The week of 04/09/12 to 04/13/12 proved volatile for many investors holding positions in global equities. The Dow did experience a maximum peak to trough of 1% with greater downside volatility. The Dow closed down -.61% for the week ending 04/13/12. The S&P moved tangentially to the Dow, however with greater downside volatility, closing down .81%. The Nasdaq experienced similar peak to trough movement as the Dow & S&P however with the greatest volatility. The Nasdaq clsoed down -.98% for the week ending 04/13/12. Higher highs were not established in either indices over the week however higher lows did assist the market to close above a loss of -1%.
Going forward, expect the most downside risk to come via the Nasdaq. Bond yields over the course of next week will be increasingly important. I am bullish on U.S. equities should yields on U.S. treasuries continue to fall w/limited upside volatility in the yield curve. Notably, I am bullish on dividend bearing companies, regional utilities (energy), consumer staples, and food & beverage companies including Yum! Brands, General Mills, Kraft Foods, Archer-Daniels-Midland, Sara Lee, and Monster Beverage Corp. I continue to like Panara Bread, which I’ve recommended awhile ago at $120/sh. The first time I walked into a Panera Bread was about 10yrs ago as an undergrad at UAlbany. I knew then Panera would be an excelelnt company.
NB: Companies with exchange rate risk relative to exports to countries whose currency is depreciating against the USD should be avoided in favor of companies that hold international supply chain and distribution systems, as well as where expenses are borne in foreign markets and revenue earned in USD or GBP bearing markets.
Relative to the U.S. markets, the major European indices experienced near tail-risk downside volatility the week of 04/09/12 to 04/13/12. The FTSE 100 index experienced a loss of -1.19% for the week ending 04/13/12. The DAX did experience tail-risk with tremendous downside volatility, closing down 3.49% for the week. The CAC 40 experienced a tail-risk event and really pushed the market lower. French stocks were slaughtered because of 0 growth in the country and the speculation regarding social and economic volatility as a function of a change in political leadership. As the French government focuses on debt, CAC 40 will continue to pare downward relative to its European counterparts.
European markets are attempting to catch up to current valuations. Future valuations are a function of the underlying economic risk associated witha debt bubble and a paltry jobs market. Austerity continues to loom over the EZ nations engaged to the eurocrisis. To remain competitive globally, at the very least, the eurozone must choose to net export goods/services to the U.S., Canada, Japan, & the OPEC nations. Spain’s debt and equity crisis looms over the nation like a vulture looming over roadkill. If the metaphor sounds insensitive, it’s because the situation in Spain is dire straits. Germany and Scandinavia is where you want to put your money in Europe. I recommend holding Hungarian 10yr as the yield can rise to 11% before holders need to sell into a buyers market.
Asian markets are experiencing growth relative to global markets to which the Nikkei 225 experienced a similar peak to trough as the U.S. equity markets from 04/09/12 to 04/11/12 however closed in positive territory up .85%. As one may expect, energy, communications & financials were mostly responsible for the rise in indices market value. A stock to watch over the next week is the Sumitomo Mitsui Financial Group (SMFG). The Hang Seng closed up 1.48% for the week ending 04/13/12 with major buying on Friday, pushing the indices higher. China’s ‘bottoming’ of GDP is seen as bullish for growth in all areas except for housing. Energy is the most promising sector. The Straits Times closed up .83% for the week with a more gradual rise in indices market value from Thursday to Friday as opposed to the buying frenzy in the Hang Seng index that occured on Friday with financials showing the largest gain.
Commodities: Not going to spend much time here.. Gold and Oil are trading within range with upside volatility for Gold at 1750/oz and oil (WTI) at 106.50/bbl.
Thank you for reading.
Have a wonderful close to your weekend.
Vidia – CEO Ricochet Alternative Asset Management