Good day. With the US debt issues now in the rear view mirror, it was a relatively decent week for the markets. However, in saying that, given this debt resolution is only temporary and a way to delay anything more permanent, it will likely result in deja vu in early January/February 2014 as the tapering of QE3 and the debt issues return back to the discussion table. Until then, we expect focus to return to fundamentals with attention on corporate earnings. So far, only about 100 of the 500 S&P companies have reported earnings to-date, and of those about 2/3 have beat expectations.
This resulted in the Hong Kong Hang Seng ending the week slightly above where it started, the UK FTSE ended the week up over 2%, and the US S&P was up about 3% for the week. China’s GDP came in at 7.8%, slightly higher than the expected 7.5%, and this has helped the global outlook with the world’s second largest economy continuing to gain traction on its growth after a sluggish start to the year. The emerging markets in general continue to lag behind the developed world and their indices, but after the temporary debt resolution in the US, we have started to see some of the capital that left the emerging regions in the summer, starting to flow back into the emerging markets which should in turn help their performance and market values.
So with only 63 days until Christmas, and not many more on top of that to round out the year, where do the markets go from here you ask? Well it seems as if the developed markets of the US & Europe will continue to gain on their already impressive run on the year, while emerging equities seem to be turning the corner and starting to show some signs of improvement after being down for most of 2013. Bond markets have also started to stabilize, but we would expect the volatility in the bond sectors to return once the talks of QE3 begin again, whether it’s late this year or early next year. Over in the commodity sector, energy continues to hold at strong values, while most of the basic materials such as iron and copper continue to slowly recover some ground following the improvement in China’s manufacturing data. Gold on the other hand continues to face short term headwinds and to trade without much fundamental basis. For those investors holding gold, it might be a while before any significant increase occurs, but with all the stimulus injections and extra money being printed, at some point inflation will become a factor and the investors who retained their gold holdings will be glad they did. Again, we must stress that it could be some time for this to come to realization so be sure to keep a balanced and diversified portfolio and speak with your Adviser about any recommended portfolio changes and investment opportunities based on market conditions at this time.
