Jeff Voudrie’s Week-In-Review 9/23/2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Trending Indicators:

       US Stock Market                Uptrend
     CAN Stock Market            Uptrend
US Bond Market               Down

In the markets:

Markets around the world gained again last week, marking the third advancing week for most.  US markets reached new all-time high territory on Wednesday, Developed International markets surpassed their 2011 highs on average, and Emerging Markets – having gained 10% in the last three weeks – are rapidly digging their way out of a large hole although still down -3.9% year-to-date.
Although US markets gave up their post-Fed bounce from Wednesday by the time the week was done, it was nonetheless a good week, with indices advancing an average +1.3%.

The big economic news of the week, of course, was the Fed’s decision (or, non-decision) to leave its QE program of asset purchases unchanged for the time being.   Almost no pundits expected this outcome, and the market quickly rallied.  However, those gains had been erased by Friday leaving only the gains from earlier in the week, which were based on separate Fed-related news: Larry Summers’ withdrawal from consideration as Ben Bernanke’s successor as Fed chair.

The Canadian market’s S&P/TSX index reached a two-year high on Wednesday, but gave most of it back by the end of the week to end with a lesser gain of +0.7%.  Declining energy and miners shares weighed on the market, but the biggest news was the shocking report from Ontario-based BlackBerry.  BlackBerry reported stunning losses, plans to lay off a huge 4,500 employees, and the writedown of a billion dollars of inventory.  Many observers were uncomfortably reminded of similarities to the final days of Quebec-based Nortel, which similarly surprised investors before finally filing for bankruptcy in January, 2009.

It was a quiet week for economic news internationally, with holidays in the Far East, and collective breath-holding in Europe as the continent awaits the outcome of Sunday’s elections in Germany.  Angela Merkel’s coalition has slipped to a statistical tie in pre-election surveys, making the outcome less certain than it seemed not long ago.  The only thing certain is the importance of the outcome to Eurozone economic policies, and particularly to the fortunes of the Eurozone’s debtor nations – Greece, Spain, Portugal and Italy.

(sources: Wall St Journal, Bloomberg.com, ft.com, guggenheimpartners.com, ritholtz.com, markit.com, financialpost.com, stat.go.jp)

Looking Ahead:

The decision by the Federal Reserve to not ‘taper’ in September impacted the bond market and drove down yields. The reaction wasn’t as strong as it was back in May, but we did see some nice gains in the bond funds. Now there is speculation about whether or not they will taper in October. The bottom line, though, is that the underlying economy continues to weaken and the Fed continues to try to spur the economy. About the only thing certain is that volatility and uncertainty will continue. In the end, though, it is all about anticipating which direction the stock and bond markets will take. Currently, I continue to believe that equities have a better risk/reward ratio than bonds but the Fed taper decision may result in the type of stocks invested in to be modified from faster growing companies to slower growing companies.

As always, I continue to monitor the markets closely and will make adjustments to allocation, strategies and investments based on events as they unfold.

God Bless, have a great week!