Press > Articles > Recent Market Trends: February 2012

Commentary: February 2012

Recent Market Trends, by Bob Child

February 2012

     Over the past year, many have felt a long-term outlook for the world, was that China would be the leading economic power of the future, while the U.S would be a diminishing superpower. This vision has been propagated by the media, individuals, and corporations around the globe. Some even felt that China’s growth might never slow down! However, it appears that those with such a viewpoint may have gotten ahead of themselves.

     Although China has had incredible economic growth over the past three decades, moving from an agrarian society to an industrialized, entrepreneurial type, there will always be growing pains. As an example, looking back on the United States during the Industrial Revolution, it took hundreds of years for the railroad, telegraph and highway systems to unfold. During this time, Henry Ford devised the concept of the assembly line. He built large factories around the moving assembly line and improved other aspects of industry, including, reducing labor hours to produce a single, commercial product. As a result, the assembly line increased production numbers and parts. The economy was extremely volatile then, fueled by the rise of monopolies and so called “robber barons”.  This point in U.S history could certainly be compared to the current economic situation in China.

     China’s progression into economic liberalization is fairly new, in fact, less than 50 years old. Looking back to 1978, years after state control of all productive assets, the government embarked on a program of major economic reform in an effort to awaken a dormant giant! The Chinese government encouraged their citizens to form rural enterprises and open private businesses. They liberalized foreign investment and trade, ramped up industrial production and educated their workers. The strategy has worked well, but we expect China to have a period of major economic upheaval. Additionally, we see several red flags within China’s financial markets. These include a lack of transparency, as well as, Chinese Government control and input, either directly or indirectly, on businesses.

     Moving on to Europe. The issues with sovereign debts are perceived as a potential, economic problem throughout the Eurozone. In December, similar to the U.S Tarp program, the ECB, European Central Bank made funding available for the country’s biggest money center banks, by allowing them to post various types of collateral, making cash available at low, fixed interest rates for three years. Without this move by the ECB, the tumult caused by weak economies and high levels of debt throughout southern members of the Eurozone, made it difficult, if not impossible, for the ECB to get short-term funding. As a result of the European Financial Stability Facility (EFSF), the financial markets have stabilized somewhat, and a lot of the fears associated with the European debt crisis have been alleviated. A step in the right direction for sure, but many economic issues still exist within the Eurozone.

     From working toward an early recovery, the U.S may be the last man standing. After the financial crisis of 2008, the Federal Reserve moved quickly to re-liquefy our money center banks. Today, the U.S. banks are better capitalized than their global counterparts. The private sector has gotten its act together and, generally speaking, is lean and mean. However, economists and politicians continue to debate, whether the Fed’s action during the crisis was good or bad.

     Our view is such that, by diving in head first, the Federal Reserve has helped stabilize our economic system, as a recovery seems to be well underway. Investor’s continue to pour into the safe havens of the world, our U.S dollar and treasury securities.  This is an obvious sign that the U.S. is still the “sheriff in town,” since our interest rate are at all-time lows. If this were not the case, with all the negative hoopla in the air, our rates would most certainly be higher. Corporations are still sitting on tons of cash and the economy is improving. But until the jobless rate, which is improving as well, makes a considerable drop, U.S. growth will continue to be sluggish.


Securities offered through vFinance, Inc., member FINRA/SIPC. Accounts are carried by National Financial Services LLC, Member NYSE/SIPC, a Fidelity Investments ® company. Investment Advisory Services offered through National Asset Management, Inc., a Registered Investment Advisor and affiliate of vFinance, Inc. Member FINRA/SIPC. vFinance, Inc. and National Asset Management is not an affiliate of Child Group Wealth Management.

National Asset Management, Inc. ("NAM") is a registered investment advisor with the Securities and Exchange Commission. NAM provides fundamental investment management services to investors. The views expressed contain certain forward looking statements. NAM believes these forward looking statements to be reasonable, although they are forecasts and actual results may be meaningfully different. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed. This material represents an assessment of the market at a particular time and is not a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any security in particular. No representation is being made that any investor will or is likely to achieve profits or losses.


© Child Group Wealth Management 2012



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