April Market Update

Well, after a mostly sunny looking April, last week and this week look like speed bumps ahead.

The trick is the interlacing of several economic events pulling on the markets.

First, oil prices are still causing havoc after a meeting of OPEC oil producers produced no plan or reduction in oil supply. That’s bad news for producers in the U.S. that increasingly depend on more expensive extraction techniques such as fracking to produce oil. Of course, the add-on difficulty spreads to other companies that provide equipment or assistance to oil production businesses, as well as the potential problem for banks financing such oil related companies.

Second up are company’s reporting earnings, most of them coming in below expectations, or with warnings of expected future declines in business trends.

fed uncertainty

Third, is potential action from the Fed, and other central banks around the world. The trick is navigating the concept that being “hawkish” on inflation is better, and the fact the the economy may be teetering on a point between growth and decline. In other words, no matter what the Federal Reserve ends up doing after their meeting Wednesday, someone isn’t going to like it. If they make it clear that economic growth is the priority, then hawks will begin worrying about inflation (despite data that shows it is very low and has been for a decade now). If they make it clear that they intend to raise rates soon, or more than twice in 2016, then other analysts (maybe the same analysts, frankly) will be wringing their hands about potential trouble with the economy.

If that weren’t enough, many foreign central banks are scheduled to meet and potentially take their own action soon.

Finally, there are new rumblings about China, although nothing looks to be happening now, that won’t stop investors from worrying.

For a year that has recovered from a big drop at the beginning of the year, volatility will continue to rule the day.

Get your investment portfolio ready by rebalancing if it is about time. Otherwise, sit tight and ride it out.

Note: One quick note is that Apple reports earnings later this week. No matter what they report the reaction is likely to be out sized, so be prepared.

Leave a Comment