“Off The Wall” Blog
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By David B. Armstrong, CFA | Jul 26, 2011 | Weekly Market Commentary
No debt deal yet (as of this writing) out of Washington, but the markets continue to broadcast that it expects a deal to be struck before the U.S. defaults on their obligations. In fact, between July 8th and July 18th, yields on all of the treasury bonds except the 30 year fell – meaning people were buying them. I don’t think people would be too excited about buying bonds if they expected the U.S. to default (causing the price of those newly purchased bonds to go down).
The market has been whipsawed over the past nine trading days. Since the close of July 11th, the Dow Jones Industrial Average has alternated back and forth every day between being up and down.
We believe that the debt ceiling will ultimately be raised and concessions will probably be made, but after this weekend, it’s hard to predict. Quoting one comment I heard last week at the Barron’s Top Advisory Summit, “Dave, in a rational world this would have been fixed a long time ago, but look who we are dealing with”…
All of the equity markets we track were winners last week. The Dow Jones Industrial Average (DJIA) gained 1.61% to finish at 12,681, the Standard & Poor’s 500 Index gained 2.19% to finish at 1,345 and the Nasdaq Composite Index gained 2.47% to finish at 2,859. The Russell 2000 Index, which tracks the performance of small capitalization stocks, gained 2.05% to finish at 842.
We are not advocating taking any protective action on equity portfolios to hedge against the debt ceiling issue… yet.
Regardless of the recent market volatility over this issue, we think that markets are currently priced for a resolution rather than any other alternative. Additionally, this could be fixed any day now and that could cause a rally. We just don’t think that at the end of the day the politicians will allow the country to default.
However, if it starts to look likely, we have a plan.
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.
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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