Last Thursday, the Dow Jones Industrial Average (DJIA) finished above 13,000 for the first time since May of 2008. Unfortunately, it gave some gains back on Friday and the index was unable to stay above 13,000 for the week. The big losers for the week were the small caps – more on that below.
While the economic releases last week were not as good as we have become used to, the data were good enough to still call the week a “winner” on the economic news front. That makes 22 straight weeks. Unemployment claims, increase in new vehicle orders (in the face of these gas prices – wow!), and consumer confidence numbers lead the week’s strong reports.
For the week, the DJIA lost -0.04% to 12,978, the Standard & Poor’s 500 (S&P 500) gained 0.28% to 1,370, and the Nasdaq Composite Index gained 0.42% to 2,976. The Russell 2000 Index, which tracks the performance of small capitalization stocks, lost ground this week shedding -2.96% to finish at 802.
To me, it’s clear that we have an economic growth picture that can be described as “self-fulfilling” because an increase in employment results in a rise in vehicle sales, which results in a rise in vehicle production, which creates more jobs… and so on and so forth. It’s an admittedly elementary analysis, but also very powerful and somewhat overlooked. A great market strategist once told me very early on in my career “Dave, it’s almost always about houses and cars.” I still believe that.
The big problem that we are facing is how much of an impact oil prices will have on the recovery. If the prices keep going up, it’s going to hit the global economy. Right now, I believe that it’s something to keep an eye on, but not something any long-term investor needs to start changing portfolios over.
Everyone always likes to hear a prediction – so here’s one for everyone. I predict that we will start hearing the financial news begin to report on double-dip fears and “sell in May” ideas by the end of March. As for the first – it’s all about getting the eyeballs – and nothing garners attention quicker than someone screaming that the sky is falling. So I’ll choose to continue to watch the indicators that guided us, at Monument Wealth Management, away from this panic last year. As for the second, well, we are not really the “trader” types anyway, so we’ll leave that action for the “guys in the know”…if they even know who they are.
We recommend investors stay invested for growth and keep their eye on energy prices. If you sell in May and go away, you also have to pick the right time to get back in. The odds of being right selling and then being right when buying back in stink.
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Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC
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.