Weekly Newsletter 11/3/2014

Global stock markets enjoyed another strong rally last week on the back of many economic data releases. Global data releases were mixed but a few reports were the real drivers of investing market moves. Here in the US the Federal Reserve (Fed) released the FOMC meeting notes which indicated that the Fed will hold rates down as long as necessary but will be ending (did end) the purchase of bonds – QE3. Many market participants viewed the release as dovish and supportive of investing markets. Additionally, the release of the Q3 US GDP preliminary report showed an annualized growth rate for the economy of 3.5%. The devil in the numbers for GDP was that much of the boost came from government defense spending which is not a sustainable number nor should it be for sustainable economic growth.

Overseas, Europe reported continuing declines in bank loans to the private sector yet improved numbers for economic sentiment. The most important overseas release for the past week came from Japan’s central bank (BOJ). The BOJ announced that it would expand its asset purchase program to an annual pace of 80 trillion yen ($704 billion). Not only will the BOJ be purchasing bonds, but also will be expanding its purchase of Japanese equity ETFs. Viewed differently, the BOJ will be expanding the monetary base (aka print money) to purchase said assets.

As we have indicated in this weekly commentary, western nations are participating in a round robin (seemingly coordinated) currency devaluation. The fact that the Fed stopped its asset purchases and the BOJ ramped its up at the exact same time points to a coordination amongst global central banks. While we recognize that global markets have responded favorably to central bank balance sheet expansion, we also recognize that it has not led to economic expansion. Hence, the investing markets expansion without economic underpinnings lead us to be cautious while the central banks continue their economic experiments.

Global Market Index Performance

Market Index 11-3

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 11-3

Chart 2 – US Aggregate Bond Index

$AKG 11-3

Global Data Points

Econ Data 11-3

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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. 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.