The situation in Greece will capture headlines this coming week and make the markets behave like a yo-yo. The news media will hold interviews with financial pundits who will forecast bad outcomes. That’s what they do to attract your attention. But, my experience indicates the markets will be affected only in the short term due to Greece’s mounting problems and will appear as a mere bump in road when looking back from a future vantage point.
Nevertheless, we will monitor whether interest rates for Italian, Spanish or Portugal government bonds jump. If so, this is a sign these countries may have been affected by investors pulling their money like what is happening in Greece– that could lead to a more serious problem. We suspect this will not occur; but, we will closely monitor nevertheless.
Most of the time the U.S. stock market looks to 3 factors (call them the “pillars” that support the stock market) to support its upward trend – let’s grade each of the pillars.
CONSUMER SPENDING: This grade is a B (favorable).
THE FED AND ITS POLICIES: We continue to grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices.
BUSINESS PROFITABILITY: This factor’s grade is a B– (slightly above average).
OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 4, an increase from last week due to the uncertain reactions to a probable default by the Greek government and its banks.. These risks deserve our ongoing attention.
Last week,Foreign Stocks increased and U.S. Stocks and Bonds decreased . During the last 12 months, STOCKS outperformed BONDS.
Returns through 6-26-2015
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
-.9
-.7
1.3
1.6
3.3
4.4
US Stocks-Standard & Poor’s 500
-.4
3.1
9.6
19.3
16.8
8.1
Foreign Stocks- MS EAFE Developed Countries
.9
8.7
-.8
14.9
9.7
5.4
Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.
The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®. This week Laurie will discuss: “Ways to protect yourself financially”
Laurie will take your calls on these topics and other inquiries this week. This show will be broadcast at the regular time. Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton and Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville and Macungie area – or listen to it online from anywhere on the internet. For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.
After a somnolent week on Wall Street, volume kicked up Friday as traders placed rapid-fire bets on stocks affected by annual changes to the Russell indexes. But the day’s surge did little to lift U.S. stock indexes, which ended the week down slightly.
Stocks also rose—and fell—last week on news about Greece, which had only until June 30 to pay off a loan from the International Monetary Fund and was working with euro-zone leaders to unlock bailout money before the end of the weekend. Greek Prime Minister Alexis Tsipras has called a referendum for July 5 to vote on terms of the latest aid package.
The Dow rose Monday and Tuesday, fell Wednesday, rose Thursday, and fell Friday, ending the week just slightly below where it started.
The Dow Jones Industrial Average fell 69 points, or 0.4%, on the week, to 17,946.68, while the Standard & Poor’s 500 index slipped 8.5 points, also to 2101.49. The Nasdaq Composite fell 36.5 points, or 0.7%, to 5080.51.More than $4 trillion in capital is benchmarked to the Russell indexes, according to Nicholas Colas at Convergex. Inclusion is based largely on market capitalization. When the indexes rebalanced Friday, fund managers who track them bought and sold stocks to match the new weightings. Friday’s volume on the NYSE was the year’s third highest.
Traders tend to play these moves too, with some buying shares earlier in the year of companies likely to be added to the Russell 2000, and selling them just before the rebalancing. It can be a lucrative trade: The stocks being added to the Russell 2000 are up 11% since May 1, according to Colas.
Friday’s flurry of activity came amid a longer lull in the market. With the kickoff of second-quarter earnings season still two weeks away, investors have time to fret about Greece—perhaps too much time. U.S. jobs and wage data are more important factors for the market than Greece, says Quincy Krosby, market strategist at Prudential Financial. But in the absence of new data points, investors are “waiting for a catalyst and hoping for a positive one.”
