Good day everyone. It was a back and forth week as mixed data on top of continued concerns around US stimulus reduction weighed on investors. Early on in the week markets got a boost from stocks in Apple, only to be reversed the next day when Walmart missed expectations and reignited concerns that the global economy may not be able to sustain its current levels without continued stimulus. Analysts’ views were even more mixed on their outlook, and the lack of consensus will likely result in hesitation as we’ve seen less and less trading volume in recent days compared to averages on the year. To get a quick snapshot of how markets fared by the end of the week, the US S&P ended down 1.8%, the Hong Kong Hang Seng was up 1.1%, and the UK FTSE down 1.6%.
The VIX index still remains quite low compared to its one year average, but rose about 6% last week alone, which shouldn’t be much of a surprise to our readers. However, it still remains an indication of additional volatility which is expected to come.
One of the better performers last week was Gold as it climbed about 3% on the week. Gold still remains subject to short term influence but it was nice to see some fundamentals returning in that investors chose the safety of gold during the market turbulence as this hasn’t always been the case, especially in recent months. Fundamentally, we still believe Gold has a long way to rise and any scale back in stimulus will weigh on the precious metal, but we feel that these will be short term movements and at some point anticipate gold will likely return to its more fundamental movements. That said, it remains a waiting game of when this might happen!
On a side note, the Eurozone finally came out of the recession it’s officially been in since 2011, with GDP numbers coming in just above 0%. And although the situation in Europe still looks choppy, the hopes of a turnaround in Europe seem more prosperous now with some stabilization in their numbers. That’s not to say that Europe won’t continue to face obstacles and hurdles along the way, but the halt in sliding numbers may be a hint that the downward trend has eased up and this at the least gives the Eurozone some traction to build on.
Over the next few weeks expect all eyes to remain on the US FED as they approach their mid September meeting with all expectations focused around whether this will be the meeting where they outline any reduction or changes to their current course. Based on all their actions in the last few years alone, we know they’ll want to get themselves out of this corner they’re currently backed into, but equally know that that they can’t afford to shock the markets or jeopardize all their gains so far.
On this basis, it remains such that the best course of action will be to retain a balanced portfolio for the time being. Investors trying to predict the outcomes and rely on any central bank policy may be utterly disappointed, and even predicting any central bank announcements correctly, may not play out the way the central banks or investors presume. This only further supports the notion that having a well balanced and diversified approach at this time, is the one’s best bet, which in turn, should give some comfort to investors that their exposure remains diverse. But more importantly, whilst adopting such an approach, means investors have the option to rebalance their portfolio during this dynamic time in the markets as necessary.
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
