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Jul 11 2016

This Week’s Market Moving Events

Market Recap:

After a choppy start to the holiday-shortened week, stocks rallied some 1 ½% on Friday as a strong jobs report boosted hopes that markets would return to a ‘goldilocks’ environment where the economy is growing just enough to help drive earnings growth, but remains tepid enough to keep inflation at bay and the Fed from raising interest rates. Markets are entering a seasonally difficult period, and second quarter earnings season is just getting on its way. Market participants will likely focus on this week’s labor reports as well that Thursday’s Bank of England announcement – the first scheduled news release since the Brexit vote.

 

Looking Ahead:

Volatility is likely to remain at the forefront, keeping hedging costs high. On the positive side, markets closed on a relatively strong note on Friday, however they failed to set new highs, meaning that they remain in their trading range. Market participants will likely focus on forward looking statements by corporate chieftains during the current earnings season to discern how the second half of the year may play out.

 

This Week’s Market Moving events:

Monday: U.S. Labor Market Conditions report

Tuesday: Redbook, JOLTS (Job Openings and Labor Statistics Report), Wholesale Trade

Wednesday: Import / Export Prices, Atlanta Fed Business Inflation Outlook survey, Beige Book

Thursday: Bank of England Announcement, PPI, Jobless Claims, Chinese GDP and Retail Sales

Friday: Industrial Production, Retail Sales, Business Inventories, Consumer Sentiment

Jul 05 2016

This Week’s Market Moving Events

Market Recap:

The S&P 500 and other indexes experienced a significant turnaround rally last week, gaining some 3%. And while this is certainly welcomed news, we caution investors from becoming too complacent. Initial fears relating to the British referendum vote to exit the European Union may well have been overblown, but remember “you can’t un-ring a bell,” and the forces that have been set in motion are unlikely to dissipate soon. When taking into account last week’s rally, there are plenty of warning signs coming from the market. The U.S. 10 Year Treasury is yield 1 ½%, German Bunds have a negative yield, Gold continues to rise, and financial shares just ended one of their worst quarters since the (end?) of the financial crisis.

We continue to expect the year to end with gains, however we caution investors from becoming complacent or taking on too much risk.

Looking Ahead: This Week’s Market Moving Events

  • Tuesday: Euro block PMI, U.S. Factory Orders, Consumer Spending
  • Wednesday: International Trade, Job Creation Index, Redbook Report, PMI & ISM Manufacturing data, FOMC Minutes
  • Thursday: ECB Minutes, Jobless Claims. PepsiCo (PEP) reports earnings
  • Friday: June Employment Report

Jun 29 2016

Brexit ease rebound Global equities including U.S. Stocks

Market Recap:

Global equities, including U.S. stocks rebounded on Tuesday as market participants’ fears relating to BREXIT eased. Energy, Financials and Consumer Discretionary shares fared best, as JP Morgan, Travelers and Visa led the Dow Jones Industrial Average nearly 270 points higher. The Euro and the British Pound rebounded slightly against the dollar, while Treasuries sold off slightly with the 10 Year yield closing at 1.46%; oil also gained.

 

Looking Ahead:

International bourses are helping lift U.S. equity futures in pre-market trading on Wednesday morning, as the initial over-reaction to Briton’s vote to exit the European Union calmed. In spite of the positive market moves yesterday and possibly today, which we certainly welcome, we urge investors to be cautious and not allow short-term volatility or emotions to drive their investment decisions. Quarter-end ‘window dressing’ (a term used to describe end of quarter trading by mutual fund managers to sell some losers and replace them with recent winners to make their portfolios look better) is likely as we approach the Independence Day holiday. Thereafter markets will likely refocus their attention on economic news as well as corporate earnings news. To that end, Nike reported earnings on Tuesday afternoon, beating EPS forecasts but disappointing on the sales and revenue front. Next week’s release of FOMC meeting minutes and Chinese economic data will be critically watched.

Jun 27 2016

The world is changing: The Brexit vote is a small piece of a very complex puzzle

Market Update: Briton’s voted to exit the Eurozone last week, sending shock waves through markets, creating political turmoil and causing enormous amounts of speculation as to what it all means. And while speculation is running rampant, the only thing we know for certain is that the process to exit the Eurozone will take about 2 years, perhaps longer as the process is largely up to the U.K. Parliament.

 

That’s it, we can’t be sure of anything else. A new referendum is unlikely, in spite of gathering over 3 million signatures requiring Parliament to discuss the matter. How will corporations react, will big banks move out of London as some pundits have suggested? Will this cause a new recession given the already fragile economic outlook for Europe and the rest of the world? Perhaps, but then again that could happen regardless of the Brexit vote. The world is changing, the Brexit vote is just one more, small piece of a very complex puzzle. Looking at the recent events in Europe, Britain, through the lens of a U.S. investor is more reassuring than most have discussed, as the U.S. economy is now un-equivalently more attractive and on more solid footing than virtually all other major economies of the world. Correspondingly, while there will likely be increased short-term market volatility, the fundamentals for most businesses, particularly domestic ones, have not changed materially as a result of Brexit. Given the general unease and nervousness associated with the implications of Brexit, we expect high-quality dividend paying stocks to gain even more favor with investors, as their relative safety and attractive yields offer a bit of a safe haven.

 

In the long-term, we think that the implications and economic impact of the Brexit vote will likely be less severe than many pundits think. Central Bankers will likely remain dovish, keeping interest rates low for even longer – there is even some speculation that the U.S. Fed’s next move will be to lower rates. And while multi-national corporations will likely have an even more conservative attitude towards cap-ex spending these factors will likely be temporary. For now, all indications are that the global economy will withstand this shock and that intermediate and long-term growth trajectories remain unaltered as a result of Brexit.

Jun 24 2016

UK Exits European Union

Markets were roiled overnight and Friday morning, after Briton’s voted to exit the Eurozone. Globally equity markets fell and safe haven assets such as Treasuries rallied – If U.S. markets close where they open today, they will have lost about 1 ½% for the week and end where they started in April of this year. In other words, another no “real” action quarter. Although Central Bankers will do their best to reassure markets, the impact of the Brexit vote on the world’s economies will take 6 to 12 months to be felt. As such, investors should expect dovish monetary policy, i.e. no rate hikes this year, lower growth forecasts and a generally conservative attitude towards cap-ex spending should also be expected. However, this will likely prove to be a temporary environment, as the ultimate economic impact of the vote will likely be much more subdued than most fear.

 

Looking Ahead:

The Brexit hangover will come on Monday, after market participants will have had the opportunity to digest the information and think through the repercussions of the British vote. And while there will likely be increased short-term market volatility, the fundamentals for most businesses have not changed dramatically. The proprietary GGFS Montebello Process® is designed to address the various needs of investors through the careful segmentation of assets and diversification of portfolio strategies with a strong focus on lower-risk / lower-volatility investments. Furthermore, as a result of the fears associated with the Brexit vote, we anticipate high-quality dividend paying stocks to gain more favor amongst investors who are not willing to settle for 1%’ish returns from high-grade bonds.

 

Next Week’s Market Moving Events:

 

Monday: Brexit hangover, U.S. International Trade, PMI Services, Dallas Fed Manufacturing data

Tuesday: U.S. GDP (Q1), Corporate Profits, Case Shiller Home Prices, Consumer Confidence, Richmond Fed Manufacturing Survey

Wednesday: Personal Income and Spending, Pending Home Sales, Janet Yellen Speaks, Farm Prices

Thursday: Lots of International Data

Friday: PMI & ISM Manufacturing, Construction Spending

 

 

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