Weekly Newsletter 9/30/2014

Global equity markets slid through most of this past week but gained some ground on Friday. Global investors are still trying to feel their way through the dark in regards to the short-term fate of interest rates. Just as political uncertainty can provide for volatile markets, so too can interest rate uncertainty.

Global economic indicators came in mixed. Here in the US, the prominent economic indicators released for the week were a positive final Q2 GDP release and a mildly positive to neutral durable goods orders release for August. Overseas, economic reports leaned toward the negative side as private loans in Europe continue to slump and China appears to be stuck in neutral.

The overwhelming market mover for this past week was the news that the founder of the world’s largest bond fund manager, Bill Gross, is leaving PIMCO (the company he founded) for another firm. The news shook the markets as Gross has been at the helm of the company and many of its funds for more than 40 years and is commonly referred to as the ‘Bond King.’ Regardless of the rumor mill reasons for his departure, Mr. Gross and his track record are a major reason for the success of PIMCO. The PIMCO site states that the company manages $1.97 trillion dollars and guides $1.55 trillion in third party assets. We seldom point to one person in this commentary but PIMCO for many has been synonymous with Mr. Gross. His departure, for right or wrong, could have a significant impact on the market if investors decide to sell shares of their PIMCO funds. With trillions of dollars in assets under management, even a small percent move out of PIMCO could disrupt smaller segments and even larger segments of the bond markets. The timing of Mr. Gross’departure along with the stopping of US Federal Reserve (FED) bond purchases could make for dicey times in the investing markets. In a nutshell the FED which has been the largest buyer of bonds, is now backing away from the table. The Fed coupled with PIMCO now opens the door for the potential to see more sellers enter the market just at a time when ‘the buyer’ is leaving.

As always, we will continue to watch global markets for opportunities and signs of stress.

Global Market Index Performance

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Getting Technical with Market charts

In this section we present charts of the S&P 500 Stock Index and the US Bond Market Index relative to their 50 day (blue line) and 200 day (red line) moving averages. In addition, we have added the blue shaded area which represents the recent trading channel. The 50 and 200 day moving averages are widely followed market trend indicators that provide a general picture of the health of the broad indexes.

Chart 1 – S&P 500 Index

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Chart 2 – US Aggregate Bond Index

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Global economic data points

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Securities are offered through First Allied Securities, Inc. (FASI), a registered Broker Dealer, Member FINRA/SIPC. Advisory Services offered through Lighthouse Financial Advisors, Inc., a Registered Investment Advisor dba Lighthouse Wealth Management (LWM). Lighthouse Financial Advisors, Inc. is not a subsidiary or control affiliate of FASI.

Disclaimer – Information contained herein is taken from sources believed to be reliable, but cannot be guaranteed as to its accuracy. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. The Standard and Poors 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Contact your investment professional to discuss suitability for your particular circumstances. This article does not constitute an offer of sales of any securities. Securities trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results. Lighthouse Financial Advisors, Inc., dba Lighthouse Wealth Management, is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.

About Henry Becker

Henry L. Becker, Jr., CFP® has 15 years of experience in the financial services and investment advisory business. Henry is the Director of Research and Investment Strategy for Lighthouse Wealth Management. In addition, Henry is a world traveler (23 countries and counting), blogger, Hemingway reader, historian, Austrian economist, Roman history enthusiast, mountain biker, and skier.