Onward and Upward – March 11, 2014
The stock market is transitioning from a macro-driven (Fed Bond Buying, Tax Increases, Budget Cuts, Budget Deficit/Debt Ceiling, European Debt Crisis), easy monetary policy environment to a more traditional, fundamental-driven (economic statistics, corporate earnings) environment. When undergoing such a transformation, the potential for elevated stock market volatility certainly exists. We’ve seen this play out during the month of January and so far during the month of March.
Currently, we believe the fundamentals lack clarity. The economic data and fourth quarter corporate earnings reports have been mixed. In order for stocks to continue moving higher in price,...
Financial Markets Update – February 4, 2014
The S&P 500 Index ended the month of January with its first monthly loss (-3.45%) since August 2013 and the largest monthly decline since May 2012. February did not begin any better with the S&P 500 declining another 2.2% yesterday. The YTD sell-off in stocks has been driven by emerging market currency declines, weaker than expected economic reports from China and the U.S., and anxiety over Fed tapering. Conversely, bonds and gold have rallied in price this year with the 10 year U.S. Treasury yield declining 45 basis points and the price of gold rising 4.5% thru yesterday.
We believe this weakness in stock prices reflects investor nervousness after huge gains last year and is not...
As with every new year, we approach 2014 assessing whether it will be a green year for stocks (less volatile with a -1 standard deviation or better) or a red year for stocks (more volatile with a -2 or -3 standard deviation event). For 2014, although we will likely see the end of Quantitative Easing (monthly Fed bond buying) in the U.S., the global economic and policy environment will remain conducive for further gains in stock prices. For the first time since the Great Recession of 2008, the global economy should show signs of synchronized growth among the U.S., China, Japan, and Europe. This economic expansion should strengthen as the year progresses and prove to be sustainable. Therefore, we believe 2014 will be another green year for most risk-based assets.
Fourth Quarter 2013 Financial Market Commentary
The Beginning of a Return to Normalcy
During the fourth quarter U.S. stock-market indices continued their move into record territory with the S&P 500 Index capping its best yearly gain since 1997 while the yield of the 10 year U.S. Treasury Note reached a two year high of 3.03%. U.S. stocks underwent the broadest rally ever as the economy showed signs of gradual improvement while the rising tide of Federal Reserve (Fed) bond buying lifted all ships.
In a year full of apparent headwinds...