U.S. economic data continues to portray decidedly positive trends. Looking forward, we believe the economy is likely to see a broader and stronger mix of contributing growth factors in the quarters ahead. Although we do not expect today’s report to have a material influence on our GDP forecast, we do believe it provides us with greater confidence in our outlook as the U.S. economy seems to have finally reached a self-sustaining pace.

The Commerce Department’s first estimate of third quarter GDP was moderately ahead of expectations as reported this morning. We were estimating a gain of 3.0 percent, in-line with consensus estimates. 

Consumer spending activity was a fraction weaker than expected, but we still believe overall consumer fundamentals are strong and getting stronger. Employment gains have been good, income growth has followed (wages and salaries were a solid 5.1 percent higher in August than they were a year ago) and consumers are working from a much improved financial base after several years of deleveraging. Recent gasoline price declines also should help consumer purchasing power over the near-term, while rising consumer confidence levels suggest consumers are likely more willing to spend.

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MINNEAPOLIS – October 28, 2014 – The Board of Directors of Ameriprise Financial, Inc. (NYSE: AMP) has declared a quarterly cash dividend of $0.58 per common share payable on November 21, 2014 to shareholders of record at the close of business on November 10, 2014.
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The recent rise in market volatility has been variously ascribed to concerns over central bank policy, slowing global growth and the approaching elections. The news flow this week will only heighten the debate over the relative importance of each.

The European Central Bank released the findings of its bank stress tests on Sunday, and the results were generally good, unless you happen to be an Italian bank. Of the 130 banks tested, 25 failed, nine of which were Italian. But otherwise, there were few surprises. None of the Eurozone’s major banks failed the test, and for some of those that did, remedial efforts to rectify their capital shortfalls had already been undertaken since the beginning of the year.

Some will insist that the test was not as strict as it could, or should, have been. But it was comprehensive. And the ECB did itself, and everyone else, a big favor by publishing reams of data associated with the exercise, enabling investors to make up their own minds about the relative health of the Eurozone’s banking system.

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U.S. stocks fell for the fourth straight week, losing 1.0 percent, as the S&P 500 fell through its 200 day moving average for the first time in two years on Monday.
But a strong rally that began halfway through the trading session on Wednesday minimized the damage and allowed investors to breathe a little easier.  When the rally began, stocks were already down 4.5 percent on the week. So far in this selloff, the S&P 500 is down 6.2 percent, on a closing price basis. From its high on September 18 to its low on October 15, the index had lost 7.4 percent. On an intraday basis, the index had fallen as much as 9.7 percent.
But, the Russell 2000 index of small stocks, which had fallen 13 percent since the start of the second quarter, began to rise on Tuesday, ahead of the large caps, and actually rose 2.8 percent for the week.
European stocks waited until Friday to rise, but not even a 3.0 rally on the day could prevent the Euro Stoxx 50 index from falling 1.0 percent for the week. It, too, had fallen 13 percent from its peak.

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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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