The Markets
Like the tortoise beating the hare, the U.S. stock market
has been slowly and steadily inching its way up over the past few weeks.
Since touching an intraday low on June 4, the Dow Jones
Industrial Average, the NASDAQ, and the S&P 500 index have all rallied more
than 10 percent, according to CNBC. In fact, the Dow and S&P 500 have now
risen for six consecutive weeks. It feels a bit like a “stealth” rally as
volume has been very low and volatility, as measured by the CBOE volatility
index, is at its lowest level in five years.
Even Europe is enjoying a strong run. As CNBC reported,
“European shares hit
13-month highs, extending their longest weekly winning streak in seven
years, amid hopes that euro zone policymakers will work closely to tackle the
debt crisis.”
Not everything is going up, though. While improving economic
data on the job market, the housing industry, the index of leading indicators,
retail sales, consumer purchasing, and consumer sentiment has helped the stock
market, it’s done just the opposite to the Treasury
market, according to Bloomberg. Prices for the 10-year Treasury just posted
their worst four-week drop since December 2010, says Bloomberg. The fall in
bond prices – and the corresponding increase in bond yields – suggests traders
think the improving economic data may forestall the Federal Reserve from
stepping in with another round of monetary stimulus.
Once summer is over and the big Wall Street traders get back
from the Hamptons, we’ll get a better read on whether this tortoise-like market
will keep inching its way up or decide to take a breather.
Data as of 8/17/12
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard
& Poor's 500 (Domestic Stocks)
|
0.9%
|
12.8%
|
18.8%
|
13.1%
|
-0.4%
|
4.1%
|
DJ
Global ex US (Foreign Stocks)
|
0.6
|
5.4
|
-4.3
|
3.4
|
-4.4
|
6.0
|
10-year
Treasury Note (Yield Only)
|
1.8
|
N/A
|
2.2
|
3.5
|
4.7
|
4.3
|
Gold
(per ounce)
|
-0.2
|
2.6
|
-9.8
|
20.1
|
19.7
|
17.9
|
DJ-UBS
Commodity Index
|
-0.1
|
1.7
|
-10.4
|
4.6
|
-2.7
|
3.5
|
DJ
Equity All REIT TR Index
|
1.2
|
16.9
|
21.9
|
26.6
|
3.9
|
11.4
|
Notes: S&P 500, DJ Global ex US,
Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does
not pay a dividend) and the three-, five-, and 10-year returns are annualized;
the DJ Equity All REIT TR Index does include reinvested dividends and the
three-, five-, and 10-year returns are annualized; and the 10-year Treasury
Note is simply the yield at the close of the day on each of the historical time
periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London
Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested
into directly. N/A means not applicable.
SOMETHING BEGAN IN THE
STOCK MARKET 30 YEARS AGO that still has people shaking their
heads today. Back on August 12, 1982, the Dow Jones Industrial Average closed
at its 1980-82 recession low of 776.92, according to The Wall Street Journal. Around the country, it was just an
ordinary day in an otherwise economically challenged economy. But, on Wall
Street, it was the beginning of something extraordinary.
Depending on your age, you may remember that back in 1982,
the prime lending rate peaked at 17 percent, the unemployment rate was near 11
percent, and inflation was on the way down from the double-digit rates of 1979-1980,
according to The Wall Street Journal
and the Bureau of Labor Statistics. Demographically, the oldest Baby Boomers
were a youthful 36 and just getting ready to unleash their penchant for big
spending. Ronald Reagan was President, Paul Volcker was head of the Federal
Reserve, and, while an unlikely pair, they were about to make history together.
Reflecting back on the summer of 1982 in a 2009 Wall Street Journal piece, Jason Desena
Trennert wrote, “Starting as a trickle, the decline in inflation and long-term
interest rates picked up speed that summer, and investors in common stocks
began to have confidence that they were being liberated from the shackles of
double-digit inflation and interest rates, an innovation-sapping regulatory
regime, and a tax code that was antithetical to capital formation.”
Awakening from its slumber the day after August 12, 1982, the
stock market took off on an unprecedented 18-year bull market run that saw the
Dow Jones Industrial Average rise a spectacular 1,500 percent, according to
Bloomberg.
So, here we are, 30 years removed from the start of that
great bull market and what do we have to show for it? Well, since that great
bull market ended in early 2000, we’ve experienced two harrowing bear markets
that saw the broad market decline around 50 percent. And, today, we’re still
below the all-time high of late 2007.
Yet, here’s what is extraordinary. Despite the weak markets
we’ve experienced since 2000, if you go back to August 1982 and look at the
returns for the past 30 years, the market has done extremely well. According to
The Wall Street Journal, the total
return of the S&P 500 index was a compound 11.3 percent between August 1982
and now. That’s even better than the average return for the entire 20th
century, which was 10.1 percent, according to the Journal.
It’s easy to get too caught up in what’s happening today
in the markets and lose sight of the big picture. Instead, it’s better to take
the long view. While past performance is no guarantee of future results, the
past 30 years have shown that patience may be rewarded.
Weekly Focus – Think About It…
“Patience is a bitter plant, but it has sweet fruit.”
--Old Proverb
Value vs. Growth Investing (8/17/12)
1.06
|
14.11
|
4.21
|
9.01
|
20.83
|
15.92
|
2.34
|
|
0.95
|
14.80
|
4.10
|
9.29
|
21.97
|
15.12
|
1.85
|
|
1.22
|
14.88
|
3.48
|
9.07
|
23.96
|
15.03
|
3.27
|
|
1.82
|
19.26
|
4.94
|
9.85
|
24.48
|
17.86
|
4.33
|
|
-0.27
|
10.58
|
3.80
|
8.92
|
17.30
|
12.53
|
-2.28
|
|
1.18
|
12.26
|
4.86
|
8.06
|
17.21
|
17.83
|
3.27
|
|
1.22
|
12.87
|
4.72
|
7.79
|
21.07
|
19.63
|
4.45
|
|
1.65
|
12.83
|
4.53
|
7.72
|
13.54
|
18.60
|
3.22
|
|
0.66
|
11.10
|
5.34
|
8.64
|
16.94
|
15.18
|
1.82
|
|
2.01
|
11.90
|
3.51
|
8.66
|
19.02
|
17.89
|
3.84
|
|
2.25
|
11.79
|
3.43
|
8.22
|
16.48
|
16.82
|
2.61
|
|
1.91
|
11.85
|
3.49
|
8.91
|
18.94
|
18.26
|
3.78
|
|
1.88
|
12.08
|
3.61
|
8.92
|
21.87
|
18.53
|
4.94
|
|
1.29
|
14.30
|
3.72
|
8.78
|
22.92
|
16.19
|
3.62
|
|
1.79
|
17.43
|
4.77
|
9.37
|
21.85
|
18.14
|
4.13
|
|
0.06
|
10.79
|
4.09
|
8.86
|
17.56
|
13.48
|
-0.96
|
©2004
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guarantee of future results. Indices are
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Office Notes:
How
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,
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P.S.
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Schwartz Financial Service is not an
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This
information is provided for informational purposes only and is not a
solicitation or recommendation that any particular investor should purchase or
sell any security. The information contained herein is obtained from sources
believed to be reliable but its accuracy or completeness is not
guaranteed. Any opinions expressed
herein are subject to change without notice.
An Index is a composite of securities that provides a performance
benchmark. Returns are presented for
illustrative purposes only and are not intended to project the performance of
any specific investment. Indexes are
unmanaged, do not incur management fees, costs and expenses and cannot be
invested in directly. Past
performance is not a guarantee of
future results.
* The Standard & Poor's 500 (S&P
500) is an unmanaged group of securities considered to be representative of the
stock market in general.
* The DJ Global ex US is an unmanaged group
of non-U.S. securities designed to reflect the performance of the global equity
securities that have readily available prices.
* The 10-year Treasury Note represents debt
owed by the United States Treasury to the public. Since the U.S. Government is
seen as a risk-free borrower, investors use the 10-year Treasury Note as a
benchmark for the long-term bond market.
* Gold represents the London afternoon gold
price fix as reported by the London Bullion Market Association.
* The DJ Commodity Index is designed to be
a highly liquid and diversified benchmark for the commodity futures market. The
Index is composed of futures contracts on 19 physical commodities and was
launched on July 14, 1998.
* The DJ Equity All REIT TR Index measures
the total return performance of the equity subcategory of the Real Estate
Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any
reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change
without notice and are not intended as investment advice or to predict future
performance.
* Past performance does not guarantee
future results.
* You cannot invest directly in an index.
* Consult your financial professional
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