The Word from Main Street
Market Update - Week of December 15th, 2014:
December has historically been one of the best months of the year for US markets. However, as of Tuesday, after three out of four days of market losses on heavy volume, the markets have shifted back into correction. How long this downturn lasts is anyone’s guess, but it appears that the “Oil Grinch” may have sabotaged the traditional “Santa Rally.” Oil hit the mid-$50 per barrel price range this week strengthening the dollar and rattling emerging markets. According to Reuters, ”the Russian ruble has come under heavy selling pressure this week, falling around 20 percent against the dollar at one stage on Tuesday, sparking fears of financial meltdown, despite the (Russian) central bank hiking its key interest rate by 650 basis points.” Russia is a one-trick pony in its dependence on oil , so falling oil prices together with foreign sanctions related to Putin’s interference in Ukraine is certainly coming home to roost. Unfortunately, this global turmoil precipitated by falling oil prices is currently overshadowing what is thought to be a very good long term development for the US economy. Wednesday, the Federal Reserve indicated it would take a slower approach to the pace of future rate hikes as it sees core inflation well under control, the employment situation steadily improving and the economy recovering at a steady pace. While market corrections dictate that we must shift into defensive mode, we have resisted raising more cash, except to unload our energy positions and our limited exposure to emerging markets. Energy is still a wild card as oil prices are trying to find a bottom. We have reviewed our selling points in case the investing environment further deteriorates. In addition, this is a great time to review our watch lists to see what opportunities await, particularly in the energy sector, as many leading stocks begin to form new bases. We continue to hope that the market downturn is abbreviated and the New Year will emerge on a positive note. Happy Holidays and enjoy your friends and family!
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