The global markets were affected by heightened tension in Ukraine as the downing of the Malaysia airliner by Russian backed separatists led to stronger sanctions by the EU and the U.S. on Russia. This action puts in doubt a fragile European recovery and set back the markets on the Continent with Germany, France, and the UK down by 8.2%, 4.3 % and 2.4 % respectively YTD. Money seems to be shifting over to Asia with China + 5.5 %, Hong Kong + 6.8 %, Taiwan + 9.2 % and Australia up 9.1 % YTD.
Negative news from Gaza, Argentina and Portugal combined with relatively high valuations for stocks and led to profit taking.
Needless to say this fluid environment affected 10 year Treasury bonds now at a 2.55 % yield down from 3% on January 1. 10 year German Bunds by comparison yield 1.2% as feared economic weakness coupled with easy money have driven Eurozone yields to levels not seen in centuries.
Both payroll employment and profits continue to grow in the U.S., as the slowest economic recovery since World War II stretches beyond 5 years of age. Dividends and profits of U.S. companies are now the key ingredients along with share repurchase helping stocks remain aloft. The re-rating of the price earnings ratio for U.S. stocks which fueled last year’s gains is likely behind us.
Without a recession, inverted yield curve, suddenly higher interest rates or another war, stocks will remain an investment of choice. U.S. energy production approached 30 year highs as we persistently free our economy from foreign oil dependence.
Since we have gone 33 months without a 10 % correction caution is warranted as the Summer and early Fall are typically weak periods for U.S. share prices.
Douglas Coppola
John Coppola
August 1, 2014
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Disclaimer: This communication is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles managed by Client First Advisors, LLC or an associated person or entity. Client First Advisors does not accept any responsibility or liability arising from the use of this communication. No representation is being made that the information presented is accurate, current or complete, and such information is at all times subject to change without notice. Opinions expressed may differ or be contrary to the opinions and recommendations of Client First Advisors. Client First Advisors does not provide legal, accounting or tax advice. Any statement regarding legal, accounting or tax matters was written in connection with the explanation of the matters described herein and was not intended or written to be relied upon by any person as definitive advice. Any discussion of U.S. tax matters contained within this communication is not intended to be used and cannot be used for the purpose of avoiding penalties that may be imposed under applicable Federal, state or local tax law or recommending to another party any transaction or matter addressed herein. Each person should seek advice based on its particular circumstances from independent legal, accounting, and tax advisors regarding the matters discussed in this e-mail.
