Around the world, March often brings with it inflection points, a changing of seasons, and a variety of momentous events. Every March across the U.S., college basketball fans gear up to watch and celebrate the tournaments that will culminate in the NCAA Division I Men’s and Women’s Basketball Championships. This media spectacle, dubbed “NCAA March Madness” in the U.S., draws millions of viewers and dominates water cooler conversation for weeks. By contrast, in Canada, “March Madness” refers to the budget flush that occurs in the last month of the government’s fiscal year ending March 31st, in which departments traditionally scramble to spend the remainder of their budgets to avoid having their following year budgets reduced. In Europe, March Madness refers to the most active part of the European hare’s prolonged mating season, which lasts from January to August.
March has historically been a month of heightened market activity and emotional frenzy in the global markets as well. Case in point, the NASDAQ Composite hit its peak in March 2000. The broad market bottomed in March 2009, and the NASDAQ recently topped 5000 again. Already, the first two weeks have seen a hotly debated employment report, Dow component AT&T (T) being replaced by Apple (AAPL), and the kickoff for the European Central Bank’s new government bond buying program, also referred to as quantitative easing. Looking ahead, the Fed is scheduled to meet the week of March 16th, and investors eagerly wait to see if the Board of Governors thinks the economy is strong enough to remove the term “patient” from its policy guidance. All of these events have ramifications which may influence markets going forward in different ways.
The U.S. unemployment report, in addition to a desirably low unemployment number, also conveyed a lower number of full time jobs in the U.S. than in February 2008, despite an overall increase in population. This gave some a cause for optimism that the labor market is finding a foundation, while it gave others reason for caution that the labor market is still fragile and may be affected by low oil prices. For Apple (AAPL), heretofore a behemoth growth stock, being inducted in to the Dow 30 may be interpreted as an acknowledgement that the days of big growth may be behind us. As the largest company in the world, this is not surprising, but as a former driver of index returns, investors may struggle to replace Apple’s historic growth in their portfolios. The likely divergence of central bank policy as Europe launches quantitative easing and the U.S plans to unwind theirs, is likely to spur market activity in the sovereign bond market with yields in Europe declining, and yields on U.S. Treasuries increasing, at a faster pace once anticipated events come to fruition. Moreover, because an increase in rates would reflect perceived strength in the U.S. economy, domestic stocks may initially see an increase in confidence while the removal of some equity risk in Europe may propel European stocks out of the doldrums. However, the strong dollar byproduct created by European quantitative easing will be a significant headwind for many large global companies, and has contributed to the recent uptick in market volatility. In short, many unknowns remain about the strength of the U.S. recovery, the stability of the various economies in Europe, and the geopolitical risks throughout the world which may cause further investor frenzy and market volatility.
Overall, we remain cautiously optimistic about the Eurozone region, its investor-friendly ECB, improving fundamentals and new quantitative easing program. We also recognize that emerging markets cannot be painted with a broad brush and are optimistic that amidst the turmoil, there will be many investment opportunities in emerging markets that are less affected by what happens in the U.S. and in Europe. As widely different as the interpretations of “March Madness” may be around the world, so may be the effects of the events highlighted in this commentary, among others. With that said, we continue to stress diversification in portfolios, including an allocation to international investments. Moreover, given our cautious optimism about Europe, within an international allocation, we would slightly tilt toward this region.
For more information on Summit Brokerage Services, visit www.joinsummit.com or contact us at (800) 354-5528.
This blog and website are for informational, educational and discussion purposes only, and the owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. Summit Brokerage Services, Inc., Summit Financial Group Inc., and any of their affiliated entities and principals are not a law firms or an accounting firms, or substitutes for an attorney or accountant. Although topics may be discussed on this blog that may involve legal, accounting, or investment issues, nothing on this blog shall be deemed to constitute the practice of law, legal advice, investment advice, and/or tax advice. Summit Brokerage Services, Inc., and its affiliates do not, and cannot provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defenses, options, selection of forms or strategies. The content on this blog is “as is” and carries no warranties. You should consult an experienced professional regarding tax consequences of specific transactions.
No reader should act in reliance on anything discussed in this blog without prior consultation with a licensed professional who is qualified to evaluate the reader’s individual facts and circumstances and offer an informed professional opinion with respect thereto. If any reader takes action or makes decisions based solely on the information on this blog without prior consultation with a qualified, licensed professional, the reader does so at his or her own risk and agrees that Summit shall have no liability resulting from such unilateral action or decisions by the reader.
Summit makes every effort to provide accurate and truthful information in its posts on this blog, but in no way expressly or impliedly warrants or guarantees the accuracy of its postings and/or the information posted here by others. All information is believed to be from reliable sources, however we make no representation as to its completeness or accuracy.
About Cetera Investment Management
Cetera Investment Management LLC provides passive and actively managed portfolios across five traditional risk tolerance profiles to the clients of financial advisors, who are affiliated with its family of broker-dealers and registered investment advisers. Cetera Investment Management is part of Cetera Financial Group, Inc.