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Wednesday, July 15, 2015

As U.S. record level M&A heats up this summer, this activity has drawn the attention of international investors, especially China. Just recently, a Chinese state-owned technology firm offered an enormous $23 billion bid for a U.S. technology company in the Russell 1000 Growth index, a would-be record amount for any Chinese takeover of a U.S. firm. This bid along with numerous other large cap growth offers this year reflects a widening popularity in this sector. Chinese firms, along with other investors, are offering massive premiums to acquire these large cap growth companies, proving that this investment class has significant and compelling value. To make the most of this growing asset class, it must be included as part of a properly diversified investment strategy. Refer to page 5 and page 17 of the Voya Global Perspectives™ book to see how including a large cap growth asset can help maximize your returns.

Tuesday, July 14, 2015

Fundamentals drive markets and there is no more telling fundamental than corporate earnings aka “the bottom line”. Second quarter earnings have kicked off. So far, they are dripping in positive but will be in full swing in the next few weeks. Expectations of -4.1 percent for the quarter are similar to the first quarter but, like last quarter, we expect it to squeak out another positive due to overly pessimistic expectations. Meanwhile, another proposal is on the table; this time, an Iran Nuclear Deal. But, geopolitics doesn’t trump fundamentals which have been broadly positive despite weaker than expected retail sales this morning. Markets are back to positive for the year and bond yields have surged on this good economic data. A strategy that is making a comeback is senior loans or floating-rate loans that are a good hedge against unexpected rising rates. Please see Voya Global Perspectives™ page 8 for corporate earnings and page 28 for “Senior Loans and Rising Rates”.

Monday, July 13, 2015

Back to back rallies in global markets because of the Greece economy, that is 0.2 percent of the Eurozone, is astounding. Or maybe it is just a normalization of markets after the perennial Greek tempest. Many unfortunate investors have been whipsawed in 2015 and here it goes again; selling into the noise and media hype. It is clear that Europe needs Greece and Greece needs Europe which is why the market is rallying on the prospect of a third bailout and not the actual signing of a bailout – so Grexit is off the table. The terms are billed as “tough” but really are similar to those agreed to in years past, which have yet to be implemented. Management of the structural reforms and privatization will be by the retro “troika” which includes the ECB, IMF and European Commission. Don’t think that the U.S. is not participating since we fund 17 percent – more than next 3 countries combined – of the IMF budget. Meanwhile the fundamentals continue to march on and bond yields in the U.S. have bounced reflecting increased confidence in the economy. Please see Voya Global Perspectives™ Midyear Review on investing in these volatile markets.

Friday, July 10, 2015

All eyes remain on the ever-changing crises in China and Greece. Greece remains in tremendous amounts of debt and China’s stock market has been facing losses nearing $4 trillion in value. However in the recent days the tides have begun to change. Greece submitted a 13 page proposal Thursday night that included significant compromises in areas such as taxes, retirement benefits, sales of state owned assets and military spending, all factors creditors demanded Greece must improve upon. As for China, the sell-off has appeared to slow down as the Shanghai Composite gained 5.9 percent Thursday and 4.5 percent Friday due to market wide state intervention. So the question remains, is the storm behind us and will Greece and China move on from these near financial collapses? International markets have reacted positively to these improvements but if we have learned anything in these past weeks it’s that anything can happen. A globally diversified portfolio can protect against the volatile and unpredictable markets of Europe and Asia. Review page 5 of the Voya Global Perspectives™ book to see how effective diversification can protect your portfolio.

Thursday, July 9, 2015

The minutes of the Federal Open Market Committee June 16-17th meeting were released Wednesday, in theory, giving some insight into the Fed’s thinking behind when they would begin normalizing policy. The Fed continued to say the market is on its way to meeting certain criteria for hiking rates but that “they would need additional information indicating that economic growth was strengthening”. However, policy makers remain cautious when it comes to increasing rates. Raising rates too late could cause the Fed to move too fast because of heightened inflation. Giving a somewhat dovish tone, Federal Reserve officials did little to lighten the mood after a day filled with a malfunctioning U.S. stock exchange, worries over Greece, and a massive selloff in China. In summary, nothing really changed and the analysts are split on whether or not a September rate hike is in the cards. On tap starting this week: earnings season for Q2 which will help guide the markets. In addition, keep an eye out for strengthening economic indicators that will aid the Fed in their decision of when to begin hiking rates. Please see the Global Perspectives Mid Year Update for guidance on navigating these volatile markets.

Wednesday, July 8, 2015

The exodus of Chinese stocks continued today as the Shanghai Composite fell 5.9 percent. In an attempt to tame the massive sell-offs, Chinese officials have pulled out all the tricks in the bag. Policy makers froze trading on over 1,300 companies, which account for nearly 40 percent of China’s total stock market, and ordered state owned companies not to sell shares. Government authorities went as far as increasing the types of assets – to include houses – that investors can use as collateral to buy Chinese stocks. The PBOC even made an effort to restore the once rock solid investor confidence by pledging to provide the market with “ample liquidity” to prevent a systematic financial crisis. Remember, fundamentals drive markets and China’s stock market has not been reflective of a slowing economy, doubling in the last year. Today’s U.S. markets will be anxiously waiting for the release of the Fed minutes, attempting to gauge if all of the Greece and China drama will delay the Fed’s interest rate hike. Please review page 43 of the Voya Global Perspectives™ book to see how growth in China has been steadily diminishing.

Tuesday, July 7, 2015

Oil futures fell sharply on Monday mainly attributed to the news coming out of Greece but also because the recent uncertainty in China’s markets has renewed fears of a global slowdown. Down 7.7 percent – or $4.40 – to $52.53 a barrel, this decline in the price of oil followed the significant “No” vote on Sunday. Oil futures reacted negatively to the vote, fearing that a possible Greek exit from the Eurozone would affect Europe’s economy adversely and impact Europe’s energy use. Although Greece is a relatively small oil consumer, the European economy would still take a significant hit from a “Grexit” thus affecting energy demand throughout the region. China is the world’s second largest importer of oil and their wild market ride is showing no signs of abating despite the government’s emergency measures. Turn to page 66 of the Voya Global Perspectives™ book for a look at the recent history of the price of oil.

Monday, July 6, 2015

Greek citizens voted “No” on Sunday’s referendum to accept their creditor’s terms in exchange for financial aid, pension cuts and sales tax increases. As a result, media outlets immediately jumped to conclusions stating that Greece will now undoubtedly leave the Eurozone. However this is not the case, there are multiple different and very plausible options. Greece could exit the Eurozone with a desperate government and even more desperate local banks but Greece could also strike a deal with its creditors, reopen banks and stay in the Euro or even fail to reach a deal but remain in the Euro, not as a full member, and rely on local IOUs. A Greek exit from the Euro would have intense global ramifications, far more significant than what a deal with creditors would have. As of today do not buy the media hype, Europe has to keep Greece in the EU in fear of grave economic consequences. Look to Doug Cote’s view on the Greek situation and potential impact on domestic markets in this CNBC article.

Thursday, July 2, 2015

The U.S. jobs report was released today, giving investors mixed feelings. Certain numbers indicate a strong economy bouncing back from a tepid first quarter while other data foreshadows an economy trapped in the same low growth trajectory. Signs of a solid job market were aided by 223,000 new June jobs and a 0.2 percent decrease in unemployment that brought the jobless rate to 5.3 percent. The new jobs added in June mark the 13th time in the last 15 months the economy has added at least 200,000 per month. However the U.S. job market did take hits from reduced employment gains, disappointingly flat wages and a record low labor force participation number. Remember that a robust job market is one of the Fed’s key indicators for raising rates and every jobs report from here on plays a significant role on when that hike will take place. Look to Employment Payrolls on page 54 and Unemployment Rate on page 55 of the Voya Global Perspectives™ book to see a detailed history of the U.S. job market.

Wednesday, July 1, 2015

Greek Prime Minister Alexis Tsipras is ready to talk. A two page letter from Tsipras to the leaders of the European Central Bank, the European Commission, and the International Monetary Fund stated that Greece is ready to stop the panic and willing to agree to the bailout conditions discussed this previous weekend. The letter continued to describe how Greek demands were only minor changes and would have a great fiscal impact. This willingness to compromise comes as a surprise to many as it seems as recent as last night that the Greeks were not ready to budge on key issues such as tax hikes and pension changes. A deal like this in the works supersedes the referendum planned for July 5th and makes a vote to stay in the European Union unnecessary. The optimistic news coming from Greece spread to the international futures market. All three major U.S. future indices reacted positively along with the Euro Stoxx. Look to Chief Market Strategist Doug Coté on CNBC this morning for further explanation.

Doug Squawk Box


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