How long can the bull market ‘winning streak’ continue? By Ken Mahoney
The bluebird of happiness has landed in the headlines again. In the longest winning streak since April 2010, the Dow posted its seventh straight week of gains as investors fly in the face of lackluster economic data. Driven by a rally in the financial sector, U.S. stocks reached their best closing levels in two and a half years.
Despite higher than expected unemployment numbers, more Americans are dining out, traveling, and paying down their debt – all signs that people are feeling more confident in their spending ability. The National Retail Federation reported that holiday retail sales showed the biggest percentage gain in six years, rising 5.7%.
While the recent increase in optimism is a relief, it is prudent to remember that too much optimism can be dangerous. It is especially during times when euphoria is spreading that we need to be realistic and balanced in our expectations. In the words of noted stock investor, businessman and philanthropist Sir John Templeton, “Bull markets are born in pessimism, grow on skepticism, mature on optimism and die on euphoria.” Despite recent positive developments, many investors remember these timely words. There are still a number of challenges worth keeping an eye on, such as sovereign debt concerns in Europe, and the rising cost of basic goods. Keeping such issues in mind helps maintain a balanced approach toward investing.
While we are not recommending that any specific action be taken, we are highlighting the importance of avoiding the type of irrational exuberance that leads to poor, emotional decision making. If you have questions, please remember that we are always here to help you balance the risks and the rewards associated with investing.
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HEADLINES:
The U.S. federal government will bill states $1.3 billion in interest on jobless-pay loans. Thirty states owe money to the federal government for their unemployment programs. The first interest payment on the borrowed $41 billion is due in September.
Wall Street is facing its first blitz of fourth-quarter earnings, with Bank of America Corp., General Electric Co. and Apple Inc. among the industry titans slated to report in coming days. With the U.S. financial markets closed Monday for Martin Luther King Jr. Day, Wall Street faces a holiday-shortened week.
BP and Russia's state-controlled Rosneft agreed to a share swap under which they would jointly explore for offshore oil and gas, in a deal that immediately raised concerns in the United States about Russia's global oil ambitions. The deal gives BP access to highly sought after reserves of oil and natural gas in Russia's remote Arctic region. BP will trade 5% of its shares, for 9.5% of Rosneft.
The People's Bank of China raised the level of reserves that banks are required to hold by one half of a percentage point. Major Chinese banks will have to set aside 19% of their reserves and small and medium banks will have to keep 15.5% of their deposits as reserves, a record high for the country's deposit-taking institutions. This is the seventh time in the last year that the bank has used higher reserve standards to try to pull money out of the economy and tame rising prices.
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