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When they say "it's all Greek to me" I never thought it would mean that we would spend all of our time discussing Greek debt, the country's possible default and the country's possible exit from the Euro. Unfortunately I think that's what is going to happen.
Certain controls have been put in place to slow down a complete run on the bank. And ATM withdrawals have been limited to 60 euros per day (Seeking Alpha 6/29/2015).
As the Euro nations decide how to handle/adjust to this financial challenge, Alexis Tsipras - the Greek Prime Minister - has indicated that there will be July 5th referendum on whether to accept the new terms of Greek's creditors (Seeking Alpha). To say that Mr. Tsipras is a bit outside reality in his response would be the understatement of all understatements.
But, to be fair, this result was not unforeseen. There will certainly be some painful stuff here but it will be dealt with over time. It is just another knot in the ball of yarn that is right now the world economy.
On the debt front, also watch Puerto Rico to see how they handle their difficulties.
On the more positive side, Eurozone lending rose to its highest in 3 years (IBD 6/29/2015) which I take to be a sign of consumer confidence.
Also, NY Fed Chairman William Dudley indicated earlier this month that a rate increase this year is "on track" (WSJ 6/5/2015). I think that is right. Time to move on from this Fed balance sheet ballooning silliness and work to normalize interest rates. As I have said before, even investment portfolios have gotten out of whack a bit in their risk profiles and should be brought to heel a bit for better long term stability.
And finally, existing home sales this morning reported up.9% (National Association of Realtors 6/29/2015). This is the highest pace in nearly 6 years. There still appears to be some unsold inventory but if the sales pace continues then this won't provide a headwind. Again, home buyers to me indicate a long term bet on the economy and some comfort with wage stability. One caveat is that a continued strong market will be predicated on employment opportunities and wage increases going forward.
TECHNICALS
We have been in a range for some time now. See the chart below on the S and P 500.
Source: Wooden Brothers TC 2000 Software Data
My bet is that we get some downward pressure here but then rebuild from there. At some point this range must be broken for us to make progress.
Final thoughts
Look, I have not changed my opinion one iota. For those tactical positions I still think cash is king for a piece of your portfolio. We still have some surprises that could crop up.
But, at the same time, I am looking for this downturn - if it occurs - to do some shopping. I am focusing on stocks that I think will benefit during a period of higher inflation. These includes items such as financials, food stocks, and healthcare (among others). Now get this straight, I am not looking for a jump to 10% on the 10 year treasury but I am looking for a slow return closer to 3 plus % on the 10 year. And it won't happen overnight but I believe the turn is here.
As for Europe, I like some of the countries within the zone. We are going to separate a bit the good countries from the weaker ones and I expect those stronger economic countries to shine.
All in all I think this is a time to be constructive here. This is not Chicken Little the "sky is falling", this is "let's buy when others don't want to".
Of course I can be wrong but until then I am holding fast. And if I am wrong I will be the first to tell you.
Cheers,
Tim
Tim Withers is Chief Investment Officer of MSW. He has over 20 years of experience managing money on both an asset allocation and tactical basis for clients as well as serving as investment analyst to qualified retirement plans and individuals. He holds a BA from Connecticut College and an MBA from the Wharton School at the University of Pennsylvania. Disclosures: S&P 500 An index of 500 stocks chosen for market size, liquidity, and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and it meant to reflect the risk/return characteristics of the large cap universe. "Asset allocation does not protect against loss of principal due to market fluctuations. It is a method used to help manage investment risk." Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), member FINRA/SIPC. NFPAS is not affiliated with MSW Financial Partners. The above links are provided for your information only. As they are provided by third parties, NFP Advisor Services, LLC (NFPAS) does not endorse, nor accept any responsibility for the content. NFPAS does not independently verify this information, nor do we guarantee its accuracy or completeness. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. It is not guaranteed by NFP Advisor Services, LLC for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. The indices mentioned are unmanaged and cannot be directly invested into. Past performance does not guarantee future results. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market. |
