was mixed. On the plus side, in the U.S., non-farm payrolls beat expectations, home pricessurged, small business optimism rose to a 12month high, retail sales had a surprising gain,and the Philly Fed manufacturing index hadits highest reading since April 2011. InEurope, UK manufacturing expanded at itsfastest pace since March 2012 and a number of EU countries had PMIs (Purchasing Man-ager Indexes) come in much stronger thanexpected. The market rebounded, sort of.Then, around the middle of the month, the
Stock Market Commentary
July 6, 2013
Lane Asset Management
“Fragile” comes to mind
when I think about thecurrent market. Readersknow that I focus moreon technical analysis thanfundamental. That is,price movement patternsguide my investmentviews. But fundamentalanalysis, the awareness of the relationship betweencorporate earnings (andthose things that influ-ence earnings) and stock prices, is extremely im-portant. Today, a num-ber of analysts havesliced and diced the rela-tionship between currentand projected earningsand the S&P 500 (or SPY) and have producedreports that make astrong case that the mar-ket is richly valued and asignificant correction ispossible in a 3-12 monthtimeframe. Accordingly,my analyses should betaking as a point in timeview and subject tochange as new patternsdevelop.
picture began to change again with new talk fromthe Fed of diminished risks to the economy and
potential “tapering” in bond purchases. This was
enough to touch off a spike in interest rates and adive in bond values as investors withdrew a recordamount from bond funds. Gold plummeted as thedollar strengthened.As June concluded with a number of upbeat eco-nomic reports
rising home prices and sales andincreasing consumer confidence and durablegoods orders
July kicked off with better-thanexpected nonfarm payrolls and market gains wereextended.Investment Outlook In no change from my outlook in recent months, Icontinue to think the prudent thing to do is keep
risk exposure in check, at or below one’s long
term strategic allocation:
Lessen exposure to international sectors (I pre-fer the indirect exposure through U.S. multina-tionals)
Increase exposure to safer, stronger U.S. sec-tors like consumer goods and health care
Increase exposure to strong dividend payers.As for bonds and other income investments, yields
are becoming more attractive, but I’d keep expo-
sure low and narrowly focused for now.
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.