Fear and Volatility Rattle Markets: What's Next?

Published on October 14, 2014 9:49 AM

(SI Newswire)

Troy, MI October 14, 2014 – “October of 2014 has been an interesting month so far; just in the first nine trading days the Dow Jones 30 industrials have moved (up and down) over 1,700 points and the Dow is down over 700 points since the beginning of the month. That is significant volatility, especially since the movement tends to oscillate. What are some of the causes, and what do we do? We could attribute this to a variety of causes.” says Leon LaBrecque, JD, CPA, CFP, CFA. Leon is also the Chief Strategist and founder of LJPR, a firm managing $668 million* in assets.

Ebola. “Ebola is a significant problem, both from a pandemic and economic standpoint. Western African nations stand to lose possibly more than $32 billion of economic growth. The S&P 500 lost about the same amount on October 9th,” says LaBrecque. “This outbreak started earlier this year, and the market seemed to shrug it off. Ebola is sinister, but maybe not the major fear driver.”

ISIS. “ISIS is a significant problem, actually more deadly than Ebola. ISIS has killed, by reports in July, over 5,600 civilians in Iraq alone,” continued LaBrecque. “And, like Ebola, ISIS seems to be spreading (and possibly treatable), with a couple of billion dollars, tens of thousands of fighters and our military hardware. ISIS is a fear driver.”

Mario Dragi. “Now we may have something. The head of the European Central Bank (ECB) promised he would take all steps to get the EU out of recession. However, all steps appear to involve only talking,” says LaBrecque. “The ECB has not engaged in any serious monetary policy. As a result, we’re now seeing signs of weakness in the German manufacturing economy. Maybe we can remember when the Grecians didn’t have a formula. Right now, it’s possible the ECB doesn’t have one. Definite headwind.”

US Economy. “Back to good news. The US economy saw a drop in unemployment and the dollar is rising. Exports are up, bankruptcies are down,” continued LaBrecque. “Business optimism is up, but business confidence is down. The bellwether consumer confidence is up, as are retail sales and consumer spending. The US economy is providing a nice tailwind.”

Elections. “TV advertising will be off significantly after November 4; the outcome will probably be rather anticlimactic. As long as there is rancor in Washington, the sequester forces the deficit to be reduced,” says LaBrecque. “I predict continued gridlock; election results are probably a non-factor.”

“World jitters, behavior, economic data, are all contributing factors to the volatility,” says LaBrecque. “When this happens, recognize that volatility provides the opportunity to rebalance and re-price and more importantly, to let markets regroup. My take is that global GDP is still growing at about 3.3%. Inaction by the ECB can (and probably will) turn into action. The US is still continuing to slowly grow, but grow it will. ISIS and Ebola are sinister, but solvable threats. The glass is half-full. Maybe tomorrow it will be half empty. In my research, all downturns are followed by upturns.”

Leon C. LaBrecque is the managing partner and founder of LJPR, LLC, an independent wealth management firm located in Troy, Michigan that manages $668 million in assets (as of 9/30/2014). Leon is a practicing attorney, CPA, CFP® and CFA that has specialized in servicing individuals, families, and small businesses in the areas of financial, estate, and tax planning for over 32 years. LaBrecque’s extensive career includes previous work at Arthur Andersen, Plante Moran, and as the Department Chair of Finance and Economics at Walsh College where he created the Master of Science in Finance program. He has also authored several proprietary retirement planning programs for CalPERS, the states of Montana, and Washington, and corporate clients including General Motors, Ford Motor Company, Lucent, and AT&T, among others. LaBrecque’s specialties include investment management for foundations and non-profit organizations, financial planning for automotive employees and retirees, and retirement planning for police officers and firefighters.