1. Do you know how
world events can affect
your investments?
Wealth Management Insights June 2011
As the rapid collapse of investment markets around the globe
demonstrated just a few years ago, what happens in one country
can quickly influence what happens in another. It would be a
mistake for any investor to assume that just because you aren’t With the ever-increasing
interconnectivity of
actively invested in foreign companies, events occurring outside the global markets, you
need a financial partner
the United States won’t impact your portfolios or plans.
with perspective to help
you stay on top of it all.
What You Should Know:
1. Global commodity supply and demand ∙ In May 2011, cotton prices were more
are parts of the equation. than double their 10-year average,
A large part of the interconnectedness of prompting retailer The Gap to announce
world economies is based on their supply an anticipated 20% cost increase per
of and demand for certain commodities clothing item for the second half of the
essential to economic growth. These year. The Gap’s stock dropped more
include oil and grain – the fuels that than $3 per share on the day of the
keep machines and people running – announcement.
as well as precious metals and other ∙ Meanwhile, increased demand for
components essential for manufacturing. consumer goods from China’s emerging
The availability of these materials can middle class has created significant
directly impact not only commodity expansion opportunities for U.S. retailers
prices, but the share prices of publicly over the past year, particularly in the area
traded companies that rely on them and of online commerce.
the consumer prices of the goods those
companies produce.
∙ China, which has reported robust Lawrence M. Counen, CRC®
economic growth in recent years, has Senior Investment Consultant
experienced significant upticks in Private Wealth Management
demand for numerous commodities, 8888 Keystone Crosssing, Suite 1440
including cotton. Indianapolis, IN 46240
317-582-2265 . 800-382-1603, ext. 2265
lcounen@rwbaird.com

2. Wealth Management Insights June 2011
2. International politics often play a role. in check over much of the next year,
The political climate in nations possessing concerns resurfaced on May 23, 2011,
high concentrations of the commodities after the defeat of Spain’s ruling party
we use every day can also have a significant and a warning from S&P on Italy’s debt
impact on the prices of those commodities sparked a steep decline in stocks and
and the publicly traded companies that commodities.
deal in them.
4. Nature’s course can be unpredictable.
∙ The United States consumes nearly 19 In March 2011, a 9.0-magnitude seismic
million barrels of petroleum products event off the coast of Honshu sent tsunami
per day, just under half of which are waves crashing into Japan. The devastation
domestically produced. was massive, taking thousands of lives and
∙ Of U.S. petroleum imports, roughly ravaging Japan’s infrastructure – including
half come from nations in the western the cooling system at Fukushima Daiichi
hemisphere while the rest come from nuclear plant, which caused radiation to
Africa (22%), the Persian Gulf (17%) and leak into the ocean and air. As the world’s
other sources (10%).1 third-largest economy, Japan’s tragedy had
a multitude of implications for the global
∙ During the wave of political unrest economy – some of which have yet to
that spread across the Middle East in reveal themselves.
early 2011, the price of oil climbed to
more than $115 per barrel in late April. ∙ The reactor leak renewed global concerns
Shares of Exxon Mobil peaked at $87.98 about the safety of nuclear energy,
that month, up from $74.55 from the prompting some analysts to revisit their
beginning of the year. expectations of an anticipated global
“nuclear renaissance” and revise their
3. Sovereign debt has shared effects. outlooks regarding other forms of energy.
Economic growth requires capital, and to ∙ Disruptions in the production capabilities
raise that capital, nations often sell debt and supply chains associated with certain
to other nations. But when the resultant consumer electronics (of which Japan is a
growth doesn’t meet expectations, the risk leading manufacturer) is expected to impact
associated with those debt investments the availability and pricing of these goods.
increases even as the issuing nation’s credit
∙ The necessary rebuilding of damaged
worthiness decreases. This type of situation
infrastructure is expected to increase
was playing out on the world stage – and
demand for certain materials and
impacting U.S. markets – even before our
machinery.
own federal deficit and debt ceiling began
dominating headlines.
What You Should Do Now:
∙ In early 2010, concern over rising
government deficits and debt levels in Baird’s resources on three continents
Europe – most notably Greece, Ireland and provide the international insights
Portugal – raised potential default concerns required to offer investment advice with
for the nations that held that debt. the bigger picture in mind. Consult
your Baird Financial Advisor to discuss
∙ While austerity measures and the the implications of the current global
promise of loans from the International environment for your portfolio and plans.
Monetary Fund helped keep fears
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©2011 Robert W. Baird & Co. Incorporated. Member SIPC. First Use: 6/2011. MC-32596.