MADISON, Wis. -- Despite a "flurry of bad news" in the markets recently, opportunities still exist to upgrade its portfolios, MEMBERS Capital Advisors recently reported.
In its Feb. 29 Marketline Alert, MEMBERS Capital, the registered investment advisor of CUNA Mutual Group, said a combination of reports on weak purchasing orders, rising oil prices, disappointing corporate earnings, and sluggish consumer spending was enough to send sellers in to action.
Sparking the sell-off was a large "miss" in earnings from American International Group and Dell. AIG, the world's largest insurance company, took a write-down in excess of $10 billion related to subprime mortgage exposures. This resulted in a loss of $5 billion, shocking analysts who expected a profitable quarter, the firm reported. Dell reported a profitable quarter, however, it was 6% lower than the prior with warnings that sluggish consumer spending would continue to hurt their business. Bond yields fell and prices rose as investors continue to seek shelter from the stormy economy and anticipate the next interest rate cut in a few weeks.
"Despite the negative news flow, and in fact during the past few weeks, the market has yet to test its January low--a positive sign in our view," MEMBERS Capital said. "And while the drum beat of recession and stagflation continues, commodity prices soar and the dollar weakens, the Fed is standing ready and seemingly very willing to continue to cut interest rates."
Still, the yield curve has steepened and the market is statistically inexpensive--all strong positives, the firm noted, saying it continues to find opportunities to upgrade the quality of its portfolios in this environment.