More Season Highlights

More Season Highlights

More Season Highlights 351 308 AMA Team

Screen_Shot_2013_02_04_at_4.44.18_PMHello everyone and welcome to February! As Chinese New Year looms for our readers in China and around Asia, I have no doubt it’s a busy few days ahead as we all work towards tying up loose ends and preparing for the holiday. For our readers abroad though where it’s business as usual, don’t feel left out! Some of us here at Austen Morris Associates, myself included, will enjoy a lighter work week but we will continue to track the US, Europe, and other major markets. Hopefully we’ll have some spectacular firework shows and enjoy the festivities the holiday brings. Speaking of spectacles and shows, for those that caught the Superbowl, Beyonce’s Rubin Singer outfit has been making headlines along with the Ravens’ win against the 49ers despite the minor disruption the loss of power caused! In other news, last week’s headlines were full of economic data so let’s reflect on those.
Earnings reports from companies around the globe continued last week, along with the latest US FED meeting, and a wide range of announcements from governments around the world. This makes for a lengthy list of items to discuss, so instead, let’s just focus on some of the highlights shall we? Starting with the US FED meeting, this was pretty much a non-event as they confirmed low interest rates are to remain and didn’t dwell on their QE3 exit strategy (which most investors took as meaning QE3 will not end anytime soon). You may recall that at their previous meeting they mentioned that QE3 would likely end in 2013 and that caused a lot of market hesitation, so the fact that they hardly talked about it last week eased concerns that QE3 won’t be going anywhere in the next few months.
Company earnings were a mixed bag with a wide range of swings, but all in all, a number of companies reported better than expected earnings and Screen_Shot_2013_02_04_at_4.22.51_PMEurope Markets Inproving gave some additional confidence that fundamental growth was returning but there are still more earnings reports pending release so stay tuned. For our readers who caught last week’s Money Matters, we know that expectations can be different from actual performance so let’s take this news with a grain of salt whilst not ignoring the fact that things continue to look up! But don’t be fooled either – there are still plenty of obstacles and issues that haven’t been resolved and areas like Europe, although calm and relatively stable, still have a long way to go before they can break out the Champagne.
This conveniently leads us to the current hot topic question, and that is “how long will this market rally last?” As we’ve been talking about this upward trend for the last three months, it might be beneficial to take a quick peek back…. Most assets and sectors have seen positive growth in the last three months, with January accounting for a majority of those rises. The S&P 500 is a decent example with about 7% growth in the last three months, with about 3.4% of that coming in, in January. And with the mixed bag of data pouring in from around the world the answer to our question is a debate that can be argued from all sides. I wish I knew the answer, because if I did, I’d be on a very long vacation writing this from a sunny island resort in the tropics. But as we don’t have a crystal ball, nor know the exact answer to this, let’s approach this from a fundamental point of view.
Screen_Shot_2013_02_04_at_4.10.26_PMProjected numbers show that with the amount of government intervention over the past few years, markets could sustain higher values simply based on the extra money that’s been injected into the global economy. The concerns in Europe and the US that hit the markets hard last year are still around, but currently delayed, and its likely we won’t see issues from Europe or the US until May when the next debate meeting is scheduled. The key outlier to watch for at the moment will be market momentum and this is tough to gauge.
Due to the past few years of market swings and volatile conditions, it’s understandable that investors are cautious, especially as upward trends like this haven’t been sustained for long in recent years. So while three months of uptrend in the past might have gone unnoticed, due to volatility in recent years, investors are certainly noticing this three month trend. This doesn’t mean that they can’t be sustained now and we’ve already seen profit taking at these levels. So let’s just be reminded that this is a short period in which we should be continuing to keep a close eye on market movements but with that said, some profit taking from equities periodically could be prudent. Holdings in commodities such as gold, oil and resources should remain as their levels are yet to reach their full potential, while in bonds a shift from developed to emerging bonds remains ideal. And as always, continue to hold those bonds to ensure a balanced portfolio.
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

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