Highlights of this Week’s Update:
- S. stock indices continue volatile and end last week in the red, bringing the year-to-date returns for the Dow down to less than 1%.
- Interest rates remain low and mortgage rates little changed.
- Oil Prices continued to rise last week, pushing West Texas Intermediate Crude to $56.14 per barrel.
- International events in China and Greece helped move the markets on Friday.
- Corporate earnings season for the first quarter is off and running.
- Portfolios for all risk levels are performing relatively well so far in 2015 given overall market results.
- Our focus remains on individual stock issues for equity exposure with an increase in number of holdings for each current stock model for further diversification.
READ ON FOR FURTHER DETAILS……………………………………………………
Stocks seemed to wander aimlessly through much of last week with no major catalysts to move the market in either direction. That was until Friday, which was a good reminder that international events can and do move stocks. Down over 350 points at its low mark (MarketWatch), the Dow Jones Industrials managed to end the day off 280 points, with two international events in particular encouraging short-term traders to move to the sidelines. It ended with week down 1.28%, and pushed the index to basically flat so far in 2015. (MarketWatch, Google Finance)
Then there was trading yesterday (Monday), which saw the Dow recover over 208 points in one day. Volatility is once again creating day-to-day market swings, with the major U.S. stock indices basically moving sideways so far this year.
Interest rates continue to stay low with the yield for the 10 year U.S. Treasury now sitting at 1.87% and the average rate for a 30 year fixed mortgage is in the 3.625-3.875% range. (U.S. Treasury, Bankrate.com)
Oil prices did jump last week, with West Texas Intermediate Crude rising $4.37 per barrel closing out the week at $56.14. (CNBC)
International Events to Close out the Week:
China garnered the headlines Friday by tightening margin lending rules and issued its strongest warning yet about the country’s soaring stock market. In addition, the country’s two stock exchanges will make it easier to bet against a drop in equities (Wall Street Journal). Stocks in China have been soaring recently, with a major market index in China up nearly 15% since the start of April (Wall Street Journal) and over 30% since the start of the year (CNBC).
Greece: the seemingly never ending story. Greece hasn’t defaulted but it has yet to get a firm handle on its finances. International creditors signaled that a lack of progress between the troubled nation and its lenders has substantially increased the risk of default and exit from the euro-zone (Wall Street Journal). In response, yields on Greek debt have jumped (Bloomberg), highlighting the growing angst among its creditors.
Early start to earnings – cautious optimism
With barely more than 10% of all S&P 500 companies having reported first quarter earnings, 75% have posted profits that have topped analysts’ estimates, ahead of the long-term average of 63% (Thomson Reuters). It’s not unusual for firms to exceed analysts’ expectations. It’s a different story on the revenue side. Given the strong dollar, just 46% have exceeded forecasts, below the long-term average of 61% (Thomson Reuters).
What’s likely happening to explain the revenue-profit disconnect – firms continue to keep a sharp eye on expenses, which aids the bottom line. Many companies are blaming the strong dollar for weaker-than-forecast sales (FactSet Research/CNBC). Simply put, companies that sell goods or services overseas in the local currency are forced to translate those sales back into stronger dollars. It’s still very early in the season, but the next couple of weeks will help fill in some of the missing pieces to the earnings puzzle.
As we said early in the year, we expected increased volatility within the markets for 2015 and a possible sideways movement for the major stock indices. So far, that has generally been the case for stocks this year. In light of this, we have continued to focus our stock/equities holdings on individual stocks of specific companies vs. stock/equity mutual funds. We have increased the number of stock issues held in each stock model this year in an effort to further diversify our equity exposure and hopefully assist in dealing with increased volatility. Overall, we are pleased with the relative net performance for all three stock models and client portfolios across all risk levels so far in 2015. We will continue to monitor and keep you posted
We wish you all a great week and as always, call us if you ever have any questions, or if we can be of further service in any way.
Your TEAM at F.I.G. Financial Advisory Services, Inc.
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1 The Dow Jones Industrials Average is an unmanaged index of 30 major companies which cannot be invested into directly. Past performance does not guarantee future results.
3 The S&P 500 Index is an unmanaged index of 500 larger companies which cannot be invested into directly. Past performance does not guarantee future results.
5 New York Mercantile Exchange front-month contract; Prices can and do vary; past performance does not guarantee future results.
6 London Bullion Market Association; gold fixing pricing at 3 p.m. London time; Prices can and do vary; past performance does not guarantee future results