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Atlas Market Outlook - August 16th, 2013
Where is the market going? Why is uncertainty pushing around the markets?
A mixed earnings season now turns its attention to the political and economic headwinds over the next 6-8 weeks. During a tenuious 3-month time frame when the 10-Year Treasury Note has spiked in yield, both investors and fund managers seemed white knuckled while they determine their next major move. The move in the 10-year yield has spooked the Bond market and related Preferred Stocks and Equities that are sensitive (and over sensitive) to it's movement. This spike may provide a headwind to the economy as it will affect home sales because mortgage rates have risen along with the financing of cars. Those two industries are the backbone to our economy that has shown signs of life over the last 6-8 months (political theatre aside). If the 10-year yield continues it trek towards 3%, it could derail our Bull market temporarily.
With Corporate Earnings very mixed and guidance flat to down, investors are waiting for their next catalyst to determine if there is another leg to the Bull run, or part of a larger 15%-20% pullback in the market. We have some headwinds over the next 6-8 weeks:
- Debt Ceiling debate again (probably end of September or early October)
- Federal Budget debate (Fiscal Year ends September 30th)
- Another Possible Sequester (also part of the Federal Budget debate)
- Uncertainty who the next Federal Chairman will be next year (Janet Yellen or Larry Summers)
- Quantitative Easing: The Fed is expected to taper the program in September or December and there isn't a real sense of what that will do to the markets.
Now if those headlines don't bother you, they will bother the markets to the financial media delight. With the ubiquitous run in the markets year-to-date, no one ever went broke taking some profits. Forget about tax liability, profits are profits, greed is what gets you closer to losses. If you have lightened or removed profitable positions, stay in cash or cash equivalents for at least 3-4 weeks, probably 6-8 weeks. There will be plenty of buying opportunities of quality equities (Please refer to our "Atlas Market Outlook for 2nd Half 2013" for many of those opportunities that you may be in now, or may pull back to the "buying price range").
The financial media loves to prime the pump with all these stories and make sure they get "experts" to give their opinions on both sides of the story, in the end it only confuses you on what to expect. Rely on your Investment Advisor to stay the course and smooth out the edges of the ups and downs of volatility.
We've had many conversations with clients over the last few weeks about taking profits and putting together the "watch list" of the quality names that we want to add positions to in their portfolio's. Our standing on the S&P 500 Index for the balance of the year is "Bullish", but we need a pullback here first. The profit-taking, modest economic stats and short-term headwinds may be catalysts for a pullback.
Authored by Ronald Lang - Ron.Lang@AtlasBuildsWealth.com