Global CIO Commentary by Scott Minerd
"A few weeks back I pointed out that just about every bit of good news was being discounted into the market and that a continuation of such a trend was unlikely. Now that the good news has been digested, market participants are increasingly returning to their worries. Europe, China, and the Fiscal Cliff have returned to center stage.
While these global economic issues are not sufficient to derail further U.S. expansion, the market needs time to consolidate and we are now in the most seasonally difficult time of the year. Given that credit spreads have plunged and equities have surged higher, especially in Europe, I would expect some kind of pullback in stocks and credit spread widening in the coming weeks.
The good news is that pullbacks should be regarded as buying opportunities. I expect the rally to resume before the end of October, with the S&P500 reaching new highs before the end of the year.”
Economic Data Releases
U.S. Economic Data Mixed, Weakness in Construction and Manufacturing Countered by Resilience in Employment and Sentiment
U.S. real GDP growth in 2Q was revised down to 1.3% from 1.7%, led by a decline in farm inventories as a result of the drought. In August, durable goods orders fell sharply, down 13.2% from July, led by the 34.9% decline in transportation equipment orders. Construction spending also decreased by 0.6% in August, the second consecutive month of decline. Personal spending grew 0.5% MoM in August while the price deflator rose 0.4%. Personal income rose 0.1%, the slowest monthly gain in nine months. On the positive side, jobless claims fell to an 11-week low and the University of Michigan consumer confidence index rose to a four-month high. The ISM manufacturing index rebounded to 51.5 in September, ending three consecutive months of contraction.
Spain is on Track to Miss Budget Targets, Chinese Manufacturing Improves, and Australia Slashes Interest Rates Further in the Face of Slowing Growth
The eurozone unemployment rate rose to an all-time high of 11.4% in August, with consumer confidence sinking to its lowest level since May 2009. Manufacturing PMI in the eurozone rose to a six-month high of 46.1 in September but remains in contraction. Germany, France, Italy, and Spain all posted manufacturing PMI’s below 50. Spain is currently on pace to miss its official deficit target of 6.3% of GDP for 2012. Its budget deficit is currently at 4.8% of GDP through the first eight months of this year, which is equivalent to a 7.2% annualized rate. In China, industrial profits fell 3.1% YoY on a cumulative basis through August. Both the HSBC and the official manufacturing PMI improved in September, although both are still in contraction. Elsewhere, Japanese industrial production fell for a second consecutive month in August and the Australian central bank cut its benchmark interest rate to 3.25%, the lowest since 3Q2009.
Chart of the Week
Eurozone Real GDP Growth vs. Eurozone PMI Composite
The European Central Bank (ECB)’s bond purchase plan and its record low benchmark interest rates have stirred the rally in European equity markets over the past three months. The euro stoxx 600 index has climbed 16.2% since early June. However, economic fundamentals in the eurozone continue to weaken. Historically, the eurozone purchasing manager index composite (PMI composite), which encompasses both the manufacturing and service sectors, tends to trend closely with GDP growth. In September, the PMI composite fell to a 39-month low and has been in contraction for eight consecutive months, suggesting that eurozone real GDP is likely to decline further in 3Q2012.

Source: Bloomberg, Guggenheim Investments. Data as of 9/30/2012.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"). Guggenheim Funds Distributors, LLC is an affiliate of Guggenheim.
Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.
Investing involves risk, including the possible loss of principal.
*Assets under management is as of 3.31.2023 and includes leverage of $14.7bn. Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Advisors, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.
This is not an offer to sell nor a solicitation of an offer to buy the securities herein. GCIF 2019 and GCIF 2016 T are closed for new investments.
©
Guggenheim Investments. All rights reserved.
Research our firm with FINRA Broker Check.
• Not FDIC Insured • No Bank Guarantee • May Lose Value
This website is directed to and intended for use by citizens or residents of the United States of America only. The material provided on this website is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation. Investing involves risk, including the possible loss of principal.