A very uneventful week saw stocks move higher. For the week, the Dow and S&P both gained 1.7% and the Nasdaq was higher by 2.2%. Gold saw little change, up just 0.3%. Oil reached the highest levels of the year before a modest retreat, closing the week with a 5.1% gain to $51.64 per barrel. The international Brent oil, which is used to make much of our gas here in the east, moved higher to close just shy of $59 per barrel.
Source: Google Finance
As mentioned above, the week was a very uneventful one. The market started Monday on a sour note but stocks crept slowly higher for the rest of the week. Trading volume was among the lightest of the year.
We opened the week looking at terrible jobs data released on the holiday last Friday. Economists were looking for nearly 250,000 thousand jobs added in March, only to be caught off guard when the number came in at 126,000. This was the worst report in 15 months.
Stocks were initially disappointed by the news. However, we have to remember the role the Fed plays in today’s market. They have been looking to pull back on the stimulus due to stronger economic reports, but this poor employment report decreases the chance of a reduction in stimulus any time soon. Therefore, it wasn’t surprising to see stocks move higher after the disappointing report.
The Fed also made news this week with the release of the minutes from their latest meeting. Investors were curious what was going on behind the scenes as the Fed prepares to raise interest rates.
The minutes showed us there is wide disagreement as to when to raise rates. Some regional Fed presidents wanted rates higher in the coming months, others preferred waiting until 2016. It looks like the Fed is trying to keep us guessing as to when rates will rise.
Corporate earnings for the first quarter began rolling in this week, too. At this point, it is far too early to tell how corporations are doing, but expectations are very low. Factset predicts earnings will fall 4.9% for the quarter, which would make it the worst quarter since 2009. Companies are already blaming the cold winter and stronger dollar (which makes our exports cost more to foreign buyers), so be prepared to hear these excuses often in the coming weeks – regardless of how true they really are.
Finally, international stock markets were a big story this week. Europe recently embarked on an aggressive stimulus program that has pushed their market to a new record high. Japan is in the same boat, with their market hitting the highest level in 15 years. China, too, hit new highs after loosening restrictions to foreign investors. We see none of these stories ending well, but stocks are likely to continue higher for some time.
Finally, in honor of the Masters tournament this week, here is a link to pictures of the course in 1935. It’s quite a difference from the course we see today! Below is an image of the iconic 12th green:
We opened the week looking at terrible jobs data released on the holiday last Friday. Economists were looking for nearly 250,000 thousand jobs added in March, only to be caught off guard when the number came in at 126,000. This was the worst report in 15 months.
Stocks were initially disappointed by the news. However, we have to remember the role the Fed plays in today’s market. They have been looking to pull back on the stimulus due to stronger economic reports, but this poor employment report decreases the chance of a reduction in stimulus any time soon. Therefore, it wasn’t surprising to see stocks move higher after the disappointing report.
The Fed also made news this week with the release of the minutes from their latest meeting. Investors were curious what was going on behind the scenes as the Fed prepares to raise interest rates.
The minutes showed us there is wide disagreement as to when to raise rates. Some regional Fed presidents wanted rates higher in the coming months, others preferred waiting until 2016. It looks like the Fed is trying to keep us guessing as to when rates will rise.
Corporate earnings for the first quarter began rolling in this week, too. At this point, it is far too early to tell how corporations are doing, but expectations are very low. Factset predicts earnings will fall 4.9% for the quarter, which would make it the worst quarter since 2009. Companies are already blaming the cold winter and stronger dollar (which makes our exports cost more to foreign buyers), so be prepared to hear these excuses often in the coming weeks – regardless of how true they really are.
Finally, international stock markets were a big story this week. Europe recently embarked on an aggressive stimulus program that has pushed their market to a new record high. Japan is in the same boat, with their market hitting the highest level in 15 years. China, too, hit new highs after loosening restrictions to foreign investors. We see none of these stories ending well, but stocks are likely to continue higher for some time.
Finally, in honor of the Masters tournament this week, here is a link to pictures of the course in 1935. It’s quite a difference from the course we see today! Below is an image of the iconic 12th green:
Next Week
Things should get a little busier next week. We’ll get several important economic reports, including retail sales, inflation at the consumer and producer levels, industrial production, and housing data.
Corporate earnings releases will start to pick up, too. The bar has been set extremely low here so it may be easier for corporations to beat estimates – even if earnings were negative.
Investment Strategy
While stocks are on the expensive side, we’re not seeing anything that would cause us to sell at this point. We aren’t looking to buy, though, and remain on the cautious side.
We continue to have concerns for the long run as we worry the longer these stimulus programs remain in place, the greater the distortions in the market become. This makes the correction even more painful when it does correct. The “when” is anyone’s guess, however.
Bond prices fell this week (so yields rose) and we think they will likely to stay around this level or rise further. We think stimulus from global central bankers will keep our bonds attractive to investors and therefore keep yields low (and prices high).
Bonds to protect against inflation, or TIPs, remain a good long term hedge for inflation. They have not fared well recently as the likelihood of inflation has waned with the lower energy prices, but we are keeping a longer term focus with them.
Some municipal bonds look attractive for the right client, too. We like buying individual, insured names for these bonds, avoiding muni index bonds if possible. They have not done well recently as a record supply has kept prices low. Therefore, we keep a longer term focus with these investments.
Gold is another good hedge for the portfolio. It is only a hedge at this point – rising when more stimulus looks likely and falling on the opposite. But it does protect against negative effects from policymakers.
Finally, in international stocks, we see weakness around the globe and favor neither the developed or emerging markets. However, the stimulus programs in Europe and Japan do make for interesting investments, as long as the currency effects are hedged.
Please note, these day-to-day and week-to-week fluctuations have little impact on positions we intend to hold for several years or longer. Our short and medium term investments are the only positions affected by these daily and weekly fluctuations.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
Things should get a little busier next week. We’ll get several important economic reports, including retail sales, inflation at the consumer and producer levels, industrial production, and housing data.
Corporate earnings releases will start to pick up, too. The bar has been set extremely low here so it may be easier for corporations to beat estimates – even if earnings were negative.
Investment Strategy
While stocks are on the expensive side, we’re not seeing anything that would cause us to sell at this point. We aren’t looking to buy, though, and remain on the cautious side.
We continue to have concerns for the long run as we worry the longer these stimulus programs remain in place, the greater the distortions in the market become. This makes the correction even more painful when it does correct. The “when” is anyone’s guess, however.
Bond prices fell this week (so yields rose) and we think they will likely to stay around this level or rise further. We think stimulus from global central bankers will keep our bonds attractive to investors and therefore keep yields low (and prices high).
Bonds to protect against inflation, or TIPs, remain a good long term hedge for inflation. They have not fared well recently as the likelihood of inflation has waned with the lower energy prices, but we are keeping a longer term focus with them.
Some municipal bonds look attractive for the right client, too. We like buying individual, insured names for these bonds, avoiding muni index bonds if possible. They have not done well recently as a record supply has kept prices low. Therefore, we keep a longer term focus with these investments.
Gold is another good hedge for the portfolio. It is only a hedge at this point – rising when more stimulus looks likely and falling on the opposite. But it does protect against negative effects from policymakers.
Finally, in international stocks, we see weakness around the globe and favor neither the developed or emerging markets. However, the stimulus programs in Europe and Japan do make for interesting investments, as long as the currency effects are hedged.
Please note, these day-to-day and week-to-week fluctuations have little impact on positions we intend to hold for several years or longer. Our short and medium term investments are the only positions affected by these daily and weekly fluctuations.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
