Aug 01 2014

Investors in Focus

Market Recap:

An overnight (technical) default by Argentina on some (very select) bond obligations, a stronger than forecast GDP report, and improving labor markets were too much for market participants, who sold stocks in droves fearing that an abrupt change in policy by the Fed was increasingly likely. Separately, and in somewhat of a contradiction to the line of thinking that inflation and the economy are heating up too fast, worries that looming sanctions against Russia would cause a spike in oil prices – hindering the economic recovery and having an adverse effect on global growth. Corporate earnings continued to roll in, with Exxon Mobil reporting earnings significantly above expectations, while Yum Brands warned that issues relating to its suppliers in China negatively impacted its sales. The Dow Jones lost more than 200 points, as all sectors of the S&P were lower for the day. Commodities were generally higher, as Treasury Yields rose on the economic news.

Investors in Focus:

As the chatter of more rapidly rising inflation pressures and a potential shift in monetary policy heat up, we’d like to remind investors that they should take a longer-term view and that none of the events over the past few days are likely going to cause any material shifts in the Fed’s action any time soon. While market action may appear dramatic on this last day of July, the S&P is in essence flat for the month – and up about 5% so far this year. Interest rates are still significantly below their January 1 2014 levels and are not expected to spike. Overall inflation expectations, in the U.S. and globally, continue to be benign. Improvements in the labor market, i.e. lower unemployment and higher wages, is a good thing…. Most significantly, investors should ask themselves the following: “Have recent events impacted the fundamentals of the U.S. economy and the corporate earnings outlook sufficiently to expect a prolonged market correction?” Or, in other words, “has anything happened that change your outlook over the next year or two?” In the view of the members of our investment committee, nothing has changed. Improvements continue to occur at an uneven pace and will likely face new headwinds and tailwinds as various events occur. Most significantly, the overall picture continues to improve and we look forward to the day that Central Banks around the world are able to reduce their support mechanisms and raise interest rates to a more normalized level.

Make sure to tune into Money Matters with Gary Goldberg this Saturday at 2:00 PM and Sunday at 11:00 AM on WOR 710 AM Radio to hear our complete market and economic analysis, as well as a great interview with Nobel Laureate and MIT Finance Professor Dr. Robert Merton. Visit our website for details.

Jul 31 2014

Rate Hike Comes Sooner Than Expected?

Market Recap:

Market participants received some encouraging news early Wednesday as economic data showed the US economy growing by 4%, significantly above the 3.2% estimate, during the second quarter. However, given the sharp adjustments to GDP data in the past, many investors remained pessimistic that the final read will be this strong. Moreover, the strong data and a somewhat mixed message Fed policy statement by Chairwoman Yellen during her testimony at 2:00 PM caused some to speculate that a rate hike could come sooner than forecast. Lastly, market participants also contended with the possibility that Argentina would default on its bond payments, which could cause a broader sell off in its currency and emerging markets as a whole. Sectors of the S&P were mixed, with the interest rate sensitive Utilities sector falling most and Consumer Discretionary shares rising most on the better GDP data.

Looking Ahead:

Earnings continue to roll in and mostly impress investors, who are likely to be distracted by the overnight bond-default by Argentina. This marks the second default in 12 years for the South-American nation, as it failed to negotiate a repayment deal with a group of hedge-funds who purchased the bonds at a steep discount years ago. While these events will create some turmoil in currency markets and make for great headlines, they are unlikely to cause a broader impact on developed markets in North-America and Europe. Clients of Gary Goldberg Financial Services can rest assured that none of our portfolios have any Argentinian debt or currency exposure, and that our overall emerging market exposure is minimal. Once this headline crisis passes, market participants will likely refocus their attention on fundamentals, which primarily revolve around economic strength and corporate earnings – both of which are solid at this stage.

Make sure to tune into Money Matters with Gary Goldberg this Saturday at 2:00 PM and Sunday at 11:00 AM on WOR 710 AM Radio to hear our complete market and economic analysis, as well as a great interview with Nobel Laureate and MIT Finance Professor Dr. Robert Merton. Visit our website for details.

Jul 30 2014

Expect a Relatively Muted Session

Market Recap:

Slightly disappointing earnings and nervousness ahead of Wednesday’s GDP release caused markets to drift lower on Tuesday. Volume and volatility were muted ahead of a busy reporting day, with most sectors of the S&P declining – Telecom shares were the only gainers for the day. Commodities were mixed, while Treasuries remained flat as the Ten-Year Yield remained below 2.5%.


Looking Ahead:

Stocks are set to get a boost from much better than forecast second quarter GDP data, which showed the economy growing at 4% while observers expected a 3.2% gain. We expect a relatively muted session until mid-afternoon when the FOMC releases its meeting minutes at 2:00 PM and Chairwoman Yellen briefs reporters and market participants on the Fed’s view of the economy. While we do not expect any new language in the minutes, we do view a rising probability of increasing dissent amongst committee members regarding the appropriateness of the current policy and when the Fed should begin raising rates.

Make sure to tune into Money Matters with Gary Goldberg this Saturday at 2:00 PM and Sunday at 11:00 AM to hear our complete economic analysis, a great interview with MIT finance professor and Nobel Laureate Robert Merton, as well as our ongoing market commentary. Visit our website for details.

Jul 28 2014

Investors Are Holding Their Breath

Market Recap:

It was a rough start of the week, as the Dow Jones Industrial Average dropped by nearly 100 points before rebounding and ending the day near flat for the day. M&A activity continued as its recent torrid pace, with online real-estate company Zillow announcing it would acquire rival Trulia for $3.5 billion and retailer Dollar General announced their intention to acquire Family Dollar Stores. Oil and Gold were flat for the day, as were Treasuries, with the Ten-Year yield remaining below 2 ½%. Sectors of the S&P were mixed, with Utilities having a very strong day, while economically sensitive shares, such as industrials, fared worst.

Looking Ahead:

Investors are holding their breath ahead of a slew of corporate earnings reports, the busiest week so far, as well as Wednesday’s release of second quarter GDP and Fed Chairwoman Yellen’s testimony after the 2 day FOMC meeting. So far, corporate earnings have been robust, rising 8.3% from Q1 – and up an astounding 10% excluding financials. Politics and geopolitics continue to weigh on investor sentiment, as the rising tensions in Ukraine as well as the Obama’s administration focus on “tax inversion” are raising concerns.

Don’t miss Money Matters with Gary Goldberg this Saturday at 2:00 PM and Sunday at 11:00 AM on WOR 710 AM Radio, when we discuss the latest economic data releases, the impact of the Q2 GDP number being released on Wednesday, as well as having an in depth interview with MIT Finance Professor and author of “America’s Retirement Crisis” Dr. Robert Merton. Visit our website for details.

Jul 24 2014

The Current Market Environment

Market Recap:

Strong earnings drove stocks to new highs as Facebook shares soared on much better than forecast earnings. Shares of International Paper (IP), Yahoo (YHOO), and IBM (IBM) were also among market leaders. In spite of the positive earnings momentum and encouraging economic news, which showed jobless claims falling to a 9 year low, markets reversed course in the afternoon to close with small losses. Word that the Obama administration, one of Wall Street’s favorite ever, was working on a plan to close a tax loop hole that allowed companies to move their headquarters overseas and pay lower taxes – so called Corporate Inversion – unnerved some already jittery investors. We talked about the current market environment with MarketWatch Radio’s Chief Correspondent Larry Kofsky this morning – listen to the interview here:

Sectors of the S&P were mixed, with industrials underperforming and consumer staples outperforming.

Looking Ahead:

More earnings and economic news releases are on tap on Friday. Generally speaking, we continue to expect a relatively strong earnings season with continued positive economic news. However, as has been the case in the last few months, we expect markets to take a “two steps forward, one step back” trading pattern. The Durable Goods order report being released at 10:00 AM will be the most meaningful data point ahead of the weekend and next week deluge of economic releases.

Don’t forget to tune into Money Matters with Gary Goldberg this Saturday at 2 PM and Sunday at 11 AM to hear a great interview with S&P Capital IQ’s Sam Stovall, our latest economic analysis, and a discussion about why markets are trading at all-time highs, in spite of the current geopolitical turmoil in the world. Visit our website for details.

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