Thank God It’s Friday! May 29, 2015

Market jitters returned this week, but the DOW is still holding that psychological 18,000 level.  The US economy officially shrunk by 0.7% in the 1st Quarter, a steep dive, revised from the previous 0.2% growth estimated just a month ago.  The frigid winter, a west coast port shutdown and the strong Dollar really hampered US activity and exports.   These were seemingly temporary issues that have gone away.  Except for the Dollar, which we anticipate its strength to continue and does hurt US exports.  The trade gap in Q1 was the widest its been since 1985.

Looking at the current quarter, estimates still project 2% growth.  They might need to come down.  Even if 2% growth does materialize, that would still combine for the worst first half economic activity since 2011.  That was the year we saw the near 20% correction over the Summer, which was led by Europe’s crisis, but resulted in a global slowdown and the US losing its AAA status.  There are some parallels today that can’t be quickly dismissed.  That was the last time Greece and the rest of the PIIGS nations (Portugal, Italy, Ireland, Greece, Spain) faced major distress.  This is why the Fed is in such a precarious position on what to do with interest rates.  The past is the past.  It’s all about where we’re headed.  It will likely be a bumpy ride this Summer.

Other things don’t feel right.  China’s Market activity has been anything but normal and healthy.  It’s stock market fell 6% on Thursday.  That came after an 11% spike in the previous 7 trading days.  Violence continues in the Middle East, and an Iranian deal deadline is far from clear.  This type of activity does not instill confidence for investors.

Next week will be an important and eventful one for investors.  The European Central Bank is holding a policy meeting on Wednesday to discuss the European Economy.  Greece will no doubt be a topic.  OPEC will be meeting on Friday, which is also a day that brings the deadline for a Greek debt payment as well as the US job report for May.  Next week will also bring the annual cancer research conference called ASCO (Americana Society of Clinical Oncology), which always brings a buzz about new medicines and promising biotech companies.

The Bull Market is still alive and it’s health will certainly be tested in the coming weeks.  We expect more anxiety to build around Greece and the Fed, but don’t see an end to the Bull run yet.  We feel good about our portfolio positioning.  If the facts change, we will too.

Have a nice weekend.

Mike Frazier

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