Remember that Key Market Fundamental: Stock Prices Follow Earnings
The stock market has enjoyed a very solid run over the past five years. Unfortunately, over the last few weeks, potential market headwinds have made their appearance, shaking investor confidence.
Tensions between Russia and Ukraine Worry Investors
Over the weekend, tensions escalated between Russia and Ukraine as Russian forces invaded and took complete operational control of the Crimean peninsula.
The Malfunctioning United States Government
Overall, we are entering a potentially volatile period for the financial markets. Increased uncertainty combined with below-trend economic growth will likely lead to sharp market fluctuations. To mitigate the risk of volatility, we remain committed to increased diversification. Within equities, we would begin reducing exposure to U.S. stocks and instead focus on better areas of opportunity international developed markets. Within fixed income, we would maintain a bias toward spread product, such as corporate bonds, which generally pay a higher yield compared to similar Treasuries.
What's easy about Quantitative Easing?
Recently you may have read or heard in the news about the possibility of the Federal Reserve (Fed) tapering its Quantitative Easing (QE) program. The topic can be so ingrained in the news cycle that few newscasters take the time to cover the details. So we thought wed spend a few minutes discussing the background and recent developments on the QE program, and why it matters to investors.
Fourth Quarter Outlook: A Turning Point?
It seems sometimes that the outlook for the global economy and the markets has been unchanged for years. Since the end of the recession, each year has commenced with forecasts that the United States economy would break out of its below-trend growth mode, only to see expectations dashed. Meanwhile, Europe has been mired in its own recession as it struggles with heavy post-crisis debt burdens. Growth has slowed in the emerging markets, ending the commodity boom of the first decade of this century.
What's Developing in Emerging Markets
Despite strong returns in United States equity markets, a different story has played out in the emerging markets. The MSCI Emerging Market Index, a proxy for emerging market equity returns, has fallen 9.94 percent year-to-date through Aug. 31, 2013. In contrast, the S&P 500, a proxy for U.S. equity markets, has risen 16.15 percent over that same span.