Weekly Newsletter 10/6/2014

Global markets sank this past week in the midst of an increasingly challenging global macroeconomic environment. Throughout this past week US economic indicators pointed toward the negative side as reports on consumer confidence, ISM Manufacturing, ISM Services, Factory Orders and Labor Force Participation all moved lower. All of this was being reported in the midst of the US dollar strengthening. It has been a while since we pointed to it, but it is important not to forget that we are in the midst of a global currency war. It is no surprise that the dollar is strengthening at the same time that the European economy is struggling and the European Central Bank is taking action. It was not that long ago that we hinted at the prospect of an environment where western economies take turns moving their currencies lower in an effort to give their exporters a leg up. We have seen the US expand its monetary base, Japan had its turn and now Europe is looking to do the same. As the Europeans devalue their currency, other countries such as the US and Japan are likely to see strength in their currencies.

Going along with the above topic, this past Thursday European Central Bank (ECB) chief Mario Drahgi outlined the details of the beginning of a new form of European QE. The ECB head outlined the plan that will entail purchasing covered bank bonds and asset-backed bonds. The US investing markets had been sagging through last week until the announcement from the ECB on Thursday where the markets began to turn up throughout the end of the week. Similar to the QE programs from the US and Japan, the program is more of an economic patch than a long-term fix. Nonetheless, QE has given a boost to global asset values. The question remains as to what happens when the monetary spigots are shut off as there is no historical precedent for doing such. We continue to monitor global markets and economic data points with vigilance to try to understand the impact of the extraordinary economic actions of the last five years.

Global Market Index Performance

Global Market 10-6

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

$SPX 10-6

Chart 2 – US Aggregate Bond Index

$AKG 10-6

Global economic data points

Econ Data 10-6

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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 Katy Chase

Katy Chase, MBA, contributes her own perspective to the team. With previous training in Marketing and French, her perspective offers a mixture of macroeconomic, cultural, and client-focused experiences. In addition, Katy is a baker (with a specialty in chocolate), athlete, perpetual student/learner, volunteer, blogger, Nittany Lion, daughter, grand-daughter, sister, and wife.