PMC Market Commentary: July 25, 2014
In many ways, it has been an eventful week, with a slew of earnings on Wall Street and a plethora of geopolitical crises. The earning picture has been anything but crystal clear. For those inclined to see their cup half full, there have been ample positive signs, ranging from a stellar report from semiconductor giant Intel to robust earnings from a number of cloud and technology companies to social media behemoth Facebook and even decent earnings from large banks such as JP Morgan (weighed down by legal costs though it was). For those who believe that there is more economic and corporate weakness on the horizon, there were weak results from Amazon (though those were as much a product of Amazon’s intent to spend and spend to expand) to Microsoft to General Motors. Added to the mix, Goldman Sachs among others cuts its estimates for second quarter GDP, down to a still healthy 3.0% but less than the 3.5% number anticipated as recently as the beginning of July.
Overall, this earnings season will do little to halt the back-and-forth debate about markets, whether they are fairly overvalued or overvalued, and economic trends writ large. A confluence of foreign crises has also taken center stage, with Israel’s incursion into the Gaza Strip, the downing of the Malaysian airline flight in Ukraine and continued tensions between Russia and the West, along with the ever-fluid chaos in northern Iraq and Syria. Financial markets, however, have not reacted strongly to these. That does not make them less important and crucial in the grand scheme of things, but it does reflect a simple calculus that none of these conflicts in and of themselves represent a challenge or threat to the global economic trends that most companies are exposed to. Only if these flash points trigger a series of falling dominos could they jeopardize economic growth or international stability.
So while these hot zones require our attention for any signs of widening crises, whether in the form of intensified tension between Russia and the West that could lead to a spike in energy prices or more turmoil in the Middle East, we are of now left with a series of financial markets that have been in a definitive upward trend even with modest earnings and revenue growth and low yields world-wide. Some believe that augurs volatility and turmoil ahead, but to date it has simply meant steady gains that continue to surprise an investment community primed for a fall.
The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this weekly review is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All investments carry a certain risk, and there is no assurance that an investment will provide positive performance over any period of time. An investor may experience loss of principal. Investment decisions should always be made based on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. The asset classes and/or investment strategies described may not be suitable for all investors and investors should consult with an investment advisor to determine the appropriate investment strategy. Past performance is not indicative of future results.
Information obtained from third party sources are believed to be reliable but not guaranteed. Envestnet|PMC™ makes no representation regarding the accuracy or completeness of information provided herein. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.
Investments in smaller companies carry greater risk than is customarily associated with larger companies for various reasons such as volatility of earnings and prospects, higher failure rates, and limited markets, product lines or financial resources. Investing overseas involves special risks, including the volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. Income (bond) securities are subject to interest rate risk, which is the risk that debt securities in a portfolio will decline in value because of increases in market interest rates. Exchange Traded Funds (ETFs) are subject to risks similar to those of stocks, such as market risk. Investing in ETFs may bear indirect fees and expenses charged by ETFs in addition to its direct fees and expenses, as well as indirectly bearing the principal risks of those ETFs. ETFs may trade at a discount to their net asset value and are subject to the market fluctuations of their underlying investments. Investing in commodities can be volatile and can suffer from periods of prolonged decline in value and may not be suitable for all investors. Index Performance is presented for illustrative purposes only and does not represent the performance of any specific investment product or portfolio. An investment cannot be made directly into an index.
Alternative Investments may have complex terms and features that are not easily understood and are not suitable for all investors. You should conduct your own due diligence to ensure you understand the features of the product before investing. Alternative investment strategies may employ a variety of hedging techniques and non-traditional instruments such as inverse and leveraged products. Certain hedging techniques include matched combinations that neutralize or offset individual risks such as merger arbitrage, long/short equity, convertible bond arbitrage and fixed-income arbitrage. Leveraged products are those that employ financial derivatives and debt to try to achieve a multiple (for example two or three times) of the return or inverse return of a stated index or benchmark over the course of a single day. Inverse products utilize short selling, derivatives trading, and other leveraged investment techniques, such as futures trading to achieve their objectives, mainly to track the inverse of their benchmarks. As with all investments, there is no assurance that any investment strategies will achieve their objectives or protect against losses.
Neither Envestnet, Envestnet|PMC™ nor its representatives render tax, accounting or legal advice. Any tax statements contained herein are not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Taxpayers should always seek advice based on their own particular circumstances from an independent tax advisor.
© 2014 Envestnet. All rights reserved.