February was a month to break records. Here in NJ the average temperature was just 10 degrees Fahrenheit – breaking the record set back in 1934. Boston has had 104.1 inches of snow through the end of February and looks sure to beat its all-time record of 107.6 inches before this winter is over. February also saw all-time highs in the U.S. equity market as the S&P 500 Index broke the 2,100 level on Feb 17, 2015. So what will March bring?
On the weather front, your guess is as good as mine, and probably better than most meteorologists J On the investing front, I believe the outlook favors equities over bonds for the foreseeable future.
When I look at equities I reflect on a quote from Sir John Templeton – the founder of Templeton Funds and a pioneer in globally diversified mutual fund investing – “bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria”.
Right now I feel we are somewhere between skepticism and optimism. In favor of optimism is the current trend in the stock market as evidenced by the chart below from RiverFront Investment Group. However, the current trend has been up since the fall of 2009, which is quite a long run.
On the skepticism front, the lack of bullishness among individual investors can be seen in the chart below. This supports the level of cash on the sidelines right now. There is $11.7 Trillion dollars sitting in cash, savings accounts and retail money market accounts, according to the Federal Reserve (M2 money level Jan 2015 http://www.federalreserve.gov/releases/h6/current/default.htm#t1tg1f1)
So I feel the current bull market is currently in the ‘growing’ stage but heading for the ‘maturing’ stage.
For bonds, the general outlook is that U.S. interest rates will start rising sometime this year. With the consumer price index (CPI) still below the Federal Reserve target of 2.0%, I believe the FED isn’t going to raise interest rates until the latter part of this year, and then the increases will be small (perhaps 0.25%). Therefore, I think the return on fixed income investments (bonds) is likely to be stuck in the 0.0% – 3.0% range for the year.
The main factors I am paying attention to are (1) the ongoing dysfunction in U.S. government over budget, immigration, et al (2) increasing signs that economic activity in China is slowing and (3) international geo-political uncertainties such as Russia/Ukraine, Greek debt, and ISIS. So far this year the financial markets have basically ignored these factors but that could change at any time.
March Calendar of Events (comments and additions for future months are always welcome)
March is Women’s History Month. Please says thanks to all the important women in your life.
March 8th Daylight Savings begins – Spring forward
March 8th International Women’s Day
March 17th St Patrick’s Day
March 20th Spring begins in US – I’ll believe when I see it
March 29th Summer begins in Europe – that’s a good one!
March 29th Palm Sunday
Sources: RiverFront Investment Group, American Association of Individual Investors
Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.
Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful. Past performance is no assurance of future results.