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Matthew Sauer, Esq.
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Matthew Sauer, Esq. is the President and Chief Investment Officer of the Mutual Fund Investor Guide. Each month he publishes the Investor Guide to Fidelity Funds, Investor Guide to Vanguard Funds and ETF Investor Guide. On a weekly basis he publishes the Global Momentum Guide, focusing on sector... More
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Mutual Fund Investor Guide
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Mutual Fund Investor Guide
  • Week In Review: September 6, 2013 0 comments
    Sep 6, 2013 11:05 AM

    This proved to be another week stuck in sideways action for the U.S. stock market. While the indexes inched higher, the move lacked a clear signal, leaving traders to read the tea leaves. There were plenty of signals for them to parse, with one part of the market weakening and another part strengthening, all while interest rates climb to two year highs.

    Moving higher were biotechnology, solar and Internet companies, with related ETFs reaching and surpassing their 52-week highs. This sends a strong bullish signal that the market momentum leaders are off to the races again, with the advance in solar shares particularly strong over the past several trading sessions.

    On the negative side are the defensive and interest rate sensitive sectors. Consumer staples, utilities, housing and real estate have all been weak, hurt by rising interest rates. The ten-year Treasury broke 3 percent during the week and if it holds that level, it can easily advance another 50 to 75 basis points.

    As we said earlier this week, the market is really on the knife's edge in the battle between bulls and bears, with several sectors at risk of breaking down and a few on the cusp of breaking out. It seems like the market has to choose one way or the other, but there is a third path, and perhaps it is the explanation that makes the most sense.

    The most important data point right now is the rise in interest rates. This is seen as bad for stocks because quantitative easing is widely believed to be supporting the stock market, but rates also rise due to economic strength, leaving investors with a quandary. If we weigh this information against sector performance though, the picture becomes clear. Low debt technology companies are at 52-week highs, and cyclical sectors such as automotive are also among the momentum leaders. The worst performing sectors are rate sensitive sectors and defensive sectors such as housing and real estate, utilities and consumer staples. In sum, it is the picture of an economy in the midst of a growth spurt.

    The shift from defensive sectors towards the riskier sectors in the market has been messy and led to weakness in stocks. More weakness could come in September and over the short-term we would urge caution. However, the long-term outlook continues to look favorable. If you are comfortable with increased volatility over the next few months, you will likely have a strong buying opportunity.

    Finally, we are very pleased to report on our long-term performance. Since we began the Fidelity Independent Adviser in 1995, we have more than doubled the return of the S&P 500.

    Here is how our focus on long-term performance compares to the market:

    Fidelity Select Portfolio: +476%

    Fidelity Growth Portfolio: +348%

    Fidelity Growth & Income Portfolio: +356%

    Fidelity International Portfolio: +269%

    Fidelity Retirement Income: +192%

    S&P 500: +179%

    If you are not yet a member, I encourage you to join the Fidelity Independent Adviser Investment Service by visiting our subscribe section on our website: For $49.95 you will receive 12 monthly issues of my newsletter, plus four weekly email hotlines to update you on the market.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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