Seven Things You Should Know
November 20th 2009
1. Six Month Periods: The 6-month period from November-April has gained +230% for the S&P 500 since 1990, more than 5 times the +44% return achieved during the 6 months from May- October. Both numbers are total return performance results from 1/01/90 to 10/31/09 (source: BTN Research)
2. Breadth Weakening: In the S&P 500, 60% of stocks are trading above their 50-day moving averages. As shown in the first chart below, this indicator has made a series of lower highs in recent months, even as the S&P 500 has made subsequent new highs over this time period. This means that less and less stocks have been helping the index move higher. (source: Bespoke Investment Group)
3. Interest Rates: Following the end of our nation’s 8 month recession in November 2001, the Federal Reserve first raised interest rates on 6/30/04 or more than 2 ½ years later (source: National Bureau of Economic Research)
4. Retirement: Americans that are working today expect to live an average of 21 years in retirement (source: Wells Fargo)
5. Institutions Sidelined: 2009 has been a bountiful year for institutional investors, and thus we believe many are moving into “hibernation,” shifting to lower Beta, expecting little upside into year-end. With a greater share of hedge funds re-attaining their “high water” marks and a large 33% of mutual funds beating their benchmarks, it is not too surprising that it appears trading in some stocks is becoming more difficult with volumes falling. (source: JPMorgan)
6. Earnings: Next week, we’ll see reports from Hewlett-Packard (HPQ), Barnes & Noble (BKS), and Deere & Co (DE).
7. Econ Calendar: Next week we get the Case-Shiller 20 Index (home prices), November Consumer Confidence Index and October New Home Sales.
Have a great weekend!