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Brink of war

Posted: Aug 28, 2013 11:41:54 AM

With the U.S. about to embark on some form of military action against the Syrian government, we thought it would be appropriate to comment on the possible effect on the markets.  Pre-emptively the market began selling down as soon as John Kerry announced an intended action.  Oil prices are rising as the assumption of a production disruption is building into pricing.  What is important to remember is:  this action will be temporary, and so will the effects to the markets. 

Fundamentals always drive markets in the long term.  Last week we commented that the markets are set to become more volatile due to the debt ceiling fight, the budget debates, as well as the Fed tapering its bond purchases. The S&P 500 is down approximately 3% from the intraday high set on May 22nd. We are currently trading at 14X next years earnings expectations.  Historically, this would be a little below the long term average of 15X earnings, but in an a low growth environment with low interest rates, a P/E expansion is a more plausible long-term effect.  

This is where Granite Group Advisors stands:  Eventually all this shall pass, and when all is said and done, the markets will get back to fundamentals and the markets will move accordingly.   If the market continues to fall,  it presents a buying opportunity and that is how we look at the current situation. In the next 30 days or so, there will be more clarity as to how the issues will shape the future, and markets love clarity!

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