Montreal, Canada (PressExposure) June 27, 2011 -- Hilbroy Advisory Inc. (DeutcheBörse: 2H0) Weekly, Market wrap up.
The major averages advanced Monday and Tuesday on light volume in an anticipation trade rooted in the belief that (a) the Greek prime minister and his new cabinet would survive a no confidence vote at midnight on Tuesday and (b) the FOMC's policy directive and subsequent remarks from Fed Chairman Bernanke at the press conference would have a calming effect in an angst-ridden environment.
Participants got it half right. The Greek prime minister and his cabinet survived in a party-line vote, yet the FOMC and the Fed chairman in particular failed in their supporting role.
The Fed's failings were as much about what it said as what it didn't say. In truth, the policy directive read almost exactly as conventional wisdom said it would.
There was an acknowledgment that the economic recovery was unfolding more slowly than previously expected, but that the slowdown reflected in part factors that are likely to be temporary. Commodity-based inflation pressures are expected to dissipate; QE2 will be complete at the end of June; and economic conditions are likely to warrant exceptionally low levels for the federal funds rate for an extended period.
The added wrinkle for the market is that Mr. Bernanke acknowledged at the press conference that the Fed does not have a precise read on why the slow pace of economic growth is persisting. Furthermore, the Fed's central tendency projections for real GDP growth in 2011 and 2012 were lowered from their April projections, yet the Fed chairman downplayed the likelihood of QE3 coming to fruition anytime soon.
The market had been little changed for most of Wednesday, but it rolled over after the press conference and closed at its lows for the day. We suspect the late sell-off, which carried over into a 200+ point decline in the Dow early Thursday, emanated also from the unsatisfying thought that the market is going to be handcuffed by the economic calendar here and abroad for an extended period of time.
At its low on Thursday, the S&P 500 was down 1.9% as the weight of the Fed's debatable outlook and the aforementioned data flattened investor sentiment. It didn't help matters either that press reports indicated GOP leaders walked out of budget deficit negotiations with Vice President Biden, saying talks had reached an impasse. That may just be political gamesmanship, but in this uncertain period, it can also be labeled poor timing.
The market needs closure on the issue of the debt ceiling being raised by August 2 and the current deficit attention disorder that is afflicting both parties is clouding the prospect of the debt ceiling being raised in time. Undoubtedly, the ratings agencies aren't too keen on the latest developments.
The fact of the matter is that the Greek parliament still hasn't passed the plan. That vote comes next week and the outcome is as up in the clouds right now as the Greek gods. In brief, nothing got settled Thursday, but the idea that things didn't get any worse with respect to Greece held sway in the rebound effort.
The recovery vibes didn't last long though. Despite an upward revision to Q1 GDP and a durable orders report showing renewed growth in orders for nearly every sector in May, the market struggled on Friday. Basically, it gave back most of the ground it made up in Thursday's late rally, which is consistent with our thought that we were not quite sure why the market rallied like it did on the Greece headline on Thursday.
Notwithstanding the concerns about Greece and an economic slowdown, risk aversion was not the default trade in the equity market.
About Hilbroy Advisory Inc.
Hilbroy Advisory Inc. is a Canadian based advisory and consultancy services company founded in 2000. Our Company provides publicly traded and private companies, institutions and individuals with a series of advisory services enabling these companies to fully reach their corporate objectives and potential.
Our specialists will customize a service package that includes reviewing, identifying and recommending a series of specific action and tasks that help their clients' management decisions when seeking
Go Public strategy,
Debt and or equity financing
Identify prospective investors
Hire investor relations firm
Cross listing decisions
Planning road-shows and promotional campaigns.
Hilbroy Advisory has established numerous international relationships over the years with Broker Dealers, Hedge Funds, Institutional Investors, High net worth Investors as well as with investor relations firms and consultants. These relationships are made available to all Hilbroy clients and our team will manage the relationships from introduction to post financing activities.
Jean François Amyot
1400 rue Begin
Montreal, QC H4R 1X1
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