Market Update March 2015

Better, much better. As expected (or at least hoped for), we got a bounce off of the January dip through the end of February. We also saw the NASDAQ hit 5000 for the first time since the “tech bubble” of 2000. But this time it has a much more reasonable valuation than it did before the bubble popped.

Sector strength is starting to return to the “growth” stance we have had for much of the past two years, mostly leaning towards Technology and Healthcare. On the other hand, Utilities, often referred to as one of the most “defensive” market sectors, has lost the interest of the general market. So, onward and upward we should go!

International Markets – while there has been a rebound in overseas markets the past month, we still see it as place we’d avoid. In other words, it’s still “a dog with fleas.” For example, the Baltic Dry Index, which is a shipping index, has fallen to its lowest level since 1989. When the reading is low, we think it suggests an impending global economic slowdown. More specifically, it suggests one of the world’s largest exporters of raw materials, the Chinese economy, could be in for some rough seas.

Another indication that it’s not quite time yet to jump back in to the International sector:
eafe

 

 

On the weekly iShares EFA International Index chart (shown on left), during the run-up over the past few years, there has been a tendency to bounce off of the 40 week moving average (blue line). Now that the EFA has crossed below the moving average line, it is possible that it will keep “hitting its head” on this ceiling, then continue moving down.

Bonds – in many ways the Bond market is behaving the reverse of what we are seeing in the International markets. Bonds have been coming down over the past few weeks, and are now to a point where they look buy-able. At least in the short-term. Most readers know that we’re not a fan of bonds due to the possibility of an interest rate hike looming on the horizon. That just won’t end well. Think of it like a very expensive game of “hot potato.” When the music stops (when interest rates rise), you don’t want to be the one left holding the bonds.

Fun Fact of the Month: The Dow Jones Industrial Average broke 10,000 for the first time on March 19th, 1999 (recently it’s been around 18,000). The famous DJIA is an index that shows how 30 large publicly owned companies based in the United States have traded during a standard trading session in the stock market. It was first calculated in May 1896, and at that time only contained 9 railroads and 2 industrial companies.