01.23.12: In the markets, as in life, there are no guarantees but everyone is entitled to their opinion. Here’s my opinion on the financial markets today.
The markets have enjoyed three straight weeks of positive returns and eight of last nine days have been favorable. At our financial planning services firm, here is what we are watching this week and how we think it may affect investors.
- European News – The actions of the ECB have helped calm markets and the announcement last week that the IMF will seek $500 billion for lending has given confidence back to market participants. Euro-zone finance ministers are scheduled to meet today in Brussels to discuss the Greek debt deal. Last week’s discussion didn’t produce an agreement between politicians and negotiators and the impasse is centered on the restructuring of the debt – which is a proposal to cut 100 billion euros from the existing 350 billion of Greek debt.
What this could mean for investors- As mentioned above, the U.S. stock markets have enjoyed three straight weeks of positive returns. It would be perfectly normal for the broad markets to experience an orderly decline after such a long rally. That decline could become pronounced should a major surprise emerge from the Greek Debt meetings.
2. Companies reporting earnings this week – 117 of the S&P 500 Index component companies are reporting earnings this week. Earnings results to date have been Okay, but not great. About 15% of the Index constituents have already reported and of those, 33% have been financials. Major companies reporting this week include Transportation companies, Technology companies, Food chain companies, and Industrial Companies.
What this could mean for investors- As the economy begins to expand it is typical to see Transportation and Technology companies improve first and to be the better market performers. Investors should watch to see how the market digests the earnings results of the major players within Technology and Transportation to gauge the overall view of the U.S. economy.
3. The Federal Reserve Meeting – The Federal Open Market Committee (FOMC) meets this week and is expected to provide more transparency to the markets regarding forecasts by individual Fed members. It is expected that the FOMC will maintain rock bottom rates, however there is some anticipation in what the published rate forecasts will reveal.
What this could mean for investors- most analysts anticipate the new guidance showing that the Fed plans to keep rates low longer than previously thought. A surprise in the published forecasts or an increase in rates could cause the stock market to decline, however it would be perfectly normal for the market to decline after such a long rally, so only a pronounced decline would be troublesome.
Franklin Bradford, CMT
Note: The opinions voiced in this material are for general information and are not intended to be specific advice. Any indices such as the S & P 500 can’t be invested into directly. Past performance is no assurance of a future result.
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