Market Comments
WSGardener
5-30-2014
There isn’t anything particularly ground breaking to discuss this week as we see a continuation of the emerging global slowdown. Markets continue to shrug off the slightly negative news as more of a bump in the road to recovery than the beginning of a downward trend. I like that scenario.
In the big picture one of the biggest concerns is China as the real estate market has slowed and growth rate trends lower. India looking for new hope with the change in government and sometimes the positive feeling can help turn things around. Either way there is still a lot of wood to cut to get growth moving and provide jobs for one of the youngest aged emerging economies in the world. I believe!!!
What we are seeing across the board is increased level of volatility in the market place but the fear level as displayed by implied volatility (as in VIX) is not reacting. But market is making new highs, so there really isn’t a reason for increased fear levels. Fear doesn’t usually show up until late after the bad thing has happened. It’s as if no one thinks to buy insurance until after the flood, then everyone scrambles to pay the highest rate when the storm has passed. Let’s watch and see. The US indicator we use is VIX - volatility index. It gauges the cost of purchasing index options. Today’s level is 11.55, so near lows of the year
Here in the US our most recent data showed the ecomomy shrnk in the 1st quarter. Again, this is being seen as a short term blip as we came out of a dreadful winter. The housing market is struggling but with interest rates backing up quite a bit, there is still reason to feel positive.
Merger activity is heating up nicely here and the size of the proposed deals is astounding. As an example I would use Phizer bidding $120 billion for AstaZeneca. WOW!!! This should be a nice underlying positive for the market as industries looking to consolidate and create efficiencies through partnerships.
I am going to stay a touch bearish even in the face of the new highs as my brain says sell and my heart wants to buy here at the highs.
Good luck!!!
