Last week’s market movements included a few ups and downs but most indices ended the week in positive territory with the FTSE up 0.1%, the Hang Seng up 0.7%, and the S&P up 1.7%. Once again, a number of events took place last week that influenced markets, although none that stole the spotlight. Nonetheless, it’s worth recapping on some of them. Over in Europe, the ECB decided to hold their current low interest rates at 0.25% and also claimed that no additional stimulus is deemed necessary at this time. This pushed the Euro up against the dollar and helped give more support to the slow but still positive recovery going on in Europe. Tensions around Ukraine and Russia have eased, but still remain prominent in the market and as a result, investors are pushing this to the back seat. Any new sparks could bring the caution flags back out though, but until then, the focus seems to remain on the data front.
Over in the US there was a heap of data that came in with some mixed results in consumer spending and housing figures, but the jobless number, which seemed to catch the most attention, surpassed expectations pushing the markets up in the US on this unexpected news. It’s been difficult to gauge the accuracy of data recently from the US as everyone’s claiming weather interference. Even Janet Yellen mentioned the weather in her latest market address which means we could see some revisions in the coming months but with that said, the data appears strong enough to warrant the FED to continue with their stimulus reduction and considering the S&P went through new record high levels, we would expect the FED to trim another 10 billion of stimulus at their next meeting.
Heading across the ocean to Asia, the focus continues to remain on China and their economic plan to shift further away from their traditional reliance on manufacturing which to date has been the economic driver. We mentioned last week that the PMI or manufacturing gauge came in lower for a third month, but at the same time, spending and consumption numbers rose on the opposite side which reflects the changing shifts in China’s economy. Even though this economic shift will be beneficial to China in the longer run, and make them more diverse in the ways they can grow their GDP, the world still views China as the manufacturing powerhouse. Given this view, we would hope to see the manufacturing levels start to reverse and start to strengthen as that would help boost investor confidence more than that of rising spending and consumption data.
With most central banks holding their current strategies in place, and with the markets also holding their current levels despite all the mixed results in data, we could see this holding pattern continue for a few more weeks yet (and which has been going on for the last few weeks). In accordance with this, we will continue to recommend our clients hold a diversified mix of equities – both emerging and developed, some exposure to commodities, as well as a small weighting in fixed interest or bonds to maintain a well balanced portfolio.
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.
Austen Morris Associates Wealth Management & Investment Team
Darren Cox
Co-Head of Portfolio Management
