A September Overview

The markets made a surprising move higher this past quarter, in the face of what most thought would be bad news for the global economies: Great Britain leaving the European Union (aka Brexit).  In reality, investors have been comforted by the fact that the FED has decided to leave interests rates low in an effort to inject plenty of liquidity into our slow growth economy.  There are several global themes we are now monitoring for the remainder of the year:

  1. The Presidential election – This one is pretty obvious.  In reality, we all give the US President too much credit or blame for the economy.  The economy is more dependent on who the President puts around him/her.  In any case, it’s a story.
  2. The UK economy – Many thought that the UK leaving the EU would force their economy into recession.  However, it’s too early to tell.  For now, their economy seems to be on sound footing.
  3. Interest Rates – The FED has elected to stay accommodative.  However, at some point, they will need to start raising rates a bit more aggressively, especially if inflation picks up. If possible, it would be ideal to raise rates slowly.

In all, we like the way the markets are reacting, in the face of some challenging global economic news.  We made a big jump just after the UK vote and that move took us out of a two-year range.  This is very positive technical action.  It wouldn’t surprise us to see the markets go through a short-term correction.  But, we believe we will see another market push higher before year-end.   

An August Overview

The markets have rallied strongly since the Brexit vote was finalized, a move that was counterintuitive to most investors.  In reality, markets typically rally when investors do not expect it and bear markets appear when everyone is apathetic.  So, it wasn’t surprising to see the markets rally in the face of this year’s volatility.

There are a couple things we feel are driving this rally:

  1. The last round of earnings announcements was much stronger than most investors expected.  Stocks were selling off because analysts were ratcheting down earnings estimates.  So, the bar was pretty low for companies to beat.  However, the numbers were particularly impressive in the second quarter.
  2. The global economies are not as bad as many had feared.  It appears China has stabilized and Great Britain, of Brexit fame, just produced one of their strongest GDP reports in ten years.  
  3. There is a definite bias in the asset allocation world toward stocks and away from bonds.  The FED looks like they are poised to raise rates at least one more time this year and that has sent traditional bond investors looking for other places to invest.  

The markets look a bit tired in the short-term, as they have rallied strongly over the past couple months. We wouldn’t be surprised to see investors take a short-term break.  However, we feel that any pullback in this time frame would lead to higher prices down the road.  We are currently analyzing markets and sectors to discern where we might deploy more capital. 

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As your investment professional, we are committed to delivering performance in a manner that is consistent with your needs, goals and desires. Headquartered in Orlando Florida, Delta Advisory Group serves clients throughout the United States.