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Not So Super

Raise your hand if you were surprised that the (not so) Super Committee failed to reach an agreement on the federal debt-reduction deal.

Exactly. Actually, it was about as surprising to me as my Thursday night stomach ache.  Much like our national spending habits, I simply could not stop consuming on Thanksgiving no matter how much it hurt.  So hey, Super Committee, I kinda get it.  The difference is that I’ll do something about it on the treadmill.

For the week, the Dow Jones Industrial Average (DJIA) lost -4.78% to finish at 11,232, the Standard & Poor’s 500 (S&P 500) lost -4.69% to finish at 1,159 and the Nasdaq Composite Index lost -5.09% as well to finish at 2,442. The Russell 2000 Index, which tracks the performance of small capitalization stocks, lost -7.40% to finish at 666.

It was the worst Thanksgiving week for stocks in the past 80 years – yes, that’s all the way back to the Great Depression.

Unfortunately, the failure for the Super Committee means a higher hurdle to getting the items passed that have greater near-term consequences for the economy and markets.  Before the end of the year, Congress has to pass some combination of the following: unemployment benefit extension, payroll tax cut, doctor Medicare fix, 100% depreciation, and an Alternative Minimum Tax fix.

Real gross domestic product (GDP) growth in the third quarter was revised down last week as the new data was incorporated in the report. When first reported in late October, third quarter GDP growth printed at +2.5%. Today’s revised data shows that GDP grew at just 2.0% in the quarter.

Virtually all of the downward revision came as a result of less inventory accumulation in the quarter than previously thought. The good news is that a drawdown in inventories sets up for a rebound in inventory stocking in the current fourth quarter. Most economists are still forecasting real GDP growth between 2.5% and 3.0% in the fourth quarter and at around 2.0% next year.

The good news is that the real GDP for the third quarter of 2011 is higher than the real GDP was in the fourth quarter of 2007 – the peak before the 2008 recession.

As we have said before, the outlook may not be great, but it’s not bad either.  Unless your need for liquidity has changed, we are recommending that investors stay allocated for recovery and not recession. We continue to favor cyclical sectors of the markets, growth over value, and small- and mid-capitalization stocks over large-cap even though they are more volatile in the recent whipsaw markets.

And as some extra punctuation for that last sentence, it looks like the S&P 500 is up about 3% today on the strong beginning to holiday sales and some progress in Europe.

Call us for help or if you have any questions.

IMPORTANT NOTE: Due to industry regulations, comments are not permitted on this blog. If you would like to contact the author, please email us at info@monumentwm.com.


Securities and Financial Planning offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC


**Standard Compliance Disclosures
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. 

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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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