Market Notes April 28th 2009

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This market takes a licking and just keeps on ticking. With the news today that regulators are urging Bank of America and Citigroup to boost capital the market had every reason to decline.

Yet with the backdrop of a possible flu pandemic the market absorbed this news and as of the time of this writing was slightly positive, according to Yahoo Finance. This is a very encouraging sign about the resiliency of the market.

It is our opinion that the swine flu will likely impact foreign markets more than domestic markets. Unless we see businesses, factories and schools having to shut down, in which case we could see a market impact in the U.S.

Investors can look back to the SARS outbreak of 2003 to understand how the market might react to a pandemic. SARS killed 775 people in 25 countries (Yahoo Finance) in 2003. The impact was significant for foreign markets but relatively short lived. The domestic impact was negligible.

Lowe fs will continue to closely monitor the situation and potential economic and capital market impacts. If we determine any strategy is appropriate we will implement it in our actively managed discretionary accounts. However, at this time we believe the capital markets underlying trend continues to be up and that unemployment and banking are the only things holding it back.

The fate of the markets and the economy are essentially in the hands of the banking system. As the banks go, so go the markets. Financials will need to take an active role in any sustainable recovery.

If there is not noticeable improvement in the banking sector and an overall reduction in risk, any market rally is not likely to be sustainable. Analysts and investors are counting on a trend of “less worse news” and a signs of stability returning to the sector. If banks suddenly need more bailouts we could see a market pull back.

Speaking of stability in the baking sector, Lowe fs believes that Bank of America CEO Ken Lewis will likely be gone by Labor Day. He has become a lightning rod of bad publicity for BofA and the clock is ticking on his future at the helm. We do not think this will be a major factor in terms of market movement.

Alliance Capital Management Fair Fund Distribution

Some Lowe fs clients may be receiving a distribution from the Alliance Capital Fair Fund Distribution.

If you receive a check please do the following:

  1. Determine if the check is an IRA or taxable account. Typically, an IRA will say FBO or IRA account.
  2. If the check is an IRA do not cash it and do not endorse it. Please forward it directly to your Fidelity IRA account where they should treat it as a rollover. If you need help determining if your check is an IRA or a taxable account please call Lowe fs and we would be pleased to assist you. To send IRA checks to Fidelity the address is:

    Fidelity Investments
    PO Box 770002
    Cincinnati, OH 45277-0075

    NOTE: Please put your account number on the check and include a memo instructing them to deposit the check as a rollover into your IRA. If you are not sure what your account number is please call Lowe fs and we will provide it for you.

  3. If the check is NOT an IRA please read the tax notice included in the mailing. We recommend you save this information and provide it to your tax preparer. Do not send the check to Fidelity. The best option is to deposit the check into your bank account.

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary therefore, the information should be relied upon when coordinated with individual professional advice. Not all portfolios are actively managed. If you have a question about how your account is being managed please contact us. Generally accounts less than $150,000 are not actively managed.

Important Disclosures

  • Not all portfolios are actively managed. If you have a question about how your account is being managed please contact us.
  • 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.

Foreign investing carries additional risk such as currency risk, political risk and different accounting standards.

*Lowe fs is a registered investment advisor.