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Strategic Insights

Volume 4, Edition 15 | April 20-24, 2015

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Tech Trek

FILE_MAX_BERKOVICH_SHORT_2021 Max Berkovich | Articles

Read time: 5 min


This week in Strategic Insights: The stock market’s familiar pattern throughout the six year bull market continued. Stocks recovered from recent losses in short-order to rally yet again and close at record levels.

Economic Commentary

A key measure of the euro zone’s business activity pulled back from its March high. Investors were left wondering if the region’s fledgling recovery remained on track.

Less Flashy

The euro zone’s Purchasing Manufacturing Index (PMI) fell, indicating that the pace of growth fo business activity had slowed from an 11-month high.

  • Problems in Greece contributed to the pull back as businesses and consumers became more risk averse.

French Connection

The business activity expanded in the periphery of the region however, perhaps a sign that the ECB’s quantitative easing is working.

  • Lower PMIs for Germany and France offset the gains from the periphery and drove the overall slowdown.

Key Takeaway

Going into the report, investors had expected that quantitative easing, a weak currency and low energy costs would increase the pace of euro zone recovery. The weaker rate of expansion came as a disappointment.

  • It may be too early to draw conclusions about the pace of the euro zone recover as one stat does not make a trend. The poor reading from France however may be an accurate reflection of the long-term structural problems with its economy.

Eurozone Business Activity

Market Review

Contributed by Alan Leist, III

The stock market’s familiar pattern throughout the six year bull market continued. Stocks recovered from recent losses in short-order to rally yet again and close at record levels.

Don’t compare yourself with anyone in this world… if you do, you are insulting yourself.

bill gates

Tech Trek

For the 1st time since 2000, the technology heavy NASDAQ Composite set a new all-time high.

  • Two old favorites led the way on Friday as Microsoft (MSFT) and Amazon (AMZN) rallied on solid earnings.
  • Having worked as a NASDAQ trader in the bubble, I can say unequivocally that this time is much, much different.
  • That being said, there are times to add to risk and times to reduce exposure, we remain net sellers of stocks as part of our regular, disciplined rebalancing. (Alan )

Lone Gunman

A 36-year-old small-time futures trader living at home with his parents has been identified as the culprit behind the May 2010 ‘flash crash’ when the DJIA plummeted by 1000 points in a matter of minutes.

  • The vulnerability of the market in an age of electronic trading exacerbated by computer programs has been a long-standing theme of Insights.
  • Hopefully, this 5+ year investigation revealed holes for regulators to plug and make markets safer for investors.

Looking Ahead to Next Week

Bigger than Bigger

Strategic holding Apple will report one of the most anticipated earnings announcements of the season Monday after the bell.

  • Though Apple watch shipments have begun, focus will remain on the iPhone. Units sold in Q1 as well as future sales guidance will determine if Apple is maintaining massive market share in the smartphone segment.

One Step Back

Wednesday will bring the advanced revision (first of three) of U.S. Q1 GDP growth.

  • Growth has likely slowed to near 1.0% in Q1 (off from 2.2% in Q4 2014) partly attributed to anemic wage growth and cold weather weighing on consumers.

Heads of State

Japanese Prime Minister Shinzo Abe will make an official visit to the U.S. next week. His agenda includes a State dinner and speech to Congress.

  • The strengthening of Japan-U.S. relations is viewed as critical in the wake of China’s military growth and asserted authority in the key Asia Pacific trade region.

Investment Strategy

STRATEGIC Asset Allocation

The Underdogs

Emerging Markets and Commodities have been among the best performers this month with most asset classes posting gains (thus far).

The Favorites (and an also ran)

U.S. Large Caps stocks have been solid, helping both relative and absolute returns.

  • REIT’s, however, have been giving up some of their recent strong gains after multiple years of outperformance.


TIPS have enjoyed a period of outperformance partially due to generally declining interest rates as well as an some increased attention to inflation.


Big Blue Clouds

Earnings season took center stage with multiple companies reporting this past week.

  • IBM’s (IBM) quarter beat earnings expectations and slightly missed on revenue. The company reported its 12th consecutive quarterly revenue drop. A strong dollar and poor performance from units it is divesting were to blame. Cloud computing results were a big positive. Revenue from the cloud was 65% higher year over year at $3.8B.

STRATEGIC Equity Income

Soft Serve

The materials sector had a very strong week but tech had an even better one. Mostly because…

  • Microsoft Co. (MSFT) topped earnings expectations by $0.10. Stock buybacks of over $5 billion helped overcome a mere 6% revenue increase. The company held $95.4B in cash and had $29.3B in debt at the end of the quarter.
Indices & Price ReturnsWeekYear
S&P 5001.8%2.9%
S&P 400 (Mid Cap)1.2%5.6%
Russell 2000 (Small Cap)1.3%5.2%
MSCI EAFE (Developed International)1.1%8.0%
MSCI Emerging Markets1.1%10.2%
S&P GSCI (Commodities)0.8%4.1%
MSCI U.S. REIT Index1.0%1.6%
Barclays Int Govt Credit0.1%1.6%
Barclays US TIPS-0.4%2.7%

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