Another Positive Week

Another Positive Week

Another Positive Week 566 361 AMA Team

Screen_Shot_2014_02_17_at_5.21.50_PMWeekly greetings from the Money Matters and entire Austen Morris Associates team! We trust readers had an enjoyable weekend – not least because the markets enjoyed a pretty strong rise last week! This was mostly off the news from China’s import and export numbers which came in over 10% compared to last year and both beating expectations helping to signal that China’s internal consumption, as well as foreign demand for exports, were stronger than expected. In addition, most of the economic agenda went through without a hitch including several central bank meetings and the FED’s first hearing with Janet Yellen as their chairwoman – of which a summary article was in the Sydney Morning Herald a few days ago, if you wish to read more about her speech HERE. The better than anticipated data and relative calm from other market events pushed the FTSE up 1.1%, the S&P up 2.3%, and the Hong Kong Hang Seng up 3.3%.
Screen_Shot_2014_02_17_at_5.27.21_PMOur readers probably aren’t too surprised with the uptick in Asia numbers, but nonetheless welcome them after the Christmas period which typically hold back some numbers from the USA and Europe, in addition to the Chinese New Year which do the same for numbers in the Asia region. With these events now having passed, we would expect to revert back to more normal figures following the slower than expected month of January. It’s not all plain sailing however, as there are still plenty of obstacles to overcome and the global recovery still remains fragile in many areas. With these main events behind us now, let’s take a look at what might be in store over the upcoming months.
Screen_Shot_2014_02_17_at_5.34.35_PMThe US FED is still confident in the US recovery and will likely continue their stimulus reduction at each of their upcoming meetings. However let’s not forget that they still control this reduction with their foot on the pedal, and can at anytime decide to “step on” or “step off” (the pedal) depending on how they view the economy. As no one really enjoys too much fluctuation, the FED will likely try to stick with their reductions as planned, but don’t put it past them to reaffirm their control of the pedal if things don’t go their way!
Other central banks didn’t really have any major news to announce, and most held their current rates steady amidst the low inflation and economic figures. Part of this could be attributed to most banks not having the ability to lower rates much further, but even if they did, we wouldn’t expect many to do things differently at this time as although the recovery remains slow, it’s still moving in a positive direction – which is discussed in another recent article “Europe Sees First Annual Growth Since 2011” for those interested click HERE. Added to this, none of the central banks want to disturb the markets right now, especially if none of the banks are in the spotlight and can just as easily drift back into the crowd. But how does this translate for investors? With less direction coming from the central banks we would expect fundamental numbers to come back into play.
Screen_Shot_2014_02_17_at_6.00.27_PMSpeaking of fundamentals, we haven’t seen strong fundamentals in some time, and although they’ll still be pushed into the background from time to time we do know that they’ll have to (and are due to) return so let’s have a recap of some of the recent earnings. Corporate earnings are about 65% above expectations while corporate revenue is roughly 60% above expectations, both in line with the past four quarters and both above the longer term 15 year average. Nothing too exciting to warrant bringing out the marching bands but strong enough to continue building on the current levels!
Based on this, we can likely expect some continued upturn in the developed markets in the US and Europe, while for Asia and other emerging markets, they will continue to face short term hurdles whilst the longer term potential still looks more promising in these emerging markets. A recent article from CNN Business 360 Blog outlines this recovery “within the speed limit” and potential outlook for the various markets HERE for those that are interested in more on the topic. Commodities, including gold, have seen some positive growth since the start of the year but still have a way to recover from last year’s lows, and bonds still remain rather unchanged but face some longer term issues around rates in 2015.
Screen_Shot_2014_02_17_at_6.03.34_PMOur Austen Morris Associates Investment Board Team will be meeting at the end of February to review markets to date and discuss investment strategy and opportunities for the coming few months for investors, which we’ll be sure to share with you in Money Matters in the coming weeks. In the mean time, be sure to have a balanced and diversified portfolio in order to have exposure to both some near term and longer term growth areas as the markets will continue to develop but also continue to show it’s volatile side and throw some surprises in to the mix.
For Austen Morris Associates’ investors – talk with your advisor about any repositioning to take advantage of markets at this time. For more information about Austen Morris Associates please visit our website.
Austen Morris Associates Wealth Management & Investment Team
Darren Cox
Co-Head of Portfolio Management

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