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What Is Driving the Current Financial Markets?--Second Quarter 2013 Recap

We know that many of our clients are concerned about the volatility we experienced in the financial markets during the second quarter of this year. Therefore, we'd like to present our insights into what transpired, what the catalysts were and our forecast for how the markets will react throughout the remainder of the year.

Here is a basic recap of what transpired:
  • The second quarter was a tale of two halves in the U.S., with mixed performance to go along with the mixed economic data.
  • Financial markets reacted strongly in mid May after the Federal Reserve announced that its asset purchase program could soon wind down.
  • All areas of the global fixed-income markets declined as real yields spiked.
  • Global equity performance was mixed, with U.S. stocks outpacing most other regions.
  • In the U.S., small caps led large caps.
  • Emerging markets, encompassing both debt and equity, were laggards on rising treasury yields and uncertain growth in China.
  • Concerns about moderating emerging market growth also pressured commodities.
This graphic illustrates the performance of various financial assets as measured by market indices:

As mentioned, small U.S. domiciled companies slightly out-performed their larger counterparts while emerging markets and fixed income investments had negative returns for the quarter and year-to-date. In other words, this shows that traditionally more conservative asset classes, such as investment-grade bonds, showed negative performance both in the second quarter and year-to-date. Keep in mind that past performance is no guarantee of future performance or success.

The Outlook: Do not Fear the Taper:

While markets experienced a strong reaction to the Fed's taper plans, we are expecting that this initial response, while intense, will not be prolonged or repeated. We also anticipate the following:

  • Interest rates are rising because growth prospects appear to be improving.
  • The U.S. economy continues on a slow but steady expansionary path.
  • Japan's economy is showing some signs of life while Europe may be starting to stabilize. However, despite its stabilization, Europe still has a way to go before pulling itself out of its slow-growth recessionary funk.
  • Inflation remains subdued despite the extraordinary expansion of the monetary base.
  • Emerging market economies are struggling as trade with China and Europe slows and commodity prices fall.  Sliding currencies and weak bond and stock markets are creating opportunities for emerging market investors.

Overall, we expect the stock and bond markets to be volatile over the next few months. However, patience must be exercised and , while it is no guarantee against loss, a diversified portfolio certainly helps.

You can also view this commentary in video format by clicking on the following link:

***Link to Video Commentary***

White House Financial & Settlement Consulting helps busy professionals and entrepreneurs live easier and less stressful lives through the proper management of their financial resources.  We do this by acting as our clients’ trusted advisor and providing a personal touch customized to the client’s needs!  Please visit our web site at  or contact us directly for more information!

Please be aware that we do not provide tax or legal advice, and that the information set forth herein was obtained from sources which we believe reliable, but we do not guarantee its accuracy.  Neither the information nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities.  In addition, past performance is no guarantee of future results.  Diversification does not guarantee against loss; it is a method used to help manage risk.

White House Financial & Settlement Consulting, LLC


114 South Main Street • Suite 300 • Chelsea, Michigan 48118 • Phone: (734) 433-1670 • Fax: (734) 433-1671

Securities offered through Sigma Financial Corporation. Member FINRA/SIPC
Fee-based investment advisory services offered through Sigma Planning Corporation, a registered investment advisor
White House Financial & Settlement Consulting, LLC is independent of  Sigma Financial Corp. and Sigma Planning Corp.


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