A series of major events – the earthquake disaster in Japan, growing political violence around the Persian Gulf and President Obama’s decision to engage our forces in the Libyan conflict – gave us lots to consider during the last month. Though the shock of the Japanese disaster and the engagement of U.S. troops in Libya were new additions to major global issues, the markets took the news in stride after a couple of unsurprising wobbles. Here’s an overview of what’s been happening and a synopsis of varied opinions from investment experts.
The continued optimism on Wall Street is perhaps the most significant news of all. Investors have remained bullish in the face of bad news – another example of how market performance often flies in the face of logic. On the other hand, the bears remain concerned about the long-term problems created by Japan’s damaged nuclear facilities and the unknown toll of the disaster on the Japanese people and their economy. They note that the impact of the turmoil in the Middle East on oil prices, the decrease in production capacity and the region’s spreading tide of political upheaval can’t be ignored. For the most part, the burgeoning unrest in the more moderate countries in the Middle East took most analysts by surprise, with uprisings in countries that normally don’t hit the headlines. Since the government fell in Egypt, we’ve seen the Tunisian government topple, protests in Oman and Syria, and violence in Yemen and Bahrain – where the Saudis took the unprecedented step of sending troops in to support the Bahraini ruling family. Bahrain – a small island kingdom that mirrors the area-wide animosity between Sunni and Shiite Muslims –has been at the center of political disputes between Iran and Saudi Arabia for decades.
Middle Eastern conflicts have overshadowed the financial woes in Europe, but they continue unabated – with Portugal the latest nation to report a fiscal crisis. As March drew to a close, the British government unveiled a budget featuring spending cutbacks and belt-tightening measures.
Good news came from the National Federation of Independent Business, reporting that small businesses are showing an upswing in hiring. Gross domestic product rose 3.1 percent – higher than predicted – suggesting that a steady but slow recovery is under way. Sustained gains in corporate profits for the fourth quarter of 2010 were hailed as a welcome trend based on the assumption that it will spur hiring and capital spending.
On the downside, investment experts worry about the rise in food prices and a surge in gas prices. Light crude oil that sold for $85 in February reached $100 recently, and some industry experts are predicting an average price of $106 during 2011. Many investors are betting that oil prices will continue to surge. Others continue to favor consumer staples and some also think that defense stocks are a good strategy. Many investors are bullish on gold, a commodity that traditionally is boosted by global conflict and political turmoil.
Though traders and money managers have to react to world events – and disasters always create opportunities for speculators – there is no reason for investors to make hasty decisions. Balancing and managing your portfolio requires sound strategy. As always, consult your tax and investment professionals before implementing any changes.