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May 6 2015

Stock markets tipped into the red last week.

Major indices in the United States and elsewhere dipped lower as U.S. economic growth came in below expectations. The Commerce Department reported gross domestic product (GDP) grew by 0.2 percent annualized during the first quarter. Growth was hindered by the strength of the U.S. dollar, which made exports less attractive, and cold winter weather. U.S. market performance also reflected last week’s earnings news for technology stocks which wasn’t quite as rosy as the previous week’s.

Markets across much of Asia lost value last week, too. China was a notable exception. The Shanghai Composite gained more than 1 percent during the period. It was a truly remarkable performance as China is in the midst of its worst earnings season since the global financial crisis. Bloomberg reported:

“…2014 profits missed estimates by the most in six years and analysts cut their outlooks at the fastest pace since 2009…Yet, it’s mainland individuals who account for at least 80 percent of trades, and they’re still buying shares at a record pace in anticipation of further government stimulus. That helps explain why the highest price-to-earnings ratios in five years have failed to slow the Shanghai Composite’s advance.”

China’s economic growth has also slowed. During the first quarter, its GDP grew by 7 percent. That’s a much better showing than the United States but not so great when benchmarked against previous growth in China. In fact, it was China’s slowest growth since 2009.

The Economist commented, “…the question for China is not whether growth will rebound to anything like the double-digit pace of the past. Instead, it is whether its slowdown will be a gradual descent – a little bumpy at times but free from crisis – or a sudden, dangerous lurch lower.”

Sources:
http://online.barrons.com/mdc/public/page/9_3063 economicCalendar.html?mod=BOL_Nav_MAR_hpp
http://www.bbc.com/news/business-32517366
http://online.barrons.com/articles/twitter-yelp-linkedin-implode-as-disappointed-investors-flee-1430527154
http://www.bloomberg.com/news/articles/2015-04-28/take-bad-earnings-off-your-list-of-bull-market-killers-in-china
http://www.economist.com/news/briefing/21648567-chinese-growth-losing-altitude-will-it-be-soft-or-hard-landing-coming-down-earth

  • Data as of 5/1/151- WeekY-T-D1-Year3-Year5-Year10-Year
  • Standard & Poor’s 500 (Domestic Stocks)-0.0040.0240.1190.1450.1190.061
  • Dow Jones Global ex-U.S.-0.97.80.56.43.83.8
  • 10-year Treasury Note (Yield Only)2.1N/A2.623.74.2
  • Gold (per ounce) -0.6-1.9-0.8-10.9-0.210.6
  • Bloomberg Commodity Index1.8-0.9-24.1-9.9-5.2-3.8
  • DJ Equity All REIT TR Index-3-0.81310.9128.5

*Indices are unmanaged and investors cannot invest directly in an index.
*Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
*S&P 500, Gold, Dow Jones Global ex-Us, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend).
*The DJ Equity All REIT Total Return Index does include reinvested dividends.
*All investments involve risk – coins and bullion are no exception. The value of bullion and coins is affected by many economic circumstances, including the current market price of bullion, the perceived scarcity of the coins and other factors. Therefore, because both bullion and coins can go down as well as up in value, investing in them may not be suitable for everyone. Since all investments, including bullion and coins, can decline in value, you should understand them well, and have adequate cash reserves and disposable income before considering a bullion or coin investment.

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Bart A Zandbergen, CFP® is a Registered Investment Advisor with Optivest, Inc and a Registered Representative with Gramercy Securities, Inc. Investment advisory services are offered by Optivest, Inc. under SEC Registration and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC, 3949 Old Post Road, Charlestown, RI, 02813, 800-333-7450.

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