Don’s Outlook 2/6/09
The “stock market” appears to want a rally. Of course, the market is just an aggregation of the millions of investors and traders who make buy and sell decisions every day. These market participants have, on average, become extremely short-term focused, but while this resulted in a panic drop last fall, it is now producing a surprisingly resilient market. Exports plunging 30 percent in Asian countries was cause for a sell-off, but the S&P 500 Index spent the better part of January bouncing between 825 and 850.
Jobs data out this morning was grounds for another sell-off, but again shares marched higher. The jobless rate in America rose to 7.6 percent as nearly 600,000 jobs were eliminated in January, consistent with the previous two months. As the Bureau of Labor Statistics pointed out, 3.6 million jobs have been lost since December 2007, but nearly half came in the previous three months. The U.S. is on pace for a loss of 7 million jobs in 2009, enough to lift the unemployment rate to around 12 percent.
The implications for the retail, consumer goods, consumer service, and housing sectors are going unexplored today, however, as investors look forward to a stimulus package and to the bank bailout details due Monday from the Obama administration. Shares of financials spiked higher today, with Bank of America up more than 22 percent in morning trading and Citigroup up 10 percent.
On January 28, the S&P 500 Index closed at 874 before sliding back into its trading range; it’s back over 860 today. Technicians will be looking for a higher high either today or sometime next week, and if we get it, perhaps a more significant rally will take place.
Last week I discussed a new position, ETF Market Opportunity fund (ETFOX) that I was adding to most client accounts. It continues to perform well, and as we rebalance your accounts moving forward, I expect this fund will become a larger holding among other growth positions. You can find a more detailed discussion of this fund and an interview with its manager, Paul Frank, in this month’s newsletter that will arrive in the next few days.
