APRIL 15, 2011 SECOND QUARTER COMMENTS
WHEN I GET TO THE BOTTOM, I GO BACK TO THE TOP OF THE SLIDE…
From the August 2010 lows, to the February 18, 2011
high, the S & P 500 gained 30%.
Three days after the March 16 low, the Dow gained
500 points and four days later another 200 points.
The S&P 500 had its best first quarter since 1998, when it gained 13% as the tech bubble was inflating. This year, the quarterly gain was ONLY 5.6 %.
All while revolutions and civil wars spread throughout the Middle East, a nuclear meltdown and tsunami hit Japan, Europe tries to keep banks and countries solvent, with oil and food inflation threatening global stability. Strong markets climb a wall of worry. Could there be anything more to worry about?
Interest rates at historic lows, corporate profits at historic highs, and with Carmelo Anthony back home, Wall Street was in a good mood during this first quarter of 2011.
GREET THE BRAND NEW DAY...THE SUN IS UP, THE SKY IS BLUE…
The average duration of bull markets since 1932 has
been 3.8 years.
In a bull market, the gains are the largest in the
first and last quarters.
First time claims for unemployment are falling and the work force expanded in February and March. The 8.8% unemployment rate is at a two year low. The Federal Reserve is still pumping liquidity into the system and the economy is growing. Companies are boosting dividends, stock buybacks are ahead of last year’s pace and we have already seen $250 billion in takeovers in 2011.
Take a look around. If the recovery starts looking like an expansion…..that is bullish.
THE DEEPER YOU GO, THE HIGHER YOU FLY…
The strongest stock market period in the presidential election cycle is from the low before the mid-term election, to the high after the election. This usually happens during the 3rd year of a presidential cycle and over the past five mid-term elections, during this period, the S & P 500 has averaged a 41% gain.
When combining the fourth quarter and the first quarter of the year following the past five mid-term elections, this has been the strongest period for stocks and has averaged a +7.9% compounded gain. In comparison, the average performance during the second and third quarters of these years was - 6.4%.
2011 is a pre- election year, which are usually positive for stocks as the administration tries to fire up the economy so voters will be feeling good at election time. In three of the past four pre-election years, the Dow Jones Industrial Average posted 20% plus gains, and while some fiscal sanity would help make that target a reality, the way our legislators spend our money, it won’t come easy.
YOU SAY YOU WANT A REVOLUTION…
The drive for individual freedom over state control is breaking out from Wisconsin to Cairo, from Syria to Tibet. Whether the outcome is a complete rejection of Western values remains to be seen.
The Jasmine Revolution is the biggest threat to Chinese regime since Tiananmen Square in 1989.
The Green Revolution in Iran would benefit from our “responsibility to protect” program if we decide to help the students finally over throw the mullahs.
The Muslim Brotherhood’s constitutional amendment, approved by 77% of Egyptian voters, bars women and Christians from the Presidency, and creates a board of Muslim clerics to oversee the government.
Clearing past limitations is disruptive but necessary if freedom for the individual is the goal. Societies that open their markets are better fed, better housed and provide better opportunities for upward mobility than societies that remain closed and bureaucratic. A modern, prosperous, and enlightened society, based upon entrepreneurship, and education is what people want, not submission to elites, church or state.
And money for people with minds that hate, or who carry pictures of Chairman Mao…not bullish.
TWELVE O’CLOCK A MEETING, ROUND THE TABLE, FOR A SÉANCE IN THE DARK…
Warren Buffett says, “It won’t be the economy that will do in investors: It will be investors themselves”.
Investing on Wall Street is like swimming with sharks. The waters are treacherous. You must be careful what you do, and who you trust and it’s often best to avoid the bait that gets thrown your way since most is designed to hook and separate the investor from their wealth.
YOU KNOW I’D GIVE YOU EVERYTHING I’VE GOT FOR A LITTLE PEACE OF MIND…
Most do not have the proper training to understand
the dynamics of the global economy or how to benefit from its activity.
Many believe the stock market is manipulated because they don’t know
the rules of the game or how it is played. Without the right perspective
and experience on how to interpret situations and act accordingly, valuable
resources and financial peace of mind could be lost.
As a Certified Financial Planner, I have a fiduciary
responsibility to help clients achieve financial goals.
If there is any investment or financial concern that I could help with, please let me know, and thank you for your continued confidence and support.
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