Last Friday, several key senators began to elevate pressure on Fed Chairman Ben Bernanke. The stock market reacted with a third day of declines. However, as of Monday, the stock markets appear to be taking a respite based on growing support for Chairman Bernanke.
If Ben Bernanke’s confirmation were to fail we believe that the credibility of our monetary system and monetary policy would be undermined at this critical time.
There could be a swift and significant downturn in the stock market.
This is not so much about whether or not Chairman Bernanke has done a good job. Rather, the stock market does not like uncertainty on any level. The Central Bank is clearly an area that needs to be a stabilizing force during this period of recovery.
All signs indicate that the “Bernanke Storm” will pass and that cooler heads will prevail and that Chairman Bernanke will be confirmed to his second term.
Lowe fs will be watching the stock market closely this week. Presently, we do not foresee any compelling reason to increase cash positions or add potential hedges to our actively managed portfolios. We will notify you if our view changes or if we believe a specific strategy is warranted.
The Monday report that U.S. Home sales fell in December (Source: WSJ) is not a significant surprise. Home purchases often slow during the holiday season and many buyers anticipated the tax credit would end and may have deferred purchases. With the extension of the tax credit and the normal seasonal uptick, we expect home sales to regain momentum in the spring.
At this time, we believe that the first quarter of 2010 could be flat or down for the stock markets. However, if corporate earnings continue to improve and turn the corner toward recovery, we could see potential improvement by the second quarter. Further, if we see the creation of jobs by July 4th or Labor Day, the risk of a double dip recession may diminish, especially if the private sector begins to stimulate the economy in the third and fourth quarters of 2010.
Of particular interest this morning is the move by China to stop issuing new loans for the remainder of January. This is an apparent attempt to slow growth in China. The view of the Chinese government may be that there is too much available credit. However, most economists believe that the intention is simply stabilize loan levels and that the impact on the Chinese economy will be negligible.
On a personal note, Harold is grateful for the many well wishes and prayers from all of you. He has successfully completed two rounds of his chemotherapy. He has been able to come into the office several days a week this month. I am sure most of you never thought the day would come when you would see Harold without hair. Well, that day has come, but we think he looks great. His attitude is great, he truly looks good and we all remain very optimistic. We will keep you informed of his progress and I know he looks forward to talking with and seeing all of you very soon.
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. 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.
- 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.