After starting off 2013 at a blistering pace, the markets have finally experienced a bit of a rocky period this week. Monday saw the indices post their biggest drop of the year, but bullish sentiment, better-than-expected corporate earnings, and positive economic news have pushed stocks up to near five-year highs once again.
Despite the extraordinary start the markets have witnessed to kick off the year, investors still are uneasy about various macroeconomic problems looming over the financial world. Washington is yet again facing a fiscal showdown, as Congress argues over the looming sequester and budgetary uncertainty. As this fight marches on, it will sure to have a signification impact on the markets. Meanwhile, Europe continues its economic woes with a slew of foreign banks subject to criminal investigations regarding fraud and interest rate rigging. [See Everything Investors Need to Know About Foreign Dividend Stocks]
Below we outline seven insightful articles circulating around the financial space this week:
Economic analyst Timothy Taylor outlines the recent report by the nonpartisan Congressional Budget Office that the U.S. economy may finally be hitting its bounce back point in 2014. Given the extent of the recession and the financial crisis, it has taken awhile for the economy to reach “Potential GDP.” But indicators such as real estate investment leads the CBO to believe a bounce back is on the horizon.
Ben Bernanke and the Federal Reserve are doing everything they can to drive investors into the stock market, explains investment expert Rick Ferri. The Fed policy to keep interest rates low is causing investors to flock towards equities as a way to realize attractive returns. Ferri argues that this is not necessarily a bad thing and that stocks should continue to rally in 2013.
Many investors are uneasy over the recent 30% drop in Apple (AAPL) stock and its similarity with Microsoft’s (MSFT) downfall 12 years ago. CFA Keith Goddard explains that this pullback could be could be good for investors; by getting a position in Apple now, assuming the similarities with Microsoft’s history, it could mean big rewards for investors down the road.
At the Bucks Blog at The New York Times, financial planner Carl Richards explains that small investors should not concern themselves with the history of the stock market and the manic finance media when deciding when to buy and when to sell. Rather, these small investors need to come up with a smart and sound investing strategy that fits their own needs.
There has been a lot of news about the upswing in home sales in 2012. However, Gwynn Guilford states that perhaps these figures are misleading. Though sales of existing homes might be on the up, an influx of new homes may end up pushing prices down. It is not quite clear what the effect on the economy this might have, but it is not exactly a time to tout a housing recovery just yet.
Bloomberg reporter Wes Goodman explains how big-time investors like Jim Rogers and Bill Gross are warning that the market for Treasuries is on the down and out. As investors move out of Treasuries, it will only lead to a bigger push towards equities.
High-Yield bonds may be attractive to some investors, but David Schawel warns that the market for these high-yield assets might be overbought. Investors need to be aware of the changes in the the characteristics of high-yield bonds; if not their expectations will be no where near their realities.