New Street$marts is out chock full of tidbits with Paul Ryan, the Fed, ECB and stocks on their way to new 2012 highs!
Archives for August 2012
Following up from the Street$marts issue I published today (link to follow here on Friday), the bulls are stepping up here on the Dow, S&P 500 and NASDAQ 100, closing the day within striking distance of new highs for 2012. I expect that to occur over the coming days. Once that is achieved, I do not anticipate a blow off to the upside. Rather, I think the stock market will be within a few percent of peaking.
Flies in the ointment include the S&P 400 mid caps, Russell 2000 small caps, semiconductors and transports. All are well below their 2012 highs, which is not a healthy sign. Of course, theses indices could get into gear, race higher and confirm, but that’s not the usual scenario.
Have a great weekend and enjoy what’s left of summer!
Here is the link from Friday’s segment:
Nothing has changed regarding the outlook for stocks. I think we are in a generally benign period for equities that has been following the typical presidential election year pattern of a Q1 rally, a springtime low and summer rally to a peak. If that continues to hold true, we should see another good bottom in September or October and then rally into year-end. I am sure the market will throw some doubt into that along the way!
Over the coming month or so, we should hear from the Chinese that they are going to stimulate their economy a bit more. The Fed has their annual retreat in Jackson Hole in two weeks followed by a very important meeting on September 12 and 13 where more stimulus should be announced. September 12 is also the date when the German courts will rule on the constitutionality of using funds for bailouts. And of course, the markets are waiting on the ECB to unveil another round of bond buying to help Spain.
So there’s lots on the calendar before we even get to the November elections!
After the stock market declines and potentially world ending news during the summers of 2011, 2010, 2008, 2007 and 2006, it’s a welcome change that this summer has been without significant volatility. As we head into September, that should change a bit, but nothing extreme.
I am going to be on CNBC’s Closing Bell with Tyler and Maria at 3pm est today. The discussion will likely focus on the very anemic and sub par economic recovery, but certainly not unexpected. As I have written about many times before, this is your typical post financial crisis recovery. It’s frustrating and uneven with little major progress. But this too will come to an end.
Earlier this week, we heard from two non voting members of the FOMC (Federal Open Market Committee), Richard Fisher and Eric Rosengren. The latter made headlines calling for the Fed to embark on an open ended bond buying program until the economy grows more and employment improves, while the former (an inflation hawk) thinks the Fed has done enough and questioned whether more stimulus would really work.
So you have two experts with very differing opinions! One thing is certain and that is the uniform belief that the US needs to get its fiscal house in order. And that starts with Congress who are enjoying a month long vacation!
Getting back to the Fed, Fisher has always been a hawk and has no problem dissenting, along with Plosser. He was one of the guys who stubbornly refused to cut rates in mid 2007 when the financial crisis was in its infancy!
Rosengren’s salvo is all the more interesting as the Fed’s annual retreat in Jackson Hole Wyoming is a few short weeks away and we all know that Bernanke & Co. aren’t done printing money. Big Ben’s speech in WY should reveal much about the Fed’s intent this fall.
The open ended bond buying program is controversial for sure and is something we should be hearing about from the Fed’s counterparts in Europe first. What I would give to be a fly on the wall when Germany and the ECB (European Central Bank) discuss what to do about Spain! Eventually, Germany is going to throw in the towel and allow an out money printing assault, but that day is not close yet.
It has been a very quiet week for the stock market and that’s likely to change next week!
Have a great summer weekend! Our family has a packed weekend with my buddy Rocket Ron Weiss’ magical 50th birthday party on the beach in New York along with family BBQ’s with some of our closest and favorite friends. Great food, great drinks and great friends! What else could you ask for? Maybe a little PGA Championship?
Here is the link from my FOX Business segment on Monday. You will notice that I was on the phone rather than in front of the camera. I guess they finally realized that I had a better face for radio!
I am going to be on FOX Business’ Markets Now close to 1pm est on Monday, hopefully discussing some of the items below.
After a string of weak but positive employment reports, Friday’s data were “better than expected”, but still not strong enough to keep pace with population growth. And when you dive into the details of the report, according to John Williams of Shadow Stats, you see the normal “seasonal adjustments” accounted for a significant number of jobs created.
What continues to amaze me is how many “experts” think this recovery is anything other than normal following a financial crisis. As I have said for three years, the economy we are living through right now is what typically happens after a systemic meltdown. It’s lukewarm, tepid and any other adjective you want to throw in. If history continues to guide us, the real progress on the jobs front will happen on the other side of the next recession, which I happen to believe will be mild given the almost $3T in cash on corporate balance sheets and how lean corporate America has become.
The markets reacted very favorably to the news on Friday, but Europe and our futures were already in rally mode before the employment report was released. With the disappointing lack of news from our Fed and the ECB and the positive jobs report, the Dow ended last week almost exactly where it began the week. As I mentioned in the last few Street$marts, there are a few key indicators to watch for clues to the next big market move.
On the positive side, high yield bonds are making new highs and the semiconductors are trying to step up and lead. But the Dow Jones Transportation index, S&P Mid Cap 400 and Russell 2000 Small Cap need to get into gear for this rally to last much longer. We also need to see less defensive sectors outperform the market. For a while now, it’s been consumer staples, utilities, REITs and biotech, not your typical healthy bull market leadership.
Could the Dow reach up to visit its 2012 peak? Sure. But unless something changes dramatically, I think it will be your typical summer selling opportunity in a presidential election year more than anything else.
After Ben Bernanke gave the market little to cheer for on Wednesday, his European counterpart, Mario Draghi, and the ECB left interest rates alone and disappointed investors who were hoping for a follow up from his bold statement last week. Draghi did indicate that massive bond purchases would resume again, but that was more than expected. Draghi better deliver quickly or his credibility will certainly suffer. Could he have put his foot in his mouth without speaking with the Germans first?
Friday at 8:30am brings the monthly employment report and the market has reacted negatively for most of the past year. What’s interesting right now is that while the market reacted negatively to the Fed’s and ECB’s lack of action on Wednesday and Thursday, the net result could have been much worse with stocks closing right in the middle of the range today.
I have never been a big fan of betting on the outcome of an economic number and how the market will react, but IF the losing streak on employment Fridays was going to be broken, the stars are lined up to do it.
The latest Street$marts is out.
Bernanke & Co. gave the market little in the way of new stimulus today, but I think that’s just temporary. Like a crack addict, the markets just want more and more and more, no matter what the consequences. QEIII should be coming and all eyes will be on Jackson Hole Wyoming later this month for the Fed’s annual retreat angd speech.
The data are not strong, but they are certainly not falling off of a cliff. It’s just your typical post financial crisis recovery. Tepid and frustrating. Fits and starts but never really making significant progress on the employment front.