Granite Group Advisors

Over the last week the stock market has gone down roughly 2.7%. Was it the start of US bombings in Syria and Iraq? The poor economic performance of Europe and China? Was it home sales? Durable goods orders?   Fed Fisher’s comments?  It was all of the above, plus poor technical indications.

We have consistently mentioned that markets were fully valued in the short term when trading at 17 times 2014 and 16 times 2015 earnings. The risk/reward for new money was too high to enter the markets. It was simply the low growth, wages and the expectation of higher interest rates at this valuation that has made Granite Group  concerned.

There are some indicators that are not fundamental in basis but are more technical.  Technical data shows points where markets are over-bought and over-sold.  On Tuesday of this week, the S&P 500 hit a technical violation break at 1985.00. Going forward, the next technical support levels look to be approximately 1940-1950, then 1925  and then finally the August 7 low of 1904.  This does not mean that we will hit or go through these supports. They are signals to see if more downside is to come.  This is mostly short term information for entry points on pullbacks, as we do expect the S&P to rise slightly in the 4^th quarter.

Please feel free to call us directly at 203-210-7814 with any questions or concerns.  You can also follow Granite Group Advisors on LinkedIn and learn more about our Corporate Retirement Services and Wealth Management on our  Website.

Today ends the two day policy meeting by the Federal Reserve and the results are expected in at roughly 2pm this afternoon. There has been much speculation as to when the Fed will start raising short term interest rates. Some say 2nd quarter 2015, and some say 1st quarter 2015. The bottom line is interest rates are going to go up next year.

What we need to expect is the Bond market reaction. Last year, when then Fed Chair Ben Bernanke telegraphed the ending of QE 3 ½, the fixed income markets sold off (rates rose) into the end of 2013. The Fed will not want a repeat performance, so we expect the “dovish” language to be changed slightly towards an interest rate rise. This will temper the market response, but we still expect a negative reaction in the fixed income markets. The fed is walking a fine line, but the one thing you can count on is that interest rates are going up, and it is coming relatively soon.

Please feel free to call us directly at 203-210-7814 with any questions or concerns.  You can also follow Granite Group Advisors on LinkedIn and learn more about our Corporate Retirement Services and Wealth Management on our  Website.

What ever happened to “Sell in May and go away”?  As the markets continue to climb the “Wall of Worry” we are compelled to let you know that markets might be a little ahead of themselves. At 17 times this year’s earnings and 16 times next year’s earnings, we feel the market is fully valued in the short term. We would think a short term pullback, not a correction is in order. Granite Group is not suggesting that we are going into a big market downturn or a recession, we are simply saying that it would be more prudent to wait for opportunities with new cash. From here, we see very little upside for the year end.

Please feel free to call us directly at 203-210-7814 with any questions or concerns.

You can also follow Granite Group Advisors on LinkedIn and learn more about our Corporate Retirement Services and Wealth Management on our  Website.

With the recent rebound to new highs, we find ourselves near the top end of the range.  As we have previously stated in our blogs, geopolitical events come and go.  The recent lull has allowed the equity markets to reach new highs.  Since we are at the top end of the valuation range, and if geopolitical risk serves as a catalyst to the downside, it could provide another buying opportunity.  We do not see this as unhealthy, as markets do not go straight up, but as a temporary market dislocation.

The old adage: ”it is quiet but too quiet” strikes us as a small warning that we are just about ready to return to reasonable valuations.

You can follow Granite Group Advisors on LinkedIn and learn more about our Corporate Retirement Services and Wealth Management on our  Website.

As the markets are set to move higher this AM because of easing Ukraine tensions, we are obligated to talk about the impact of geopolitics on the markets. As we said “not to panic” in our last blog because of non-fundamental geopolitical reasons (market is up 2.5% since the last blog), we urge people not to get suckered in because of geopolitical reasons. Non fundamental events tend to effect markets in the short term, not the long term. As we open higher today and we get closer to 2000 on the S&P, we believe that anything over that price would indicate a short term overbought condition in the equity markets.

You can follow Granite Group Advisors on LinkedIn and learn more about our Corporate Retirement Services and Wealth Management on our  Website.

From our quarterly commentaries to our blogs, Granite Group has expounded on the market valuations being simply too high. We have cautioned investors not to add to equity allocations in this higher valuation environment. This premium valuation could not sustain itself indefinitely!

The recent down-turn in the equity markets might be blamed on the FED pulling back on its stimulus or on the global political instability. However, this is not a time to panic: we are not suffering from a fundamental crisis that could lead to a sell off. The actual fact of the matter is: the high valuation of equities has been the issue. When political headlines (with little financial impact) affect valuation, it presents opportunity! Politics and unrest come and go, but we believe that equity valuations are becoming more reasonable. It is important to remember to be pragmatic and assess what is vital to investing.

Please call us at 203-210-7814 if you would like to discuss our commentaries or blogs. If you are a retirement plan client, please refer to the internal GGA Educational Resource section when you login to review your account.

You can follow Granite Group Advisors on LinkedIn and learn more about our Corporate Retirement Services and Wealth Management on our  Website

Over the last week, the housing environment has weakened here in the US.  Last week’s June housing report was not pretty:  there was a surprise 8.1% drop, and building permits fell to 4.2%.  (Both May readings were revised lower as well). This morning we received another report that pending home sales fell 1.1% while the market expected a gain of 0.5%.  We have reiterated in past commentaries that housing would not do well because of demographics, hence housing prices will continue to stall even with historically low rates. Traditionally, housing is one of the biggest industries to lead us in and out of recession. The last few years has seen a rebound in prices and sales from its dismal bottom, but the current data suggests that housing will not help us further in our hunt for sustainable economic growth.

You can follow Granite Group Advisors on LinkedIn and learn more about our Corporate Retirement Services and Wealth Management on our  Website.

This morning the equity markets are taking a major leg down. This is in response to a Portuguese bank missing a coupon payment on a short term piece of debt. If you add in that Israel is putting thousands of ground troops at the border, this is an excuse for the markets to come down from high valuations. Europe’s problems, while getting better, have obviously not gone away. What is apparent, as we have discussed in previous blogs, is that the market has just moved too far too fast. The continued slow growth in the economy, and a premium P/E ratio of 17 times this year’s earnings, is hard to justify. From our perspective: the market needed a pullback to get back down to a reasonable valuation. The additional fear of war between the Palestinians and Israel certainly does not help people feel safe. Granite Group believes this news will bring an opportunity to put equity money to work at more reasonable valuations.

You can follow Granite Group Advisors on LinkedIn and learn more about our Corporate Retirement Services and Wealth Management on our  Website.