Dubai Scare and Current Market Thoughts

Hope everyone had a nice Thanksgiving. Giving the scare of Dubai World, we thought we’d communicate our thoughts with you. Today, the markets are modestly below water as traders get their first full day to assess last Friday's announcement that Dubai World has requested a debt restructuring. Those concerns were muted somewhat by the announcement from the United Arab Emirates’ (UAE) central bank that it will provide support to banks in the region. As a result, stocks in Asia rebounded strongly but European shares finished under pressure as traders contemplated the higher exposure of European banks to Dubai. We continue to monitor the situation closely and will make any necessary adjustments to clients’ portfolios if things deteriorate.

Other positive news from the weekend included the beginning of the holiday shopping season, as Black Friday sales came in slightly higher than last year. Attention has also begun to shift to “Cyber Monday,” as today is generally an important day for online sales.

Key Thoughts:

• We believe the general market trend will continue to be higher, but gains are likely to be more muted, and bumps along the way are to be expected.
• The US economy continues to recover, though not in a straight line. We are on the lookout for signs that the supports provided by the government can be removed, resulting in a self-sustaining recovery.
• We firmly believe that investors need to have exposure to international markets; And caution is necessary as the Dubai situation continues to evolve.

We’ve had a very nice year in the equity markets. After the recent run up, it's not surprising to see some periods of "digestion" of these gains. In fact, we view a sideways-to-up path as a positive, allowing economic development and earnings improvement to catch up with the forward-looking equity markets.

Many market watchers and investors have been expecting sharper corrections, crying "too far, too fast," but given the severity of the last year’s downturn, a similarly sharp move upward is not all that surprising – a spring-like effect.

While we still believe there will be periods of profit-taking, we remain relatively optimistic.

Some reasons why:

• Earnings are improving meaningfully. 
• Economic data shows recovery. 
• Seasonality is positive in November and December. 
• Investor sentiment, which had gotten a bit frothy (a contrarian indicator), has moderated during this sideways movement—a bullish sign for equities.

Please know that we’re only a phone call away if you’d like to discuss your personal financial situation in more details. The Holidays are upon us, but there’s always time to Plan for Success.