Markets Rise with Love in the Air

in Market Commentary by

Market Digest – Week Ending 2/14

The global equity markets were full of love this week. In a “clean” bill, Congress increased the debt ceiling, allowing the government to run until at least March, 2015. Stocks also rallied on testimony by new Fed Chairwoman Yellen indicating the Fed intends to stay the course with measured reduction of bond purchases. The global stock market is now down less than 1% for the year. Bond prices were down modestly for the week. Gold rose, and is quietly up almost 10% for the year.

Weekly Returns:

S&P 500: 1,839 (+2.3%)
FTSE All-World ex-US: (+2.1%)
US 10 Year Treasury Yield: 2.74% (+0.06%)
Gold: $1,318 (+4.0%)
USD/EUR: $1.370 (+0.4%)

Major Events:   

  • Monday – The Treasury department said employers with 50-99 employees won’t have to comply with the Affordable Care Act until 2016.
  • Monday – Billionaire activist investor Carl Icahn has backed off from his campaign urging Apple to increase its stock buybacks.
  • Tuesday – The House voted to lift the debt ceiling until well into 2015. The bill was viewed as a victory for Obama and a sign that Congress is returning to a more functional status.
  • Thursday – Time Warner Cable accepted a $45 billion merger offer from Comcast. The merger is expected to face heavy anti-trust scrutiny.
  • Friday – The European Union announced Eurozone Q4 GDP increased at 1.1%, marking another step in the regions fragile recovery.

Our Take:

Stocks were up this week, and for good reason. There was plenty to be encouraged about. First, Congress managed to pass a straightforward and needed bill. That may not sound like much, but it wouldn’t have happened six months ago. Second, the Eurozone posted a slow but reasonable growth rate for Q4. Europe remains a concern and any signs of momentum are welcome.

On Thursday, the $2.2 billion Ivanpah solar thermal power plant opened. If you’ve driven from LA to Vegas, it is just off the freeway about 10 miles before you get to Buffalo Bill’s and Whiskey Pete’s on the Nevada border. Partly owned by Google, it uses about 350,000 mirrors to aim sunlight at three 459 foot high towers. Water in the towers is heated, creating steam which drives turbines. It covers about 5 miles and only pictures can do it justice – just search for Ivanpah.

Unfortunately, the massive heat is killing birds that either crash into the mirrors or are simply incinerated by the heat. Also, the energy generated costs about five times more than a natural gas power plant and relies on government subsidies.  I’m no scientist, but it is hard to see how creating a giant oven in the desert is the ideal green way to get away from fossil fuels. Either way, all signs point to decreasing reliance on traditional energy sources. Other direct and indirect investors in the project include NRG Energy, Goldman Sachs, Chevron Technology Ventures, and BP Ventures. When the leaders of Technology, Financial Services, Utilities, and Energy are coming together to push for change, you can be fairly sure it will come.

The following two tabs change content below.
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.

Leave a Reply

Your email address will not be published.

Disclaimer. This communication and all data are for informational purposes only and do not constitute a recommendation to buy or sell securities. You should not rely on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific situation. Third party data is obtained from sources believed to be reliable. However, PCAC cannot guarantee that data's currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.