Specific Stock Market Report
My comment today is dedicated entirely to the stock market. Many of my readers are concerned over last week’s unpredictability and are clearly invested in stocks.
Let Us begin with the general consensus…
Whatever I read this weekend, the message was essentially the same: “The stock market is in huge trouble.” Stock market advisers are turning bearish in droves. You read a lot about the leading market indices breaking significant 50-day and 200-day trend lines, thus even the marketplace technicians have turned bearish.
I ‘ve been in this company a very long time; about 30 years. I’ve never found a stock market follow the direction of the consensus view. To put it differently, I doubt the stock market will make everyone happy and simply roll over, as the great bulk of analysts and investors consider it will.
Let Us move to the businesses that trade in the marketplace…
Gains in corporate America stay powerful. The poor market isn’t striking the large companies that are public. We’ve yet to find the 30 Dow Jones Industrial firms that are large report downgrade revisions to their estimated gains this year. Corporate America sits on over $ 1.0 trillion in cash.
At a dividend yield of 2.65%, the Dow Jones Industrial Average is still a great option to the approximate 2.5% return on the now S&P-downgraded 10-year U.S. Treasury. Stocks are cheap in relation to their dividend yields and price/earnings multiples in comparison to choices in the market, including Treasuries.
Going to the Fed and the authorities…
The authorities got what Wall Street needed: a large increase in its spending limitation. The authorities was granted permission by Congress to spend another $ 2.1 trillion of cash it does not have–make no mistake, Wall Street loves when the government has more cash to spend.
The Federal Reserve, it’s my belief, is getting prepared to come out with some new kind of QE3. Financial and fiscal policy stays not as inflexible as I’ve found in three decades of following the markets. Both the Fed and authorities stand ready to jump in and “save” the market again as needed. They are going to pull out all the stops…and that’s precisely why this bear market rally has survived as long as it’s.
Ultimately, let us look at what occurred last year in the stock market, as investors have really short-term memories.
As of this past Friday, the Dow Jones Industrial Average was down just one percent for the year. Let us take a quick look back at last year. 2010 was began by the Dow Jones Industrial Average at about the 10,500 degree. Just in this way year, the Dow Jones Industrial Average rallied to the spring of 2010 from the start of 2010. In the summer of 2010, stock markets in North America crashed. By July of 2010, the Dow Jones was down 8.5% for the year–yes, 8.5%
We all understand what happened after that. The Dow Jones rallied from a low of 9,500 in the summer of 2010 to close at 11,500 by the end of 2010. The stock market really increased about 10% in 2010 despite a horrendous summer for stocks.
My message to my readers…
Do Not panic. It’s the worst thing you can do. Be realistic and take a look at the amounts. Stocks are just down one percent this year. If we look back at 2010, stocks were down 8.5% for year by the summer and they still came back to close a great year.
The bulk of investors and analysts are bearish on stocks now–and we know from previous experience the majority opinion, frequently called the consensus, is generally incorrect.
Corporate earnings are powerful. Its firearm to spend more has been loaded by the authorities. “Chopper” Ben Bernanke and his crew at the Fed are prepared to jump in and “save” the market again if desired.
By this stage in this report, you can tell I’m not prepared to give up on my belief that we’re still in a bear market rally that began in March of 2009. I really believe this bear market rally has more time. Yes, the bear market rally will finish and Phase III of the bear market will kick in–but it WOn’t be well-publicized.
If we were to look at this from a pure technical interpretation, the Dow Jones Industrial Average would have to drop below 9,658 for the bear market rally to formally finish (the midpoint between the March 9, 2009 low and the May 2, 2011 high). We’re Dow Jones Industrial Average. on the much from 9,658
That, my beloved reader, is the greatest stock market advice I can give you.
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