Global Events Have Little Affect On Stocks

Highlights of this Week’s Update:

1. U.S. stock markets ended the week stable and the major indices saw small gains overall in the midst of global turmoil.
2. Events in Ukraine and Gaza had only a short term impact on U.S. financial markets (so far).
3. We are pleased with the general stability of client portfolios and 2014 performance across all risk levels to date.
4. Our general outlook remains unchanged:  We feel the stock markets are overvalued and some type of correction could occur at any time so we are still underweight in overall stock/equity exposure.

 The Markets:

The overall U.S. financial markets held up relatively well last week given the global turmoil in both the Ukraine and Gaza.  For the week, the Dow Jones Industrial Average was up .9% and the Standard & Poor’s 500 stock index gained .5%.  The rate for U. S Treasury bonds fell, (prices rose), with the 10 year U.S. Treasury yielding 2.50% at the end of the week.  Oil prices rose by $2.53 per barrel, closing the week at $103.02 per barrel on Friday.  (MarketWatch, U.S. Treasury, Energy Information Admin.)

Global hotspots

Last week’s downing of a Malaysian jet took nearly 300 innocent lives and can only be described as senseless and tragic. Sadly, it’s a vivid reminder that events can take unexpected and unwanted turns.

Taken together with the Israel’s military incursion into the Gaza Strip, stocks did react negatively on Thursday but bounced back on Friday.

The biggest risk from the latest twist in the Ukrainian crisis would probably be a significant tightening of the economic sanctions on Russia, which in turn could retaliate against Europe with its own set of sanctions.  How this will play out in the political arena is uncertain, but early reaction in the market suggests investors aren’t overly concerned at this point in time.

Over the weekend, however, new U.S. intelligence assessments suggest that Moscow likely provided sophisticated antiaircraft systems to pro-Russia separatists in eastern Ukraine, bolstering charges that Russia was the source of the weapon that shot down the airplane (Wall Street Journal).  On Sunday, the Wall Street Journal reported European leaders are threatening to implement harsher sanctions, departing from the more muted toned taken in the wake of the downed jet.

Ultimately, the critical question that must be asked: will events overseas have any effect on the buying decisions of U.S. consumers and businesses.

Our Outlook:

We have remained well diversified across all risk levels and our client portfolios have been relatively stable given the recent global uncertainties. Our stock weightings are still under the “normal” allocation percentage for all risk categories, as we continue to feel that some type of stock correction could occur at any time.  In the meantime, we are pleased with the overall results in each risk level so far in 2014.  We will keep you posted.

We hope you are all having a great summer and if we can be of further service in any way, please don’t hesitate to call.  We appreciate the privilege to serve each and every one of you.

God Bless,

Your TEAM at F.I.G. Financial Advisory Services, Inc.

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