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I mentioned on CNBC this past Friday that the market has been “resilient,” despite the “perfect storm” of “ugly” headlines These negative headlines constantly remind us about China, Oil and Greece on a daily basis and I do believe that the US markets will ultimately be the “beneficiary” of international concerns.
Ken’s wife visits Ken at the NYSE, and set of CNBC
Markets finally broke the losing streak, closing up for the week as worries about Greece and China faded. For the week, the S&P 500 gained 0.88%, the Dow rose 1.11%, and the NASDAQ grew 0.69%.1
International
Though a deal with Greece wasn’t reached on Sunday, both sides of the debt overhaul debate appear committed to finding a solution. Top-level officials from around Europe met to put together a deal that would be acceptable to creditors as well as Greece’s wary parliament. With Greek banks shut since June 28 and unlikely to reopen without additional funds, damage is already being done to the Greek economy.2 As of Monday morning, an “Agreement” was finally reached between the two sides; now, attention turns to Greek’s parliament, which must ratify the deal.3
China’s stock market, which has been experiencing a bear market correction, stabilized last week. Is the free-fall over? Hard to say, but we’re not worried. China’s stock market and investing culture is immature, and the recent 30% drop in the Shanghai Composite Index came after a run-up of 150%.4 Many analysts felt that Chinese markets were frothy and overpriced, so the correction isn’t unexpected. However, the stock meltdown does lower the expectation that China’s economy will reignite global growth.5
What can we expect in the weeks ahead?
On the domestic side, the largest stock exchange in the U.S. experienced an outage last week that caused some to worry about the effects of software on markets. The technical fault that caused the New York Stock Exchange to halt trading for four hours on Wednesday gave investors pause but didn’t result in too much disruption to U.S. equity markets because orders were routed through other exchanges. While rumors of a malicious attack flourished, NYSE officials claimed a software glitch was to blame.6
In today’s software-reliant world, technical faults can and do happen. While other institutional traders who measure positions in microseconds can suffer serious losses when orders don’t go through in time, long-term investors aren’t usually affected by small glitches. Why? When you’re investing for long-term time horizons, the timing of individual trades doesn’t matter as much, and little ripples in the market generally won’t affect your long-term financial picture.
In the week ahead, Federal Reserve Chair Janet Yellen will be speaking about monetary policy to the House and Senate. Remarks that Yellen made on Friday suggest that she will probably reiterate the Fed’s intention to raise rates later this year as long as economic activity continues on pace7. Earnings season will ramp up with many banks reporting this week as well. We’ll have more for you on earnings next week.
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