As I expected, U.S. markets rebounded this holiday-shortened week, with the Dow Jones up 0.61%, and the S&P 500 recovering 1.25%. Global markets remained mostly flat with the MSCI Emerging Markets Index (MCSI) up a mere 0.05%.
U.S. stocks rose more than 1% yesterday as new opinion polls showed a shift in favor of austerity measures in Greece. That boosted optimism that Europe’s “ne’er do well” economy will remain in the euro zone.
Yet markets continue to be held hostage to the latest headlines. European shares are down this morning and the euro touched a 23-month low as investors worried that Spain’s banking problems would push its borrowing costs to unsustainable levels. The euro dipped to $1.2438 today, its weakest level since July 2010.
That said, markets had not been this oversold since early December, and are due for a strong bounce. I expect U.S. markets to continue to outperform their global counterparts.
You saw this in the performance of your Alpha Investor Letter portfolio, which boasted some solid gains with Visa Inc (V), Yum! Brands (YUM) and The TJX Companies (TJX) up by at least 3%. Crossing back over their 50-day moving averages, both V and YUM are back to BUYs.
Overall, I expect markets to remain choppy in the weeks ahead.
Here in London, the city is busy shining, polishing, sweeping and adorning streets and public spaces with traditional bunting decorations in preparation for the Queen’s Diamond Jubilee — celebrating the 60th anniversary of Queen Elizabeth’s accession to the throne in 1953. To put that in perspective, that was also the very first year of the Eisenhower presidency in the United States.
For all of the doom-and-gloom headlines, the United Kingdom does not feel like a country that is in recession. The streets are full; the hotels are packed; and the weather is unusually sunny.
Let’s hope that global stock markets will catch their upbeat mood.
Portfolio Update
MSCI Malaysia Index (EWM) gained 0.43% last week. Although EWM has taken its lumps recently along with most emerging markets, the Malaysian market has managed to outperform the other Southeast Asian markets during the recent downturn. EWM is a HOLD.
iShares JPMorgan USD Emerg Markets Bond (EMB) lost 0.45%. Your defensive play in emerging market bonds is currently testing the 200-day moving average for the second time in as many weeks. As of last week, investors have purchased $1.9 billion worth of emerging market bond exchange-traded funds in 2012 — a whopping 70% more than they had in 2011 at this time. EMB is a HOLD.
iShares Singapore ETF (EWS) dipped 0.34% for the week. EWS’s recent correction has been in lockstep with other emerging market funds over the past month as investors threw the “baby out with the bathwater.” In fact, Singapore remains the steadiest economy in the Asia-Pacific region. Extremely oversold, EWS is a HOLD.
Berkshire Hathaway (BRK-B) was flat. Berkshire Hathaway is trading at just 1.13 times book value. There is a floor under the price since Warren Buffett has stated he will buy back shares if this value hits 1.1 times book value. BRK-B is a HOLD.
iShares MSCI Hong Kong Index (EWH) lost 0.37% last week. Like other Asian markets, EWH is technically oversold, and is due for a bounce. EWH is a HOLD.
Visa Inc. (V) gained 3.49% over the week. Bloomberg recently ranked Visa and MasterCard as having the best risk-adjusted return out of all 81 U.S. financial firms. Visa and MasterCard also beat the one-year performance of all companies listed in the S&P 500 Financials Index. V is a BUY.
Yum! Brands, Inc. (YUM) rose 3.44%. The ”FactSet Analysts’ Estimates” consensus list of 22 analysts’ ratings has Yum! As “overweight.” YUM! is a BUY.
The TJX Companies (TJX) added 3.15% over the previous week. TJX continued to hold its 50-day moving average last week. If the market rebound continues, TJX will likely make a run at its 52-week high next week. TJX is a BUY.
Stratasys, Inc. (SSYS) dipped just 0.49% last week. Stratasys hit a new 52-week high last week on above average share volume and shares are now up 69% for 2012. SSYS enjoys robust revenue growth, a strong financial position, and expanding profit margins — all positive signs for the stock price. SSYS is a BUY.
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