Where do we go from here?

Despite many observing the Easter holiday and the long weekend that came with it, it seems there was still plenty transpiring in the markets for us to cover, so let’s get straight to it for this week’s Money Matters.
The Ukraine crisis continues to dominate the headlines, financial markets have been volatile in the US with some steep corrections, investors have turned their attention back to emerging market equities, and for our American readers, the much dreaded tax-day has come and gone.
Starting off in the US, Fed Chairwoman Janet Yellen announced this week new metrics to track the economic recovery based on unemployment and inflation figures. This data will in turn influence when the Fed green-lights increasing the federal funds rate which now sits between zero and 0.25 percent. Rumors alone of a rise in interest rates have already had wide-spread effects on financial markets all around the world. Despite a bounce this week, major indices are still down from their early April highs with the NASDAQ getting hit particularly hard amidst a heavy selloff in tech and consumer discretionary companies. Tesla Motors (TSLA), one of the breakout stars of 2013 with a +344% surge in its share price is now the most shorted company in the US as investors are betting that the company’s stock will fall in value by short selling publically traded shares. Next week will see earnings reports from big names like Microsoft, Amgen, Comcast, Delta and Starbucks. Given the amount of Tall Iced Mocha Lattes being consumed in our Austen Morris Associates’ office, we would be very surprised if figures for SBUX miss their targets. Looking back at last week’s results, the NASDAQ closed at 4,096 (+0.23%), the S&P 500 at 1,856 (+0.14%) and the DJIA finished out the week at 16,409 (-0.10%).
Over in Japan, we are seeing the effects of the April 1st sales tax-hike. An increase in the sales tax from 5% to 8% is part of Prime Minister Shinzo Abe’s effort to reduce Japan’s crippling national debt and restore economic stability to the nation after years of stagnant growth. Needless to say, the adjustment is not going over well with Japanese citizens who are seeing prices increase across the board. The Nikkei finished the week at 14,622 (+0.74%).
Turning to developing economies, the MSCI Emerging Markets Index finished the week at 1,011 (-0.02%). Indices in India rebounded following an impressive earnings report from I.T. company Tata Consultancy, while Brazil’s Ibovespa Index gained on the back of state owned Petroleo Brasileiro. Russia’s ruble, gained early in the week as the US said it would defer any new sanctions but ended the week down following a brutal military clash on Thursday. Over in China, trading was relatively calm as leaders indicated there would be no new major stimulus even as the country missed its 7.5% growth target for the last quarter and investors eagerly await the IPO of internet giant Alibaba.
And in commodities, one year ago this week, the price of Gold fell 9.3% as news broke that The US Federal Reserve would start tapering its bond buying program. Since the start of the year we have seen a great deal of volatility; the metal has gained favor amidst the Ukraine crisis, increased demand from India and China and concerns over inflation. Wednesday last week saw a 2% sell-off in the metal as The Fed signaled it would make further cuts to its stimulus program. Gold finished off the week trading at $1,300 per ounce.
For Austen Morris Associates’ investors – talk with your advisor about any repositioning to take advantage of the market at this time. For more information about Austen Morris Associates please visit our website.
Written by Evan M. Rodriguez on behalf of Austen Morris Associates’ Wealth Management and Investment Team.
Austen Morris Associates Wealth Management & Investment Team
www.austenmorris.com