“It has been said that democracy is the worst form of government except all the others that have been tried."
Sir Winston Churchill
British politician (1874 - 1965)
THE WEEK IN REVIEW:
For the abbreviated trading week that ended Thursday, the Dow was up 82, or 0.7%, at 11573, the S&P 500 rallied for a fourth straight week and rose 13, or 1%, to 1257, the Nasdaq added 23, or 0.9%, to 2666, and the small-cap Russell 2000 Index gained 9, or 1.2%, to close the week at 789. For many of these indices these levels have completely recouped all losses going back to pre-Lehman failure, which was September 2008.
According to JP Morgan this week, there is a "solid recovery" in retail sales. But, is the consumer really back? Retail sales came in better than expected in late December economic numbers, signaling that at least for the moment, perhaps so. Many people believe a recovery in retail sales is not possible without a parallel recovery in consumer confidence. The recent "V-shaped" recovery in retail sales so far has not seen a similar recovery in consumer confidence. But last week's revision to October retail sales coupled with strong November numbers indicate that consumer spending will come in above 4% for the fourth quarter. A strong showing. Next week's reports (see below) have the potential to be very enlightening as to what the New Year might portend. We remain cautiously optimistic for 2011 for many reasons.
However, the short term may be challenged a bit. Hanlon investments opines, "With the New Year just a week away, perhaps the gains achieved in 2009 / 2010 by many investors will become “realized” and there may be selling pressure on equities". We agree.
Finally, last week oil approached its 12-month high, closing at $91.41 per bbl, while gold continued its consolidation trade, closing at $1,379 per ounce. Copper continued to show strength, hitting a multi-year high at $4.26 per pound. The 10-year US Treasury interest rate closed at 3.39%. Although interest rate movement appears to have calmed some in the past week, the general feeling is that a “2 handle” on the 10-year US Treasury Bond is over from this point forward. We look for flat to modestly increasing interest rates.
HEADLINES
- Senate passed arms treaty with Russia
- Greek Parliament passed 2011 Austerity Budget
- 3Q10 GDP revised up to 2.6%
- Home Sales slow but improving
- Personal Income grew 0.3% in November
- Next Week: Consumer Confidence, Chicago PMI
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.
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