While
it is exceptionally difficult to forecast stock markets dips and bounces, I
believe it pays to keep an eye on the reality of the current situation. When I assess the points below, I feel confident that investors owning the
stock of great companies will be rewarded in the future:
The stock market
appears to have resumed its positive up-trend.
Most
of the time the U.S. stock market looks to 3 factors (call them the “pillars”
that support the stock market) to support its upward trend – let’s grade each
of the pillars.
CONSUMER SPENDING: I grade this factor a C- (below average
THE FED AND ITS POLICIES: I continue to grade this factor an A+ (extremely favorable) because the
FED cannot do much more than it is doing to support the stock market and asset
prices.
BUSINESS PROFITABILITY: I continue to grade this factor an A (very favorable).
Last
week’s Economic reports indicate the economy is heating up as well as the
temperature. This is evidence of the
anticipated manufacturing ramp-up to produce the goods consumers may buy when
the weather improves. Last week, good
reports came from employment/jobs, from manufacturing activity, and from
personal income levels.
One
negative economic report last week indicated productivity came in at a lower
level than expected in the 4th Quarter, 2013. I expect this to be a temporary
situation.
Last week, U.S. Stocks increased but Foreign Stocks and Bonds declined.
Returns through 3-7-2014
1-week
Y-T-D
1-Year
3-Years
5-Years
10-Years
Bonds- BarCap Aggregate Index
-.6
1.4
-.1
3.7
4.9
4.4
US Stocks-Standard & Poor’s 500
1.1
2.0
24.2
15.2
25.1
7.2
Foreign Stocks- MS EAFE Developed Countries
-.4
.6
14.6
3.5
15.8
3.6
Source:
Morningstar Workstation. Past performance is no guarantee of future
results. Indices are unmanaged and cannot be invested into directly.
Three, five and ten year returns are annualized excluding dividends.
“Your Financial Choices” The show airs on WDIY
Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s
Laurie Siebert CPA, CFP®, AEP®. This
week Laurie will discuss: “How different types of INCOME
are taxed at different rates.”
Laurie will take your calls on these topics and
other inquiries this week. WDIY is broadcast on FM 88.1 for reception in most
of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton and
Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville and
Macungie area – or listen to it online from anywhere on the internet. For
more information, including how to listen to the show online, check the show’s
website www.yourfinancialchoices.com
and visit www.wdiy.org.
The three M’s of March Madness: Money, Media and
Marketing. March Madness has now drawn
even with the Super Bowl for followers – not overlooked by marketing
professionals. Because it is drawn out
over a couple weeks, there is plenty of opportunity to market products through
all sorts of media carrying the games, pools, betting results etc., And, the actual players receive none.
It’s beginning to seem that, short of war, this
market’s going up, so perhaps it’s no wonder that talk is building of a
2000-style stock market bubble.
Shares jumped 1%
last week, notching another all-time record high despite a serious
confrontation between the U.S. and Russia over its moves in the eastern
Ukraine. Geopolitical concerns were trumped by improving U.S. economic data,
and conciliatory-sounding comments from Russian President Vladimir Putin
assuaged the market. Nevertheless, the situation on the ground in Crimea
remains unpredictable and tense, and could yet come back to slam the market.
On the week, the
Dow Jones Industrial Average picked up 131 points, or 0.8%, to 16,452.72. The
Standard & Poor’s 500 index gained nearly 19 points to 1878.04, a new high.
The Nasdaq Composite index rose 28 points, or 0.65%, to 4336.22. The Russell
2000 small cap index soared 1.7%, or 20 points, to 1203.32, and a nearly 3%
one-day jump Tuesday helped fuel the bubble talk.
The more
important geopolitical issue could extend beyond the dust-up over the Ukraine,
leading to future market-slamming confrontations between the West and Russia
over other issues, like Syria and Iran, says James Russell, senior equity
strategist at U.S. Bank Wealth Management. “Cooperation with Russia could
be off the table, and that could lead to more strident event risk later this
year,” he adds.
U.S. domestic
data continue to show trends that are “two steps forward, one step
back,” Russell adds, but remain supportive nonetheless of the rally. Last
week’s report of a drop in jobless claims and a larger-than-expected rise in
payrolls was welcomed by investors.
In addition to
the equity rally, a hot IPO market is also behind the bubble talk. Initial
public offerings are ramping up so the market will have to digest a lot of new
stock supply, he adds. Bad-weather issues might also be reflected in the
first-quarter reporting season (Barrons Online).
