Will the market continue to climb? By Ken Mahoney
With the Dow up 4.1% for the 1st quarter, the S&P up 4.9%, and the Russell 2000 index of small company stocks up 8.5%, 2010 is off to the races! Both the Dow and the S&P posted their 4th consecutive quarter of gains, and their best 1st quarter performance in over 10 years.
Investor’s ride to recent gains has certainly not been without bumps. Amidst credit problems in Greece and an ongoing healthcare debate in the U.S., the quarter’s rally-fade-rally roller coaster saw the Dow shed more than 7% off its mid January high, leaving it down 5% for the year. Thankfully, it didn’t take investors long to come to the conclusion that with the debt crisis likely to be contained, stock valuations at reasonable levels, and corporate balance sheets strong, the footing for stocks appeared relatively stable. And so began the second rally of the quarter – one that gave birth to an eight-session winning streak, and eventually ended the quarter up 428.58 points.
The question everyone seems to be asking now is: Will this trend continue? As you well know, when it comes to the stock market, we never make predictions. That being said, there are signs pointing to a bright future for the stock market. Consider a few:
- U.S. corporate balance sheets are strong. After showing a steep decline during the financial crisis, in the 4th quarter of 2009, undistributed corporate profits hit an all-time high of $527 billion at a seasonally adjusted annual rate.
- Cash stockpiles could be put to work in mergers and acquisitions, fueling corporate growth and higher prices. The nonfinancial companies in the S&P have a record $830 billion of cash on hand.
- Optimism is growing that the U.S. economy is healing despite some weak spots such as housing and unemployment. Retired Fed Chairman Alan Greenspan said Sunday that the likelihood of a so-called double dip recession “have fallen very significantly in the last two months". He added, "There is a momentum building up which is really just beginning, and it's got a way to go”.
- Historically, 1st quarters are not the strongest of the year. Going back to 1945, on the S&P, 1st quarters have only gained an average of 1.9% while the 4th quarter has gained an average of 3.6%.
Granted, both stocks and the U.S economy still face hurdles. With the Fed moving forward with its plan to end the unprecedented easing of credit, unemployment at 10%, construction spending falling, and rising taxes on the horizon, there are certainly no guarantees that the 2nd quarter will be as good – or better – than the first.
Whatever the future brings, one thing is certain: We will not allow the market’s recent advancement to make us complacent. We are committed to staying ever alert to changing economic tides, and to making prudent adjustments to protect the assets you have entrusted to our care.
The U.S. economy created 162,000 jobs in March, the largest seasonally adjusted increase in nonfarm payrolls in three years, the Labor Department reports.
The U.S. Treasury Department on Friday confirmed $4.4 billion in payments from two companies that received funds from the Troubled Asset Relief Program. Hartford Financial Services Group, Inc. repaid $3.4 billion to repurchase preferred shares, while General Motors Co. repaid $1 billion.
The Obama administration handed down a tough new set of mileage standards for cars and light trucks Thursday, as part of its drive to cut harmful emissions and ease the nation's dependence on foreign oil. The rules, based on a joint proposal by officials at the Environmental Protection Agency and Transportation Department, aim to raise the average mileage of new cars on U.S. roads to 35.5 miles per gallon by 2016. That's a 34% increase from the current 26.4 mpg level and accelerates emissions targets set by Congress in 2008.
Former American International Group (AIG) executive Joseph Cassano will likely not face criminal charges related to the collapse of the insurance giant, CBS news reported on its website Friday evening. Cassano will meet with Justice Department lawyers next week in what is seen as the end of the criminal investigation into the collapse, which resulted in a U.S. government bailout to the tune of $180 billion.
Have you filed your taxes yet? The top five pro.
0crastinating U.S. cities last year were Houston, Chicago, New York, Austin and San Francisco, according to TurboTax.
QUOTE OF THE WEEK:
In reference to the U.S. economy: "We are beginning to turn the corner" - President Obama speaking on Friday to employees of a manufacturing plant that received government stimulus money.
Share the Wealth of Knowledge!Please share this market update with family, friends, or colleagues. If you would like us to add them to our list, simply click on the "Forward email" link below. We love being introduced!
Sources: The Wall Street JournalStrategas Research PartnersUSA Today http://www.marketwatch.com/story/treasury-confirms-tarp-payments-from-gm-hartford-2010-04-04 http://www.marketwatch.com/story/usseen-ending-aig-probe-without-charges-report-2010-04-03 http://www.marketwatch.com/story/payrolls-rise-162000-best-gain-in-three-years-2010-04-02-83000 http://www.marketwatch.com/story/as-april-15-nears-dont-forget-these-tax-tasks-2010-04-02 http://www.marketwatch.com/story/us-sets-tougher-car-mileage-standards-2010-04-01
Russell 2000 Index - What Does Russell 2000 Index Mean? – It is an index measuring the performance of the 2,000 smallest companies in the Russell 3000 Index, which is made up of 3,000 of the biggest U.S. stocks. The Russell 2000 serves as a benchmark for small cap stocks in the United States.
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 Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq. The DJIA was invented by Charles Dow back in 1896.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
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.
Google 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.
These are the views of Platinum Advisor Marketing Strategies, LLC, and not necessarily those of the named representative or named Broker dealer, and should not be construed as investment advice. Neither the named representative nor the named Broker dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.
