Last week was an amazing week for the stock market. As you can see in the tables below all asset classes ended the week sharply higher with small caps winning the race rising 7.97%. I have been watching the market, looking for a significant pull-back and now wonder if we have already seen it. (Though the S&P 500 declined by 7% over the last four weeks, it managed to erase those losses in just four days last week.) Despite the fact that economic and political news has created a dark backdrop for the markets, investors are plowing money back in almost without fear. Many would suggest that the greater fear is the fear of missing the rally. Dollars are flowing from cash to stocks.
We are currently in the midst of earnings season. Expectations are so low that even disappointing results are greeted with jubilation. “At least they weren’t as bad as they might have been”. Sentiment is still rising out of a cataclysmic end of the world scenario to something more akin to survival. Even influential bank analyst Meredith Whitney, who last year nailed the demise of our large money center banks raised her rating for Goldman Sachs and even warned against shorting large banks. Things aren’t great but they could be worse. Nouriel Roubini, Dr. Doom had more positive comments on the economy, suggesting that perhaps the worst is behind us.
Even though fundamentals don’t support the continuation of this rally, they almost never do. We are bullish in the intermediate term. We recognize that at some point the reality of huge government spending, higher taxes and muted profit expectations for corporations will come home to roost. Until then, we are glad to own stocks.
The numbers:
| Returns through 7/17/09 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year |
| DJIA |
7.37 |
1.56 |
-21.00 |
-4.07 |
-0.42 |
| Russell 2000 |
7.97 |
4.90 |
-24.16 |
-7.19 |
-0.03 |
| S&P 500 |
6.98 |
5.62 |
-23.35 |
-6.64 |
-1.10 |
| MSCI EAFE LCL |
5.41 |
3.62 |
-23.85 |
-11.13 |
-1.24 |
| Morningstar Core Bond |
0.26 |
1.64 |
7.66 |
7.11 |
5.25 |
Sources: Morningstar (simple averages), Yahoo! Finance, CBS Market Watch. Past performance is no guarantee of future results. Indices unmanaged and cannot be invested in directly. 3 & 5 year returns are annualized and assume that dividends are not reinvested.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article), will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Hoxton Financial, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request.
