The Ever Changing Landscape of the Investment Arena
One month was all it takes. Within a month, oil prices fell from $147 to $122. Within a month, major banking stocks in US rallied 16%. The month of July has truly been assuring for the investors. Initially, with another slew of bad news assaulting the market, the market took a tumble as a result of the troubles with Fannie Mae and Freddie Mac. However, with the help of pleasing financial results from the banks, news that demand of oil dropped and stronger consumer confidence, the market staged a tidy rebound and is looking much healthier than the bloodshed of the past months.
Many would ask me: "Why would the problems of Fannie and Freddie affect the market that much? What do they do anyway?!?" Well, to put it simply in Singapore context. Fannie and Freddie is equivalent of the HDB loan in Singapore. Imagine the problem new home owners and its impact on Singapore if the HDB loan is bankrupt and is unable to issue out new loans: Total Disaster. As a result, the US Government has to bail out these two organization. To understand more, proceed to this link to understand how Fannie and Freddie works
The News Gets Better
As of 25th July, of the 248 SNP 500 companies that reported their quarterly earnings, 72.2% have registered positive results, 4.8% have been in line and 23.0% missed expectations. Companies outside of financial continued to do pretty well. If you dig further, things are not so bad on the corporate side as many would think. Consumer companies such as Mcdonald, Pepsi and Kraft are posting healthy results in such an environment. As for the banks, Citi reported a smaller loss while JP Morgan and Bank of America posted profit declines that weren't as big as anticipated. Mind you, this is when analyst expected the financial service companies to have a dreadful quarter.
The gist of the all these data is that many companies in US are still posting health results, in contrary to the doom and gloom that many analysts and bears have been predicting.
There Goes the Crude!
Crude prices hiccupped on the back of lower demand and increased inventories from the US front. With the cooling of the China economy, the economic warnings from developing nations and the effects of the removal of fuel subsidies are all pointing to signs of a gradual drop of the demand for crude to fuel as economies slow down. The tightening of monetary policies around the world to combat inflation is suppressing the rapid development seen in the past few years. Despite news of tension from Iran and terrorist attacks on one of the largest crude producer in Africa, Nigeria, oil prices have not spiked in the face of these bad news. There is growing recognition that commodity prices will take a breather in the near term. Until then, there is limited upside for commodity prices until the economy recovers.
The Strategy for Now
US banking stocks look increasing interesting now as the clean-up of the subprime loans from the balance sheets are starting to show. The banks of today is much better financed than 1980s when similar banking problems take place. It would be a good time to move some of the funds in to take the opportunities to invest to the banking and finance sector. Commotities are looking bearish with a slew of government measures to try to curb inflation and commodities demand. Europe is looking shaky with the EU central bank doing little to elevate the subprime crisis within the members unlike their US counterparts. Underweight Europe for now. Meanwhile, with most of the nations rising interest rates and tightening monetary policies, keeping an overweight on short term bond or treasury bills will be the best bets. The high yield bond market is also looking increasingly attractive as a result of the beatings received from the subprime crisis. However, cheap can get cheaper. Put that sector in the radar screen for now
The News Gets Better
As of 25th July, of the 248 SNP 500 companies that reported their quarterly earnings, 72.2% have registered positive results, 4.8% have been in line and 23.0% missed expectations. Companies outside of financial continued to do pretty well. If you dig further, things are not so bad on the corporate side as many would think. Consumer companies such as Mcdonald, Pepsi and Kraft are posting healthy results in such an environment. As for the banks, Citi reported a smaller loss while JP Morgan and Bank of America posted profit declines that weren't as big as anticipated. Mind you, this is when analyst expected the financial service companies to have a dreadful quarter.
The gist of the all these data is that many companies in US are still posting health results, in contrary to the doom and gloom that many analysts and bears have been predicting.
There Goes the Crude!
Crude prices hiccupped on the back of lower demand and increased inventories from the US front. With the cooling of the China economy, the economic warnings from developing nations and the effects of the removal of fuel subsidies are all pointing to signs of a gradual drop of the demand for crude to fuel as economies slow down. The tightening of monetary policies around the world to combat inflation is suppressing the rapid development seen in the past few years. Despite news of tension from Iran and terrorist attacks on one of the largest crude producer in Africa, Nigeria, oil prices have not spiked in the face of these bad news. There is growing recognition that commodity prices will take a breather in the near term. Until then, there is limited upside for commodity prices until the economy recovers.The Strategy for Now
US banking stocks look increasing interesting now as the clean-up of the subprime loans from the balance sheets are starting to show. The banks of today is much better financed than 1980s when similar banking problems take place. It would be a good time to move some of the funds in to take the opportunities to invest to the banking and finance sector. Commotities are looking bearish with a slew of government measures to try to curb inflation and commodities demand. Europe is looking shaky with the EU central bank doing little to elevate the subprime crisis within the members unlike their US counterparts. Underweight Europe for now. Meanwhile, with most of the nations rising interest rates and tightening monetary policies, keeping an overweight on short term bond or treasury bills will be the best bets. The high yield bond market is also looking increasingly attractive as a result of the beatings received from the subprime crisis. However, cheap can get cheaper. Put that sector in the radar screen for now
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