Stocks Climb Despite Mixed Economic News & Turmoil in Ukraine

in Market Commentary by

 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%.

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 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.