Market Summary from Sumner Wealth Management

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Market Summary

April 2015

 
 

Dear Visitor,

April rain will bring May flowers!  And from all the rain, we should have an abundance of flowers blooming the Spring.  With so many storms this past week, is no indication to the market.  Yes, first quarter was flat, and there are several situations that we needs attention that could affect the market in the near future.  I will keep you posted.

Also, several individuals I have consulted with over the past month, who are now clients, thought it cost money to seek my advice.  Any consultation, regardless if it is 1 or 10, should be free. At least it is with me.  If your just starting to build or rebuilding a retirement plan or think you don't have a lot of money to invest, it will benefit you to meet with a Financial Advisor. I wanted to disclose that because everyone should meet with a Financial Advisor.   

 

Global Equity Moves Slightly Lower 


Global equity markets moved slightly lower, as new trading rules were announced on Chinese stocks and concerns resurfaced around the Greek banking system. While the global stock markets fell approximately one percent or more, the extreme market moves were in European debt markets and the price of oil. Buying spurred by European Central Bank (ECB) quantitative easing and Greece-related flight-to-safety, German Ten Year Bonds ended yielding just eight basis points! With shale producing regions in the U.S starting to feel the pinch from lower energy prices, production has slowed. As such, the price of oil rallied approximately ten percent to end the week at $56 per barrel.

 

Index Returns (%) 

Source:  Bloomberg

Index

YTD

1 Year

Dow Jones 30

.02

8.64

S&P 500

1.08

4.60

Russell 2000

3.91 

10.01

MSCI EAFE

6.84

-0.93

S&P GS Commodities

-0.97

-36.92

U.S. Trade-Weighted $

7.93

22.04

 

Market summary: Mixed picture amid massive global monetary policy easing

The global economy remained lackluster, but increased easing outside the U.S. pushed global bond yields and non-U.S. currencies lower and equity markets higher. A solid mid-cycle U.S. economy and improved developed economies (i.e., Europe and Japan) support the global outlook. Most financial assets generated modest positive returns in Q1, despite higher foreign exchange (FX) and market volatility. More specifically, in a reversal of 2014 market results, non-U.S. equities led moderately positive global equity returns in Q1.

Other turnarounds included U.S. small-cap stocks outpacing large-caps, and high-yield corporate bonds besting investment-grade bonds. The overall tone was mixed, though, as Treasuries performed better than the S&P 500 and commodities slumped further. Government bond yields in most developed-economies hit multiyear lows as a result of central bank bond purchases in Europe and Japan, while U.S. long-term yields remained relatively high and attractive for foreign investors. China weakness continues to be the world's biggest risk to the global outlook, and Fed monetary policy tightening could spark increased market volatility.

Six themes for 2015

1: Global monetary policies dominate the investment landscape

2. Economic/macro: Slow global growth; developed-market economies improved

3. U.S. stocks: Small-cap, mid-cap, and growth stocks outperformed

4. Non U.S stocks: Developed-market stocks lead; commodities trail

5. Bonds: Widespread positive returns

6. Asset allocation insights

Source:  Fidelity Investments

 

New Rules for Shanghai Composite

The Shanghai Composite had doubled over the last 12 months, In response, new rules on margin trading were announced this week to try to take some of the speculative frenzy out of those markets. While Chinese stocks did fall in response to these new measures Friday, in the context of the previous 12 months' strong gains it should probably be viewed in the context of profit taking as opposed to the start of something more worrisome.

 

Negotiations Ongoing Between Greek and Euro Officials

However, the real source of concern stemming from international markets came from Greece. Chart #1 shows that fears of a Greek default or "Grexit" have continued to rise, with the spread between Greek and German Ten Year yields widening again. While negotiations are ongoing between Greek and Euro officials, Greece and Greek banks are facing a cash crunch that is being stop-gapped for now by ECB lending. The rally in German bonds and widening in Greek spreads reflects investor concern that the ECB might withdraw its cash support in an effort to bring negotiations to a conclusion. As always, markets loath uncertainty, and the unknown consequences of contagion from an unknown Greek situation unsettled markets Friday.

 

The S&P Moves Sideways

After a stellar 2013 and strong 2014 (especially compared to global markets), Chart #2 shows that the S&P 500 has spent much of 2015 moving sideways. Given the strength of the rally in the previous two years, this may not be such an unwelcome event. In light of relatively flat economic growth in the first quarter (due, in part, to unseasonably poor weather), weak earnings stemming from a collapse in energy prices and surging dollar, and geo-political concerns (e.g. Greece), it is probably not the worst scenario to have domestic stocks consolidating the gains of the previous two years.

 

Upcoming Economic Announcements

Source:  Bloomberg

Day

Release

Period

Consensus

Prior

W

Existing Home Sales

Mar

5.03M

4.88M

Th

Initial Jobless Claims

Apr 18

290K

294K

F

New Home Sales

Mar

513K

539K

F

Durable Goods Orders

Mar

0.6%

-1.4%

 

Chart #1

 

Chart #2

 

To my clients, friends, and colleagues. Thank you for your continued support!  I would like to   hear your thoughts and feel free to forward this on to other individuals who could benefit from this information.

 

Sumner Wealth Management             

Mark Sumner                                         
Financial Advisor 

 

 

 

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msumner@ssnrep.com

 

 

 

 

 

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(704) 660.5510 x401 | www.sumnerwealthmanagement.com | msumner@ssnrep.com

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