“The World Cup and Equity Markets”

 There is no doubt that the World Cup captures huge attention and generates a massive amount of passion – but does it affect stock markets?

 Apparently so. According to Goldman Sachs, there is a clear pattern of outperformance by the (country) winning team in the weeks after the World Cup final. On average, the winning country outperforms the global market by about 3.5% in the first month, although very little after three months. In looking further, the winner usually doesn’t hold on to their gains and sees its stock market underperform by about 4% on average over the year following the final. I guess the message is to enjoy it while it lasts…

 Last Thursday, the Labor Department announced that 288,000 payroll jobs were created in July, far above the 215,000 consensus expectations. The unemployment rate declined to 6.1% (from 6.3% in May). The stock market gave us yet another reason for a great Fourth of July when it set yet another all-time high. The Dow Jones Index closed above 17,000 for the first time.

 But what is in a number? Some say that 17,000 DJIA is important because it causes news coverage and reminds people of what is going on in the market, perhaps prompting them to action. It may prompt some people to sell some holdings, or possibly, it will give investor’s confidence and cause them to buy. Others contend that there’s nothing at all important about a number, whether it’s 14,000, 17,000 or 20,000 – it’s just a number that has nothing to do with investing.

 Whether the correct thing to do is to buy, sell or do nothing is questionable of course and one never knows at the time. My personal intuition and goals in building portfolios is that every investor is different and their goals, risk tolerance and time frame are the most important determinant of their portfolio.

As of this writing we’re seeing a continuation of relatively quiet markets with perhaps a sprinkling of profit taking ahead of earnings season. If we do see more near-term profit taking, I believe it will likely happen in the next few weeks. However, I do not expect it will last long, since second quarter earnings announcements are expected to be the strongest in several years due to (1) resurging second quarter GDP growth, (2) the highest stock buybacks since 2007, and (3) a weak U.S. dollar boosting profits for multinational companies and commodity-related stocks.

Be sure to go to our website at lwpreno.com and check out our “Mid-year Outlook 2014: Investor’s Almanac Field Notes, with LPL Financial Research’s incredibly thorough analysis of the markets.

 Stay cool this July – and, Thank You Very, Very Much for Your Business

 Phil

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 The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Some of this research material has been prepared by LPL Financial. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly.