NOVEMBER 23, 2015
November, like the rest of 2015, has been a reaction to the recent “Fed Speak” and Geo-Political events.
On November 6th, the Fed’s targeted mandate of a 5% unemployment rate was reached. This caused a flurry of re-adjustments to portfolios, as the consensus of a December rate hike increased in probability. The expectations of the markets response to a rate hike started to play out in the markets last week.
The anticipated reactions are that both the stock and bond markets will experience a pull back. The bond market should remain “lower prices for longer”, as this is the beginning of a long-term cycle change. Opportunities will present themselves in less conventional bond sub-asset classes.
The stock market’s pull back will be shorter lived, as this market trades according to earnings and growth expectations.
Last week was a welcomed rebound for the US markets after a dismal week of sector rotation and Fed anticipation.
The markets are preparing the first fed rate move in over 7 years and the first time we have moved from a 0% Fed Funds rate.
In light of the recent events in Paris we will be watching the price of Oil.
Oil has mostly been stuck in a trading range, until these recent events. We have seen a few days where Oil has dipped into the low $40s. We expect this to remain volatile, as subsequent events to the Paris attacks unfold. Coordinated efforts to target ISIS together by France, US and other G20 countries may push oil prices up ultimately.
We will be monitoring the price of Oil as follow-up to these events occur.
Regional Bank stocks along with other financials seem to be moving upwards. This is another indication that the December rate hike is likely and the increased sector allocation is counting on higher rates to increase revenues and spread over other G20 countries.
The current volatility in the market gives us the opportunity to position our portfolios for year end, taxes, a Fed move, and the rising interest rate environment.
Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser's clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.