“Off The Wall” Blog
Unique, straight-forward, unfiltered opinion on topics of concern for individuals with newfound wealth.
Thursday :“Woo-Hoo!” Friday :“Chicken Little”
By David B. Armstrong, CFA | Jul 23, 2011 | Weekly Market Commentary
Thursday’s closing news was rife with articles anticipating a great employment report (Non-Farm Payroll or “NFP”) on Friday. By Friday at 8:31 a.m., the report was out and it was awful – the private sector added about 57,000 jobs but the loss of about 39,000 government jobs (mostly at the municipality level) resulted in a total net number of 18,000 net new jobs for June. This was a far cry from the 100,000 new jobs that had been expected.
Of the 11 economic reports released last week, six were negative, so all in all it was not a horrible week,, but we do think that the expectation of a good report followed by a terrible one simply killed the sentiment.
Interestingly, all of the equity markets we track were winners last week. The Dow Jones Industrial Average (DJIA) gained 0.59% to finish at 12,657, the S&P 500 Index gained 0.31% to finish at 1,344 and the NASDAQ Composite Index gained 1.55% to finish at 2,860. The Russell 2000 Index, which tracks the performance of small capitalization stocks, gained 1.49% to finish at 853.
On another topic, it’s that time again—earnings season is here!
We kick off the second quarter 2011 earnings reports with Alcoa, which will be reporting tonight. It seems to us that given the reduction in second quarter earnings expectations, many analysts believe that the corporate sector will continue to feel the effects of the Japanese earthquake and tsunami, the violence in North Africa and the Middle East, and the European debt problems. Investors are probably also sharing these concerns. You simply can’t have Japan, the world’s third largest economy, come to a complete standstill and not expect an impact on earnings. According to Bespoke Investment Group, we have seen the longest streak of consecutive declines (positive minus negative revisions) in earnings estimate revisions since 2007. The count? Ten weeks and running.
However, we also believe that complete pessimism on the part of analysts, the media, and investors is rarely always such a bad thing. Actually, I have not heard many in the media remind people that the DJIA is actually up just around 8% YTD and the S&P 500 is up about 5% YTD.
Please, as always, call us with any questions or concerns you may have. We realize that it is very difficult to stomach the short-term ups and downs of the market, but that’s why it’s so important to have a plan in place that keeps you from making emotional investment decisions.
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 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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