Yellen Rocks the Boat

Yellen Rocks the Boat

Yellen Rocks the Boat 604 547 AMA Team

Screen_Shot_2014_03_24_at_6.16.03_PMWelcome to the last week of the first quarter and another Weekly Money Matters. With last week’s FOMC meeting, Janet Yellen rocked the boat slightly with her comments on Wednesday that interest rates could rise near spring of next year, which is a few months earlier than anticipated. This caused a ripple through the global markets but calmed the next day due to better than expected data reports in the US. The data wasn’t incredibly strong, and trading volume was light at about a billion lower than the close to 7 billion per day average so far this year. But besides the possible step up in time frame for interest rate rises, the rest of the FED meeting comments were as expected and the 1% correction in markets following the comment was to be expected and about right. However, the question still remains of where do things go from here? Despite knowing that most US data has been coming in positively, it’s not nearly strong enough to surge the markets at a rapid pace. On the other hand, the FED still retains the ability to adjust both their interest rate outlook and stimulus reduction measures, so if data were to weaken, it’s likely the FED would change their current pace to bolster markets. Read here for more of an overview of last week’s FOMC meeting.Screen_Shot_2014_03_24_at_6.19.31_PMOver in China (which we talked quite a bit about in last week’s Money Matters for anyone who missed it) the shift in economic focus is underway but has not yet fully been grasped, and although this should be greatly beneficial in the longer run, it does present some short term hurdles which this article covers in more detail. In Europe things have been rather quiet on the economic front and that’s been a good thing as Europe has slowly, but seemingly sturdily, regained positive traction. With the lack of any exciting data to report in Europe, the focus has instead turned once more to the tensions around Ukraine and added to the up and down movements we saw last week.Screen_Shot_2014_03_24_at_6.22.15_PMAfter all was said and done, last week’s markets were barely unchanged on the week with the Hang Seng down -.0.17%, FTSE up 0.35%, S&P up 0.76%. The focus remains on the Ukraine, FED stimulus, and China’s growth data and of these, the hardest to predict in terms of impact to markets is that of the Ukraine. If we take a closer look, the situation has now led to political sanctions between the USA, Russia, and the EU. From an economic point-of-view, the volatility as a result of the sanctions has really only been seen within the Russian markets thus far, and has not dramatically impacted the European or US markets, and so, for the most part, the key thing to keep an eye out for, will be any escalation or rise in tensions. With all these global factors and situations playing their part, diversification should be crucial which has only further been reiterated by some analysts who have recently come on board and are also recommending more balance and spread.Screen_Shot_2014_03_24_at_6.27.09_PMBalanced investors should be looking to continue exposure to developed US & European equities and may find blue chip companies the best avenue to gain this exposure as the blue chips should ride through any volatility better than some of their smaller counter parts. Emerging equities, especially around Asia, should look attractive at their current values and although emerging markets in general aren’t forecasted to have strong near term performance it shouldn’t take away from their long term potential and their current low prices. Commodities, including gold and oil, continue to remain subdued from last year’s drops, but having performed positively for most of this year, perhaps are closer to their bottom, but even so, may take longer to recover than some of the other equities. While we still see fixed interest and bond markets to be rather flat as they have been so far this year, they will provide some stabilization as their movements aren’t as volatile as equity funds and a small portion of holdings in these assets could help increase diversification.
For Austen Morris Associates’ investors – talk with your advisor about any repositioning to take advantage of markets at this time. For more information about Austen Morris Associates please visit our website.
Austen Morris Associates Wealth Management & Investment Team

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