IN FOCUS: Trending – Recent weakness in a bull market

Posted on Aug 1, 2015 :: Features
Posted by , Insight on Business Staff Writer

We’ve seen an incredible run by U.S. stock markets for the past six years.

The S&P 500 has nearly tripled from its low in 2009 and many investors are euphoric with the gains they’ve seen in their portfolios.

Nobody knows when we’ll hit a bear market, so the investment world is keeping a close eye on global events that could influence market conditions. Recently, we’ve seen market weakness because of the Greek default.

So what’s going on with Greece and how does it affect the U.S. ?

First and foremost, the Greek crisis is a perfect example of when economists forecast a certain level of growth, make promises based on their assumptions and then see markets grow at rates slower than expected. That’s the general idea of what’s happening with Greece. After the dot-com bubble in the early 2000s, Greece borrowed money from members of the Eurozone to cover the spending promises made to the Greek people. Greek government officials projected healthy economic growth to help pay back the money they borrowed. Unfortunately, the recession in 2008 was not kind to the Greek economy and even more money was borrowed.

Here’s the debacle: Greece’s creditors want their money back and Greece cannot afford to pay them. This resulted in Greece becoming the first developed nation to default on international loans. The default sent shockwaves through global markets, with the S&P 500 declining as much as 3.9 percent and world market indexes falling almost 8 percent.

This is not a good thing for domestic markets since interest rate changes later in the year are expected to restrict market growth.
clearTREND research produced by Appleton Group LLC indicates downward trends in large-cap U.S. equities, emerging market economies and commodities. Its U.S. Economic Health Index shows 42 percent of U.S. sectors are expanding while 46 percent are contracting.

“Because of the Greek debt crisis, we’ve seen recent weakness in U.S. markets,” says Alexander Hunt, advisor to private clients and retirement plans. “This is especially significant because our bull market is aging and investors are expecting market conditions to change. Maybe this is the catalyst investors are looking for.”

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