Weekly Commentary April 23, 2012

The Markets
Move over European debt headlines, corporate earnings have something to say. Even though troubles are brewing again across the pond in Europe, corporate earnings season in the U.S. is stealing the spotlight. Why? According to CNBC, more than 100 companies in the S&P 500 have reported earnings and 8 out of 10 have delivered better than expected results and thats grabbed investors attention. Each quarter, publically traded companies update investors on how their businesses fared over the previous three months. And, according to the updates were seeing, business is still looking okay. The news helped push the S&P 500 higher by 0.6 percent on the week. Now, like all statistics, theres more than one way to interpret the earnings numbers. While 8 out of 10 companies have beaten expectations, the expectation was pretty low. In fact, earnings increased only 3.7 percent from the year ago quarter, according to Zacks. For the remaining S&P 500 companies that are set to report, Zacks expects those companies to report slightly negative earnings growth compared to the year ago quarter. Over in Europe, Spain and Italy saw the borrowing rate increase on their government debt, which suggests their debt problem is far from over. And, the International Monetary Fund released a report that stated the obvious if the European debt crisis cant be contained, it would negatively impact global economic growth in a severe way. At the moment, the U.S. markets seem fixated on corporate earnings and have put the European problem on the back burner. But, in this interconnected world, problems overseas may eventually find their way to our shores.
Data as of 4/20/12 Standard & Poor's 500 (Domestic Stocks) DJ Global ex US (Foreign Stocks) 10-year Treasury Note (Yield Only) Gold (per ounce) DJ-UBS Commodity Index DJ Equity All REIT TR Index 1Week 0.6% 0.9 2.0 -1.5 -0.9 2.8 Y-TD 9.6% 8.4 N/A 4.3 -1.8 11.1 1Year 3.1% -13.6 3.4 9.4 -20.0 10.3 3Year 18.3% 13.2 2.8 23.2 8.0 36.0 5Year 1.5% -5.2 4.7 18.9 -4.3 -0.3 10Year 2.2% 4.9 5.2 18.4 3.4 10.4

Notes: S&P 500, DJ Global ex US, Gold, DJ-UBS 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 TR 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, Barrons, 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.

WHEN $1 TRILLION ISNT ENOUGH Earlier this year the European Central Bank (ECB), Europes equivalent of our U.S. Federal Reserve, responded to the fear surrounding the European debt crisis by offering unlimited three-year loans with a 1.0 percent interest rate to European banks. According to The Wall Street Journal, at least 800 banks across Europe responded to this offer by borrowing over $1.3 trillion. As planned, the banks then took a good portion of that money and bought government securities that paid a higher interest rate. It sounds like a great deal to the banks borrow money at a 1.0 percent rate then turn around and buy government securities that pay a much higher rate and pocket the difference. The primary objective of this emergency lending was to indirectly allocate money to European governments who are heavily indebted. The ECB thought that making cheap money available would help lower interest rates in these troubled countries and buy them more time to work out their economic problems. Hows it working? Initially, interest rates in troubled countries dropped dramatically as banks bought the high-yielding government securities and fears of a collapse eased. Unfortunately, The Wall Street Journal says many of the banks who borrowed money from ECB may have already exhausted most of those funds leaving little money left to keep pushing interest rates down. As a result of this fear, interest rates are rising again, particularly in Spain and Italy, and, like a leak in a dike, its hard to stop a rise once it gets going. Will the ECB step in again and help European banks and governments avoid a Greek-style default? Its too early to tell, but either way, well be closely watching this tug-o-war between positive corporate earnings in the U.S. and negative headlines out of Europe. Stay tuned

Weekly Focus Think About It

There are no shortcuts to any place worth going. --Beverly Sills Best regards, Your Monarch Team P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added. Securities offered through LPL, Member FINRA/SIPC.
* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. * The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. * The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. * Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association. * The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. * The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Past performance does not guarantee future results. * You cannot invest directly in an index. * Consult your financial professional before making any investment decision. * To unsubscribe from The Monarch Report please click here, or write us at chloe.hansen@lpl.com Sources:
http://www.cnbc.com/id/47120743 http://www.zacks.com/commentary/20670/Q1+Earnings+Season+Off+to+a+Good+Start http://money.cnn.com/2012/04/19/markets/thebuzz/index.htm http://online.wsj.com/article/SB10001424052702304432704577347530806018866.html?mod=WSJ_hp_LEFT http://online.wsj.com/article/SB10001424052702304299304577349592369627840.html?mod=ITP_pageone_2 http://online.wsj.com/article/SB10001424052702304331204577352272051744662.html?mod=ITP_moneyandi http://finance.yahoo.com/news/stock-futures-signal-slight-gains-113345117.html http://online.wsj.com/article/SB10001424052702303513404577351560527620108.html?mod=ITP_pageone_3 http://online.wsj.com/article/SB10001424052702304818404577345900847700424.html?mod=ITP_moneyandi http://blogs.wsj.com/eurocrisis/2012/02/29/which-banks-took-up-second-round-of-ltro/