Finance Column » Your Money This Week » Mid-year status report

Mid-year status report

By Mark Hamrick · Bankrate.com
Monday, July 8, 2013
Posted 6 am ET

This week, there's relatively little due in the way of potentially significant economic reports. Perhaps the most interesting will be the release of the minutes from the Federal Reserve's June policy-setting session. It was after that meeting that Chairman Ben Bernanke indicated that the central bank could begin to scale back asset purchases later this year if the economy continues to recover. That specific guidance was not, however, offered in the Fed's official statement before Bernanke's news conference. The meeting minutes may provide a bit more insight into the behind-closed-doors debate among members of the Federal Open Market Committee.

Friday's release of better-than-expected hiring numbers for June, May and April have not derailed forecasts of so-called tapering of asset purchases later this year or early in 2014.

Bankrate Audio

Mark

Hamrick

Washington Bureau Chief, Bankrate.com

Hugh

Johnson

Hugh Johnson Advisors

Robert

Shiller

Professor, Yale University

Claes

Bell

Senior banking analyst, writer; Bankrate.com

Mid-year status report on markets, housing and gold

The stock and housing markets see solid gains, while gold has taken a big plunge. Experts give the outlook for your money.

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Reports on tap

This week, we have the following reports scheduled:

  • The Federal Reserve reports on May consumer credit Monday at 3 p.m. (all times eastern).
  • The Federal Reserve releases minutes from the June 18-19 meeting Wednesday at 2 p.m.
  • The Labor Department releases the June producer price index Friday at 8:30 a.m.

Mid-year status report

As investors begin to look at the markets' results from the first half of 2013, they might be wondering about the outlook for the rest of the year. Generally, the mood is fairly upbeat, despite lingering worries about possible impacts of forced federal budget cuts and weak economies in Europe. Hugh Johnson, chairman and chief investment officer with Hugh Johnson Advisors, sees continued improvement on the horizon.

"I am with the rest of the world and I think that growth is going to pick up in the second half of this year and through 2014," Johnson says. "I think that will be reflected in employment conditions getting better and better."

What does that mean for investors? Even with market-based interest rates rising, Johnson isn't too worried. "Generally speaking," he says, "I think we are entering a period where it's going to be much better for stocks than it is for bonds." Johnson's Albany, N.Y., firm manages about $2 billion in of assets for clients.

Any bubbles out there?

With unconventional means being employed by the Federal Reserve and other central banks around the world, some have worried about the possibility of new bubbles or crises popping up. Yale University economics professor Robert Shiller says he is among those who worry about a variety of areas, including the housing market. Shiller is known for his warnings about the risks associated with the housing market before the bubble burst. He's author of the best-selling book "Irrational Exuberance."

Says Shiller, "I have been arguing that home prices, while they appear to be on an upward trend, are definitely in danger of falling further. It is a speculative of market and it is affected by the government policy."

Rising rates, stocks and earnings

While he's concerned about a rise in interest rates, Shiller says, "It may be a good time to be investing in housing." He's also not urging people to avoid equities, even as his own gauge of stock valuations is running above the historical trend right now.

For stocks, Shiller watches what he calls his "Cape ratio," or cyclically adjusted price-earnings ratio. He says that is "real price divided by 10-year average of real earnings." He puts his ratio at 23 right now, compared to a historical average of "15 or 16."

This week in business history: Movie mogul's birthday

On July 12, 1884, Louis B. Mayer was born in Minsk. Although the exact date of his birth has been a subject of debate, the magnitude of his impact on the movie business is not. He first owned theaters and then a movie production company. As the head of MGM, short for Metro-Goldwyn-Mayer, he was credited for building the star system behind cinema classics such as "Gone with the Wind" and "The Wizard of Oz."

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