As We Expected

As We Expected

As We Expected 436 487 AMA Team

Screen_Shot_2012_12_17_at_5.26.44_PMGood day to everyone! My colleague asked me about the Mayan calendar this morning and I totally forgot that this is the week that calendar stops. Well until the world stops spinning I’m going to keep planning that it’s business as usual and keep trucking on! Keep up the holiday spirit and let’s take a look at what is happening in the markets!
The S&P finished up the week, once again, almost right where it started slightly down at -0.3%, while over in the UK the FTSE was up 0.2%, and in Asia the Hang Seng up 0.9%. Once again headlines are attributing this cautious movement to the US Fiscal Cliff, which was not resolved at last week’s FOMC meeting. For our readers who happened to read either of the last two Money Matters, this won’t come as much of a surprise because we did anticipate this could be the case. And as a result, it certainly has increased a bit of the uneasiness that was expected if no solution was reached.
Last week I read an article about the US Fiscal Cliff where House Speaker John Boehner argues that it is the spending cuts that House Speaker John Boehner
Screen_Shot_2012_12_17_at_5.29.24_PMare holding up resolutions and not the tax issues (which are so highly dissented), so it’s nice to see that someone agrees with what we’ve said from the outset of this debate. What we did see out of the FOMC meeting is more treasury bond purchases, and as well as the announcement to link interest holds with unemployment. And what exactly does this mean? In basic terms, the FED is going to justify holding their very low interest rates until unemployment falls below 6.5%, but unfortunately what they didn’t tell everyone is that they also have the ability to skew and control unemployment numbers through their calculation methods!
Don’t get us wrong, employment or job-creation should be the number one topic and focus of discussions. Not just in the USA but globally as well! How can job creation be more important than the housing issues and government spending issues you wonder? Let me explain. If job hiring was abundant, then people would be able to buy homes and this would help to fix the housing problems as prices stabilized and demand increased. Secondly, as more people would be earning income and therefore more people were paying taxes, this would provide governments more money, and perhaps reduce the need for spending cuts and austerity measures, (which is what caused the riots and protests as we’ve seen in Europe in recent times.)
End of the yearScreen_Shot_2012_12_17_at_5.33.25_PMReal job creation however is difficult to jump start, so in the meantime you can expect to see a lot of attention paid to the intermittent meetings and issues that will continue to pop up, such as the current hot topic of the US Fiscal Cliff. While they figure that one out we’re going to plan ahead for the long term and hold a balanced portfolio in a variety of assets. Gold, oil, and commodities still indicate potential growth and will certainly want to be held and acquired for when the economy really starts to gain traction as that’s when we’ll see these come to fruition. Emerging Market Bonds and bonds in High Yield regions should continue with their strong performance from 2012 through to at least the first few months of next year. And while developed market equities have done better than emerging market equities during this year, the emerging markets still show a lot of potential so don’t count them out as part of a balanced portfolio anytime soon.
For Austen Morris Associates’ investors – remember to hold a balanced portfolio and talk with your advisor about any repositioning or discuss any new opportunities as we head in to the final weeks of the year.
Please note that during the Festive Season, Austen Morris Associates’ offices will be closed from December 24th – 26th 2012 as well as for the New Year Holiday from December 31st 2012 – January 3rd 2013 with normal business operations resuming from 4th January 2013.
For more updates on the world financial news please visit our Weekly Global Economic Outlook.
And with only a week until Santa’s big day, I’d like to wish you all a very Merry Christmas!
Co-Head of Portfolio Management,
Darren Cox
Austen Morris Associates Wealth Management & Investment Team
www.austenmorris.com

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