Yesterday, the stock markets saw a significant increase in volatility and ultimately closed the day sharply lower. The mushrooming debt crisis in Greece and in Europe eclipsed positive domestic economic news.
Naturally, Lowe fs will be monitoring the situation closely.
Readers of this column know that Lowe fs expected the situation in Europe to deteriorate. As a result we implemented strategies for our discretionary actively managed accounts in early February, in anticipation of the recent events. Recognizing that the U.S Dollar was likely to benefit from the forthcoming global environment in the short term, on February 5th we added in most actively managed allocations, a position that would potentially benefit from a strengthening dollar.
We also increased our bond holdings in many and maintained an elevated cash position for potential defensive purposes on February 26th.
Given our proactive strategics, no significant or dramatic shift in our actively managed accounts is anticipated. It is possible that we may minimally continue to increase our holdings in the “dollar bullish” position as well as a nominal increase in our gold holding if the prices and market matches our strategy (This is not a recommendation to purchase any particular holding or asset class nor is it predictive of future results. No strategy should be considered without professional guidance personalized to your situation).
What if the situation in Europe is not merely a bump in the road and does not stabilize? If Greece cannot be stabilized and if economies of Spain or Portugal begin to unravel, Lowe fs is prepared to implement potential downside strategies in our discretionary actively managed accounts.
The dramatic increase in volatility today is a key indicator that investors are much more nervous about the direction of the stock market. If we see similar problems emerge in Spain and Portugal to the same degree as Greece, worldwide stock markets could be under downward pressure. This is the result of a truly global financial system.
We expect that the Asian markets will react to the European situation negatively. The positive economic news which was reported yesterday could be enough to stabilize domestic stock markets by today or Thursday. If we do see domestic markets stabilize, our previous conclusion for continued potential recovery throughout 2010 may remain intact. If the situation worsens or spreads globally and our improving economy is not adequate to counterbalance it, we may need to adjust our current view.
Stabilization of our domestic markets and a continued recovery as we move through 2010 remains the most likely scenario in our opinion, but we remain prepared for any situation which may develop.
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.