leeb's Income Performance Letter.

The risk of rising interest rates is directly related to all three themes. U.S. Treasury yields have surged to their highest levels since November. This spring alone, they've jumped from 2.55 percent to over 3.7 percent. The gap between yields on two-year Treasury notes and 10-year notes has widened to a lofty 2.75 percentage points.Read more...

April Not the Cruelest Month This Time 

"April is the cruelest month," T.S. Eliot famously wrote in his epic poem, "The Waste Land."  Well not this time, at least where the stock market is concerned. 

The Standard & Poor's 500 soared 9.4 percent this month. The benchmark index for U.S. stocks is now up 29 percent from a 12-year low on March 9. And April marks the S&P 500’s first consecutive monthly advance in a year. 

Along the way, stocks have climbed the proverbial wall of worry: the economy, the banking system, corporate earnings and more. 

Swine flu is the latest addition to the long list of investment worries. Yet as bad as the epidemic may prove to be, history tells us that events outside of the financial markets usually don't have much of a long-term impact on the markets. As with many other headlines, the actual cause and effect likely will prove less than we might expect. 

We have continually advised you that markets almost always turn up before the economy does. This time, the market advance so far has considerably exceeded our expectations.

The first reason is that stocks were so deeply oversold at the market bottom that any rebound would logically be powerful. Read more...

Mixed Economy, Better Stock Market
Credit Markets: Good News and Bad
Flamboyant Frugality
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Mixed Economy, Better Stock Market

This week has brought a variety of economic reports plus a steady stream of quarterly earning results and outlooks from corporate America.

The U.S. economy is still contracting overall, but there are some signs of stabilization, in the form of both a slower pace of decline and even scattered signs of improvement. That's the basic conclusion of the Federal Reserve's latest region-by-region snapshot, known as the beige book. The report is likely to intensify the debate over whether the economic glass is half full or half empty.

Meanwhile, inflation is well under control, with consumer prices lower than they were a year ago. This is the first time that has happened since 1955. But core prices, excluding food and energy, are 1.8 percent higher, which should dampen fears of deflation.

Back on the negative side, industrial production fell 1.5 percent in March, worse than expected and the fifth big monthly decline. Production is down 12.8 percent vs. a year ago. And factory capacity utilization fell to 69.3 percent, the lowest level since records began in 1967. Retail sales also declined in March, following a two-month rebound.Read more...