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“Virtually everywhere else, however, the news is grim. The euro zone, the world’s second-biggest economic area, seems to be falling from a feeble recovery back to outright recession as Germany hits the skids….Japan, the world’s third biggest economy, may also be on the edge of a downturn…even in China, still growing at a suspiciously smooth 7.5% a year, there are worries about a property bust, a credit bubble and a fall in productivity…the prescription for the weaklings is simple: heal thyself. Rather than waiting for America to solve their problems, the laggards should treat the recent spate of bad news as a wake-up call. The ECB should start bond-buying forthwith. The Japanese government should delay a rise in the consumption tax until the economy recovers. Countries that can afford it, notably Germany, should invest in infrastructure. And even America and Britain should be wary, especially over tightening monetary policy too quickly.”
“Weaker than it looks,” The Economist, Oct. 11, 2014, p. 15-16
 
Welcome to October — a month that more often than not seems to bring out the worst in financial markets. After such a remarkable period of calm, low interest rates, and more than five years of rising markets; the last few weeks have certainly been nauseating. What’s behind all of this and why are markets reacting now?

As the quote above suggests, worldwide growth has surprised on the downside. However, there is an even darker side to this negative surprise — the fear that deflation has not been defeated. It is my view that we have been fighting deflation ever since the financial crisis erupted over six years ago. In fact, most of the world (especially Europe) looks more like Japan than we would care to admit.

 



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Since its recent closing peak of 2011.4 on September 18, the S&P 500 is 7.4% lower, yet still 0.8% higher year-to-date (as of the close of trading on October 15). Some international markets have experienced more notable losses. In Europe, most of the region’s major markets are 12% to 15% lower off their recent peaks, while in Asia, most markets have registered losses in the mid-single digits versus recent highs.

Q: The stock market has been in a worrisome downtrend recently. Have underlying economic fundamentals changed?

A: Overall, we believe global economic prospects have diminished modestly given the loss of momentum in Europe, but in aggregate we still believe economic fundamentals remain broadly supportive. Particularly in the U.S., economic data has been strong and actually quite encouraging. We may lose a bit of momentum over the near term given recent fears prevalent in capital markets. Some areas of the economy, notably manufacturing activity and net new hiring, have also been growing at what we believe to be unsustainable rates, so we are likely to see some moderation there. Generally though, we still see U.S. economic prospects as solid.
 



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Minneapolis(October 15, 2014) – The overwhelming majority (86%) of baby boomers express concern about the affordability of health care in retirement, but very few pre-retirees admit they have taken financial steps to prepare for health care costs in retirement, according to a study released today by Ameriprise Financial (NYSE: AMP). The Health, Wealth and RetirementSM study, which surveyed more than 1,000 employed baby boomers ages 50-64 who are preparing for retirement with at least $100,000 in investable assets, asked these individuals about their attitudes toward health, health care costs and the impact each may have in retirement. View More

Concerns over the approaching shift in Federal Reserve policy and increasing evidence of slowing global growth continued to pressure risk assets last week and trigger flight-to-safety buying.
 
The S&P 500 experienced four days of price movements in excess of 1.0 percent last week, as four down days and only one day of gains produced a loss of 3.1 percent. The VIX index jumped 46 percent to its highest level since a spike in February. The NASDAQ Composite shed 4.5 percent, and the Russell 2000 small cap index fell 4.7 percent.
 
The yield on the Bank of America Merrill Lynch High Yield Master II index rose 19 basis points to 6.54 percent, as its spread to government yield widened by 37 basis points to 466, its widest in a year. The yield on the ten-year Treasury note fell to 2.28 percent, its lowest level since June 2013. The two-year note slumped to a yield of 0.43 percent, its lowest yield since mid-August.
 



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The much anticipated September jobs report arrived last Friday and resolved exactly, nothing. No doubt, it was a very good report. More jobs than expected were created, and the August total was revised higher, also as expected.
 
The hawks are pointing to the unemployment rate, which fell to 5.9 percent as evidence that there is less slack in the labor market than believed, and as a result the Fed should consider raising rates sooner than the consensus June timeframe. Indeed, the unemployment rate is now already at the low end of the Fed's central tendency forecast for year-end.
 



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MINNEAPOLIS – September 30, 2014 – Ameriprise Financial, Inc. (NYSE: AMP) plans to announce its third quarter 2014 financial results on Tuesday, October 28, 2014 after the close of the New York Stock Exchange. The company will host a conference call to discuss the results on Wednesday, October 29, 2014 at approximately 9:00 a.m. (ET).
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U.S. stocks wobbled last week on global growth concerns, before finding their footing to end the week on an upswing. But it wasn’t enough to prevent the S&P 500 from falling 1.4 percent, its worst performance since the last week of July. In fact, the index is now down 1.0 percent in September, and is higher in the third quarter by just 1.2 percent.
 
Weak economic data from China and the Eurozone sent stocks plummeting on Thursday, breaching near-term support in the process. But a strong rebound on Friday, fueled in part by an upward revision to second quarter growth at home, lifted the index back above the 50-day moving average as it recovered half of the prior day’s decline.



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Last week the Federal Reserve reiterated its view that the labor market remains significantly underutilized and that its exceedingly accommodative monetary policy will therefore remain appropriate for “a considerable period of time” after QE3 ends. The Fed also published its latest expectations for how quickly the fed funds rate is expected to rise once liftoff occurs, most likely in mid-2015.

As has been noted, judging by prices in the fed funds futures market, investors expect a slower pace of interest rate increases than does the Fed. And after last week’s meeting, that gap widened even further. Investors are no doubt mindful of the fact that the Fed’s own economic forecasts have been too optimistic throughout this recovery. There is agreement that eventually this gap in expectations will have to be reconciled, but so far investors are betting it is the Fed that will have to adjust.



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Minneapolis(Sept. 4, 2014) – Ameriprise Financial (NYSE: AMP) today announced it will match donations to Feeding America® up to $500,000 now through Thanksgiving. The annual Ameriprise Financial Challenge, which kicks off every September in support of Feeding America’s Hunger Action MonthTM, makes it easy for people to double the impact of their donations to Feeding America, the nation’s leading hunger-relief organization. Every dollar donated to Feeding America through the Ameriprise Financial Challenge can help secure and distribute 20 meals to hungry families in the U.S. through the Feeding America network of food banks.
 
The public can join in the effort by pledging their support at supportfeedingamerica.org/Ameriprise.
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