A Good Week – Finally
Last week, the good news was that there were coordinated actions by the world’s central banks aimed at easing the pressures on the European banks. The actions – loans, really – provide liquidity. The problem is that Greece still remains in serious debt and the other troubled countries still have loans on the balance sheets of the European banks. Liquidity is great, but it does not pay off the debt.
Regardless, the equity markets rallied all five days last week creating a mini “weekly rally”. As a result, the indices we follow were all winners last week. The Dow Jones Industrial Average (DJIA) gained 4.70% to finish at 11,509, the Standard & Poor’s 500 Index (S&P 500) gained 5.35% to finish at 1,216 and the Nasdaq Composite Index gained 6.25% to finish at 2,622. The Russell 2000 Index, which tracks the performance of small capitalization stocks, gained 5.99% to finish at 714.
There was some economic data out last week indicating that the economy remains stagnant. However, the good news is that it does not seem to be deteriorating to the downside (like it did in 2008). No doubt about it, the U.S. economy still remains fragile and vulnerable to outside shocks (oil price spike, natural disaster, terror attack, etc.) Frankly, it also remains susceptible to policy mistakes, both at home and abroad.
We still think that we are in for a period of slowing growth but no recession. In fact, when the 3rd quarter Gross Domestic Product (GDP) numbers start to get released, we think we’ll see that they are better than expected and better than the second quarter GDP.
Unless an investor’s need for short-term liquidity has changed, we do not think anyone should be reacting to this news by selling.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Stock investing involves risk including loss of principal. The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries, and widely held by individuals and institutional investors. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The NASDAQ Composite Index measures all domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. The Russell 2000 Small Stock Index is an unmanaged index generally representative of the 2000 smallest companies in the Russell 3000 Index. The Russell 2000 is an unmanaged index generally comprised of companies with lower price-to-book ratios and lower forecasted growth values.
David B. Armstrong, CFA
President & Co-Founder
Dave got into the industry when he discovered his passion for finance in his mid-20’s. He’s a combat veteran and served as an officer in the United States Marines Corps on both active duty and in the reserves, retiring at the rank of Lieutenant Colonel. While serving on active duty, Dave was unable to spend money on deployments, so he became a self-taught investor. Along with a few bucks cash as a bouncer, his investing performance grew to be good....
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