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Market Commentary
Economic Updates
Recent News |
Weekly Commentary
February 1, 2010
The Markets
Let's recap some of the good news last week:
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The Commerce
Department said the economy grew in the fourth quarter at its fastest pace in
more than six years;
-
The Institute for
Supply Management-Chicago said its index of Midwest business activity rose more
than expected in January;
- Consumer sentiment in
January as measured by The Reuters/University of Michigan Surveys of Consumers hit
its highest level in two years; and
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Of the 220 companies in
the S&P 500 index that have reported fourth quarter earnings, 78% of them
exceeded analysts' expectations, according to Thomson Reuters. In a typical
quarter, only 61% of companies beat Wall Street targets.
Sounds pretty good, doesn't it? So, how does
the stock market respond? It goes down.
Once you delve into it a little further, this
"good news for the economy is bad news for the stock market" may not be as
illogical as it seems. Do you remember how bad things were back in early March
2009? Just as the economy seemed on the brink of destruction, the stock market
turned around and started soaring. Back then, investors detected the early
signs of a turnaround in the economy. They were proven right as evidenced by
last quarter's GDP growth and the positive fourth quarter earnings that are now
coming out.
Effectively, the stock market anticipated the
recent positive news and that is partly why the market rallied so much in 2009.
Now, it appears that much of this good news is already "priced" into the
market. So, rather than propelling the market higher, the good news is causing
some investors to take profits while waiting for the next catalyst.
Whether this recent downturn is just a bump
along the bull market path or the beginning of a new leg down is unknown.
Either way, we continue to monitor the situation on your behalf.
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Data
as of 1/29/10
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1-Week
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Y-T-D
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1-Year
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3-Year
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5-Year
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10-Year
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Standard & Poor's 500
(Domestic Stocks)
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-1.6%
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-3.7%
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30.0%
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-8.9%
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-1.9%
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-2.6%
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DJ Global ex US (Foreign
Stocks)
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-3.4
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-4.4
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43.5
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-7.4
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2.8
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0.7
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10-year Treasury Note
(Yield Only)
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3.6
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N/A
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2.8
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4.9
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4.1
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6.7
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Gold (per ounce)
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-0.5
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-2.3
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20.9
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18.7
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20.6
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14.3
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DJ-UBS Commodity Index
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-4.3
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-7.3
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16.4
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-7.0
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-2.5
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2.9
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DJ Equity All REIT TR
Index
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-0.7
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-5.2
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41.7
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-15.7
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1.3
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10.3
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Notes: S&P 500, DJ
Global ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends
(gold does not pay a dividend) and the three-, five-, and 10-year returns are
annualized; the DJ Equity All REIT TR Index does include reinvested dividends
and the three-, five-, and 10-year returns are annualized; and the 10-year
Treasury Note is simply the yield at the close of the day on each of the
historical time periods.
Sources: Yahoo! Finance,
Barron's, djindexes.com, London Bullion Market Association.
Past performance is no
guarantee of future results. Indices are
unmanaged and cannot be invested into directly.
N/A means not applicable or not available.
WHAT DO A MICROSCOPE AND A
TELESCOPE have
in common as it relates to investing? Both of them represent ways to look at
the markets that may help us be better investors.
Structurally,
we like to view the markets through a microscopic and a telescopic lens.
Through reports like the one you are reading now, we keep tabs on what is
happening at a microscopic level. We know that what happens in the short-term
at the granular level could be early warning signs of longer-term changes.
These microscopic changes could include things such as: changes in market
internals and technical analysis, insider buying or selling, unexpected changes
in economic numbers, and sentiment changes.
Our
telescopic lens captures the big picture view of trends and opportunities that
unfold over longer periods. These take longer to come to fruition, but usually
end up generating the greatest rewards. Telescopic changes could include things
such as: regulatory changes, technological changes, monetary and fiscal policy
changes, and demographic changes.
Utilizing
a microscopic and telescopic point of view helps us pay attention to the
short-term so we don't get blindsided, while allowing us to scan the horizon
for bigger trends that may ultimately have the largest positive impact on your
portfolio. You could also call it being "bifocal."
Weekly Focus - Think About
It
"It is impossible to produce a superior performance
unless you do something different from the majority."
John Templeton
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Best regards,
Jim Forcella, CFP®, CFS
LPL Branch Manager
LPL Investment Adviser Representative
CA Insurance License #0635256
P.S. - Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
Closing Reminders - Should your personal or financial situation change (i.e. Marital or employment status, beneficiary changes or income needs) please contact us at 530.222.6301 or 800.546.5573 for either a phone review, or an appointment. We want to ensure that your current financial objectives meet your personal circumstances.
Forcella Wealth Management Information - Are you receiving too much mail regarding your investments? You now have the option to receive your LPL Financial communications electronically! LPL Financial is pleased to offer the convenience of viewing shareholder communications, including the fund prospectus, annual reports, and proxy statements online. Visit the link below to be directed to a secure website where you will enter your LPL Financial account number and Email address. You will no longer receive shareholder communications information through the mail but can request a hard copy at any time. Please feel free to contact us if you have any questions regarding this form.
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Forcella Wealth Management
1600 Victor Ave ● Redding, CA 96003
Phone 530.222.6301 ● Toll Free 800.546.5573 ● Fax 530.226.1677
jim.forcella@lpl.com ● www.forcellawealth.com
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* This newsletter was prepared by PEAK.
* The Standard & Poor's 500 (S&P 500)
is an unmanaged group of securities considered to be representative of the
stock market in general.
* The DJ Global ex US is an unmanaged group
of non-U.S. securities designed to reflect the performance of the global equity
securities that have readily available prices.
* The 10-year Treasury Note represents debt
owed by the United States Treasury to the public. Since the U.S. Government is
seen as a risk-free borrower, investors use the 10-year Treasury Note as a
benchmark for the long-term bond market.
* Gold represents the London afternoon gold
price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be a
highly liquid and diversified benchmark for the commodity futures market. The
Index is composed of futures contracts on 19 physical commodities and was
launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures
the total return performance of the equity subcategory of the Real Estate
Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any
reference to the performance of an index between two specific periods.
*
Opinions expressed are subject to change without notice and are not intended as
investment advice or to predict future performance.
*
Past performance does not guarantee future results.
*
You cannot invest directly in an index.
*
Consult your financial professional before making any investment decision.
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Securities Offered Through LPL Financial Member FINRA/SIPC
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