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The Market is “Lin-ing”

I’m going to draw an analogy this week between the stock market and Jeremy Lin.

Over the past year, I’ve felt like the NBA has just shot itself in the foot.  There has been so much chatter about the goings-on inside the league that it makes people want to just throw up their hands and say “I’m over it.”  Then a guy like Jeremy Lin comes along, a basketball player from Harvard who got no love from the “big time” college programs, went undrafted in the pros, and was shown the door by the Golden State Warriors and Houston Rockets before landing with the New York Knicks.  In case you haven’t heard, he’s become a sensation and this quick video clip on You Tube will show you why.  If I watch one NBA game this year, it will be a Knicks game for sure.  I’ll call it a “resurgence of interest” in the NBA.

There’s been a resurgence in the stock market as well. Last week, the Standard & Poor’s 500 Index (S&P 500) closed within a whisker of its 2011 high, the Dow Jones Industrial Average (DJIA) closed just shy of the 13,000 mark last seen on May 20, 2008 (intraday).  For those wondering, the all-time high for the DJIA was 14,012 set on October 9, 2007 and the low point of the crisis was 6,547 set on March 9, 2009.  Finally, the NASDAQ is trading at a level not seen since December of 2000.

For the week, the Dow Jones Industrial Average (DJIA) gained 1.16% to 12,950, the Standard & Poor’s 500 Index (S&P 500) gained 1.38% to 1,361 and the Nasdaq Composite Index gained 1.65% to 2,952.  The Russell 2000 Index, which tracks the performance of small capitalization stocks, gained 1.89% to 829.

So what’s the Jeremy Lin of the market?  I think it’s probably the economy.  We’ve had stronger broad based U.S economic data for 20 straight weeks.  Unemployment claims have declined significantly to a low not seen since March of 2008, and both housing and manufacturing have improved (see last week’s blog).

We’ll have more information when earnings season wraps up next week.

Finally, I want to point out some market data from the 2011 market high on April 29.  Since that day, half of the ten S&P 500 sectors are up and half are down as of Friday, Feb 17,2012.  Half and half!  Remember, we saw some awful market action from April 2011 to the end of the year.

The two best performing sectors?  Tech and Consumer Discretionary.  The two worst?  Financials and Energy.   Staying the course and maintaining exposure to the cyclical sectors of the economy was hard in the second half of 2011, but for those who did, they participated in every single day of the recovery since the lows in October.

This is why, unless your need for short term liquidity changes, it generally never makes sense to trade or invest around emotion – positive or negative.  People who do this run the risk of buying high and selling low – which I know a lot of people did last year.

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

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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