Aurum Wealth Management Blog

Icy Weather, Lazy Narrative

Its been the coldest winter in decades thanks to the 'polar vortex,' a term the average American resident can now define better than most junior weather forecasters.

Source:, NASA image showing the polar vortex in January

The good news, for what it's worth, is the Climate Prediction Center is pointing to El Niño returning in winter 2015, which would bring warmer temperatures and dryer conditions for the Northeast and Midwest.

All of the bad weather is affecting the data capital markets eye closely. Pundits blame the cold and snow for people not spending money at the store and the falloff in home sales. Sounds simple enough. Still, this does not seem much different than the last couple of years and how the seasonal cooling and warmer temperatures led the actual change in the Citi Economic Surprise Index.  We can see the correlation between economic data surprising on the upside and the temperature changing, and vice versa.

Either the economists need to go outside more to actually change their data forecasts with the weather or seasonal adjustments to the data need reworked.

Yet even before the cold streak began in January, data came in soft. The jobs report for December added only 75,000 people to the payrolls, well below consensus estimates. According to Retuers, Wal-Mart and Amazon (which is unaffected by shopping foot traffic) both reported disappointing results for the fourth quarter.

Below is the yearly change in retail sales that goes into the consumption portion of GDP (roughly 70%). It excludes buidling materials, auto sales, and gas stations. January came in at the lowest level of the recovery at 2.3% and slowing simliar to the last cycle. Did the weather really matter just last month or is this a continuation of the trend?

The rise of interest rates clearly had a negative impact on mortgage applications, as the spike last summer made the change in applications flip from positive to negative.

The rise of interest rates clearly had a negative impact on mortgage applications, as the spike last summer made the change in applications flip from positive to negative.

It seems the rush to paint all of the disappointing data with a broad weather stroke may be hasty. Is this the start of continued sluggish growth or will the warmer temperatures into spring outperform the lowered economic expectations like previous years? We are open to both possibilities and rarely find broad and 'easy to tell' narratives to be entirely accurate.

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Important Disclosures

This material is based on public information as of the specified date, and may be stale thereafter. We make no representation or warranty with respect to the accuracy or completeness of this material. Aurum Wealth Management Group and/or Aurum Advisory Services has no obligation to provide updated information on the securities or information mentioned herein. Actual events may differ from those assumed and changes to any assumptions may have a material impact on any projections or estimates. Other events not taken into account may occur and may significantly affect the projections or estimates. Certain assumptions may have been made for modeling purposes only to simplify the presentation and/or calculation of any projections or estimates, and Aurum Wealth Management Group and/or Aurum Advisory Services does not represent that any such assumptions will reflect actual future events. Accordingly, there can be no assurance that estimated returns or projections will be realized or that actual returns or performance results will not materially differ from those estimated herein. This material should not be viewed as advice or recommendations with respect to asset allocation, any particular investment, or any tax advice.


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