since December 2008. While Europe stutter-stepped through the rest of the month, U.S.equities continued to climb on the strength of consumer sentiment hitting a post-recession
high and expansion of the Conference Board’s
index of Leading Economic Indicators.The chart below reflects the positive May em-ployment report.
But here’s the interesting part. As the econ-
omy continues to make progress, albeitslowly, the FOMC April meeting minutes andsubsequent speeches by some of the boardmembers have begun to raise the specter of
Stock Market Commentary
June 7, 2013
Lane Asset Management
Is the bloom coming off the rose? The talk for the last couple of weeks
is all about “tapering,”
the word now beingused to describe the
Federal Reserve’s exit
strategy from QE Infin-
ity. When the FOMC’s
April meeting minutes were released on May22nd suggesting that ta-pering might begin later this year, interest ratesspiked and the S&P 500subsequently declinednearly 3% to-date. If nothing else, this dem-onstrates both the fra-gility of the market andconcern investors haveabout the loss of FederalReserve support.My own view is that thebloom is not yet off therose. That said, given
the market’s perform-
ance this year, I believethe risk remains to thedownside. Be carefulout there.
“tapering” or a slow down in Fed bond purchases
which led a spike in interest rates in the last week of the month. This is interesting because earlier in the month, improving economic conditionsdrove the market higher. Now improving condi-
tions, possibly leading to the Fed’s easing off the
QE pedal, has led to the market weakening. Inother words, investors want to see the economyimproving, but not so much that it might lead toless support from the Fed.On other fronts, emerging markets took a tum-ble, oil lost all momentum and gold collapsed
again after a brief recovery from April’s collapse.
Investment Outlook In no change from my outlook last month, as theeconomic headwinds have not subsided, I continueto think the prudent thing to do is keep risk expo-
sure below one’s long term strategic allocation:
Lessen exposure to international sectors
Increase exposure to safer, stronger U.S. sectorslike consumer goods, utilities and health care
Increase exposure to strong dividend payers.One change from last month is that, with the spikein interest rates, I would hold off commitments tothe multi-sector income arena until we have a bet-ter sense of interest rate movements and investor expectations.
The charts on this and the following pages use exchange-traded funds (ETFs) rather than market indexes since indexes cannot be invested in directly. The ETFsare chosen to be as close as possible to the performance of the indexes while representing a realistic investment opportunity. Prospectuses for these ETFs canbe found with an internet search on their symbol. Past performance is no guarantee of future results.