Market Commentary by Paul Touchstone, Senior Investment Strategist and Portfolio Manager
San Francisco, Calif. (May 11, 2011)– Stone & Youngberg, a leading financial services firm and the nation’s top underwriter of California and Arizona municipal bonds over the past five years, is pleased to share the following market commentary regarding the state of the US Dollar.
All Eyes Should be On the US Dollar
Global equity markets posted solid returns during the month of April with developed international stocks leading the way higher. As the table below details, US small-cap growth stocks are setting the pace (+ 12.7%) while emerging markets continue to lag (+ 5.3%) this year.
Stocks have posted new highs as this bull market enters its third year, but our expectations for the coming months are being tempered as economic growth is slowing.
If we experience a meaningful correction in equity prices (10% +/-), it will likely coincide with a sharp rebound in the US Dollar.
In periods of low-volatility, as we are in now, high-yielding currencies are purchased and low-yielding currencies are sold. This is known in the industry as the carry trade. The lower yielding currencies in the world today are the Japanese Yen and US Dollar, while the Australian Dollar, Norwegian Kroner, and Canadian Dollar are benefiting from more attractive rates.
Everyone loves to hate the dollar, and it is universally being used as a source of funding for the purchases of other investments such as higher-yielding currencies, commodities, global equities, and junk bonds. A sharp rebound in the US Dollar could force short-sellers to unwind their trades which would put downward pressure on other markets.
Commodity investments, particularly the precious metals, have high volatility characteristics and are likely to take the brunt of selling pressure.
We are not making any tactical changes to our investment strategy at this time, but we are watching the US Dollar carefully and preparing our “buy list” as the fundamentals are likely to remain supportive of the current global economic expansion.
.jpg)
About Stone & Youngberg Asset Management Group
As a complement to our fixed-income brokerage services, Stone & Youngberg offers fee-based asset management to individuals and institutions. Our approach relies on reducing volatility and minimizing exposure to risk. This is designed to increase the probability of meeting our investors’ financial objectives. Disciplined risk management, planning, and communication are essential in formulating long-term, successful investment strategy.
To learn more, please give us a call or visit www.syllc.com/amg.
Important Information: Stone & Youngberg's asset management services are only available in states in which the firm and or its associated persons are registered or exempt from registration. Information presented on this website is not intended as a solicitation of products or services or a recommendation of any investment or investment strategy.
This release is for informational purposes only and are solely the views of its author. These views are subject to change at any time based on market conditions and the author does not undertake to update the reader of any changes in opinion or information. Readers should evaluate his or her personal situation with a professional before investing. The information presented should not be construed as investment advice or guidance as to the appropriateness of any investment decision or as a recommendation as to any specific security, sector or strategy. Past performance does not guarantee future results. All investing involves risk and the value of your investment will fluctuate over time and you may gain or lose money.