Wednesday morning greetings! Chalk up another stellar weekend for the weather here in Shanghai as we were treated to more blue skies and sunshine as well as milder, more enjoyable temperatures for al fresco dining and activities! Our softball team was able to hang on to some early leads and won both games on Sunday which made the weekend seem that much better. With the FED meeting notes out of the US on Friday I’ll get right to it…
Although this isn’t news for our readers, the big headline in the business section is US Federal Chairman Ben Bernanke’s speech on Friday after the latest FED meeting. For those of you who missed it, the main point Big Ben stated is that the FED is more willing to implement some kind of easing on monetary policy as economic concerns remain, specifically with the US unemployment numbers. The US markets reversed their downward trend from the morning, and ticked up slightly with indices ending the day roughly up about 0.5% and just slightly down from where they started on Monday. With another round of QE, that’s great news right?
Maybe… Looking back QE1 and QE2 were certainly very kind to market indices when they were implemented, but it still remains up in the air as to the specifics of what will be done and when it will be done – so let’s be prudent about the direction to take!! This is like winning a free vacation package without someone being able to tell you exactly where you’ll be going or when. TheFree Vacation? guy in charge (Mr. Bernanke) just keeps saying it seems more and more likely that the vacation will be coming soon and then leaves it at that.
This has been going on for a few months so even though the hype has calmed down, expectations can have a huge sway! And, if the FED severely beats expectations either positive or negative this could play out differently than some are hoping for.
So where does this put us right now? We know that the majority consensus is that whatever the action that might be taken by the FED it will likely be positive for the markets. We know the FED meets again mid September and then again in October, which are both potential dates for the FED to announce action. But why then is there still timidness in the markets? Could it be that a majority of investors are wise enough to see other problems going on around the world? Or is it because of the lack of specifics around the measures that might be taken by the FED which is making it difficult to know which assets to acquire? Unfortunately for those who want to know the answer – they will have to wait until after the fact.
While some investors will wait and likely not realize they’ve missed most of the opportunities, we’ll stick to the fundamentals to get the most out of the upcoming opportunities and at the same time take a balanced approach to prevent from being backed into a corner and thereby opening more doors! We surely don’t want to rely on a specific event, let alone FED measures, for growth, but if we can hold fundamentally sound assets and also get a boost if/when FED measures are announced, then all the more bonus.
Gold InvestmentsGold should hold its value well and will likely be the most obvious asset to get a boost from FED measures. Oil, commodities, and natural resources should follow suit as they are necessities which makes them very suitable investment options, especially for investors with a few years remaining on their investment which will allow them to ride out any short term drops. Holding Emerging Market bonds would provide additional balance in case FED measures aren’t meeting expectations. And for those betting on the FED, stocks and equities will come into play. This is the asset class in which you need to be most diligent about investment decisions as there are still economic issues that won’t be fixed by quantitative easing and furthermore Europe and Asia will become factors with how their economies play so be sure to discuss with your advisor how best to proceed.
For our 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.
Have a wonderful week ahead everyone!
Co-Head of Portfolio Management,
Darren Cox
Austen Morris Associates Wealth Management & Investment Team
www.austenmorris.com
