Market Perspective for January 26, 2015

Greece elected the anti-austerity Syriza party on Sunday and immediately found a coalition partner in the right-wing Independent Greeks party, which also opposes austerity. This could generate volatility for the markets in the days and weeks ahead, but the immediate result of the election was the covering of short positions. The euro rebounded versus the U.S. dollar on Monday and European shares traded higher, although Greek shares did decline.

Beyond the currency markets, there were rebounds in copper, oil and other commodities. High-yield bonds, currencies and emerging markets, along with commodities, have been in downtrends stretching back to the summer of 2014 in many cases. Emerging markets have rebounded in 2015, and commodities, foreign currencies and high-yield debt are all overdue for a bounce. The U.S. dollar is also long overdue for a pullback. Markets such as oil and the euro remain in clear bear markets though, so a rebound may not last long.

If the euro and European politics takes a back seat for a while, investors may finally turn back to the U.S. market and earnings season. Apple (AAPL), Facebook (FB), Amazon (AMZN), Microsoft (MSFT), Yahoo (YHOO), Google (GOOG), Boeing (BA), Chevron (CVX), Ford (F), Pfizer (PFE), Proctor & Gamble (PG), Alibaba (BABA), Visa (V), Mastercard (MA) and AT&T (T) report over this big week. Technology, pharmaceutical and financial services funds will be most affected by the results. Growth funds will also be impacted; for example, five of the above companies are top positions found in Fidelity Blue Chip Growth (FBGRX).

The Federal Reserve meets this week and will make a policy statement on Wednesday. The Fed isn’t expected to hike rates until June, so no change is expected. The minutes from the meeting will be interesting to read because the European Central Bank launched quantitative easing last week.

At the end of the week, the Bureau of Economic Analysis will release the initial estimate of fourth quarter GDP. The average of analyst estimates is 3.2 percent growth for the quarter.

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