Welcome to another weekly Money Matters. As the Shanghai Head Office resumes normal business hours following their National Holidays and break, here in Johannesburg, South Africa it’s been business as usual for our Austen Morris Associates operations, and so it was an opportune time to give my colleague, Darren Cox, a much deserved break from writing our weekly market commentary. This week-long national holiday tradition was first implemented by the Chinese government for the 50th anniversary of the founding of the People’s Republic of China in 1999. In fact, I actually attended the 50th anniversary festivities in Beijing and enjoyed that first long holiday. This vacation policy is primarily intended to help expand the domestic tourism market, allow people to make long-distance family visits, and of course, to spur domestic consumption – something especially important for the Chinese economy at present.
Talking about taking holidays, a significant percentage of the U.S. government is currently on a forced holiday, although the technical term is furlough. Most Americans are not happy about the partial government shutdown. Regardless of who is winning or losing in the court of public opinion, the U.S. government shutdown is clearly a dysfunctional political stalemate that will have real economic impact. The only prediction I can make with certainty is that the U.S. government shutdown will eventually be resolved and confidence will be restored. Unfortunately however, nobody actually knows how long it will last and while it continues, it will affect peoples’ lives (such as federal workers being uncertain as to when they will receive a paycheck, individual citizens being unable to access government services) and it will cause volatility in the global markets. This gridlock is not particularly good for anyone and is a concern for investors, especially since Q3 earnings will be released soon and if earnings expectations are not met, this will only add to the volatility.
The U.S. Congressional stalemate aside, the U.S. market this week finished mixed while it was a pretty good week for global economic data. The S&P 500 Index and the Dow finished in the red for the second straight week, but the NASDAQ gained 0.9%. It was the NASDAQ’s fifth straight week closing up. The tech-heavy index was helped as Twitter filed for its IPO and Facebook announced plans to start running ads through its Instagram photo service. Treasury prices slipped, and the yield on the 10-year benchmark gained 4 basis points to close at 2.652%. Crude oil settled 0.5% higher at $103.84 a barrel with fears of a tropical storm in the Gulf of Mexico lending support to a rising price. Gold futures were lower last week, trading around $1,310 an ounce by Friday afternoon. Gold also slid below $1,300 per ounce to its lowest price since early August on October 1. European shares dipped in early trade on Friday, extending their two-week slide as investors worry the U.S. budget deadlock could have negative implications on much more critical legislation to raise the U.S. federal debt ceiling.
Emerging market stocks, bonds, and currencies have been at the forefront of declines in 2013, yet emerging market stocks rose for a fourth day. Brazil’s real capped the biggest weekly advance among major currencies. The real climbed 1.8 percent for the week, the greatest increase among 16 currencies. The MSCI Emerging Markets Index added 0.3 percent to 1,007.92, extending a weekly increase to 0.8 percent. Indian automakers and consumer companies advanced after the government said state run banks will increase lending to the industries. The nation’s benchmark stock index rose for the fifth week out of six. Tata Motors Ltd. (TTMT), the nation’s biggest automaker, rose 1.2 percent after Deutsche Bank AG upgraded the stock. The rupee advanced 1.7 percent this week.
As the first week of Q4 comes to a close, investors are left wondering if the U.S. government will find a compromise to end the shutdown. There are plenty of sensational doomsday headlines, but these unusual developments may not translate into actual lower stock prices. As a long-term investor you should not react to the weekly news, but rather invest into a balanced portfolio and take advantage of short-term investment volatility such as that created by the current U.S. government shutdown. As always, clients of Austen Morris Associates should feel free to talk with your advisor about these current events if you have any questions. I look forward to giving the reigns back to Darren next week.
Wade Dawson, Senior Partner
Originally from the USA, Wade Dawson, Senior Partner at Austen Morris Associates, has recently relocated to South Africa. Prior to that, he worked in our Beijing and Shanghai offices. He has worked in the financial services industry for the past 13 years helping individuals and families achieve their financial goals. He is dedicated to providing high-quality advice and creating integrated wealth management solutions that simplify and enhance the quality of his clients’ lives. Connect with him on LinkedIn or contact him directly at wade.d@austenmorris.com.
Austen Morris Associates Wealth Management & Investment Team
www.austenmorris.com
