That Was The Week That Was-2nd Week July

 

Most investors have avoided European stocks and for good reason but that’s over. Investors now view European assets as cheap. Almost every article I read promotes European shares and the future value they’ll bring to portfolios. Last week’s bad news on Portuguese lender Banco Espirito Santo SA (see more news in this blog) was but a blip, according to Josie Cox, WSJ, 7/13/2014. For investors who have avoided foreign companies now may be a good time to consider buying.  See comments from investment managers in today’s blog about Europe’s resurgence.

The Latest Jobs Report Caused the Markets to Top 17000 on the Dow and it was the 7th fastest 1000 point run-up in the market’s history. Experts had expected 218,000 jobs and we got 288,000.  According to the WSJ this simply confirmed a longer running Bull market. Morningstar’s Francisco Torralba, PhD, reported that the job increase was across multiple sectors except for the Federal government, which was basically flat. Jobs in retail, professional and business services, health care, education and construction all saw increases. Cody Willard saw the Jobs Blowout as Hype. He says his analysis shows a growing inflation bubble. Also, he reported, the jobs picture has been steadily improving since 2011. Only now is it trickling down from multi-nationals to Main Street. Information gathered from WSJ, Bloomberg, CNBC, WSJ and MarketWatch.com.

It seems like yesterday when investors wondered if the S&P 500 Index would break 1400. Now a few points from hitting a record 2000 the markets took a breather last Monday in anticipation of ‘earning season.’ All indices were lower Monday. The previous week fixed income took a shellacking while equities moved higher. Utilities, REITS and the bond market signaled a possible change. Treasuries, according to Michael Kahn at Barrons.com. ‘Getting Technical’ (7-7-14), have made lower highs and lower lows since peaking in May…and with that falling trend in hand we have to take notice.’ Kahn concludes that this consolidation could continue for weeks before moving higher. Tuesday morning markets started down triple digits and closed the same. Europe also down for the day.

Sidebar: The U.S. has always had a discriminatory immigration policy.  The Immigration Act of 1917 specifically barred Asians. The law also banned ‘professional beggars, polygamists, anarchists, anyone over the age of 16 who was illiterate along with feeble minded people and others…’ Give me your tired, poor, huddled masses, wretched refuse, homeless, tempest-tost…’, is a sonnet engraved on the statue of liberty and not a dedicated national immigration policy.

Barry Sternlicht, CEO,Starwood Capital Group, on CNBC Squawk. 7/8, spoke on investing tilt more toward Europe.  He also said, “ If we had invested $2 trillion in education here in the U.S. instead of in a war we’d be a much stronger country.’  Tim Armour, Portfolio Manager at American Funds, ‘ The economic backdrop in the U.S. still looks pretty good. Europe is further behind….the situation is improving, but the metrics are further behind the U.S.- and that’s an opportunity.’ (July. 2014 Mid-Year Outlook).

Earning season has begun.

Federal Reserve says economy better and will be stopping easy monetary policy this October. The Fed also indicated it would be managing hiking interest rates in the future. Markets responded Wednesday by closing up after a 2-day selloff.

Thursday Morning Here is the question- are markets overbought and ready for a 30% drop, much like 1987? Or, will the markets continue on making fresh highs. A market crash like 1987 would be refreshing, for those that remember it. The 87 crash lead to one of the longest and most successful Bull Markets in the history of the world. For those that don’t remember, if you bought a security in January, 1987 in October you were losing money and by December (on average)  you were back to where you were in January. That wouldn’t be so bad, would it? One clue to ‘market bubbles’ is the retail investor exuberance. We’re just not seeing that right now. ‘There is too many things wrong economically and politically around the globe to forestall such confidence,’ wrote John Gustafson in a piece for Minyanville. Gustafson is president of Palmetto Wealth Management. Another point is the retail investor has been lately a net seller of equity mutual funds. The small investor has been running from this market and not embracing it. Info gathered from Barrons.com 7/9/14 The Muddled Truth about the Stock Market. Thursday markets opened triple digits down on bad news on the Portuguese Banco Espirito Santo which missed payments on short term debt issued to some clients. According to Morningstar Mid-Day Update- 7/10, the ‘delay comes on top of accounting irregularities and other financial issues facing the bank. The DJIA was off over 180 points early but closed off about 70 points Thursday.

Finally- Markets Closed Slightly Higher Friday.

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

SECURITIES OFFERED THROUGH WESTMINSTER FINANCIAL SECURITIES, INC., MEMBER FINRA/SIPC.