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| Investment Advisor - Market Perspective May 2010 |
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Even though we are supposed to be in the spring season of the year, it sure feels like summer started a few weeks ago. We experienced an extra long cold winter, then only a few days of spring and now the hot humid weather has come roaring in. I hope this doesn’t mean an extra long, hot summer!
In many ways, our volatile weather pattern seems similar to the unusual economic circumstances we are seeing around the world. After months of quietly watching from the sidelines, the United States finally intervened in the European debt crisis last Sunday, May 9th.
The Federal Reserve announced it would open currency swap lines with the European Central Bank — in essence, printing dollars and exchanging them for Euros in order to provide some liquidity for European money markets and banks.
This step came after a hectic week in Washington. According to several United States officials, there began to be fear around the sovereign debt crisis and the possibility that it threatened to infect the American economy and hamper its recovery. The intervention, which also involves the central banks of England, Switzerland, Canada, and Japan, is part of a colossal package intended to subdue the restive credit markets.
Everyone thought this action would resolve the wild market action we experienced last week, but that has not been the case. We continued to experience extreme volatility throughout this week. Over the previous couple of weeks, our stock market was down around 9%. On Monday, it came roaring back (due to the Fed action) and recovered about half of those losses. However, Monday seems to have only been short-term relief and the market has reversed again. As I write this update, our domestic market is back down approximately 2% for the week, or a 7% cumulative loss since the beginning of current correction. Stock markets around the world have suffered even greater losses.
Is this the start of a return to the “Bear Market” that so many of us have been expecting? The one I have been writing about for the past year? It certainly could be, but who knows? The good news here at CFI is that we are keeping a close and vigilant watch on the changing circumstances and are adjusting your investment portfolio as our continuous research analysis dictates.
As always, if you have any questions or concerns, please do not hesitate to call me. I am always available. Also, be sure to tell your friends about our services. It is very likely they could use some of the comfort you enjoy knowing we constantly endeavor to Maximize Your Personal Financial Success!
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