This week the market was tested by various factors that created an overall downturn. All major indices saw a decline of roughly 1% with the S&P 500 showing the lowest loss of all with a .5% loss for the week.
There were major factors that tested the market this week including the terrorist threat in Europe, rising energy costs, and continued fears of inflation. The latter two have been impacting the market for quite some time, but the former had an interesting effect on the market. The United States equity markets have become very resilient to terrorist threats and this week’s events did not change that trend. All indices produced positive gains on Thursday following the announcement in the UK that terrorist suspects had been apprehended in an apparent aviation planned attack. These events, however, had adverse effects on the airline sector still trying to recover.
Energy costs actually declined following the events in Europe as investors anticipated a decrease in air travel. The developments in the Alaskan oil fields earlier in the week, however, created turbulence that shot oil prices higher on fears of deceased supply and higher costs. British Petrolium (BP) is unsure when the pipelines will be back functioning fully, so we will have to wait and see what effect this has on oil prices, and the overall market long term.
Overall, it seems that we are stuck in the middle of fears of a slowing economy and rising inflation, but if corporate profits maintain their overall health there are still opportunities. Again, though, as value investors we are concerned with weekly events, but it does not affect our long term investing goals. We cannot be blind to current events, nor ignore them as we must continue to be as Ben Graham calls “Intelligent Investors”. Have a productive and profitable week!
-Ben and Jon