Weekly Economic & Market Update 7/6/2015

Week in Review

Global stocks floated lower this past week as the questions swirling around Greece accelerated into the holiday weekend. Over this past weekend, the Greeks held a referendum vote on whether or not to accept the terms of Europe’s ‘bailout.’ The result of the vote was “no” to the terms of the bailout. This leaves Greece with what appears to be three options.

1. Greece remains in the European Union, and in the Eurozone currency bloc, while having defaulted on payments to the International Monetary Fund (IMF) for previous aid, and while falling into arrears on its upcoming payment to the European Central Bank (ECB). At the same time, the European monetary authorities work to restructure the Greek debts.

2. Same as above, but the European Union or Greece decides to leave the Eurozone currency bloc.

3. Again, the same as option #1, but with a departure from both the Eurozone currency bloc and the European Union.

With both sides continuing to play hardball on what will or will not happen, it is very difficult to gauge an outcome. Over the last few years we have seen a number of macro-economic events that, in the past had the potential to derail global markets. But in today’s world of central bank interventions and global monetary easing, it is hard to say what may trip up the financial markets.

The one certainty is that, should the issues surrounding Greece get messy, the ECB will likely step in to calm markets. The last thing the ECB wants is to upend their broad economy over Greece. If there is trouble to come from the situation in Greece, it may very well come from private investors who have made leveraged bets for or against Greece in the derivatives market. It is in this fuzzy derivative marketplace that few know the real state of financial exposures.

We continue to monitor the global market place to identify opportunities and stresses. As has been in the case in the past, it is unlikely that the risks we see (like Greece directly) will trip up the markets in a meaningful way. To that end, we utilize technical analysis to help remove some of the emotional decision making that problems like Greece often encourage.

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

SPX 7.3.15

 

 

 

 

 

 

 

 

Chart 2 – Aggregate Bond

AKG 7.3.15

 

 

 

 

 

 

 

 

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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.