In the United States, every four years a presidential election comes around. It hardly seems like the President takes the Oath of Office and we begin the process all over again. Investors always seem to be looking for a link between every day events and the stock market.
The past year reminded investors that they should hope for the best, prepare for the worst, and be thankful when reality does not match their fears. Investors entered 2011 with hopes that the world economy would continue recovering from a long and painful deleveraging process.
Last month, we reviewed the new Internal Revenue Service regulations for cost basis reporting. We discussed the difference between covered and non-covered securities as well as the three year phase in period which began January 1, 2011. In this newsletter we would like to focus on how these new rules affect our clients.
On Friday, August 5, after the market closed, Standard & Poor’s (S&P) announced that it would downgrade the U.S. sovereign debt rating from AAA to AA+. On Monday, August 8, S&P carried this downgrade through to U.S. government agencies, including Fannie Mae & Freddie Mac.
The market struggled to gain traction during the second quarter of 2011 as a result of multiple domestic and global economic issues. The major indices were relatively flat over the last three months with the S&P 500 down less than 1% and the DJIA and NASDAQ up less than 1%. The following areas continue to drag the overall economy:
Markets have been rather volatile lately, sparked by unrest in Europe – more specifically in Greece. In May last year, Greece narrowly avoided default with the help of a bailout from its fellow euro-zone members and the International Monetary Fund (IMF).
First quarter of 2011 revealed significant new concerns about the global and domestic economy. One might label this past quarter as the “SEASON OF THE BLACK SWAN”. Black Swans are events in history that occasionally occur without possibility of predicting.