Week of Jan 4 2013 – Weekly Recap & The Week Ahead
Adios 2012! — Happy New Year from Equity Guidance!
“The market will do what it does to embarass a large group of investors” — Leon Cooperman
1. US fiscal cliff deal averted — the deal has averted most of these measures, including:
– making permanent tax cuts dating back to George W Bush’s presidency, for individuals earning less than $400,000
– postponing the $65bn of automatic spending cuts for two months
– keeping benefits available for the long-term unemployed, worth $26bn, for another year
– postponing for another year an $11bn cut in Medicare payments
However, the deal did also allow some tax rises to go ahead, namely:
– the expiry of a payroll tax holiday, expected to raise $95bn in additional annual revenue
– allowing the Bush-era income tax cuts for individuals earning over $400,000 to come to an end, with the top rate increasing from 35% to 40%
– higher taxes on dividend income, capital gains and inheritance for these same top earners
– phasing out certain income tax deductions for individuals earning more than $200,000
2. Growth in China’s services industries speeds up – China’s non-manufacturing PMI rose to 56.1 in December from 55.6 in November, with the construction services sub-index increasing to 61.9 from 61.3. That’s consistent with a recovery in the property sector, which supports 40 other industries.
3. Investors swap stock-pickers for ETFs — WSJ, Investors are jumping out of mutual funds managed by professional stock pickers and shifting massive amounts of money into lower-cost funds that echo the broader market. Investors pulled $119.3B out of actively managed vehicles in January-November and poured $154B into stock and bond exchange-traded funds, with both figures the largest since 2008. The trends reflect the under-performance and higher fees of the stock pickers. Companies benefiting include Vanguard, BlackRock (BLK) and Pimco.
4. Some FOMC members turn hawkish, QE to end at 2013 — Fed policy officials “were approximately evenly divided” between those who want endless QE and those who surprisingly want to end it by the middle of this year, the minutes of the latest meeting show.
5. Ford F-Series Truck Sales Highest Since 2007 — courtesy of BIG, For the month of December, Ford sold 68.8K F-Series trucks, which was a slight increase from December 2011. For the entire year, total sales of F-Series trucks were 645.3K, representing a 10.3% increase from 2012, and the third straight year of annual increases. 
6. American Association of Individual Investors (AAII) sentiment report — after five straight weeks of increases, bullish sentiment declined for the second week in a row, falling from 44.4% down to 38.7%. 
The week ahead — Economic data from Econoday.com:
