With the Canadian oil fires and issues with governments home and abroad, it is not a dull moment for investors in the markets right now.
Earnings and prices are off balance
We are about 90 % of the way through earnings season and we are expecting a 5%-6% drop from last quarter. It’s concerning that even though earnings are going down, stock prices are staying high. At some point the two will need to converge.
Government spending is not helping
Another concern is over our Federal debt which has increased over 100 billion dollars over the past two months. However, we are seeing lower tax revenue and higher spending. The trickle down effect will hurt state government budgets soon. It touches everyone’s portfolios as higher state and federal debt impacts the bonds they are issuing. This also hurts investor confidence.
At this point government spending is not causing the economy to pick up or add anything to GDP. The presidential candidates will be hitting on this very strongly in the forefront of the news stories.
Canadian oil fires impact portfolios
Recent Canadian oil fires have taken around a third of their production, or a million barrels a day, off line. Most Canadian oil ships directly to the US. This will have a direct affect on oil prices and possibly our gas prices. Ironically, this is happening right before the summer when historically gas prices go up as more people travel.
Saudi Arabia is going public?
We have been saying for a long time that the next big technology impact we will see is in government. Saudi Arabia this past week replaced their oil minister which had been there since 1995. He was replaced by the head of Saudi RAMCO which is the state owned oil company. Many people believe he was chosen because Saudi Arabia is about to take their oil production public with an IPO. So, Saudi Arabia is looking to go public? We admit it’s very odd but Saudi Arabia is feeling the pressure from technology competition and they are looking to diversify their revenue and invest in other forms of energy.
The US dollar is helping multi-national companies
For a long time the US dollar has been the gold standard around the world. Any time our dollar drops, that helps our multi-national companies be more competitive in the markets. So far this year it has dropped 4.5%. What rises as a concern is that we would rather see these companies grow by earnings and sales. This drop in the dollar is helping prop stocks up but it is not sustainable. It is artificial growth.
Cracks in the economic foundation
We are still staying conservative in our investment strategies. While there are still many good things going on in the economy, there is enough concerning issues that are causing cracks in the economic fundamental foundation to crumble. We want to help you build your house on a firm foundation. Stay tuned for more investors’ insights.
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Greg Powell, CIMA
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Ashley Page, JD, MBA
Senior Vice President
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Bobby Norman, CFP®
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Trey Booth, CFA®
Email Trey Booth here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.
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