The month of November is really flying by. Chi Fan for Charity in Shanghai took place on Saturday evening and was another huge success. We’ll be sure to let you know how much was raised for our charities as a result of the event organized by Austen Morris Associates in an upcoming Money Matters but in the mean time you can check out some photos from the fantastic event. With that said, we now have Thanksgiving to look forward to later this week and this is perhaps my favorite holiday of the year! In addition, there were many other events during the course of last week including the US fiscal cliff, rising tensions in the Middle East, the ASEAN summit meeting which continues through this week, and the leadership change in China which means there is a lot to cover! So let’s see how the markets have fared during all of these….
As promised last week, we said we’d reflect on the recent Communist Party policy makers meeting in China which has just finished. This is a once a decade meeting to change over the top leadership positions which will govern the country for the next 10 years and this is rather big political news given the top two world economies are going through elections/leadership change in the same month! Following the US re-election of Obama we would expect more fiscal policies out of the US than we’ve seen over the past 4 years including more QE, more bond buying, and more spending to reduce problems. Out of China we would expect more freedom to implement fiscal tools but in a controlled and cautious manner similar to the past few years. Beyond these points we’d only be speculating and this is not beneficial so we will reiterate the importance instead to continue to invest on fundamentals and not on political standpoints. Anyone who wants to invest based on factors outside fundamentals should take caution!
Fundamentals will never be able to time the markets but investing on fundamentals will almost always result in better outcomes because at some point, fundamentals always VIX index
return. Speaking of returning we see the VIX level is at a two month low. For all our readers who know about VIX feel free to skip to the ** as I want to take a second to explain this our newer readers. The VIX index is a popular measure of short-term investor confidence. It tries to gauge investor confidence over a 30 day period and although it only focuses on the S&P 500 index it is widely used to get a feeling of investor confidence around the globe. Basically how it works is, the lower the VIX number is, the less concerned investors are believed to be while a higher VIX number indicates that investors are less confident and typically, they are worried about upcoming events in the next 30 days.**
So although the VIX level isn’t as high as it was before a few months ago, it doesn’t mean that everything is completely fixed and ready to go. However despite the downside moves in the past week the current VIX index could indicate that investors are not overly concerned and expect the markets to bounce back in the short term. With the US fiscal issue it seems to be preventing any decisions, but if the previous US budget issues were any example, then we’ll likely see this current fiscal issue be avoided, or delayed at the last minute.
Oil Investments
Either way, it’s unlikely that they’ll let it come into effect suddenly. However, investors still realize that potential remains and opportunities are still available, and that’s perhaps a reason that we’ve seen such small movements in the markets as everyone is waiting for the “opportune moment”. And who can blame them? The opportune moment sounds good right? It certainly does to me, but unfortunately I don’t think anyone is going to be able to call this one and let all of us know exactly when that will be. So in the mean time with West Texas Oil around $85 a barrel and with Gold around $1,700 an ounce I would think these are two areas for investors to continue to hold and acquire. I’m not saying these two assets are not going to drop any further but I do feel they have much more upside than downside and at their current levels provide good investment avenues for a well balanced portfolio. In addition to emerging market bonds and other equity classes a balanced portfolio will be a huge advantage for almost any investor at this time.
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.
Wishing you all a great week!
Co-Head of Portfolio Management,
Darren Cox
Austen Morris Associates Wealth Management & Investment Team
www.austenmorris.com
