Happy Independence Day!
I hope all of you are enjoying the long weekend after what was a downright ugly week for the markets.
The trading floor bloodbath started on Monday, when the Dow Jones Industrial Average sank 350 points – a nearly 2% drop which marked the Dow’s worst single-day decline of the year.
The culprit: Greece.
Despite the fact that the small Mediterranean nation makes up 0.3% of the global economy, seemingly 99.9% of financial news was devoted to whether Greece would default on its International Monetary Fund debt and potentially exit the eurozone.
After two bleak days of shuttered banks and Greeks lining up at ATMs to withdraw a daily limit of 60 euros, Greece did indeed accomplish the ignominious feat of becoming the first developed country to default on an IMF debt payment.
In the grand scheme of things, the Greek brouhaha is over a pittance. The country owed the IMF 1.55 billion euros, or roughly $1.7 billion. For comparison, in February the Obama administration requested a 2016 budget of $1.7 billion for the U.S. Securities and Exchange Commission – a single government agency.
But as Wyatt Research analyst Bob Ciura points out, the market selloff was due to the fear of “contagion” – the idea that the Greek calamity could have a ripple effect across Europe, which could in turn impact U.S.-based multinational corporations with large international footprints.
So if you have any equity exposure at all in your portfolio, there’s a good chance you lost money this week. But as with any distressing bit of over-discussed market news, a little historical perspective is often a comforting salve.
As Steve Mauzy wrote in Wednesday’s Income & Prosperity newsletter, “Russia defaulted on its sovereign debt in August 1998. Two months prior to the blessed event, the Dow lost 18% of its value, thanks to fear-mongering not unlike today. Less than three months later, though, the Dow had reclaimed all lost turf. A year after the Russian default, the Dow was up 47%.”
So sit back and enjoy some time with your family. There’s no need to panic. This too shall pass.
And if you have a few minutes in between the Nathan’s Hot Dog Eating Contest and your local fireworks display, I invite you to check out some of my favorite articles from the week:
Top 5 Dividend Increases for July – Dividends simply cannot be overlooked. The S&P 500 index is up a cool 95% over the last five years. But when you throw in dividends, the large-cap benchmark has surged 117% over the same time period. Click here for the top five stocks in the dividend universe that are upping their payouts in July.
3 Ways to Profit from Brazil’s Eventual Comeback – Brazil is in the midst of its worst recession in 25 years. Weak commodities prices, a water crisis, political intervention in the economy and the scandal surrounding state-controlled oil and gas behemoth Petrobras (NYSE: PBR) are primarily to blame. But patient investors should start building positions in select opportunities now for the eventual Brazil turnaround.
Why Carl Icahn Bailed on Netflix – People mostly seem to hate Carl Icahn. And a lot of those people are grumpy that he made about 12 times his outlay by investing in Netflix (NASDAQ: NFLX) at $58 per share and then recently selling his remaining stake. But why did Icahn sell now, and what are Netflix’s prospects?
Growth Stocks Continue to Outperform in 2015 – It’s important to be invested in the strongest area of the market while it’s in bull market mode. Right now that area is growth stocks, and this asset class shows no signs of letting up.
A 10% Yield and a Bet on Rising Oil Prices – In the energy sector, the exploration and production companies have been hit the hardest over the past year, so a bet on upstream master limited partnerships is a bet on rising oil prices. Contrarian investors should see a lot to like about this upstream MLP, which grew oil and gas production 2% last quarter, despite a large reduction in capital expenditures.
The Reasoning Behind AT&T’s $100 Million Net Neutrality Fine – The FCC’s net neutrality fine stems from AT&T (NYSE: T) allegedly throttling the connection speeds of “unlimited” data plans after a certain amount of data usage. But will it have any significant impact on AT&T’s stock?
3 Solutions to the World’s Biggest Problem – With the problems we face these days in the investing world – possible rising interest rates, the Greek debt crisis and volatility in energy prices – it’s easy to ignore the big picture. And these three stocks provide necessary relief to a very long-term problem with no other viable solutions.
Your Next Mobile Device Is Bigger Than You Think – Cars have been equipped with satellite radio and other relatively limited connectivity features for a while, but all signs point toward an explosion in connected car technology over the next five years. Here’s how to play the trend.
Have a great holiday weekend!
Happy Independence Day!