Granite Group Advisors -


2012-06-01 :: Mid-Quarter Commentary
Please read our comments on the current market volatility.

The most recent economic news from around the globe has sent global markets into a quick retraction from the fast positive movement of the first quarter.  Europe’s well publicized problems are causing fear for all, as the possibility of a Euro-region breakup creates unknowns.  Additionally, China, which has buoyed many of the developed nations with their buying patterns, is now experiencing an economic slowdown. Based upon this information, the US stock market has dropped over 6% in the month of May and much worse around the globe.  This morning, a combination of a weaker-than-expected Chinese manufacturing report, combined with another weaker-than-expected US jobs report has pushed the markets down even further.

Please do not panic, as all economic data and markets run in cycles and will find homeostasis and calm down again.  The leading indicators are still positive, but the market is disappointed that we are not growing faster.  We have and will continue to trade at a discount to historical valuations (please refer to our 2010 quarterly commentaries). Equity markets are trading at roughly 10 – 11x 2013 earnings which traditionally is quite low.  Also, fixed income is overbought which means bond prices have increased and the 10yr treasury yield has dropped to about 1.5%. We believe the 10yr yield will increase from here.

As we have stated in our 1st quarter 2012 commentary:

“From our perspective, the markets have come a little too far too fast this year.  The
economy is healing and moving forward, but there are still many global headwinds.”

As we know from history, when there is blood in the street it is time to buy.  One piece of good news is that despite the downturn and volatility we are still positive for the year and expect to be higher by the end of year.  Please call us if you have any concerns or would like to discuss this further.

Granite Group Advisors

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