BAM MARKET WRAP

IS THIS TIME DIFFERENT?

BIDING TIME

The market is in a tight trading range with the S&P bounded by 1700 on the upside and 1685 on the downside.  Breaks in either direction will likely lead to the next big move.  While there are a number of dark clouds on the horizon, the markets have generally ignored all storms in 2013.  At some point, the bulls will not be able to withstand the pressure and a larger decline will occur.  With the talk of Fed tapering, a debt ceiling debate, changes in the Fed leadership (and policy?), upcoming elections, unrest in Egypt, and the historically weak month of September fast upon us, it is not the time to get aggressive.  We will continually reassess but, for now, a conservative posture is deemed prudent with the information available.  The market's resilience has proven a thorn in the side to those of us who have been expecting a larger decline but rest assured it will come (maybe sooner than many think) and we will be glad we have taken a more cautious approach.  In the meantime, we remain invested to capture some of the gains and are ready to make portfolio adjustments whichever way this market breaks.

WELL WORTH A LISTEN

Jeremy Grantham is a British investor and co-founder and chief investment strategist of Grantham Mayo van Otterloo (GMO), a Boston-based asset management firm.  GMO is one of the largest managers of such funds in the world, having more than US $97 billion in assets under management as of December 2011.  Grantham is widely regarded as a highly knowledgeable investor in various stock, bond, and commodity markets, and is particularly noted for his prediction of various bubbles.  In this engaging and thought provoking interview with Charlie Rose, Mr. Grantham shares his thoughts on the US and world economies and what potentially lies ahead for years to come.  It is a fascinating interview and well worth listening to in its entirety.  While long (roughly an hour), Mr. Grantham touches on a number of thought provoking subjects far beyond what many are talking about.  

Jeremy Grantham

BAM MARKET WRAP

OPTIMISM RUNS HIGH - IS IT WARRANTED?

BAM MARKET WRAP

OUCH!

CHANGES IN MARKET CHARACTER

Over the last week or so, the markets have endured a mild correction.  The jury is still out on whether or not it is over but it is indisputable that the nature of this recent weakness is very different from bouts of selling earlier this year.   Generally speaking, in a market correction investors flee to the safety of treasury bills driving the rates on those instruments lower.  However, over the last 4 weeks the 30 year treasury rate has actually increased 16% and the 10 year rate has increased over 28%.  As a result, interest sensitive sectors have been hit much harder in recent weeks than the economically sensitive groups.  Talk of the Federal Reserve tapering off their quantitative easing and entering into a more tightening monetary policy has led, in part, to the recent sell-off.  Is the nature of the recent decline and the affected groups a sign of things to come?  After all, quantitative easing cannot last forever...  It is certainly worth watching and considering.  As we have mentioned in our newsletter a number of times over the last year, many investors will be surprised that their "safe" allocation to bond funds is really not that safe in a rising rate environment. 

BAM MARKET WRAP

SELL IN MAY ... ER... JUNE