Financial Markets Recap – March 13, 2015
Written by: Ryan Bouchey
There was a lot happening in the financial markets this week with volatility rearing its ugly head once again. Let’s take a look why this may not be a bad thing and how some of the major financial news of the week could potentially effect the markets.
Strong February Jobs Report
Expectations of what the Federal Reserve will do with their monetary policy can change on a dime and we certainly saw that with the stronger than expected jobs report posted last Friday. The U.S. economy added 295,000 jobs in February and unemployment dropped to 5.5%. With such good news why has the market been volatile ever since this news broke last Friday? For one, the strength of these numbers may cause the Federal Reserve to raise interest rates as early as June. In the short term, this worries investors who believe the market has been propped up solely due to the Fed which is why we saw a sell-off. The fact of the matter is that for the Fed to raise interest rates it means they believe the economy is improving. Historical data has shown that with rates as low as they are now, any rise in rates actually helps the market instead of hurting it. In the long-term, we feel this is a good thing and the recent volatility presents a buying opportunity.
A Tale of Two Central Banks
The Federal Reserve and the European Central Bank (ECB) are on the verge of taking two very different paths when it comes to monetary policy. Given the recent U.S. jobs report, expectations are that the Fed will tighten monetary policy by raising rates. The opposite is true in the Eurozone where the ECB is loosening its monetary policy with their own version of quantitative easing. The dramatic effect we have seen so far is the strengthening of the dollar versus the Euro. A year ago, one Euro was worth $1.39. Today that same Euro is worth $1.06. This has the potential to hurt earnings for U.S. companies based on foreign exchange rates. Given that approximately 45% of revenue of S&P 500 companies is earned overseas, this stronger dollar could hurt bottom line earnings when bringing overseas profits back to the U.S.
Apple Watch
Did everyone already pre-order their Apple Watch? Since news broke on Monday of the Apple Watch, investors have not been very excited about the stock as its dropped 5%. Who can blame them? The Apple Watch is neat and has some cool features but it doesn’t offer anything new to consumers. You can track your health from a number of health trackers already on the market for much cheaper. The price point may be an issue, especially when you factor in that the latest iPhones were essentially free if you renewed your cellular contract due to competition between the carriers. It’s yet to be seen if the Apple Watch will help propel the wearable market but from our perspective there isn’t really a compelling reason for consumers to purchase the Apple Watch just yet.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bouchey Financial Group, Ltd. [“Bouchey Financial”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, no portion of this discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Bouchey Financial. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Neither Bouchey Financial’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if Bouchey Financial is engaged, or continues to be engaged, to provide investment advisory services. Bouchey Financial is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Bouchey Financial’s current written disclosure Brochure and Form CRS discussing our advisory services and fees is available for review upon request or at www.bouchey.com. Please Note: Bouchey Financial does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Bouchey Financial’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a Bouchey Financial client, please contact Bouchey Financial, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.