Let's recap some of the good news last week:
» The Commerce Department said the economy grew in the fourth
quarter at its fastest pace in more than six years;
» The Institute for Supply Management-Chicago said its index of
Midwest business activity rose more than expected in January;
» Consumer sentiment in January as measured by The Reuters/
University of Michigan Surveys of Consumers hit its highest level
in two years; and
» Of the 220 companies in the S&P 500 index that have reported
fourth quarter earnings, 78% of them exceeded analysts'
expectations, according to Thomson Reuters. In a typical quarter,
only 61% of companies beat Wall Street targets.
Sounds pretty good, doesn't it? So, how does the stock market
respond? It goes down. Once you delve into it a little further,
this "good news for the economy is bad news for the stock market"
may not be as illogical as it seems. Do you remember how bad things
were back in early March 2009? Just as the economy seemed on the
brink of destruction, the stock market turned around and started
soaring. Back then, investors detected the early signs of a
turnaround in the economy. They were proven right as evidenced by
last quarter's GDP growth and the positive fourth quarter earnings
that are now coming out.
Effectively, the stock market anticipated the recent positive news
and that is partly why the market rallied so much in 2009. Now, it
appears that much of this good news is already "priced" into the
market. So, rather than propelling the market higher, the good news
is causing some investors to take profits while waiting for the
next catalyst. Whether this recent downturn is just a bump along
the bull market path or the beginning of a new leg down is unknown.
Either way, we continue to monitor the situation on your
behalf.
| DATA AS OF 1/29/10 |
1-WEEK |
Y-T-D |
1-YEAR |
3-YEAR |
5-YEAR |
10-YEAR |
Standard & Poor's 500
(Domestic Stocks) |
-1.60% |
-3.70% |
30% |
-8.90% |
-1.90% |
-2.60% |
DJ Global ex US
(Foreign Stocks) |
-3.4 |
-4.4 |
43.5 |
-7.4 |
2.8 |
0.7 |
10-year Treasury Note
(Yield Only) |
3.6 |
N/A |
2.8 |
4.9 |
4.1 |
6.7 |
Gold
(per ounce) |
-0.5 |
-2.3 |
20.9 |
18.7 |
20.6 |
14.3 |
DJ-UBS
Commodity Index |
-4.3 |
-7.3 |
16.4 |
-7 |
-2.5 |
2.9 |
DJ Equity All
REIT TR Index |
-0.7 |
-5.2 |
41.7 |
-15.7 |
1.3 |
10.3 |
| Notes: S&P 500, DJ Global ex
US, Gold, DJ-UBS Commodity Index returns exclude reinvested
dividends (gold does not pay a dividend) and the three-, five-, and
10-year returns are annualized; the DJ Equity All REIT TR Index
does include reinvested dividends and the three-, five-, and
10-year returns are annualized; and the 10-year Treasury Note is
simply the yield at the close of the day on each of the historical
time periods.Sources: Yahoo! Finance, Barron's, djindexes.com,
London Bullion Market Association.Past performance is no guarantee
of future results. Indices are unmanaged and cannot be invested
into directly. N/A means not applicable or not available. |
WHAT DO A MICROSCOPE AND A TELESCOPE have in common as it
relates to investing? Both of them represent ways to look at the
markets that may help us be better investors.
Structurally, we like to view the markets through a microscopic and
a telescopic lens. Through reports like the one you are reading
now, we keep tabs on what is happening at a microscopic level. We
know that what happens in the short-term at the granular level
could be early warning signs of longer-term changes. These
microscopic changes could include things such as: changes in market
internals and technical analysis, insider buying or selling,
unexpected changes in economic numbers, and sentiment
changes.
Our telescopic lens captures the big picture view of trends and
opportunities that unfold over longer periods. These take longer to
come to fruition, but usually end up generating the greatest
rewards. Telescopic changes could include things such as:
regulatory changes, technological changes, monetary and fiscal
policy changes, and demographic changes.
Utilizing a microscopic and telescopic point of view helps us pay
attention to the shortterm so we don't get blindsided, while
allowing us to scan the horizon for bigger trends that may
ultimately have the largest positive impact on your portfolio. You
could also call it being "bifocal."
For your convenience the sources have been listed below:
www.cnbc.com/id/35141739
www.cnbc.com/id/35143310
www.marketwatch.com/story/us-stocks-stumble-in-february-2010-01-30
