Weekly Market Highlights
February 23, 2015
Europe Kicks the Greek Can Down the Road
- Greece must submit a set of proposals on Monday to secure a four month extension to its current bailout program
- A busy week of economic releases is on tap in the U.S.
- Fed Chair Janet Yellen will give monetary policy report to Congress on Tuesday and Wednesday
Last Week’s Highlights
- NAHB Housing Market Index:
-2 to 55 in February.
- U.S. Producer Price Index:
-0.8% in January month-over-month and flat year-over-year (excluding food and energy, core PPI decreased 0.2%).
- U.S. Housing Starts:
-2.0% to SAAR of 1.065 million units in January.
- U.S. Building Permits:
-0.7% to SAAR of 1.053 million units in January.
- Oil: $50.81 (▼$1.97)
- Gold: $1,204.90 (▼$22.20)
- U.S. 10-year Treasury: 2.13% (▲0.11%)
- Dollar: Euro--$1.14, Yen--119.05 (flat against Euro, strengthened against Yen)
- VIX: 14.30 (▼0.39)
What to Watch for
- Monday 2/23:
- U.S. Existing Home Sales
- Tuesday 2/24:
- Euro Area Consumer Price Index
- Case-Shiller Home Prices
- U.S. Consumer Confidence
- Tuesday 2/24-2/25:
- Humphrey-Hawkins Hearings
- Wednesday 2/25:
- U.S. New Home Sales
- Thursday 2/26:
- U.S. Consumer Price Index
- U.S. Durable Goods Orders
- Friday 2/27:
- U.S. 4Q 2014 GDP (second estimate)
Last week provided plenty of fodder for both euro optimists and pessimists, but ended with an interim deal that will give Greece a four month extension to its current bailout program. After weeks of grandstanding, Greek Prime Minister Alexis Tsipras caved in to the troika as the country faced an escalating banking crisis and a bailout package that was set to expire at the end of February. For Tsipras, the hard part comes next. First, he and the Greek government must submit its own set of reform proposals on Monday to secure the four month extension. Second, Tsipras must convince his own Syriza political party that this is the best way forward, even though it was what they vowed not to do. Although it has been and will continue to be a tough pill to swallow, Tsipras is banking on a belief that Greeks want to avoid chaos and ultimately remain a part of the euro bloc.
The agreement reached on Friday largely reduces the risk in the near term of a more adverse scenario consisting of a Greek default and “Grexit” from the Eurozone. Longer term, however, there is still ample execution risk. First and foremost, Greece will need to maintain a commitment to their bailout program. Equally important, other European countries such as Germany and Finland will need to ratify the extension, which is easier said than done considering the distrust that has developed between Tsipras and his counterparts following weeks of political brinksmanship. In spite of these challenges, we believe Greece and the rest of Europe can get past their current dilemma as there is some common ground; at the end of the day, Greece would like to remain in the monetary bloc and the rest of Europe would like to avoid the headache that would accompany a “Grexit.”
Over the past few weeks, the market’s reaction to the ongoing Greek saga has been relatively contained, with Greek bonds and equities bearing the brunt of market volatility and declines. European and U.S. markets, in comparison, have remained at or close to recent highs. Overall, we believe a weight has been lifted as a result of Friday’s agreement and that momentum can continue to build with the European Central Bank’s quantitative easing program beginning next month. While we may see setbacks and periods of volatility along the way, we believe equities remain well positioned from an asset class perspective as the economic and geopolitical backdrops stabilize and improve going forward.
Statistics on the Current State of the Market
|S&P 500 Index
|Russell 1000 Index
|Russell 1000 Growth Index
|Russell 1000 Value Index
|Russell Midcap Index
|Russell 2000 Index
|DJ Industrial Average Index
|MSCI EAFE Index
|MSCI Emerging Markets Index
|Alerian MLP Index
|Cash & Fixed Income
|Citigroup 10-Year Treasury Index
|Barclays US Aggregate Index
|Barclays Municipal Bond Index
|BofA Merrill Lynch U.S. High Yield Index
|Real & Alternative Assets
|FTSE EPRA/NAREIT North America Index
|FTSE EPRA/NAREIT Global Index
|Bloomberg Commodity Index
|Gold (NYM $/ozt) Continuous Future
|Crude Oil (NYM $/bbl) Continuous Future
Data Source: FactSet and RIMES
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