Investors on the Fence.

Investors on the Fence.

Investors on the Fence. 530 384 AMA Team

Screen_Shot_2013_07_22_at_7.54.02_PMGood day. It was an interesting week in the markets and although there wasn’t a lot of movement in the indices, there was plenty of data, events and announcements happening throughout it. One such announcement that is of particular interest to us, and we hope you too, and as we write, no it’s not the royal birth that many have been waiting on, but rather that as on of Asia’s largest Offshore Advisory firms, Austen Morris Associates is proud to announce its rapid and continued global expansion into Africa. Our Global Expansion plan aims to improve International Client Servicing standards around the world. We would like to officially announce the opening of the Austen Morris Associates Africa Headquarters. Our Senior Partner, Mr. Wade Dawson, along with our Executive Director Mr. Phillip Morris have merged with one of the top local Financial Advisory firms in the region, allowing the highly anticipated opening of our South Africa headquarters in Johannesburg. For more on this announcement, please visit our press release.
Screen_Shot_2013_07_22_at_7.57.49_PMBack to the market wrap up…. Both the US and China addressed their monetary policies and reaffirmed that any changes would be implemented in a prudent manner without haste. But, as central bank statements have been rather vague and open ended, most investors didn’t pay much attention to these announcements. The G20 meeting also followed suit with announcements that any changes to monetary policy would need to be done cautiously to prevent any shock or reversal in economic growth. In addition, with the majority of Quarter 2 data reports being printed right in line with expectations so far, it hasn’t given investors much of an insight which has resulted in most indices around the globe ending the week within a 1% range of where they started.
Screen_Shot_2013_07_22_at_8.17.03_PMSo what can we take away from last week? We know that out of the corporate earnings released so far, about 65% have surpassed earnings expectations which is similar to what we’ve seen the past two quarters and remains slightly above the historical average. This week we’ll see even more corporate earnings released and initial indications expect the trend will remain around the current level. Do remember that forecasts were lowered so although expectations are being met, the underlying revenue and profit earnings are not as strong as desired and leaves the question of whether global growth is strong enough to sustain itself without the current stimulus measures. However, with no stimulus changes expected in the near future, it should be all eyes on data with a large portion of companies set to release reports this week. As mentioned by Jordan in last week’s Money Matters, included in this week’s corporate reporting’s will be Apple, McDonalds, Boeing, and Ford along with over 100 other companies. Also mentioned by Jordan were reports due out on Microsoft and Google, and to follow up for those of you who have been tracking these or are interested in how they fared, they (Google & Microsoft) both came in below expectations and dropped their stocks, while for Johnson & Johnson as well as Goldman Sachs, they beat expectations.
Another important point raised as a result of last week’s markets movements and data, is the disconnect between developed indices and emerging indices. Since the concerns around stimulus arose at the end of May, we’ve seen most developed equities return to their previous highs with most developed indices sitting within a few percentage points from their yearly highs. On the other hand, emerging indices remain 12%-18% below their yearly highs and this disconnect is reaching a spread of a 20%-30% difference between developed indices and emerging indices! In the short term, emerging markets will likely continue to be more susceptible to economic concerns and changes to stimulus measures, but with that said, there still remains strong potential in the emerging markets so some investors may want to keep this (disconnect) in mind when looking at any rebalancing.
Screen_Shot_2013_07_22_at_8.24.27_PMIn summary, it looks like earnings this week will likely keep the upward trend in equities afloat, although movement is expected to remain within a small range. There is a strong disconnect between developed equities and emerging equities and although it may be some time before this gap closes, when it does, emerging equities will have a wide area of potential ground to recover. Commodities still remain subdued, but gold is rising and nearing $1,300, while oil also continues to climb and is currently around $108 per barrel.
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.
Darren Cox
Co-Head of Portfolio Management
Austen Morris Associates Wealth Management & Investment Team
www.austenmorris.com

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