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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.