Turns out, “denial” IS a river in Egypt

David B. Armstrong, CFA Weekly Market Commentary

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Stocks rallied on Friday after news of Mubarak’s departure reached investors.  That, combined with good news on improving consumer confidence and solid earnings reports made for a pretty good week in the market.

Additionally, the Obama Administration looks to be making moves to eliminate Fannie and Freddie.  While there seems to be a lack of consensus on how to proceed, financials did trade up on Friday.

The equity markets we track were all up last week.  The DJIA gained 1.50% to finish at 12,273, the S&P 500 Index gained 1.39% to finish at 1,329 and the Nasdaq Composite Index gained 1.45% to finish at 2,809.  The Russell 2000 index, which tracks the performance of small capitalization stocks, gained 2.75% to finish at 822.

While the news out of Egypt may have been historic, it really did not turn out to be much of an event for stocks, bonds or the commodity markets.

China, on the other hand, has surpassed Japan as the second largest economy in the world.  Not an easy feat.  This is not really much of a surprise since China has been gaining on Japan for the past 10 years, but it’s interesting none the less.

There was a lot of talk about food prices last week.  Markets outside the US, specifically the emerging market economies, have felt more of the food inflation pressures than we have domestically.  This is probably one of the reasons that we have seen the Emerging Markets down about -4% year-to-date as measured by the MSCI Emerging Markets index, versus the S&P 500 which is up almost 6% over the same period.  It’s also possible that our great domestic earnings reports have added a lot to the yearly S&P 500 return.

We will be looking to see how much of the food and energy increases creep into the Core prices over the next few months.  If the Core does not spike up, it means producers are having trouble passing along higher prices to consumers.

We still have a positive outlook on the equity markets and are over-weight the small and mid cap space and the technology sector.  We are still looking at investments in areas OTHER THAN bonds for fixed income allocations.

Call us for help or if you have any questions.

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC

**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.

About the Author
David B. Armstrong, CFA

David B. Armstrong, CFA

David B. Armstrong, CFA, is a President and Co-Founder of Monument Wealth Management. Along with his role as the firm’s chief investment strategist and portfolio manager, Armstrong is viewed as an industry leader in several areas including innovative practice management, discretionary asset management, digital marketing and social media. Dave is the writer of Monument Wealth Management's weekly "Off the Wall" Financial Blog and Market Commentary, and is frequently sought after by journalists and event coordinators. Visit his full biography here.

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