A Rising Tide of Liquity Raises all Boats

A Rising Tide of Liquity Raises all Boats

A Rising Tide of Liquity Raises all Boats 729 529 AMA Team

Screen_shot_2012_09_11_at_12.40.10_PMI hope everyone had a great weekend and for those who follow professional sports it has been an eventful last couple of days. The NFL (National Football League) started their greatly anticipated regular season. Last years’ Heisman trophy winner Robert Griffin III had a great first game passing for 300+ yards and outdoing Drew Bress and the Saints for the win. Also for those Aussie Rules Football fans, the finals have started and it seems Hawthorn is the team to beat.
Last week was also quite eventful economically.
On Thursday, the European Central Bank (ECB) announced its bond buying program and this caused global stocks to rally. Under the new program, the ECB will buy short-term government bonds and by doing so, it will attempt to keep a lid on borrowing costs.
Wall StreetThe stock market clearly loved this news and shortly after the ECB’s announcement, Wall Street staged an impressive rally. Screen_shot_2012_09_11_at_12.45.30_PM On Friday, the Asian markets also appreciated sharply but there are some doubts that this up trend will continue.
It is worth noting that Wall Street is leading the pack and on Thursday, the NASDAQ Composite closed at a 12-year high. Furthermore, the S&P500 Index also climbed to a multi- year high and the market’s breadth was very impressive.
Turning to commodities, the CCI Index (Continuous Commodity Index) is still hovering just above the 200-day moving average and QE3 is now needed to trigger additional gains. Looking at specifics, it is notable that both copper and crude oil are currently trading below the 200-day moving average and if QE3 is not announced soon, they could face selling pressure.
Over in the precious metals patch, gold and silver made an impressive move up which was accompanied by even stronger moves in the gold and silver miners. The ETF that tracks the junior gold miners (GDXJ) increased by 12% over the last 5 trading days but is still down more than 40% over the last year. As long as QE3 is announced, which many think it will, gold and silver should continue its climb to potentially new highs by the end of the year.
Silver BarsIn the currencies arena, the US Dollar is weakening and other major currencies are on the rise. Once QE3 is Silver_barsannounced, the downtrend in the greenback will gain momentum in the short-term.
Finally, over in the bond market, US Treasuries have formed a higher low and it appears as though interest rates are on the rise. Across the pond, German Bunds are also feeling the heat and thanks to the ECB, capital is now flowing to high yield bonds.
Looking forward to this week, the US Federal Reserve is meeting which will give us more insight into what they plan to do in regard to providing additional liquidity. We suspect that they will announce some program involving the purchasing of mortgages rather than government treasuries or bonds. Details of which, I’m sure my counterpart Darren Cox will provide you more information on in next week’s letter.
For our investors – remember to hold a balanced portfolio and talk with your advisor about any repositioning to take advantage of markets at this time. For more updates on the world financial news please visit our Weekly Global Economic Outlook.
That’s it for today, I hope everyone has a great week.
Co-Head of Portfolio Management,
Bill Longstreet
Austen Morris Associates Wealth Management & Investment Team
www.austenmorris.com

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