Wednesday, January 28, 2015

A diverse equity market day

Today's U.S. equity market, looked at here at 3:25pm, a needed fact given rampant market volatility, is a combination of strong performance by Apple, in particular, plus Boeing, Yahoo, and certain steel companies, combined with pressure on major bank names, and a search for liquidity that is negatively impacting strong performing mid-caps. That all translates into to a flat or declining market, after a reasonably robust start to the day.

The most interesting downturn here is in the big banks, and all banks in general.  The yield curve keeps getting flatter and net interest margins will continue to be crimped.  Of note, JPMorgan, Citicorp, and Bank of America are all down by more that 2%.  One could reasonably guess that the uncertainty about private banking clients in Russia, Greece, and other stressed areas is a cause for concern.  Losses in private banking flow through well after trading results and corporate issues.  Greece was always a large private banking market for the wealthy there, and the Russian oligarchs have widespread banking relationships.  That's not to forget the Swiss or those with ties to that country or its banks, and any repercussions from its currency actions.  Goldman and Morgan Stanley are both down more than 1%, perhaps reflecting this concern, but they don't have the double whammy of net interest margin concerns.

The end of day market decline was foreshadowed by the search for liquidity during the day in mid-cap stocks that are trading vehicles for some investors and have built up considerable gains.  Gold is declining as well, as cash is becoming preferable to commodities.  What is not new is that energy related stocks continue to be in free fall.  A small stab here a few days ago at bottom picking energy was not a good short term idea.

Equities continue to be going through a vulnerable period.  That bonds continue to outperform expectations is mind boggling to many, but it is a fact.  We will watch, hold, make small investments, and sell when necessary for diversity purposes or take an exit in a name that can no longer be justified.  That happens, even here where there is the double edged sword of a reticence to give up, a character trait.     


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