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Current Views

August 19, 2013: Equity Market Outlook

Thoughts from our Domestic Equity Team

Recent data indicate that the U.S. economy continues to grow at a slow and steady pace of approximately 2%. Global central banks continue to provide substantial support to capital markets and the Federal Reserve has prepared the market for a potential tapering of its asset purchase program in the fall, which, in our view, is largely discounted in the equity markets at this point. Valuations do not appear stretched relative to fundamentals. Overall we believe this backdrop is supportive for equities.

Internationally things appear to be improving slightly, given: a) signs that Europe may exit its recession in the second half; b) the Chinese central government recent indication of its goal to deliver a 7% annual growth rate; and c) Japanese Prime Minister Shinzo Abe’s coalition gaining control of both houses of the Diet which could allow him to pursue meaningful structural reform in the coming months.

We do see potential risks for the markets, including instability in the Middle East and the approaching debt ceiling debate later this year. However, at the moment we believe that the most likely case with regard to these risks is that they may not rise to the level necessary to create a bear market in U.S. equities. We recently expressed our view that the risk of volatility in fixed income and currency markets is significant, but we believe that the Fed has effectively addressed this and that measures of stress in these asset classes declined considerably in July. While the equity market volatility late last week may have been driven by earnings reports, overall our assessment of the second quarter earnings season is that earnings were not extremely robust but were healthy enough not to detract from the other positive factors listed above.

Submitted by: Jason Benowitz, CFA

 



This information is intended solely to report on investment strategies and opportunities identified by Roosevelt. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation to buy, hold or sell any financial instrument. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Please contact us at 646-452-6700 if there is any change in your financial situation, needs, goals or objectives, or if you wish to initiate any restrictions on the management of the account or modify existing restrictions, or if you would like to request a copy of our Code of Ethics. Our current disclosure statement is set forth on our Form ADV Part II, available for your review upon request, and on our website, www.rooseveltinvestments.com.

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