Stabilizing After Summer
Posted on Wednesday, November 12, 2014
The headlines in the financial pages this autumn could give a person whiplash: Record numbers in the stock market, followed by sudden crashes offset by rallies, and the biggest IPO in history were just a few items of interest. Then October brought surprisingly strong U.S. corporate earnings for the third quarter, with data suggesting the economy is stabilizing. These developments underscore the importance of keeping a calm, steady eye on the fundamentals of companies in all markets, which is the specialty of Investor Advisory Service.
Each month the IAS editors provide an overview of investment trends, providing perspective beyond weekly and short-term developments. In the October Investment Notes, IAS editors discussed why the S&P 500, after rallying 4% in August to touch 2,000 for the first time in its history, declined afterward. “It’s not unusual for an index to pull back after rallying to a milestone,” the editors explained. The S&P’s performance after its peak was “very resilient,” considering interest rates bounced significantly in September, and stock movement is typically inverse to interest rates.
Currency fluctuations also play a key role in recent market developments, and IAS’ editors in October provided insightful commentary on the relevance of currencies, along with the possible economic effects of the Fed’s exit from bond-purchasing. “Investors don’t have to own the whole market,” IAS said, noting that informed investors use research, data and trusted recommendations to select which companies to add to their portfolios and which ones to leave behind. Apart of the chaos of daily market headlines, “a continued focus on companies at fair valuations with rising earnings and strong cash flows should keep investors’ portfolios headed in the right direction,” IAS notes. Check out a free trial or go here to subscribe.