Weekly Update: September 29, 2014

Volatility and the Rise of the Machines

The month of September is living up to its long, well-documented reputation of taking investors for a roller-coaster ride. This was accentuated last week by triple-digit swings for the Dow every day of the week and then again today as ripple effects from several fluid situations trigger computer-generated buy and sell programs, with the selling more intense.

Hedge-fund chatter that the Fed is targeting a 3%-4% Fed Funds rate over the next couple of years made the rounds over the weekend, but there was no credible response by the Fed or any other newsworthy sources to shed any light on what can only be considered short-seller's rhetoric.


Looking for the Next Catalyst

Weekly Update: September 22, 2014

Coming off an action-packed week of high-priority data points, central-bank policy meetings and the biggest IPO of all time in Alibaba (BABA), markets are enduring a bit of an information-overload hangover, trading lower across the board, around the globe. The S&P 500 posted a new all-time intraday high of 2,019 on Friday, but the tone of the investing landscape became subdued late that afternoon, and it has carried over into today's session.

Fresh concerns of slower growth in China and Europe are dampening an otherwise optimistic view of the U.S. economy, partly because low interest rates and declining energy prices are stimulating consumer spending and forecasts of capital spending, and hiring by companies is increasing heading into the fourth quarter.


Big Week Ahead for Market Bulls

Weekly Update: September 15, 2014

A quick view of the economic, IPO and Fed calendars provides a clear take on how well the bullish case will be able to build on itself following a three-week period of consolidation for the major averages. The scales are tipped in favor of being long the U.S. markets as the third quarter comes to a close and earnings season approaches against a somewhat cautious tone.

For what is historically a quiet time of the year, much has transpired during the past month, from volatile geopolitical situations to a major rally in the dollar to levels not seen since July 2013. The soaring greenback is drawing capital flows from around the globe into U.S. equities and debt assets, which is providing a solid bid under both markets.


U.S. Markets Tapped as Global Safe Zone

Weekly Update: September 2, 2014

The month of August saw the S&P 500 climb 3.8%, defying its historical laggard behavior, primarily as a world awash in cash allocated capital to U.S. bond and equity assets as the de facto recipient for financial yield and growth. Strength in the U.S. dollar also acted like a magnet, drawing huge interest in the wake of geopolitical risk and uncertainty that hasn't shown any signs of abating.

The dollar index (DXY) hit a fresh 52-week high of 83.0 last Friday as the yield on the 10-year Treasury traded down to 2.33% before seeing some giveback this morning, which sent the yield back up to 2.41%. Typically against a backdrop like this, including the Russian invasion into Ukraine and the widespread violence in the Middle East, crude and gold prices would be soaring. However, quite the opposite is occurring: Crude is trading below $95 per barrel, and gold is trading below $1,270 per ounce. But, then again, the market landscape has been anything but normal.


Feeling Good After Jackson Hole

Weekly Update: August 25, 2014

A double-barreled dose of dovish commentary by Fed Chair Janet Yellen and ECB President Mario Draghi has got stock bulls trying for new high ground today. Both central bankers assured markets that low interest rates would persist until the U.S. macro employment picture broadens out further and the war on deflation in Europe is won on all fronts. That's taken as supportive rhetoric by markets looking for additional catalysts to add to already sharp gains of the past two weeks.

The threat of inflation, or lack thereof, is also contributing to the bullish sentiment. Crude oil is hovering in the low $93 per barrel level, providing consumers a decent measure of savings at the pump and on paying utility bills. The decline in oil prices comes as Mid-East tensions and violence remain unchecked as Russian tanks moved into Ukraine early this morning.


Late-Summer Volatility Alive and Well

Weekly Update: August 18, 2014

Leading up to last week, markets were trying to find support after getting aggressively sold off amid a stream of negative headlines surrounding several potentially highly disruptive scenarios engulfing Ukraine, Iraq and the slowing of the European recovery that will only be exacerbated by Russian sanctions. Soft retail sales in the U.S. during the month of July also contributed to the sharp pullback for the major averages.

That said, there appears to be a de-escalation of geopolitical risk and the notion of further European Central Bank stimulus to support the European economy, and coming up is what is expected to be a highly dovish speech by Janet Yellen at a conference in Jackson Hole, Wyoming this week. Together, these two factors have the market putting together a sharp rebound during the past week.