AMJ Financial Blog

The Markets- April 18, 2016

Isn’t it remarkable that China’s growth is so consistent?

A columnist from The Washington Post once opined that China “produces an astonishing number of astonishing numbers.” Last week’s GDP announcement, which helped push markets higher, may fall into that category.

China’s official statistics agency reported the country’s gross domestic product (GDP) grew by 6.7 percent during the first quarter of 2016. That didn’t come as a big surprise because it’s smack-dab-in-the-middle of the official Chinese government target of 6.5 to 7.0 percent GDP growth. The target was set last year when the government adopted its most recent five-year plan.

Not everyone thinks China’s official statistics are on the money. The Conference Board (TCB), an independent global research association, has found:

“…an upward bias in the previously published GDP growth series of, on average, 2.6 percentage points per year since the start of Deng Xiaoping’s so-called “reform era” that began in 1978, this percentage has not been constant over time. In fact, our alternative series indicates much larger volatility in the year-on-year estimates (sometimes even showing faster growth rates than the official estimates), suggesting that the impacts of external and internal shocks on the Chinese economy are much more pronounced than the official statistics convey.”

In other words, China’s growth may not be as steadfast and unwavering as the country’s government would have us believe.

TCB estimated China’s GDP grew by 3.7 percent during 2015, which was significantly lower than the Chinese government’s 6.9 percent growth estimate. In fact, TCB expects the Chinese economy to grow by 3.7 percent in 2016, too. It’s not 6.5 percent, but it’s solid growth.

Data as of 4/15/16 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 1.6% 1.8% -1.2% 10.3% 9.5% 4.9%
Dow Jones Global ex-U.S. 3.3 0.7 -13.0 -0.6 -1.6 -0.3
10-year Treasury Note (Yield Only) 1.8 NA 1.9 1.7 3.4 5.0
Gold (per ounce) -1.0 15.5 2.9 -4.2 -3.6 7.2
Bloomberg Commodity Index 1.7 2.3 -20.8 -14.8 -14.0 -7.4
DJ Equity All REIT Total Return Index 0.2 6.0 7.2 9.1 11.4 7.2

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable. 

What do economists think? As they’ve traveled across the country, U.S. Presidential candidates have made a variety of economic proposals and promises. National Public Radio’s Planet Money asked 22 economists from across the political spectrum for their two cents on the matter. Survey participants were given three options: good, debatable, or bad. Here are their opinions:

  1. End the “carried interest” tax break, which benefits hedge fund managers and private equity executives.
    • Good: 20
    • Debatable: 2
    • Bad: 0

 

  1. Lower the corporate tax rate to 25 percent.
    • Good: 10
    • Debatable: 10
    • Bad: 2
  1. Create a “National Infrastructure Bank” seeded with public money to help finance infrastructure projects.
    • Good: 10
    • Debatable: 8
    • Bad: 4

 

  1. Make tuition free at public colleges and universities.
    • Good: 1
    • Debatable: 1
    • Bad: 20
  1. Make tuition free at community colleges for students who contribute earnings from working 10 hours a week.
    1. Good: 5
    2. Debatable: 9
    3. Bad: 8
  2. Impose a “spectator tax.” Stock trades will be taxed at 0.5 percent and bonds at 0.1 percent.
    1. Good: 4
    2. Debatable: 6
    3. Bad: 12
  3. Raise the federal minimum wage to $15 an hour.
    1. Good: 2
    2. Debatable: 4
    3. Bad: 16
  4. Remove single taxpayers who earn less than $25,000, and married taxpayers (and those filing jointly) who earn less than $50,000 – approximately over 50 percent – from the tax rolls.
    1. Good: 2
    2. Debatable: 9
    3. Bad: 11
  5. Everyone pays the same 10 percent tax rate. It retains some version of the earned income tax credit and deductions for lower-income families.
    • Good: 1
    • Debatable: 0
    • Bad: 21
  1. Expel immigrants who are in the United States illegally.
    • Good: 0
    • Debatable: 0
    • Bad: 22

We’ll find out what the American people think later this year!

 

Weekly Focus – Think About It

 

“And along the way I discovered that a lot of great originals in history were procrastinators. Take Leonardo da Vinci. He toiled on and off for 16 years on the Mona Lisa. He felt like a failure. He wrote as much in his journal. But some of the diversions he took in optics transformed the way that he modeled light and made him into a much better painter.”

–Adam Grant, Organizational psychologist

Best regards,

 

Angela M Bender

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The information provided for informational purposes only, and does not constitute an offer, solicitation or recommendation to sell or an offer to buy securities, investment products or investment advisory services. All information, views, opinions and estimates are subject to change or correction without notice. Nothing contained herein constitutes financial, legal, tax, or other advice. These opinions may not fit to your financial status, risk and return preferences.

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