J. L. Davis Weekly Market Update 1/3/2011

QUOTE OF THE WEEK:

“What you are shouts so loudly in my ears I cannot hear what you say.”
Ralph Waldo Emerson


THE WEEK IN REVIEW:

.... And 2010 is now in the "Rear View Mirror". Stocks ended the week, month and year quietly. All the major domestic indices were plus or minus less than 1% for the week. Domestic equities saw the best December on record since 2003, and the Dow Jones and S&P 500 Index did something that rarely (5% or less of the time) happens: they finished the year at their highs for the year.

2010 was a good year for most all asset classes in terms of positive returns. Ironically, China became the second largest country (by GDP) this past year, but its stock market experienced near the worst performance of the major world economies. Investors seem to fear inflation is too rampant there. Rising interest rates there were the Christmas "present".

There are many reasons to be bullish as the new decade begins, however. The industrial economy is showing more than a pulse at present; emerging stock markets seem healthy and most large blue-chip American corporations are sitting on record amounts of cash. Their balance sheets are strong.

Gold continued on a tear, closing at $1,422, a new all-time high. Gold looks like it wants to break-out here. Oil also finished the year strong, closing at $91.40. Gasoline prices have crept back to pre-economic meltdown levels, creating a tax on the consumer.

The 10-year US Treasury yield closed the year at 3.29%.

THIS WEEK'S U.S. ECONOMIC RELEASES

3-Jan Construction Spending
3-Jan ISM Index
4-Jan Factory Orders
4-Jan FOMC Minutes
4-Jan Auto Sales
4-Jan Truck Sales
5-Jan MBA Mortgage Purchase Index
5-Jan Challenger Job Cuts
5-Jan ADP Employment Change
5-Jan ISM Services
6-Jan Initial Claims
6-Jan Continuing Claims
7-Jan Nonfarm Payrolls
7-Jan Unemployment Rate
7-Jan Hourly Earnings
7-Jan Consumer Credit


Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.

The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.

The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

Google Finance is the source for any reference to the performance of an index between two specific periods. Multiple sources including Hanlon Investments and JP Morgan, and their respective weekly bulletins were consulted for both the data and viewpoints.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Past performance does not guarantee future results.

You cannot invest directly in an index.

Consult your financial professional before making any investment decision.

These are the views of J. Leland Davis and Jeremy L. Davis, with materials & additional viewpoints taken from multiple sources, including those referenced above. These views are not necessarily those of JL Davis Financial Corporation or Multi Financial Securities Corporation, and should not be construed as investment advice (neither of whom gives tax or legal advice). All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.