Total Returns %

1 Week

YTD

Dow Jones Industrial Average

-0.41%

+2.13%

NASDAQ Composite

-0.10%

+1.28%

S&P 500 Index

-0.55%

+1.49%

Russell 2000

+0.29%

-1.05%

U.S. Aggregate Bond Index +0.24%

+0.10%

MSCI All Country World

-1.08%

+0.04%

Source: Yahoo! Finance.  Data through 1-28-11

Global markets were mixed on the week.  Going into Friday, the markets were carrying gains.  However, the markets were pushed lower due to a combination of the problems in Egypt, Ford Motor Co. underperforming, and the 4th quarter U.S. GDP coming in less than expected.

The markets have been scratching out forward progress for some time now, and it is no secret that it is overdue for a breather/pullback.  It is a well-known fact that the markets do not like uncertainty.  For the last few months, we have enjoyed (like it or not) the certainty that taxes in the US were more or less remaining unchanged, the government will continue papering over the economy, and the Europeans are joining the papering party.  What could go wrong?  The Middle East; but is anyone surprised?  With all the other economic worries in the world, Egypt would be the one to knock the market off-course.  Typically, the news is an excuse for a market selloff.  The markets have been struggling to move higher for about a month as the rally in stocks has gotten long in the tooth.  The unrest in the Middle East is as good an excuse as any for a pause.

The issues in Egypt and Tunisia are catching the market’s attention as problems in the Middle East can have serious impacts on oil prices and stability in the region.  Another major concern is Israel in relation to new governments (if new governments are the result).  These new governments could be a problem, and may lead to radical leadership and/or Al Qaeda.

If we take a look at the breadth of the market at the end of the week, the percent of stocks on the NYSE that are trading above their 50-day moving averages dropped to 63% from 78% two weeks ago.  The percent of stocks on the NYSE trading above their 200-day moving average decreased to 79% from 82% 10 days ago.

A stronger pullback in the markets as a result of the tension in the Middle East can offer a good buying opportunity.  In addition, this may also be a good opportunity to consider buying defense-oriented stocks if things remain tense.  Instability in the Middle East is a certain positive for defense spending.  We will have to wait and see how this plays out.

Would you like an analysis of your current investment portfolio?  Call me to schedule your free consultation- 913.693.7918.

John P. Chladek, MBA, CFP® is the President of Chladek Wealth Management, LLC, a fee-only financial planning and investment management firm specializing in helping families and couples who are not yet retired realize their financial goals.  For more information, visit https://www.chladekwealth.com.

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