Daily Capital

Stocks Climb Despite Mixed Economic News & Turmoil in Ukraine

 Market Digest – Week Ending 2/28

Stocks rose despite a downward revision of Q4 GDP and tension in Ukraine. Bonds were up as some investors sought safer assets. Bitcoins suffered a setback when a major exchange was hacked and hundreds of millions of dollars of bitcoins disappeared, but the currency showed resilience, only dropping 4%.

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Weekly Returns:

S&P 500: 1,859 (+1.3%)
FTSE All-World ex-US: (+0.8%)
US 10 Year Treasury Yield: 2.66% (-0.07%)
Gold: $1,326 (+0.1%)
USD/EUR: $1.381 (+0.5%)

Major Events:   

  • Monday – Netflix agreed to pay Comcast for a direct connection to the cable operator’s broadband networks.
  • Tuesday – Tokyo based Mt. Gox, one of the largest bitcoin exchanges, shut its website and was rumored to be subject to a hacking attack.
  • Wednesday – Sales of new homes rose 9.6% in January, the fastest rate in five years.
  • Thursday – Sandwich chain Quiznos announced it is planning to file for bankruptcy in an effort to speed restructuring.
  • Friday – Former Ukrainian President Yanukovych, whose ouster a week ago led to instability in Crimea, said Ukraine must remain united, and reiterated that he remains the legitimate leader.
  • Friday – Bitcoin exchange Mt. Gox declared bankruptcy and announced it lost 750,000 bitcoins.
  • Friday – Q4 US GDP was revised down from 3.2% to 2.4% due to bad weather and soft demand overseas. The revision was in line with more recent estimates.

Our Take:

US stocks partied like it was 2013, rallying on mixed economic news. Meanwhile, the geopolitical environment felt more like 1983. The situation in Ukraine is potentially quite bad. Russia may be tempted to intervene militarily by sending troops into Crimea, in similar fashion to what happened in Georgia in 2008. So far, this outcome seems unlikely. Sending troops into Ukraine would be a bigger risk than Georgia was, and as of now, Secretary of State John Kerry said Russia confirmed it will respect Ukraine’s borders.

The stock market does not seem concerned. Russia’s equity markets were down about 3% this week, but losses were contained to the country, which represents only about 6% of emerging markets indexes and only about 1% of the global stock market – or just less than Apple. Still, Russia’s influence on global capital markets extends way beyond the value of its companies. Hopefully, for the people of Ukraine, and the capital markets, there is a swift and peaceful resolution.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Craig Birk, CFP®
Craig Birk leads the Personal Capital Advisors Investment Committee and serves as Chief Investment Officer. His focus is translating improvements in technology into better financial lives. Craig has been widely quoted in the Wall Street Journal, Bloomberg, CNN Money, the Washington Post and elsewhere. Prior to Personal Capital Advisors, he was a leader within the portfolio management team at Fisher Investments, helping assets under management grow from $1.5 billion to over $40 billion. Craig graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

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