How long
will this market correction last for?
Markets
slid considerably last week after investors were rattled by a confluence of
events in emerging markets. For the week, the S&P 500 fell 2.63%, the Dow
sank 3.52%, and the Nasdaq dropped 1.65%.[i]
What were the international events that fueled the sell off?
Chinese manufacturing activity contracted in January for the first time
in six months, according to one important survey. While there are probably some
distortions in the numbers due to the Chinese New Year holiday, the data
indicates that all may not be well with one of China
Political unrest in Turkey
and financial turmoil in Argentina
Investors seeking higher returns have also poured money into developing
markets in recent years. The central bank’s tapering process now has investors
scrutinizing the weak fundamentals that underpin many developing countries’
markets and wondering if their economies can stand on their own. If they pull
their money out, developing economies could be hurt by damaged currencies,
falling standards of living, and potential social unrest.
Fourth quarter earnings reports also drove some volatility last week. So
far, results have been a mixed bag, with slightly more than half of the S&P
500 beating estimates. Of the 102 S&P 500 companies that have reported in,
63% have achieved earnings above expectations, as compared to 67% over the
previous four quarters.
The takeaway: If any of last week's
headlines rob you of sleep, try to remember that it's routine for economies and
equity markets to cycle. While the selloff is troubling to some, it may also
have created some opportunities to cherry pick investments with good upside
potential at attractive prices. Investors buying the dip could spur another
rally; disappointing data or a Fed surprise could cause the contraction to
deepen. Whichever way markets move, we’ll be keeping our eyes on the trend and
working to position our clients for long-term success.
ECONOMIC CALENDAR:
Monday: New Home Sales, Dallas
Tuesday: Durable Goods Orders,
S&P Case-Shiller HPI, Consumer Confidence
Thursday: GDP, Jobless Claims,
Pending Home Sales Index
Friday: Personal Income and Outlays, Employment Cost
Index, Chicago PMI, Consumer Sentiment
HEADLINES:
2013 existing home sales highest in 7 years. U.S.
Weekly jobless claims creep up. While
the number of Americans filing new unemployment claims inched upward last week,
the overall trend suggests slow improvement in the labor market. The four-week
moving average, a less volatile measure, fell 3,750 to 331,500 new claims.[vi]
Oil prices climb on cold weather. U.S.
Quote of the week
‘I ask you to ensure that humanity is served by
wealth and not rule by it’
Pope Francis
Around the World …
U.S GDP is slowly moving up as consumers are
starting to spend more and manufacturing is making a comeback
China GDP is moving down as high debt and lower manufacturing
is a drag on growth
Japan government predicts a 1.4% GDP, which is
low considering the trillions that, is being added to the economy in the form
of stimulus.
The Stock Market
Almanac says: that if the market is down in January, there is a high correlation
that it will be down for the year
Did you know? That oil prices are unchanged from a year ago according
to Page One financial
It’s the economy ‘stupid’: overall economic diffusion index for the US
increased again last week. We are convinced the US economy is OK. Source
ISI
Just the facts Ma’am: The most a social security recipient
will receive in 2014 at the age of 66 is $2642 per month. Source MFS
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e. Securities
offered through Aurora Capital Member FINRA/SIPC.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification
does not guarantee profit nor is it guaranteed to protect assets
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a
price-weighted average of 30 significant stocks traded on the New York Stock
Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common
stocks and similar securities listed on the NASDAQ stock market and is
considered a broad indicator of the performance of stocks of technology
companies and growth companies.
The MSCI EAFE Index was created by Morgan
Stanley Capital International (MSCI) that serves as a benchmark
of the performance in major international equity markets as
represented by 21 major MSCI indexes from Europe, Australia and Southeast
Asia .
The Dow Jones Corporate Bond Index is a 96-bond
index designed to represent the market performance, on a total-return basis, of
investment-grade bonds issued by leading U.S.
The S&P/Case-Shiller Home Price Indices are
the leading measures of U.S.
The 10-year Treasury Note represents debt owed
by the United States Treasury to the public. Since the U.S. Government is seen
as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark
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