Market Recap – Markets React to Fed Signaling and Ongoing World Crises

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Market Digest – Week Ending 2/20

For a second straight week, the crisis in Ukraine and Greece remain in limbo, but partial solutions boosted stocks. Europe retained a hard line on Greek demands to renegotiate their bailout, but reached a four month extension. In Ukraine, a shaky cease-fire is in place but Kiev accused Russia of sending more troops and tanks and sporadic fighting remained. Quietly, after faltering in January, stocks are having a strong month, with the FTSE All World index up 6% in February. Bonds were down modestly despite the Fed signaling it may remain “patient” with rate increases.

Weekly Returns:

S&P 500: 2,110 (+0.6%)
FTSE All-World ex-US: (+1.5%)
US 10 Year Treasury Yield: 2.11% (+0.08%)
Gold: $1,200 (-2.3%)
USD/EUR: $1.138 (-0.2%)

Major Events:

  • Tuesday – Ukraine’s president denounced the advance of Russian separatists into a transportation hub as a violation of the cease-fire.
  • Wednesday – Fed minutes showed disagreement on the best time to begin raising interest rates with some members preferring action sooner and some not wanting to signal when an increase may occur.
  • Thursday – American Express lost an anti-trust lawsuit around not allowing merchants to promote other cards.
  • Thursday – Pinterest was rumored to be seeking a $500 million funding round at an $11 billion valuation.
  • Friday – Eurozone finance ministers agreed on extending the bailout for Greece by four months, but stipulated that Greece details adequate reforms by Monday.
  • Friday – Eurozone GDP growth for Q4 was reported at 0.3%, modestly ahead of expectations.

Our take:

European leaders seem to have a penchant for reaching last minute deals that delay, rather than solve problems. Such was the case once again with Greece, as a four month bailout extension was reached, pending Greece’s ability to outline reform measures in the coming days. Stocks rose, as this reduces the risk of a Greek exit from the Eurozone in the short term, but it will cause more uncertainty down the road.

In the meantime, on Thursday, Germany announced stronger than expected growth of its services sector. Things in Europe have been bleak since the sub-prime crisis erupted over six years ago. We’re starting to see glimmers of hope and European stock markets are responding. After a dismal 2014, International Stocks are leading US Stocks by a few percent so far in 2015.

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Craig Birk, CFP®

Craig Birk, CFP®

Craig Birk is a member of the Personal Capital Advisors Investment Committee. He also serves as Vice President of Portfolio Management. Prior to Personal Capital Advisors, he was an integral leader within the portfolio management team at Fisher Investments. During Craig’s time there, the company increased assets under management from $1.5 billion under management to over $40 billion. His responsibilities included risk management, portfolio implementation oversight, and management of all securities and capital markets research analysts. Mr. Birk graduated from the University of California at San Diego and has earned the Certified Financial Planner® designation.

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