03|04|2016

Bad news = selling & good news = buying, Huh, interesting…

That almost sounds like what should happen on a regular basis…  Since the government shutdown we’ve seen the opposite.  Positive economic data was viewed as an indication that the Federal Reserve Board (FRB) may be one step closer to “tapering” their bond buying scheme.

 

This reaction has slowed in recent weeks and last week completely reversed.  This is good news.  Rather than being concerned about the I.V. drip of stimulus the markets were actually focused on the positive economic data.  This means one of three things:

 

1)      “Tapering” is priced in (I doubt it).

2)      “Tapering” isn’t viewed as a negative drag on the economy (again doubtful).

3)      “Tapering” is being ignored until we get further FRB guidance (likely).

 

In a week that started with 4 straight losing sessions totaling 265.61 points on the DOW; Friday’s rally on positive data allowed the week to end with just a 69.21 loss (.4%).  This does mark the end of 8 straight weeks of gains on the market, which isn’t necessarily a bad thing.

 

In case you were wondering what that positive data was:

 

–        Unemployment rate dropped from 7.3% to 7.0% (lowest level in 5 years)

–        2013 Q3 GDP revised from 2.8% to 3.6% (should slow in Q4)

–        US new home sales increased 25.4% October over September.

–        Consumer Sentiment rose from 75.1 to 82.5

–        ISM Manufacturing Index rose from 56.4 to 57.3 (over 50 indicates expansion)

 

Internationally, Japan announced a $182 Billion stimulus package to stave off fears of tax hikes in April.  Italy and Germany showed strong economic data, while France and spain are threatening a double dip recession.  Brazil also contracted during the 3rd quarter and may continue this trend, if not consecutively, but in the 1st quarter if “Tapering” occurs at that point.

 

If you would like an in-depth analysis of your current positions and allocation, please feel free to call Jason Roque at 719-313-7536 to schedule an appointment.

 

Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services.  Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.  Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.

 

Sources: mfs.com, oppenheimerfunds.com, investing.com, yahoo.com and morningstar.com

 

* Financial Action, Inc. is a Registered Investment Advisor.