Trouble Overseas

Market Summary: 

U.S equity markets ended the week lower, marking the third consecutive week of market declines.  Volatility returned to the market amid concern that international growth is slowing.  The International Monetary Fund reduced its global growth forecast and warned of “frothy” valuations in equities due to the extended low interest rate environment in developed nations.  In addition, several economic reports showed that Germany’s economy is nearing a recession.  Domestic reports offered a bright spot on Wednesday as mortgage applications beat expectations and rose for the first time in three weeks due to the improving U.S. job market.  Additionally, third quarter earnings season began and expectations have been falling as corporate profits will likely be affected by slowing international growth and a strong dollar.  Looking ahead, investors will pay close attention as more companies report earnings and hope for good news.

The S&P 500® was down 3.1% for the week.  The top-performing sectors in the S&P 500® Index included Utilities (0.9%) and Consumer Staples (0.5%), while bottom-performing sectors included Industrials (-4.7%) and Energy (-5.0%). In the fixed-income market, the 10-year Treasury yield was down during the week, ending at 2.3%.

We continue to seek those companies possessing identifiable catalysts, and focusing on those stocks with favorable odds.

Strong Growth Potential

JP Morgan Chase & Co. (JPM) is a financial holding company that provides various financial services worldwide. Founded in 1823 and headquartered in New York, New York, JPM operates it business in several segments including investment banking, commercial banking, asset management services, retail finance services, as well as credit card and auto services.

JPM emerged from the financial crisis as one of the few financial institutions with a solid balance sheet. JPM demonstrated its superior financial position by passing the Federal Reserve stress tests and also obtaining approval to buyback shares and increase its dividend. Despite the headwinds of a low interest rate environment and a more onerous regulatory landscape, JPM is poised to gain market share as its weaker peers consolidate their businesses to improve their balance sheets. We believe JPM has the potential to significantly surprise on the upside as economic conditions continue to improve for the banking industry.   For these reasons we have added JPM to our portfolio and believe it represents favorable odds for our clients.