PMC Weekly Review - April 24, 2015
The past week saw a deadline in the Greek crisis that was anything but, and a slew of large technology company earnings announcements that defied low expectations. The result: the Nasdaq composite index finally closed above 5048, its March 2000 high at the peak of the technology bubble.
Although anxiety remains that stocks are inflated “artificially” by central banks’ easing, there is little similarity between stock valuations today and their nosebleed ones of 2000. Today, larger technology companies are now global behemoths run with both financial discipline and a focus on innovation. Google, Amazon, and Microsoft reported earnings this week, and despite slower revenue growth than hoped for, each was impressive in absolute terms. For instance, Google’s revenue exceeded $17 billion for the quarter, compared to about $15.4 billion a year ago. Even though the rate of growth slowed, a 12% revenue increase in a world of relatively flat global growth still is impressive.
Not all companies have done as well, of course, and S&P 500 earnings this quarter appear poised to decline for the first time in several years. In addition, the interminable Greek crisis shows no signs of ending. What had been billed as a hard-and-fast April 30 deadline by which Greece would convince its lenders to extend more credit turned out not to be much of one at all: negotiations and heated rhetoric continue. Whether it ends with a new deal or a Greece exit (“Grexit” ) from the Eurozone, it remains a concern—perhaps neither existential nor dire, but one to watch. Nonetheless, barring Greece’s triggering a Lehman-like domino effect, this market environment is still relatively placid, with a bias to equity upside. Bonds are in an understandable holding pattern, as markets game when or to what degree the Fed raises rates, but even so, volatility is low. Of course, all of this can shift rapidly, and sentiment, always slippery, remains so. But for now, critical risks seem less evident.
The information, analysis, and opinions expressed herein are for general and educational purposes only. Nothing contained in this weekly review is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. All investments carry a certain risk, and there is no assurance that an investment will provide positive performance over any period of time. An investor may experience loss of principal. Investment decisions should always be made based on the investor’s specific financial needs and objectives, goals, time horizon, and risk tolerance. The asset classes and/or investment strategies described may not be suitable for all investors and investors should consult with an investment advisor to determine the appropriate investment strategy. Past performance is not indicative of future results.
Information obtained from third party sources are believed to be reliable but not guaranteed. Envestnet|PMC™ makes no representation regarding the accuracy or completeness of information provided herein. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice.
Investments in smaller companies carry greater risk than is customarily associated with larger companies for various reasons such as volatility of earnings and prospects, higher failure rates, and limited markets, product lines or financial resources. Investing overseas involves special risks, including the volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. Income (bond) securities are subject to interest rate risk, which is the risk that debt securities in a portfolio will decline in value because of increases in market interest rates. Exchange Traded Funds (ETFs) are subject to risks similar to those of stocks, such as market risk. Investing in ETFs may bear indirect fees and expenses charged by ETFs in addition to its direct fees and expenses, as well as indirectly bearing the principal risks of those ETFs. ETFs may trade at a discount to their net asset value and are subject to the market fluctuations of their underlying investments. Investing in commodities can be volatile and can suffer from periods of prolonged decline in value and may not be suitable for all investors. Index Performance is presented for illustrative purposes only and does not represent the performance of any specific investment product or portfolio. An investment cannot be made directly into an index.
Alternative Investments may have complex terms and features that are not easily understood and are not suitable for all investors. You should conduct your own due diligence to ensure you understand the features of the product before investing. Alternative investment strategies may employ a variety of hedging techniques and non-traditional instruments such as inverse and leveraged products. Certain hedging techniques include matched combinations that neutralize or offset individual risks such as merger arbitrage, long/short equity, convertible bond arbitrage and fixed-income arbitrage. Leveraged products are those that employ financial derivatives and debt to try to achieve a multiple (for example two or three times) of the return or inverse return of a stated index or benchmark over the course of a single day. Inverse products utilize short selling, derivatives trading, and other leveraged investment techniques, such as futures trading to achieve their objectives, mainly to track the inverse of their benchmarks. As with all investments, there is no assurance that any investment strategies will achieve their objectives or protect against losses.
Neither Envestnet, Envestnet|PMC™ nor its representatives render tax, accounting or legal advice. Any tax statements contained herein are not intended or written to be used, and cannot be used, for the purpose of avoiding U.S. federal, state, or local tax penalties. Taxpayers should always seek advice based on their own particular circumstances from an independent tax advisor.
© 2015 Envestnet. All rights reserved.