Hello everyone. Hope you all had a great weekend, and for those in Shanghai, that you managed to make the most of the double digit temperatures and mini “heat wave” we’ve been experiencing. It has been nothing like the temperatures nor heat wave they’re experiencing down under in Australia however! It seems the weather and climate is as hot a topic as some of the market news these days too with a huge focus on China’s pollution problems of late and how these indices are reported between different entities. On the topic of indices, let’s look at how the markets fared last week…
It was good to see more steady gains in the markets last week. Without moving very fast or very far the DOW ended the week just about 1% higher, but what this does represent is a continuing positive trend in the markets. I think this is a combination of both better economic numbers coming out of China as well as the lack of news in the USA and Europe. It’s been a while since we’ve seen Greece, Portugal, or Spain in the news and this has allowed some fundamentals to return back to the markets. Of course it is worth mentioning that Europe still has a long way to go, but debt numbers from these countries have been improving slightly and without the papers shining the spotlight on them they’ve been relatively calm for the past several months allowing them to focus on what matters most rather than having the distraction of their issues in the media.
People always ask about market volatility and understanding this can be helpful for investors regardless of how sophisticated their financial knowledge is (or Investor Confidenceisn’t). In order to gauge market volatility let’s take a look at the VIX index. For some of our readers who are just joining us, the VIX index is a popular measure of short-term investor confidence. It tries to gauge investor confidence over a 30 day period and although it only focuses on the S&P 500 index, it is widely used to get a feeling of investor confidence around the globe. The basic premise behind the VIX index is the lower the VIX number, the more (perceived) confidence investors have in market conditions. On the flip side, a high VIX number indicates that investors are less confident about market conditions and more worried about upcoming events in the next 30 days. So what’s the current VIX index then and how does this translate to investor confidence at this time? The VIX index is at some of its lowest levels in years but before we get too excited and believe that all is well let’s go back to the basics for a moment and take a look at some of the fundamentals.
Earnings season is upon us with Q4 numbers being released around the globe. The major banks reported earnings last week, and although it was a mixed result, along with some not reaching expectations, we still saw almost all of the banks earn a profit on the quarter. GDP results around the globe were relatively in line with expectations meaning we should see another week of fundamental trading. And, by fundamental trading we mean more movements based on economic data than reactions or emotional responses to what we see on the TV.
So with fundamentals making a slight return to the market foreground along with the US and Europe being out of the spotlight for now, we can expect more of the same this week ahead of further Q4 earnings reports that will shed further light on fundamentals for global sectors and industries.
For Austen Morris Associates’ 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.
Co-Head of Portfolio Management,
Darren Cox
Austen Morris Associates Wealth Management & Investment Team
www.austenmorris.com
