Recap: Week Ending February 28, 2014

March 2, 2014

After a week of slow trade, US equities closed higher for the week. Equities started the week off with extreme movement to the upside, however, traded horizontally till a busy Friday. Friday was without a doubt the busiest day in weeks with numerous key US economic data being released. The fourth quarter GDP started the morning off followed by Personal Consumption, Chicago Purchasing Managers index for February, as well as the Reuters/Michigan Consumer Sentiment Index for February. On a bright note, all these economic indicators beat the consensus with the exclusion of GDP which came in at 2.4% with expectations of 2.5% and a previous reading of 3.2%. Friday also saw the Canadian GDP be released for the fourth quarter. Unlike the US, Canadian GDP beat on both expectations and the previous reading coming in at 2.9% with an expected reading of 2.5% and a past reading of 2.7%.

All North American equity indexes closed higher for the week. However, it must be noted that the NASDAQ 100 was the weakest and the Dow Jones Industrial Average was the strongest for the past 5 trading days. During the current bull market, the Dow is usually lagging while the NASDAQ is usually providing the largest gains. This sign of swings among the indexes shows that the rally could be coming to a close. After a strong push in past weeks to the upside, the TSX did not move much closing the week fractionally higher.

The big news late this week was out of Eastern Europe, where the situation in Ukraine continues to develop. The situation still is very volatile and remains unclear. However, what is known is that protests in Ukraine broke out, and a gang of armed militant like soldiers entered Ukraine unannounced. It still remains unclear whom these armed soldiers are, however, the Ukraine government has announced that they believe Russia has sent troops into Ukraine. Russia has said little regarding the situation. With this being said, the Russian government has stated that troops are entering Ukraine to calm the protestors and assist in peacekeeping. The peacekeeping is rather questionable after a group of soldiers stormed a Ukraine government office and hoisted a Russian flag above the building. Both Canada and the US are considering taking serious action towards Russian in support of an independent Ukraine. Some believe that the Russians are invading Ukraine in order to control a shipping port in the Black Sea.

Late Friday markets were rocked by news out of Ukraine as the possibility of a Russian invasion was officially brought to light by the Ukrainian government. As the news broke the Dow tumbled over 120 points from the high to make a new low on the day. With this being said, US bonds caught a strong bid, gold was also hot as well. Both gold and bonds are a haven play. It appears that the end is nowhere insight for this very liquid situation in Eastern Europe. The potential for upside in both bonds and gold is high. Investors can look back on the Syrian crisis in late summer to see how both assets reacts, a similar satiation can only be expected.

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