Employment: Good, But Not Great

Today the market seemed to be spooked by the latest payroll employment report. According to the Bureau of Labor Statistics (BLS), nonfarm payroll employment rose by 115,000 in April. The official expectation was for 160,000, although the whispered number was 125,000 to 150,000. What is most interesting is that in actuality, nonfarm payroll employment rose by 896,000 in April.

Apple Island

The NASDAQ 100 is dominated by Apple. At 18% of the index, the Apple earnings report last night had a huge effect on the chart. From the end of March through yesterday, the index fell from 2795 to 2625, driven largely by a 14% drop in Apple. But after the massive earnings number reported last night, the index surged higher at the open and created what we are calling the Apple Island. (I smell a reality show!)

The Good and Bad News About Global Diversification

Pinnacle managed accounts are globally diversified. Most investors readily acknowledge that diversification is a benefit in its own right, since it tends to reduce portfolio volatility and helps investors avoid large investment mistakes. Global diversification offers more of the same: By owning stocks in different countries, you presumably get to invest in equities that have low correlations to the U.S. market, meaning they zig and zag at different times giving you a smoother ride as your portfolio grows in value. (This article discusses stock markets, but the same could be applied to almost any asset class.) Since the U.S. represents about 30% of the world’s stock market capitalization, you also get to invest in great companies that make up the other 70% of the global stock market. You will certainly recognize many of these international giants, including Nestle, HSBC Holdings, BP Plc, Vodaphone, Novartis, Royal Dutch Shell, and Toyota, just to name a few.

Looking Ahead to the Second Quarter

Recently the Pinnacle investment team met to discuss the state of the world, the views of the independent analysts we follow, our market expectations, and what it all means to the asset allocation of Pinnacle portfolios. As always, it was a lively discussion that swung between business cycle dynamics, technical condition of markets, valuation, and bigger picture themes.

In Your Best Interest

Registered Investment Advisors like Pinnacle Advisory Group are held by law to a fiduciary standard. That means that we’re bound to act at all times in our clients’ best interests, even if those interests should clash with our own. In doing so, we have a legal obligation to disclose to our clients exactly how we’re to be compensated, as well as any related conflicts of interest. At Pinnacle we have met this standard since we started the company in 1993.

Earnings Season Gets Underway…

Second quarter earnings season officially kicks off today, as companies report on their performance during the first quarter of 2012. Dow component Alcoa, an aluminum company, reports shortly after the market close. Earnings have been incredibly strong for the past few years coming out of the last recession, and have been one of the main drivers powering the stock market climb.