Brian Kasal, CEO of FourStar Wealth Advisors, Chicago, discusses the February Market
Review of January
In January the Swiss detached their Swiss franc from being pegged to the euro. As a result the Swiss Franc rallied and it hurt a number of currency shops that were heavily levered. Many currencies are under pressure as the central governments are recklessly printing money and deflating the value of the currencies. Also this month Commodity is showing strength, but when peeling back the onion you can see that the entire positive move in Commodities has all been the precious metals and gold specifically.
In January US equities were weaker down 3% and Int’l Equities weakened more. In the daily tug of war between asset classes, cash is rising versus the other five regular investing classes. Foreign currencies in US terms are weakening and more specifically the euro is weakening. Many predict that the euro will go back to parity. One euro per one dollar. The good news is that everyone who missed a trip to Italy in recent years, can now hop on the travel sites and prepare your next trip. This euro down move is your cheaper opportunity! Anyone who remembers in 1994 when the Mexico devaluation grew by approx. 40% overnight. Mexican vacations became cheap, which then lead to a revival of trade with Mexico. The US dollar is gaining on other currencies as our economy continues to be the best performing, which could also lose out as well.
Markets were weaker in January and the S&P 500 was down 3% for the month on weaker earnings for the major SPX components than expected. Notably Microsoft that was experiencing a resurgence had a serious earnings miss which led to casting doubt on their recovery. The popular Surface notebook has not been enough slowing the overall Microsoft earnings concern. Apple on the other hand, had great earnings! It is entirely possible that the lower energy costs this year compared to last year could help earnings of many consumer companies. This trend will be interesting to watch.
International stock markets were also weaker, more than the US, on a dim outlook for Europe, concerns in China and general slowing of the non – US economy.
As we had discussed, gold caught a bid in January which rallied in the way it does when gold acts as a counterweight to a declining stocks market. The January gold rally was merely so far a technical blip and gold still shows no clear sign of changing the long term trend.
Reported this Month
Congressional Budget Office estimates that 10 times the number of people originally estimated by the program sponsors of the Affordable Care Act, are getting kicked off their personal health plan. The “if you like your plan you can keep it,” lie keeps getting worse and worse.