TGIF July 11, 2014

Correction?  What correction?  The S&P had its worst week in 3 months.  But it really wasn’t that bad. Stocks were down less than 1% on the week, and remain near all-time highs.  The DOW is just shy of that record 17,000 level.  It’s a big round, psychological number, that doesn’t have that much technical significance.  But DOW 17K is still pretty darn cool.  

This was an informative week for investors.  Market attention was flip-flopping between the start of earnings season, and the various issues overseas.  Thursday brought the biggest sell-off on the week, triggered by a problematic Portuguese bank.   But interestingly, DOW and S&P started rallying once the European Markets were closing for the day.  The reversal was pretty telling.  Demand for US stocks is still quite strong.  That’s been the case for 5 years now.

So weakness continues to prove buyable…until it doesn’t.  Something about Thursday felt a little different.  We have been preparing for another sell-off.  Perhaps Thursday was a wake-up call.  It has been over 1,000 days since a 10% Market correction.  That’s the longest stretch since 1987.  Interest rates fell again, as money plowed into US Treasury Bonds.  The Bond Market continues to enjoy 2014.   Gold has been trying to rally too.  A correlation between Treasuries and Gold has been absent.  These moves are more consistent with 2011 than 2014.  The last 10% sell-off no surprise was 2011.  It’s only a matter of time for some sort of Market correction for these outsized gains in the US.  It’s natural, and it’s healthy.

Brazil had an eventful week.  The greatest attention was placed on its soccer team, and the devastating loss to Germany in the World Cup.  It was a heart breaker for the host nation that lives and breathes soccer.  But what might surprise you was the Brazilian stock market was actually up 2% on the week.  Brazil and Asia traded much better than the US and Europe this week.  There’s something brewing there we think. We continue to study select international markets closely.

Enjoy the weekend.  We’ll be back dark and early on Monday.

By: Mike Frazier

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