Market Notes May 17, 2011

Are Red Flags Emerging?

A growing number of financial analysts seem to be offering cautionary signals based upon the perception of a slowing economic recovery, the end of the Federal Stimulus (QE2), the debt ceiling and overall global instability.

Add to that the fears of inflation, rising interest rates and a persistently weak housing market and the economic forecast can seem quite gloomy. The increasing prices of food and fuel could also begin to put a lasso on consumer spending.

The debt situation in Europe, and in particular in Greece, remains to be a pervasive problem that may not end for the foreseeable future. The ongoing debt crisis demonstrates why Lowe Wealth Advisors has tended to avoid foreign markets year-to-date and has instead generally focused on domestic markets.

Concerns for the Middle East have temporarily taken a backseat. The Libyan conflict rages on with the likely future outcome unclear. One situation that could alter the dynamics and overall stability in the Middle East would be the emergence of a new government in Egypt. If a government emerges that is unfriendly to the West, we believe this could cause widespread regional instability and uncertainty in the oil marketplace.

Japan continues to struggle with the recovery from their disasters. Clearly they are in recession and will have ongoing problems with power generation and potentially debt issues especially related to their power companies.

It is important to recognize that a focus on domestic markets and an avoidance of foreign markets may not entirely mitigate the risks that foreign markets presently pose. One needs to consider that many of the largest domestic companies derive a portion (some most significant) of their revenue from overseas consumers and exports.

While there is no perfect solution Lowe Wealth Advisors continues to advocate a well-diversified portfolio among different asset classes and strategies. With the backdrop of the potential challenges we mentioned above, it is easy to see why you are beginning to hear on the evening news that “getting defensive” may be in order.

We acknowledge the risks but also believe that a shift in strategy is not always appropriate based on speculation of what might go wrong. If we began to see actual and tangible reductions in job creation and reductions in business spending (combined with signs of weakening corporate earnings), a potential strategic shift may be in order.

As of today, we do not see an imminent major strategic shift. We are closely monitoring two sectors in particular – materials, technology and high-yield bonds. It is possible that we could see shifts in these two specific sectors in the coming days or weeks. We expect that May and June could be challenging months given the current economic picture. However, Lowe Wealth Advisors believes and is optimistic that with continued growth in job creation, as well as solid 2nd quarter earnings, there is equal potential for the equity markets to gain a foothold for growth. (We must emphasize this is not a prediction of the market movements or economic growth.)

Lowe Wealth Advisors News

As part of our ongoing commitment to provide superior service to our clients, Harold, Greg and David attended the Financial Planning Association of MD Spring Symposium last week. They attended sessions focused on Elder Law, Retirement Portfolio Distribution Strategies, the Municipal Bond Marketplace, Interest Rates, Estate Planning and Ethics. The day provided insight and ideas which will be helpful as we provide insight and advice to our clients.
As always, should you have any questions or wish to discuss our perspectives in greater detail we would be glad to speak with you.

Client Service Agreements

By now most of our clients should have received an updated Client Service Agreement. Thank you to those who have returned them already and thank you to those of you are will be sending them back this week.

We want to note a typo on the exhibit of the Schedule of Assets. This should read assets.

Please note: Harold Lowe has a new email address. It is All other Lowe Wealth Advisors email addresses remain unchanged. Please update your address books to ensure future delivery of emails to Harold.

Lowe Wealth Advisors Disclaimer for Readers: Commentaries on this web site are intended as a vehicle for the dissemination of general information regarding market conditions to Lowe Wealth Advisors clients only. 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 for the time of postings and are subject to change without notice.

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 Wealth Advisors is a registered investment advisor.