U.S. Markets Gain while European Markets Weigh Risks02-17-2015 |
Sources: Rates Data and Economic Calendar—Bloomberg Markets as of 2/17/15; Equity Market, Fixed Income and REIT returns from JP Morgan as of 2/13/15.
U.S. Markets Gain while European Markets Weigh Risks
The U.S. equity markets moved solidly higher last week as the S&P 500 index gained 2.1% to finish the week up 2.12% for the year while the Dow Jones Industrial Average gained 1.14% to finish the week up 1.44% so far in 2015. Moving forward, we continue to watch developments out of Europe with regards to the future of Greece’s membership in the European monetary union. While we are not overly concerned with the risks of contagion to the periphery that plagued European equity markets during the late summer of 2010, we are concerned about the message that will be sent to other debt laden countries in the region, should concessions be made.
On Monday, talks between Greek and European finance ministers broke down after Greece rejected a proposed six month extension of its bailout package. European markets closed lower Monday as the Euro Stoxx 600 lost 0.11%, and closed flat Tuesday after trading lower throughout the day. Also important to European markets is the future path of Russian involvement in Ukraine. Despite a ceasefire put in place on 2/15, the EU handed Russia fresh sanctions Monday that were applied to 19 individuals and nine organizations.
The geo-political risks to the Eurozone add a risk premium to the equity markets in the region that we believe offsets their relatively attractive valuations and has caused us to continue to underweight the region in our model portfolio strategies. Should these risks subside and loose monetary conditions continue, the potential for growth opportunities in certain markets may prove attractive. The value of the Euro relative to the U.S. dollar will continue to be vital in evaluating these potential opportunities and certain hedging techniques to reduce or eliminate Euro exposure should be considered.
Because of the difficultly in building and managing a diversified portfolio, we strongly recommend that individuals seek the expertise of a professional portfolio manager. We continue to make ourselves available to anyone in need of these services or simply looking for a second opinion. If you would like to learn more about Hennion & Walsh’s Portfolio Management services, please speak with your Hennion & Walsh Financial Advisor or a member of the Hennion & Walsh Asset Management Team.
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