The Markets:

China Dampens Markets Globally

A weaker than expected number for the Chinese economy over the weekend (growth of 7.7% vs. expectation of 7.9%) put a damper on stock prices around the globe today and helped add to a continued decline in commodity prices.  Gold and silver prices slid steeply again today, capping a two day drop in both of the precious metals, pushing price levels back to around the same area as they were in October, 2010.  Reports of two explosions at the finish line of Boston Marathon before the markets closed also added to the uncertainty of the day.  The Standard & Poor’s 500 stock index fell 36.49 points, or 2.30%, ending today at 1,552.36.  The Dow Jones Industrial Average gave up 265.86 (1.79%), to close Monday’s trading session at 14,599.20.  (Google Finance, MarketWatch.com)

We’ve recently been dealt a raft of soft U.S. economic reports – the March employment report, the Institute for Supply Management’s surveys of the manufacturing and service sectors, a drop in consumer sentiment (University of Michigan’s survey for early April), falling retail sales last month, among other weaker than expected reports.

There has been a rally in U.S. Treasury prices, which could be viewed as somewhat defensive over the past week or so.  We had been increasing our allocations to the fixed income category over the past few months, and this has helped our portfolios become more defensive than normal with our current allocation amounts for all risk levels.  No doubt the drop in the precious metals sectors has hurt us over the past two days, but longer term we still see reason to hold these types of investments moving forward.  There are still too many problems in the world today that have not been solved as of this date.  It appears one possible reason for the sharp decline in gold prices today was due to margin calls that were placed on gold contracts, forcing some positions to be liquidated without choice.  Hopefully, the selling will subside over the next few days, and we still see potential moving forward into the next 18-24 months.  We will keep you advised.

The U.S. Fed continues buying $85 billion in bonds each month to provide ongoing liquidity in the financial markets and is forcing interest rates to stay low.  If it appears an economic downturn is developing, we would not be surprised for the Fed to increase this even more to try and stave off another possible recession.  Short term, this could turn stock prices higher once again, but longer term, we still view this strategy as ultimately inflationary, and in the next 18-24 months, we could see a totally different market environment.  We will be watching this very closely.

 Quarterly Statements Posted Online

The first quarter, 2013 statements for your Trust Company of America accounts were posted online last week for your immediate access and viewing.  The first quarter Performance Reports should be available sometime next week as well.  If you have any questions or if we can be of further service in any way, please don’t’ hesitate to call us at any time.

God Bless,

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

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