On Monday, April 9, 2012, the global equity markets responded to last week’s lackluster U.S. employment report by selling off shares with decidedly downward pressure. According to The Wall Street Journal, the Financial Sector (a sector for which Lowe Wealth Advisors has sought to minimize exposure in many of our managed allocations) led the markets lower. That downward pressure continued today with ongoing fears about the Euro-Zone. Consumer-discretionary stocks were among the biggest losers today according to the Journal.
Recently we have been experiencing a market that seems to be moving sideways. In the coming weeks, all eyes will be on corporate earnings reports, which begin today with Alcoa.
Over the past five trading sessions the trend has been decidedly “risk off” with assets flowing to areas of perceived less risk such as high-quality bonds. Commodities, such as oil, continue to be under pressure as of this writing, while gold and other precious metals, such as silver, were positive. (Precious metals can be volatile and risky investments, but Lowe Wealth Advisors is not advocating a particular strategy.)
As we have digested the employment data from last week, we believe that there are some apparent inconsistencies. We would not be surprised if the numbers were revised to more favorable and expected results in the coming weeks.
Lowe Wealth Advisors will continue to monitor the corporate earnings and the overall environment. At this time we do not anticipate substantial changes to our current managed allocations. Should that change we will notify you. As always, please let us know if you have any questions.
Market Notes April 5, 2012
On Tuesday April 3, 2012, the Fed unnerved the global markets by announcing that they have no plans to implement a QE3 strategy.
Continued concerns about Europe’s financial status (e.g., Spain had a dismal bond sale.) and China’s declining economic growth rate are compounding the overall atmosphere of unease. As of this writing the domestic equity markets are experiencing downward pressure. This downward pressure seems to be pervasive in equities, commodities and bonds. Oil continues to be hit particularly hard and gold has recently had some challenging days.
Over the next few weeks all eyes will be on corporate earnings. Some early indications are showing a decline in the strength of earnings.
On the positive side, the economy continues to grow, largely based on the strength of consumer spending. With housing prices starting to stabilize there seems to be a sense of growing optimism. To date, high gas and food prices have not weakened consumer demand significantly.
Strong consumer spending could be a mitigating force against disappointing corporate earnings. Yet, if we continue to see rising gas prices there will come a time when consumers say “enough” and cut back on their spending.
The Fed’s decision to say no to a QE3 has added to the recent volatility in bond markets. While the Fed continues to state that they will keep interest rates suppressed through 2014, the bond markets have reacted with some skepticism that the Fed will be able to retain this stance. At issue is a concern that inflation might get out of hand. If the bond traders believe that rates should be rising, it is plausible that the bond markets could take the reins out of the Fed’s hands and we could see rates continue to rise.
April could be a lackluster month for the markets in both equity and in bonds should we see the anticipated weakening of corporate earnings.
From a strategic standpoint, Lowe Wealth Advisors believes that a broadly diversified approach with a focus on investments with the potential to pay regular dividends and have strong yields. We will carefully monitor our equity, commodity and bond exposure, and we will make strategic shifts should we deem them to be necessary and appropriate based on our client objectives. The most likely target would be a reduction or sale of positions focused on oil.
Avoidance of the Euro-zone remains a continuing theme in the majority of our allocations.
While most of our actively managed allocations are well-diversified, you should expect some bumps in the road just as we are currently experiencing. When there are days in which the only safe haven is cash, some degree of volatility and potential losses are likely for any given day, week or month. Lowe Wealth Advisors will continue to keep you informed of our views on the current landscape as we monitor the corporate earnings in early April.
Lowe Wealth Advisors is an SEC registered investment adviser with its principal place of business in the State of Maryland. Lowe Wealth Advisors and its representatives are in compliance with the current notice filing and registration requirements imposed upon registered investment advisers by those states in which Lowe Wealth Advisors maintain clients. Lowe Wealth Advisors may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. For information pertaining to the registration status of Lowe Wealth Advisors, please contact Lowe Wealth Advisors, or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov).
This commentary is intended for the dissemination of general information regarding market conditions to Lowe Wealth Advisors clients. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results, and there is no guarantee that the views and opinions expressed in this report will come to pass. While any general market information and statistical data contained herein are based on sources believed to be reliable, we do not represent that it is accurate and should not be relied on as such or be the basis for an investment decision. Any opinions expressed are current only as of the time made and are subject to change without notice.
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- No diversification can completely protect against market risk or other risk factors with investing. A diversified portfolio could still lose money.
- An Index is a portfolio of specific securities (common examples are S&P, DJIA, NASDAQ), the performance of which is often used as a benchmark in judging the relative performance of certain asset classes. Indexes are unmanaged portfolios and investors cannot invest directly in an index. Past performance is not indicative of future results.
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*Lowe Wealth Advisors is a registered investment advisor.