Blog

With the increase in stock market volatility over the last few weeks, we thought it prudent to write a brief update for our clients. If you have not watched our 20 minute client video update from last week that covers this issue in more depth, please do so or let us know and we can resend the link to you.

This week we were reviewing interest rates and it seemed amazing that almost all major U.S. interest rate measures were at lower levels than they were at this same date range last year. The occurrence is surprising to many because, if you will recall, by mid-September of 2013 interest rates were experiencing a stunning rise that began in early May.

As part of our research, we regularly read the writings of a variety of strategists, and every once in a while we come across commentary that is just so good we feel compelled to share it. The following is such writing, originally authored by Richard Russell and paraphrased by Raymond James Chief Strategist Jeff Saut.

Richard begins:

This is the time of year when students all over the United States head back to the classrooms, so it seems like a perfect time for a brief education session on the current status of the global investment marketplace.

The beginning of summer is upon us and the last week of May had many financial media outlets buzzing with the news that the U.S. stock market was again hitting 'all-time high' levels. While that is certainly true of some market indexes, we thought it important to bring perspective to the current conditions as we enter the typically slower summer months of the calendar.

By now you have probably heard quite a bit in the media about March 9, 2014 being the 5 year anniversary of the bull market in U.S. stocks that started in March of 2009. The stock market has certainly experienced a long and powerful move upward over that time frame, with the most recent calendar year of 2013 being especially strong.

The erratic action that characterized most major investment markets in January of this year continued in February, but in almost exactly the opposite direction. Equity markets that were in a meaningful selloff and bond markets that were branded as out of favor both roared back in February, leaving the financial media unsure what to make of the first two months of 2014.

We don’t normally like to comment frequently on short term movements of the global investment markets, but with the stellar results for U.S. stocks in 2013 being followed by a disappointing start to 2014, we felt the need to continue providing perspective to counteract the dramatic reports you are probably seeing in the financial media.

With 2013 year-end celebrations disappearing quickly in the rearview mirror, the New Year has been more grumpy than cheery for most global stock markets. While most of the selloffs have occurred in foreign stocks, the U.S. stock market has started to feel some pressure in the last week. We have discussed several times that 2014 could very well bring the first meaningful drawdown in the U.S.

An interesting chart showed up in our research this week that we wanted to share with you. The first graphic below shows the net amount of money flowing into and out of stock funds (on the left) and bond and income oriented funds (on the right) The red circles in the bottom right corner show first a trend over many months of investors adding significant money to bond funds.