Global Portfolio Strategy Update: Obama's Speech, The Fed and Davos

 |  Includes: BRXX, HAO
by: Soos Global Capital
(Note to readers: Valuable background information on global market views and some specific sector and company thoughts have been presented in recent articles that are suggested “pre-reading” for this piece. Here you will find some new thoughts and updates on many previously mentioned portfolio ideas. These articles are for thought-provoking purposes only.)
This week (Jan. 24, 2011) started out with a much better overall market tone than last week. The focus shifted, at least on Monday, to merger activity and corporate earnings which, in general, have continued to shine. The Monday euphoria might be challenged by, among other things, Tuesday morning’s surprise slip in the U.K.’s Q4 GDP.
As for the remainder of the week, here are some thoughts, in no particular order of importance, but collectively representing current thinking and offered up purely as thoughts for investors to consider and to weigh in the mix of their own investment decisions:
  1. State of the Union: Not quite a total snooze (“Zzzzzz….”), but in terms of market moving events, close. The president is likely to say many things that market participants already know ... a reminder about the extension of Bush tax cuts, focus with the new Congress on deficit cutting, ending U.S. war activities in Iraq, starting the withdrawal of U.S. troops from Afghanistan later this year, progress with relations with China (though much more to do), approval of the New START nuclear disarmament treaty with Russia, cooperation among allies with regard to sanctions on Iran and progress on that front, re-directed focus on the Israeli-Palestinian front, more cooperation with ‘big business’ especially in making the U.S. a more business friendly environment, and continued focus on education. That’s only part of the list, but if nothing else, one might expect overall "consumer confidence" to rise after such a speech since it often serves as a grand event of pomp and circumstance in which the president rallies the country around the good that’s taken place and the hopes for more "good" to come in the future.
  2. FOMC: Wednesday’s statement by the Fed might even warrant one or two more “z”s than the State of the Union. No policy shift anticipated. But this certainly stands center-stage in the eyes of markets, looking to glean any nuance from Fed-speak as to QE2 and whether the Fed intends to abbreviate the program if and when the economy starts to pick up.
  3. Davos: World Economic Forum ... throughout the week, there are sure to be interesting interviews broadcast from onsite in Davos, Switzerland. Listening closely to the tone of the interviews especially with key finance ministers, CEO’s and other top brass from the global financial community at times can offer insights ... but again, as for market-moving headlines, few if any are expected.
  4. Bank of India: The Bank of India met market expectations by hiking rates 25% to 6.5% and Bank of Japan kept rates on hold. These events tie into one of the biggest market-moving issues of recent weeks, which is the inflation fighting effort underway by many emerging markets countries. As was pointed out in “Is the Emerging Market Bull Run Over?," the markets have become disenchanted with many countries within the emerging markets sector, fearing that the fight against inflation might slow down growth too much. That said, there might be reason to believe that the market has priced in that risk, and especially with “local market” plays within EM countries, there might be value. In my case, on pullbacks, I’ll be considering adding to local China via the ETF HAO and local Brazil via BRXX. (For more on this, see: “Brazil: No One Horse Wonder on Emerging Market Stage”, “Brazil: Two Different ETFs to Consider” and “I’m a China Bull, Not a Bull in a China Shop.")
  5. In recent articles I’ve noted my shifting of portfolio weightings toward more U.S.-centric companies ... not out of global/international, but a re-directing of some assets to take advantage of what I expect to be a stronger U.S. economy in 2011. In that light, I’ve focused on companies such as Paychex (NASDAQ:PAYX), a payroll processing and human resources outsourcing firm which should benefit once hiring starts to pick up in the U.S. Also in my sights is Waste Management (NYSE:WM) which I wrote about in “Waste Management May See More Trash Thanks to Municipal Budget Deficits.” I’ve also taken a closer look at some regional banks that have been hit hard since announcing earnings last week, in which many of them showed that the low interest rate environment has led to more mortgage refinancing which in turn has reduced the banks’ interest income. Two regionals that I’ve written about and focusing on again are Hudson City Bancorp (NASDAQ:HCBK) and People’s United Financial (NASDAQ:PBCT). (See: “Banking on Hudson City Bancorp and People’s United Financial.”) Finally, a company that does much of its business in the Americas (North and South) but is pushing more aggressively into international markets is MeadWestvaco (MWV), one of the largest packaging companies that is also involved in office supplies and chemicals. MWV got a nice boost on Monday from some M&A activity in the sector, but away from that represents a company that could benefit from a pickup in U.S. growth and market share gains abroad.

As events unfold in coming days, and as U.S. economic data and corporate earnings continue to stream out, l will be posting updates on the ideas mentioned above and other portfolio structuring thoughts. Please look for updates.

(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals.)

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Disclosure: I am long HAO, BRXX, EWZ, FXI, PAYX, WM, HCBK, PBCT, MWV.

Additional disclosure: Also long many stocks within SPX, QQQQ and VWO. Positions may change at any time without notice.