Perspectives On Japan And Other Market News

By David B. Armstrong, CFA | Mar 14, 2011 | Weekly Market Commentary

Be sure to see our U.S. News and World Report column from last Friday found here.

As most people know by now, a massive earthquake measuring 8.9 on the Richter Scale hit the north eastern side of Japan last week.  It will be a long time before the impact on life and infrastructure in Japan is fully known, and we will continue to send our thoughts and prayers to the families impacted by the disaster.  However, while there will certainly be an effect on the GDP of Japan, the events have not changed our investment strategy.

Stocks advanced in the U.S. on Friday despite the news, but the indices we follow were all down for the week even with a reduction in the price of oil and an absence of escalation of violence in the Middle East.

The equity markets we track were all down last week.  The Dow Jones Industrial Average (DJIA) lost -1.03% to finish at 12,044, the S&P 500 Index lost -1.28% to finish at 1,304 and the Nasdaq Composite Index lost -2.48% to finish at 2,715.  The Russell 2000 index, which tracks the performance of small capitalization stocks, lost -1.48% to finish at 803.

There is a lot of focus on the seemingly long list of global worries these days and with the unknown situation in Japan, that list just got a little bit longer.  There are reports that the nuclear situation may worsen and that there is a possibility of another follow-up quake.  We will monitor the situation closely, but as we stated before, our long-term strategy has not changed with this event.

Despite the unfortunate events that have dominated the news, there are some positives that we want to remind everyone about.

1. The valuations of U.S. companies are still attractive, especially when measured against their expected future earnings.

2.  GDP, consumer spending, and the stock markets are all higher now than a year ago.  The manufacturing sector is also doing well.  While employment growth has not been great, there are signs (Feb +200k growth in jobs) that the job picture is getting better.

3.  Government policy is moderating towards the center which is usually good for growth

Call us for help or if you have any questions.

Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC

**Standard Compliance Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and cannot be invested into directly.  Stock investing involves risk including loss of principal.  The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index.  The Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.